Working in Canada on a Work Permit may still not count as a tax resident, what is Departure Tax Return?
- Toronto CPA Service
- 23 hours ago
- 2 min read
How Should You File Your Personal Income Tax?
Many people assume that having a work permit, living in Canada, and earning employment income automatically makes them a Canadian tax resident. In practice, this is not always true — and the consequences of filing the wrong type of tax return can be costly.
This is especially common for individuals who:
Hold a Canadian work permit
Work in Canada temporarily (often 3–6 months)
Fill short-term or transitional positions
Plan to leave Canada after the assignment
Canadian Tax Residency Is Not Based on Visa Status
Canada Revenue Agency (CRA) does not determine tax residency based on your immigration status.
Instead, CRA looks at your residential ties, such as:
Whether you have a permanent home in Canada
Whether your spouse or dependants are in Canada
Length and intention of your stay
Health card, driver’s licence, bank accounts
Whether your work is temporary or long-term
Because of this, it is entirely possible to:
Live and work in Canada, earn employment income, and still be treated as a non-resident for tax purposes.
Scenario 1: You Work in Canada but Are Considered a Non-Resident
If CRA determines that you are a non-resident or deemed non-resident, then:
✅ What you must report
Canadian-source income only
Employment income earned in Canada
Canadian rental or investment income (if any)
❌ What you do NOT report
Foreign income earned outside Canada
Global income from other countries
📌 How you file
You do not file a regular resident T1 return
You file a Non-Resident / Deemed Non-Resident tax return
Filing as a resident when you are actually a non-resident may result in:
Overpaying tax
CRA reassessments
Requests to explain your residency status
Scenario 2: You Are Leaving Canada — What Tax Return Is Required?
If you leave Canada permanently or sever most residential ties, CRA may consider you to have emigrated.
In this case, you are required to file a:
✅ Departure Tax Return (Emigrant Return)
This return:
Covers the period from January 1 to your departure date
Reports worldwide income up to the date you leave Canada
May trigger departure tax (deemed disposition) on certain assets
What Is Departure Tax?
When you leave Canada and become a non-resident, CRA assumes that you:
Sold certain assets at fair market value on the day you left.
This can apply to:
Non-registered investments
Shares
Certain business interests
⚠️ RRSPs, TFSAs, and Canadian real estate are generally excluded, but reporting is still required.
Even if no tax is ultimately payable, the reporting obligation still exists.
Common Mistakes We See
Filing as a full-year resident despite short-term work
Not filing a departure return when leaving Canada
Ignoring residency status because “I had a T4”
Assuming physical presence alone determines tax residency
These mistakes often lead to:
CRA reassessments
Penalties or interest
Lengthy back-and-forth with CRA
Key Takeaways
Work permit ≠ Canadian tax resident
Short-term employment can still result in non-resident tax status
Leaving Canada usually requires filing a departure (emigrant) tax return
The type of tax return you file matters just as much as reporting the income
If you are working in Canada temporarily, planning to leave, or unsure about your tax residency status, it’s important to determine your status before filing — not after CRA contacts you.
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