A large number of individuals departed Canada during 2020 to be closer to family members living abroad, and ride out the Pandemic with those closest to them. Time spent outside of Canada may result in filing requirements on your tax return which are outside of the norm. It is important to make sure that you are being fully tax compliant with regard to filing requirements due to time spent outside of the country.
Common scenarios for those leaving Canada during 2020 due COVID:
I kept my job in Canada whilst I worked remotely for a few months in another country, I later returned to Canada, will this affect my return?
By maintaining your employment with a Canadian employer you will be considered as a Canadian tax resident throughout your time outside of the country. This means you will file your 2020 tax return in the same manner as if you had been residing in Canada for the entirety of 2020. As you had not taken up employment abroad, you had not taken up tax ties with another country, helping maintain your tax residency to Canada.
I left Canada for a few months due to COVID, I did not work while abroad, I returned before the end of 2020, how does this affect my return?
You are typically required to be residing in Canada for 183 days or more a year to maintain your Canadian tax residency, other actions can also support your maintenance of Canadian tax residency, such as not starting tax residency in another country. If you were outside of Canada for less than 183 days, you have not problem in proving you maintained Canadian tax residency. If you were outside of Canada for longer than 183 days, but did not take up employment abroad, you can also claim that you maintained Canadian tax residency. Other things such as keeping physical property in Canada, showing your intent to return can also support your maintenance of Canadian tax residency.
By maintaining Canadian tax residency you will file your 2020 tax return like normal, in the same manner as if you resided in Canada for the entire year.
I left Canada for a few months due to COVID, I worked for a foreign company while abroad, I returned before the end of 2020, how does this affect my return?
If you left Canada for a few months, and took up employment while outside of the country, you can also maintain your Canadian tax residency for the entire year if you were residing in Canada for at least 183 days during 2020.
As you earned foreign income during your time abroad, you will be required to make a foreign income declaration on your Canadian tax return. You will be required to declare the total foreign income earned, as well as the total foreign tax paid on that income. If CRA deems that you paid sufficient foreign tax on that foreign income, you will not be required to pay Canadian tax on that income. Worst case scenario, if CRA does not deem you have paid sufficient foreign tax, you will also be hit with Canadian tax on that foreign income.
I left Canada during 2020 for over 6 months and have been working abroad, I am planning on returning in 2021 at some point, how should I file my tax return?
If you left Canada for over 6 months, took up employment abroad and have not returned to Canada before the end of 2020, you will be considered as a Canadian tax emigrant for 2020. This means that you will have ceased to be a Canadian tax resident on the date you left Canada in 2020 and will be required to file an emigrant tax return.
If you return to Canada in 2021 you will file as a newcomer tax resident when filing your 2021 tax return.
Does tax residency and maintaining tax compliancy seem like too much of a pain for 2020? Why not ask a professional for help?
2020 will be a particularly unique year for tax filing with regard to tax residency. If you are unsure of your obligations and want to remain tax compliant there is no harm in asking a professional for assistance with your 2020 tax filing. The jackstaxback team is always happy to take the weight off your shoulders and ensure that your return is filed correctly. If you are interested in a free consultation, please message us today. Tax doesn’t have to be taxing.