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Few Important Facts About Taxation Of Non-residents In Canada
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Canadian Income tax is levied on the worldwide income of Canadian residents. However, there are certain types of income that is earned from Canadian sources that are taxable for non- residents. The Canadian residents will have to use the T1 Tax and Benefit Return and it is the same for individuals and sled employed individuals. The amount of tax that will have to be paid by the individual depends on the value of their taxable income. The taxable income is calculated by reducing the allowed expenses from the gross income received.
When you live outside the country during a tax year and are a government employee, part of the Canadian Forces or staff of an overseas school chain, you need to check on the rules that apply for one. The rules are usually from other family members and dependent children as well. Such rules make it easy for people working in such institutions.
Often there is confusion regarding taxation of non-residents as to whether one would be deemed resident or nonresident of Canada for legal and tax purposes. One is deemed a non-resident of the country and a resident of another country with whom Canada has a tax treaty. In such cases, for taxation purposes, one is deemed a non-resident of Canada. Again, the definition of residential ties is important to understand for such purposes.
If one has a home in Canada or a spouse or dependent that stays in Canada and if you own personal property in Canada such as a car or furniture and have social ties in Canada, you become liable for nonresident taxation. The tax obligations in such matters are as per the income that one generates from different sources in Canada. The type of tax one needs to pay and the income tax return needed to be filed is dependent on the kind of income that one receives. The sections Part XIII and Part I tax policies apply in such cases. These sections can be easily referred to online and one can understand their tax obligations and even file their returns online to save on consultancy fees and time.
Also nonresident corporations who have business interests in Canada and generate revenue from a business that is located in Canada will have to pay corporate tax to the Canadian Government. The clauses that govern the corporate tax in Canada are a bit complicated and the complications will only increase if you are a non-resident. If you are ‘carrying on business’ in Canada either directly or indirectly then the profit that is earned out of the business will be subject to taxation. Like in income tax, the residency status of the corporation will have to be determined and the corporate tax that is levied will be based on the residency status of the corporation.
Josep Guardiola is a chartered accountant who practices as an independent tax consultant. He also author of taxation of non-residents, in this article he provides nonresident tips. For more information you can visit Taxca.com.
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