Determine Canada (Deemed) Non-resident

[zhu390x]

Hello! I wonder if I can be considered as a Canada deemed non-resident given my situation:

* I've been living in Canada for years, and moved to the U.S in 2023 June due to work.
* I rented an apartment in Seattle. I obtained US WA driver license, US WA vehicle plate. I've been consistently using my US credit card.
* I have a condo in Canada Vancouver, and rent it out since I moved to the U.S.
* My wife is still working and living in a rented condo in Canada Vancouver. She owns a townhouse in Toronto and rent it out, but filed Sec45(2) election to keep it as principal residence. Our first child was just born in 2025 February.
* We filed tax separately all the time.
* I travel back to Canada Vancouver sometimes and stay a few weeks with my wife. I spent about 200 days in the US, and 120 days in Canada in 2024.

I intend to file my 2024 Canada tax as deemed non-resident (plus departure tax on Jan 1 2024), to avoid pay tax to Canada for my US employment income.
I consulted multiple CPAs and get different answers.

[nelsona]

In my opinion, you have spent too much time in Canada to be considered non-resident -- deemed or otherwise. Tp be a deemed non-resident, you must satisfy TREATY definition of resident of US. By spending so much time in Canada with your spouse, (and child) you demonstrate that your centre of vital interest is in Canada, which is a key treaty element. While you might not own a place that you can live in in Canada, you can certainly live with your spouse, so you cannot use that to say you are US resident.

By the way, nothing "happened" on jan 01, 2024, that would change your status. It does not meet any definition of "departure date"

[zhu390x]

@nelsona Thanks for your reply!

> By spending so much time in Canada with your spouse, (and child) you demonstrate that your centre of vital interest is in Canada, which is a key treaty element.

If I'm a Canada resident, does this make me a US non-resident? Or I should be a resident of both Canada and US given my presences (200 days in the US, and 120 days in Canada).

---

The CPA I'm working with now is filing "deemed non-resident" plus "departure tax on Jan 1 2024". Should I trust and continue? What's the worst consequence?

[nelsona]

You can *elect* to be treated as a non-resident of US, but I'm quite sure you would be better off tax-wise to file like a resident (ie. full year 1040).

I have given you my opinion on how to file.

[mingchi96]

I am also in the same boat. This is what a definition of "deemed non resident" is as I have found as below. Per what is listed below, it sounds like you are a "deemed non resident". Would be interested to have others weigh in on this.



What is a Deemed Non-Resident of Canada?
A deemed non-resident of Canada is an individual who would typically be considered a resident of Canada for tax purposes but, due to specific circumstances, is treated as a non-resident for tax purposes. This status is determined based on the individual’s ties to another country and their tax obligations under a tax treaty between Canada and that country.

Circumstances Leading to Deemed Non-Resident Status
An individual may be considered a deemed non-resident of Canada if they meet the following conditions:

They are considered a resident of another country with which Canada has a tax treaty.

They are also considered a factual resident of Canada due to significant residential ties, such as a home, a spouse or common-law partner, and dependants in Canada.

The tax treaty between Canada and the other country deems them a resident of the other country for tax purposes.

In such cases, the individual will be treated as a non-resident of Canada for tax purposes, despite their residential ties to Canada.

Tax Implications of Being a Deemed Non-Resident
As a deemed non-resident of Canada, you will be subject to the same tax rules as non-residents, which include:

Reporting only your Canadian-sourced income, rather than your worldwide income, on your Canadian tax return. This may include income from Canadian employment, businesses, and investments.

Paying tax on Canadian-sourced income at the non-resident tax rates.

Potentially being subject to non-resident withholding taxes on certain types of Canadian-sourced income, such as dividends, rental income, and pension payments.

Not being eligible for certain tax credits and benefits that are available to Canadian residents, such as the Canada Child Benefit and the Goods and Services Tax/Harmonized Sales Tax (GST/HST) credit.

It is important to note that deemed non-residents must still file a Canadian tax return if they have Canadian-sourced income or wish to claim certain tax credits and deductions.

Deemed Non-Resident

You have some residential ties to Canada, but are considered to be a resident of another country by virtue of a tax treaty which Canada has with that country.

This rule trumps the rule for deemed residents, so it’ll apply even though you may have spent 183 days in Canada.

[Anna2024]

