A non-resident earned Canadian employment income working for a non-resident company without permanent establishment in Canada beginning November 2023… Paroll tax withholdings were remitted to CRA. He wants to file a T1 for 2023 to claim treaty exemption and get the income tax withheld refunded. His Canadian employment income is exempt from Canadian tax under tax treaty as long as he is present in Canada “for a period or periods not exceeding in the aggregate 183 days in any twelve month period commencing or ending in the calendar year concerned”… (Article 15 par 2 in most treaties) - this wording puzzles me. He stayed in Canada well below the 183 days limit in 2023 but does not know yet if he will exceed the 183 days total in 2024. What happens if he exceeds the 183 days in twelve month period in 2024? Does he keep his 2023 refund or does he have to repay it? If he must repay, how - by filing an amended T1 for 2023? Or does CRA have a different mechanism to get the tax back?
If he earned the money in Canada it’s taxable in Canada and he needs a S115 return to report the Canadian sourced income. If he was not in Canada when he earned all the income he probably needs a letter to the CRA outlining his treaty position to get the tax back. It sounds like he was working in Canada though so he can’t tax exempt it under the treaty if he was physically in Canada while earning the income. The treaty makes him non-resident for the whole year (possibly) but doesn’t get him out of tax on Canadian sourced employment income. Tax residency is decided each year so if he’s non-resident in 2023 because he was only here for a short period (or rotating from the states for example) then it won’t affect the decision in 2024 although the CRA may deem him to be resident in 2024 if he’s over the 183 day limit. If you can defend 2023 as non-resident under the treaty they shouldn’t retroactively decide he was resident in 2023 also. But be prepared to back it up.
Quick Comments…
There are several concepts at play. I assume he is a “temporary resident” with a work permit and a 900 SIN. The concept “tax residency” refers to a certificate of tax residency and is used when referring to tax treaties and determining tax credits.
We need more information.
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What is his country of tax residency? Is that country the USA? Special rules applies to the US.
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Has he filed his taxes within that country? Does he have a copy of that return? Does he have a copy of his tax assessment?
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Has he filed an NR74, Determining residency status upon entering Canada?
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Did he sever ties with his prior country? Is he taxable in that other country with in country income? Is he required to report his 2024 Canadian income on his prior country? Would that country credit the Canadian income tax under the tax treaty?
In many cases…
In many cases he would prepare both tax returns and send the assessments to each country as their rules apply. After obtaining tax assessments and tax residency determinations, then he would write a letter to each country’s tax agency asking for credits or refunds or adjustments to comply with both country’s rules.
Once you have more information you can contact the CRA’s International Tax Services Office (ITSO) or specialty queue for more advice.
CRA Reference regarding non-residents
CRA Reference regarding tax residency
Certificate of residency
More CRA ITSO rules
https://www.canada.ca/en/revenue-agency/services/tax/international-non-residents-tax.html