Filing taxes as a non-resident of Canada can be complex, especially if you earn income from Canadian sources while living abroad. Canada’s tax rules for non-residents are very different from those for residents, and filing incorrectly can lead to penalties, reassessments, or missed refunds.
This guide explains who is considered a non-resident, what income must be reported, and how to file a Canadian tax return correctly. It also highlights how CloudTax supports non-residents through its Done-For-You tax filing service, making the process much easier for individuals living outside Canada.
Who Is Considered a Non-Resident of Canada?
You are generally considered a non-resident of Canada for tax purposes if:
You do not have significant residential ties to Canada, and
You live primarily outside Canada during the year
The Canada Revenue Agency determines residency based on facts, not citizenship. Key residential ties include:
A home available for use in Canada
A spouse or dependents living in Canada
Provincial health coverage, Canadian driver’s licence, or ongoing personal ties
If these ties are severed and your primary life is established outside Canada, you may be a non-resident. This determination is critical because it affects what income you report and how you file.
Deemed Non Resident Status: Under the Income Tax Act and Canada's tax treaties, a person can have significant residential ties to Canada but still be treated as a non-resident if a tax treaty assigns residency to the other country (the "tiebreaker rules"). This is a common situation for individuals who move abroad but retain a home or family in Canada. These individuals are deemed non-residents, not factual residents, and are taxed differently from both.
Many individuals use CloudTax’s Done-For-You service to confirm their residency status before filing, especially when the situation involves moving in or out of Canada.
What Income Must a Non-Resident Report in Canada?
Non-residents do not report worldwide income to Canada. Instead, you only report Canadian-source income, which may include:
Rental income from Canadian property
Employment income earned in Canada
Business income carried on in Canada
Canadian pensions such as CPP or OAS
RRSP or RRIF withdrawals
Dividends, interest, or royalties from Canadian payers
Some of this income is subject to withholding tax, while other income requires filing a Canadian tax return.
CloudTax’s Done-For-You service helps non-residents identify exactly which income must be reported and ensures it is reported correctly under CRA rules.
How Non-Residents Are Taxed in Canada
Withholding Tax (Part XIII)
Certain types of Canadian income paid to non-residents are subject to Part XIII withholding tax, typically at 25%, unless reduced by a tax treaty. Common examples include:
Pension payments
RRSP or RRIF withdrawals
Rental income (unless a special election is made)
Dividend -Dividends, royalties, and certain management fees from Canadian payers — typically subject to 25% Part XIII withholding tax, reducible by treaty..
In some cases, withholding tax is final and no return is required. In other cases, filing a return can reduce the overall tax owed.
CloudTax reviews these scenarios as part of its Done-For-You service to determine whether filing a return could result in a refund or lower tax.
Filing a Canadian Tax Return (Part I)
A non-resident must file a Canadian income tax return if they:
Earned employment or business income in Canada
Sold taxable Canadian property
Want to recover excess withholding tax (mostly with S217 election)
Elected to file under Section 216 for rental income
Most non-residents file a T1 General return for non-residents. These returns are more complex and often require manual review.
CloudTax specializes in preparing and filing these non-resident returns on behalf of clients through its Done-For-You tax service, removing the need to navigate CRA forms on your own.
Step-by-Step: How to File as a Non-Resident
Step 1: Confirm Residency Status
Residency is the foundation of correct filing. If unclear, CRA allows taxpayers to request a determination using Form NR73. Many non-residents rely on CloudTax to review their facts and apply CRA guidance accurately.
Step 2: Gather Canadian Income Documents
This may include:
T4 slips for employment income (Full Year NR clients with Canadian employment, vested RSU, bonus etc)
NR4 slips for non-resident income (including S217 election for pension income - OAS, CPP, RIF etc)
Rental income summaries (S216 election)
Property sale documents (including T2062 Form - form to notify CRA and request Certificate Of compliance)
CloudTax handles document collection securely and reviews all slips for accuracy.
Step 3: Apply Tax Treaty Benefits
Canada has tax treaties with many countries that can reduce withholding tax or prevent double taxation. These benefits are not automatic and must be applied correctly.
CloudTax ensures treaty benefits are claimed where applicable as part of its Done-For-You service.
Step 4 : Schedule A and Schedule B:
Non-residents filing a T1 return must complete two additional schedules specific to non-residents:
Schedule A – Statement of World Income: Required to calculate the proportion of world income that is Canadian-source, which determines which non-refundable tax credits the non-resident can claim.
Schedule B – Allowable Amount of Non-Refundable Tax Credits: Calculates the eligible portion of credits available to the non-resident based on their world income percentage.
Step 5: File the Return Correctly
Most non-resident returns cannot be NETFILED and must be mailed or EFILED by an authorized professional. Filing incorrectly can delay processing. Non-residents who do not have a Canadian Social Insurance Number (SIN) must apply for an Individual Tax Number (ITN) using Form T1261 before filing a Canadian tax return. The CRA will not process a non-resident return without either a SIN or an ITN.
CloudTax manages the full filing process, from preparation to submission, for all types of non-resident clients.
Special Situations Non-Residents Should Know
Leaving Canada Permanently (Departure Return)
If you left Canada permanently, you need to file a departure return, report worldwide income up to the departure date, and deal with possible departure tax (including deemed disposition). CloudTax regularly assists emigrants with these filings.
What is Deemed Disposition? When an individual leaves Canada and becomes a non-resident, they are deemed to have disposed of most of their property at fair market value on the date of departure. This is called a deemed disposition and it can trigger capital gains tax on unrealized gains, even though the person did not actually sell anything.
Rental Property in Canada
Non-residents earning rental income can elect under Section 216 to file a return and pay tax on net income instead of gross rent. This often results in lower tax and is commonly handled through CloudTax’s Done-For-You service.
Selling Canadian Property
Most non-residents must obtain a Certificate of Compliance when selling Canadian real estate (T2062 Form). Missing this step can result in significant penalties. CloudTax supports clients through this process as well.
Common Mistakes Non-Residents Make on their Canadian Taxes
Filing as a resident when they are a non-resident
Selecting the wrong type of Non Resident Status or missing the election.
Reporting worldwide income incorrectly
Missing treaty benefits
Assuming withholding tax is always final
Not filing when a return is required
Missing the correct forms while filing Departure Tax with deemed disposition.
These are exactly the issues CloudTax’s Done-For-You service is designed to prevent.
Final Thoughts
Filing taxes as a non-resident of Canada requires careful attention to residency status, income type, and filing method. The rules are different, and mistakes can be costly.
For individuals living abroad, CloudTax’s Done-For-You non-resident tax service provides a simple and reliable way to ensure compliance with CRA rules while minimizing tax owed. From residency review to final filing, CloudTax handles the complexity so non-residents can file with confidence.
Thousands of Canadians living abroad trust CloudTax to stay compliant without the stress of navigating CRA rules from a different time zone.
File with confidence. File with CloudTax.
Have Questions About Your Non-Resident Tax Situation?
Every non-resident tax return is different. Your filing requirements can vary depending on where you live, your Canadian income sources, tax treaty eligibility, departure tax obligations, and whether you own property in Canada.
If you'd like guidance before filing, email [email protected] to schedule a free discovery call. We'll review your situation and explain the next steps.