If you’re a tax resident of both countries, there’s a tax treaty between them that will determine the country of your tax residency.
US internal rules for tax residency are quite easy to understand, they are objective; once the conditions are met, you become a tax resident.
Canadian internal rules are subjective, almost on a case-by-case basis. These rules are made by the judges. CRA website gives you the guidelines of the most common situations. The term “deemed” doesn’t help and certainly doesn’t change the way you pay taxes as you’re either a tax resident or a nonresident.
Deemed nonresident is taxed as a nonresident and pays taxes only on the income sourced in Canada.
Deemed resident is taxed as a resident and pays taxes on the worldwide income.
So, as soon as you become (choose to become) a US tax resident according to the US internal laws and, at the same time, a Canadian tax resident according to the Canadian internal laws (+ a list of conditions developed by the courts), you’ll have to look at the treaty because your country of tax residence will be determined by the treaty.
If a permanent home – in both country, personal and economic relations – in both countries (Ex family in Canada, friends and work in the US), we will look at an habitual abode and that may be very well in the US.
I would add that a Canadian spouse doesn’t necessarily prevent you from becoming a nonresident for tax purposes. If it were the case, we wouldn’t meet the term “nonresident spouse”. Your spouse is in Canada and you visit your spouse often. It’s not a problem. The frequency of your travels in Canada is understandable and doesn’t create any other ties. If you visit your spouse and manage your Canadian business, this may have an impact on the degree of attachment that you really have to Canada.
If you want to break free from Canada, it’s important to become a US tax resident according to the internal US rules and not only to file your US taxes as a US resident.
Ex 1. You leave Canada in May 2024 with a TN status, your spouse chooses to live in Canada, you file Canadian taxes as a part-year resident up to May 2024. You file your US taxes as a US tax resident the way you want (full year, full year with a nonresident spouse, part year). Your Canadian spouse will file her taxes as a Canadian resident.
Ex 2. You leave Canada in August 2024 with a TN status, your spouse chooses to live in Canada, you file Canadian taxes as a part-year resident up to August 2024. You file your US taxes as a US tax resident the way you want (full year, full year with a nonresident spouse, part year). Your Canadian spouse will file her taxes as a Canadian resident. You’ll have to make a first-year choice for US taxes in this case, if necessary, to become a US resident according to the US internal laws.

Yes, the second scenario, where you spend more days in Canada than in the US, may be difficult to sell as an habitual place of abode but who knows, the number of days is never the only criteria. Canada may as well stop the test on your personal and economic relations and decide that you have personal relations in both countries but all your economic relations are only in the US and qualify you as a nonresident.

The rules of residency can be interpreted in various ways, the far away you’re from common scenarios, the more arguments you may need to present to prove your position.

[mingchi96]

Can somebody comment on my situation.

Dual US/Canada citizen, never filed to CRA (obtained Citizenship as a child), no assets in Canada (not even bank account). Work in the US for a US company, all assets in the US. Canadian spouse and kids live in Canada as resident, kids attend Canadian schools, spouse files Canadian taxes. I file only US taxes, but treat my wife as resident alien for US taxes and file married filing jointly. I spend a lot of time in Canada, estimate at least 200+ days in Canada. I stay at my spouse family home in Canada, and I have a rental apartment in the US, more for when I am at work.
I know this is a gray zone, but ultimately I do think I still meet criteria of canadian residency due to the treaty tie breaker, with center of vital interest lying more in Canada however this is subjective as well and not law. Anybody think I have enough justification to continue to be deemed non-resident of Canada?

[nelsona]

I would opine that because you spend more time in canada than US, AND that your family lives in Canada, with whom you live, particularly since you do this year-after-year, you would be considered a resident of Canada, by the treaty tie-breakers.

[nelsona]

Does your spouse identify that she is married on her Cdn return, and does she report your US income on page one, for determining benefits?

[mingchi96]

she identifies as married, but does not report my US income.

[Anna2024]

If you also have an on-going rental in the US, and not only for some months you are at work there, you have a permanent home in both countries. Your vital interests are in both countries. While you spend almost the same amount of time in both countries, the term "habitual abode" includes not only a number of days: 

" the concept refers to a stay of some substance in the jurisdiction as a matter of habit, so that the conclusion can be drawn that this is where the taxpayer normally lives."
"it is clear that this paragraph does not go so far as to suggest that frequency of stay or counting the number of stays in each State is the determining or sole factor to be considered."
"To solve this conflict special rules must be established which give the attachment to one State a preference over the attachment to the other State. As far as possible, the preference criterion must be of such a nature that there can be no question but that the person concerned will satisfy it in one State only, and at the same time it must reflect such an attachment that it is felt to be natural that the right to tax devolves upon that particular State. …"

Now, your only attachment to Canada is your family while all the other ties are in the US. If, when analyzing your place of habitual abode, CRA cannot use only the number of days of your stay in Canada, we may still have grounds to say that you are a deemed non-resident in Canada. 

Trieste v. The Queen, 2012 TCC 91 (CanLII)
This case has an interesting discussion of the concept "habitual abode"

https://www.canlii.org/en/ca/tcc/doc/20 ... bnQAAAAAAQ

[mingchi96]

Thank you all for your input. I am stuck in a rock and a hard plate. How can I make whole for sure that I am doing the right thing. Should I submit to CRA to get their determination, but at the same time by doing so will open up a can of worms and possible down a pathway of Canadian residency, or just keep doing what I am doing and keep considering myself a deemed non resident and defend myself if it ever becomes an issue.

[nelsona]

To be a "deemed" non-resident, requires that you not merely "say" that you are more resident of US than canada, but prove it by the treaty.

I don't believe you can, from what you have described, Your center of vital interest, in my opinion, is where you spend time with your family. You spend NO time with your family in the US. Economic interests are not the primary component of "Vital interests"

I always suggest in cases similar to yours that the family visit the spouse in US, not what you are doing.

On the matter of your spouse's income tax return, if she is receiving any Cdn child tax credit or GST rebate, without including your income(on page 1, it is clearly required, even if you are non-resident), this is a violation.

[mingchi96]

Thank you for your insight. My wife did not (or could not) claim child care credit or GST rebate, I believe because she did not report my income on her tax returns.