Who This Applies To
- Non-residents: individuals who don’t reside in Canada and don’t maintain significant residential ties.
- Deemed residents: those with certain obligated ties (government employment abroad, military, etc.) or personal circumstances triggering residency status under tax treaties. (canada.ca)
Major Changes for 2025–-2026
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Lowest income tax rate lowered: From 15% to 14%, effective July 1, 2025, proration resulting in 14.5% for full-year 2025. (canada.ca)
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Underused Housing Tax (UHT) eliminated: No UHT payable or returns required for 2025 or later years. Penalties/interest still apply for 2022-2024 obligations. (canada.ca)
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Residency and Deemed Residency Rules: Updated definitions and tests clarified in the 2025 CRA guide for Non-Residents and Deemed Residents. E.g., those overseas with government credentials, or in the 19th month, certain ties, etc. (canada.ca)
Obligations You Shouldn’t Miss
- File tax returns if required, even if your world income is mostly foreign; Canadian source income or benefits/credits may be at stake.
- Reconcile withholding: Non-Residents may see 15% withholding on Canadian source; deemed residents may need to report global income.
- Update CRA when your permit/immigration status changes, as eligibility for benefits/credits often depends on status.
- Claiming credits: make sure you correctly classify expenses and claims under the new lowest rate rules.
Practical Example
Sara lives abroad, is a deemed resident because she’s a government employee posted overseas with a permit. Her world income is reported to Canada. In 2025:
- Adjust her withholding or instalments anticipating the lowest 14.5% bracket until July 1, then 14%.
- If she owned housing in Canada previously subject to UHT, she no longer owes UHT for 2025 or later.
- Use the CRA’s forms for non-residents / deemed residents, especially for benefits/credits.
Tips for Smooth Compliance
- Track your presence and ties: days in Canada, property, bank accounts—to assess your residency.
- Maintain immigration documentation, valid permits, employer letters, etc.—crucial for deemed residency status.
- Stay on top of CRA publications, like updated guides/forms for Non-Residents and Residency Status.
- Retain records for foreign income even when taxed abroad, and access treaty credits if applicable.
Bottom line: For non-residents and those in borderline status, recent and proposed changes (UHT elimination, rate changes, redefined residency tests) are significant. Being fully informed now avoids lost refunds, unexpected taxes, or penalties.