What Are Your Tax Obligations If You Are Temporarily Outside Canada?

You are considered Factual Resident of Canada for tax purposes if you maintain your residential ties with Canada while travelling or living abroad.

There are different types of factual residents.  If you are, you may be one of the following:

  • You work temporarily outside Canada

  • You teach or attend school in another country

  • You commute daily or weekly to the United States for work

  • You vacation outside Canada


As a factual resident, your tax obligations are the same as a resident of Canada wherein you are obligated to report your world income, claim deductions and credits and pay federal and provincial or territorial tax.

In addition to this, as a factual resident, you may be able to claim the  foreign tax credit and the overseas employment tax credit.

You can claim the foreign tax credit if you paid an income tax or a profits tax to a foreign country on foreign income that you are reporting on your Canadian return.  This may reduce the federal and provincial or territorial tax you have to pay on the foreign income.  In most cases, the foreign tax credit you can claim for each foreign country is the lower of the following amounts:

  • The foreign income tax you actually paid or

  • The tax due to Canada on your net income from that foreign country


To claim the overseas employment tax credit, you must meet all these requirements:

  • You work outside Canada for a period of more than six months in a row, and the six month period began before the end of the tax year and includes any part of the tax year for which you’re claiming the credit

  • You are employed throughout that period by one of the following:
    o    A person residing in Canada
    o    A partnership in which Canadian residents or Canadian-controlled
    corporations own more than 10% of the fair market value of all interests in the
    partnership
    o    A corporation that’s a foreign affiliate of a person residing in Canada
    o    You work during all or most of the six-month period to secure a contract for            your employer or in connection with a contract your employer had previously         entered into
    o    The contract relates to one of the following:
    - Exploring for or exploiting petroleum, natural gas, minerals or similar
    resources;
    - Construction, installation, agricultural or engineering activities
    - An activity performed under contract with the United Nations


Reference:
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Minimize Tax of Deceased Taxpayer
Tax Obligations of a Newcomer

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