ITA 2(3) “Persons” non-resident in Canada are required to pay tax on their “Canadian Source Income”, which is income earned/generated in Canada. (1)

CRA assess residency based on a variety of factors such as the location of dwelling, where the taxpayer’s dependents and the spouse resides, and other personal property and social ties of the taxpayer to the country amongst others.

For example, assume Ritesh lives in India with his wife and children and generated $10,000 in the year from working in India. He comes to Canada by himself to work temporarily from March 15th to May 15th and, earns $2,000 from Canadian employment during that time. On May 16th Ritesh returns home to India. As Ritesh’s dwelling, spouse and dependents were are in India he would likely be considered a non- resident of Canada and would only be taxable in Canada on the $2,000 employment income earned in Canada. Ritesh would not be taxable in Canada on his employment income from India.

Non-residents earning passive Canadian-source income such as dividends, interest, or royalties are generally subject to a 25% withholding tax (under Part XIII of the ITA), unless reduced by a tax treaty.  Non-resident withholding tax is not a focus of this textbook but, if it is relevant to you, further details can be found in the Non-Residents of Canada document linked below

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Author: Ritesh Dhall, March 2019

Author: Rumabel Mateo, June 2019

Ed note: In the scenario in the bottom left corner of the image above, the individual would likely fall under the ‘sojourner rule’ and therefore, while the Canadian source income would be taxable in Canada, the individual would likely be considered a ‘resident’, rather than a ‘non-resident’ as discussed in the question itself.  That is why it is considered ‘incorrect’

September 2024