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Determining Tax Residency in Canada: Deemed resident vs. factual resident

Let’s begin with the law as stated in the Income Tax Act of Canada …

Taxation in Canada is governed by the Income Tax Act of Canada. Sections 1 and 2 of the Act read in part as follows:

Short Title

1 This Act may be cited as the Income Tax Act.

PART I Income Tax

DIVISION A Liability for Tax

2 (1) An income tax shall be paid, as required by this Act, on the taxable income for each taxation year of every person resident in Canada at any time in the year.

(This does NOT say that ONLY those “resident in Canada” are required to pay Canadian tax. In fact there are circumstances under which nonresidents of Canada are also required to pay different kinds of Canadian tax.)

Searching for the meaning of “resident in Canada” …

Tax Residency” is becoming an increasingly important topic. Every country has its own rules for determining who is and who is not a “tax resident” of that country. The advent of the OCED CRS (“Common Reporting Standard”) has made the determination of “tax residence” increasingly important.

At the risk of oversimplification, a determination of “tax residency” can be based on a “deeming provision” or decided by a determination “based on the facts”. Some countries base “tax residency” on both “deeming provisions” and a “facts and circumstances” test.

Tax Residency in Canada – “Deemed residence” or “ordinary residence based on the facts” …

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