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Tax Residency In Canada: Deemed Residency (Part 2)

January 12, 2023

By: Rimo Rico, Associate, Farber Tax Law

In our previous blog post, we discussed factual residency of Canada for income tax purposes. In Part 2, this post describes how an individual can be deemed to be resident of Canada for income tax purposes under the Income Tax Act.

If a person is physically present (technically, ‘sojourning’) in Canada for a period of, or periods that total, 183 days or more in a taxation year, they will be “deemed” to be resident of Canada for income tax purposes throughout the year. Being a “deemed” resident of Canada means that a person will be treated as subject to Canadian income tax laws if they meet or exceed the 183-day threshold.

Additionally, certain government employees appointed to a post overseas are deemed to be resident of Canada if they were resident of Canada immediately prior to their departure. For example, members of the Canadian armed forces, ambassadors, Ministers, high commissioners, officers or servants of Canada or of a province posted overseas are deemed to be subject to Canadian income tax while working abroad.

Several examples illustrate how the 183-day rule works in practice. For the 2023 taxation year, an individual would meet the 183-day threshold if they were to sojourn in Canada consecutively from January 1, 2023 to July 3, 2023. Alternatively, an individual would be deemed to be a resident of Canada if they sojourned in Canada for non-consecutive periods adding up to 183 days or more during the 2023 taxation year.

The 183-day clock resets on December 31, the last day of an individual’s taxation year. As a result, an individual may reside in Canada for 182 days during a taxation year, but if they do not arrive at the 183-day threshold at the end of the year, the deeming rule will not apply. The clock “resets” as of January 1 of the following taxation year and the calculation begins afresh.

The more time an individual spends in Canada, even if they do not meet the 183-day threshold, the more the stay may contribute to finding them factually resident for tax purposes. If you have questions regarding your residency status under Canada’s tax regime, contact a lawyer at Farber Tax Law for a consultation.