Deemed Non-Resident of Canada: What Section 250(5) Does

You’re a deemed non-resident of Canada when you’d still be a Canadian resident under Canada’s own rules, because of a home, a spouse or the 183-day rule, but a tax treaty makes you a resident of the other country and not of Canada. Section 250(5) of the Income Tax Act then treats you as not resident here, for every purpose of the Act, from that moment. It’s a departure in all but name, and it carries departure tax. It sits in the Leaving Canada guides alongside the ordinary emigrant route.

What does it mean to be a deemed non-resident of Canada?

It means a treaty tie-breaker has decided you belong to the other country. Section 250(5) says a person is deemed not to be resident in Canada at a time if, at that time, they would be resident here but for the subsection and any tax treaty, and are, under a tax treaty, resident in the other country and not in Canada (ITA section 250(5)).

The CRA reads it the same way. Subsection 250(5) applies “if the tie-breaker rules in a tax treaty between Canada and another country result in a determination that the individual is resident in the other country,” and it can reach a factual resident or a deemed resident (Folio S5-F1-C1, paragraph 1.37).

Three things follow from the wording:

• It overrides the rest of the Act. The subsection opens “Notwithstanding any other provision of this Act (other than paragraph 126(1.1)(a)),” so your ties don’t save your Canadian residence once it applies.
• It needs a treaty. Without a treaty that makes you resident somewhere else, there’s nothing for 250(5) to act on, and your Canadian ties decide.
• It’s timed to a moment. The test is applied “at a time,” so the status starts on a date, not at year end.

Deemed non-resident vs deemed resident: what differs?

They point in opposite directions. A deemed resident under section 250(1) isn’t factually resident but is treated as resident for the whole year, most often for sojourning in Canada 183 days or more. A deemed non-resident under 250(5) is someone who would be resident, factually or by deeming, but loses that status to a treaty. The CRA says deemed residence has no application until you’ve been found not to be a factual resident (Folio S5-F1-C1, paragraph 1.30).

Status	Who it covers	What Canada taxes	Provincial tax
Factual resident	Kept significant residential ties (home, spouse or partner, dependants) while abroad	World income, as if you never left	Yes, for the province where you keep ties
Deemed resident, s.250(1)	No significant ties, but sojourned 183 days or more, or a listed government, Forces or aid-program person and certain family members	World income for the entire year	No. Federal surtax instead, and no provincial credits
Factual non-resident	Severed significant ties and lives abroad	Canadian-source income only: Part XIII withholding, or a return for Canadian work, business or property sales	Only on employment or business income earned in a province; otherwise the surtax
Deemed non-resident, s.250(5)	Would be resident under Canadian rules, but a treaty makes you resident elsewhere	Same as a non-resident, from the date 250(5) applies	Same as a non-resident

Sources for the rows: CRA, Factual residents, CRA, Deemed residents, CRA, Non-residents of Canada, and section 250(1). A deemed resident is also “eligible to apply for the goods and services tax/harmonized sales tax (GST/HST) credit,” per the CRA’s deemed-residents page.

The 183-day rule has its own limit inside it. The CRA’s deemed-residents page says it applies to someone who stayed 183 days or more, has no significant ties, and is “not considered a resident of another country under the terms of a tax treaty.” Commuting days from the US to work in Canada don’t count toward the 183.

When does section 250(5) start to apply?

On the date the treaty first makes you resident in the other country and not Canada. The CRA says you become a deemed non-resident “when your ties with the other country become such that, under the tax treaty,” you’d be considered a resident of that other country (CRA, Factual residents). Before that date you’re still a resident here, on world income.

Getting to that date takes two steps. First, the other country has to claim you as its resident under its own law. The Canada-US treaty’s Article IV(1) defines a resident by liability to tax “by reason of” domicile, residence, citizenship or a similar criterion (Canada-US Tax Convention, as amended by the Third Protocol). The CRA reads “liable to tax” as full tax on worldwide income, and the courts have held a green-card holder resident in the US for this purpose (Folio S5-F1-C1, paragraphs 1.41 and 1.44).

Second, the tie-breaker in Article IV(2) has to land on the other country: permanent home, then centre of vital interests, then habitual abode, then citizenship, then the competent authorities. How each test works is covered in the US-Canada treaty tiebreaker rules, and what changes once it breaks is in dual tax resident of Canada and the US.

One old carve-out: 250(5) only reached corporations before February 24, 1998, so it doesn’t apply to an individual who was a treaty resident elsewhere while otherwise resident in Canada on that date and has kept that dual status continuously since (Folio paragraph 1.38).

Does becoming a deemed non-resident trigger departure tax?

Yes. When 250(5) applies, the CRA says you’re “deemed to be a non-resident of Canada for all purposes of the Act,” and the rules for people ceasing to be resident apply from that date, including the deemed disposition of certain property and Part XIII withholding (Folio S5-F1-C1, paragraph 1.38). Your home and family may still be in Canada. The tax result is the same as moving away.

• The deemed disposition is section 128.1(4)(b): when a taxpayer “ceases to be resident in Canada,” they’re deemed to have disposed of each property at fair market value, with exceptions that include real property in Canada and an “excluded right or interest.”
• The CRA’s emigrant page says it outright: “Deemed non-residents are subject to the same rules as emigrants” (CRA, Leaving Canada (emigrants)).
• That means Form T1243 for the gains, Form T1161 if all your property was worth more than $25,000, and the option to defer with Form T1244. The forms and the math are in Canadian departure tax: T1161, T1243 and the deemed disposition.

The awkward part is timing. People don’t feel like they’ve left, so the deemed-disposition date often passes unnoticed until someone asks which country they’re resident in.

What do deemed non-residents file after that?

The same returns as any non-resident. The CRA’s guide for non-residents lists “a deemed non-resident of Canada under subsection 250(5)” as one way of being a non-resident, and the CRA says “the same rules apply to deemed non-residents as non-residents of Canada” (CRA, Guide T4058; CRA, Determining your residency status).

In practice that means:

• The year it starts: a return like an emigrant’s, with world income up to the date and the departure forms.
• Passive Canadian income after that: Canadian payers withhold Part XIII tax, usually your final Canadian tax on it, so tell them your status.
• Canadian employment, business or taxable Canadian property: a non-resident return. The non-resident return form carries a residency-status code, and “Deemed non-resident” is code 2 of four (CRA, RC4018 Chapter 1). If you complete a provincial Form 428 as a deemed non-resident, you also attach Schedule D (Form T1248), per T4058.
• Rent or pensions: the optional section 216 and section 217 returns.

Which return fits which income, with dates, is in the Canadian non-resident tax return guide.

Who usually ends up a deemed non-resident?

Mostly people who move for work and keep something in Canada. The common case is a Canadian who takes a US job, on a green card or a TN, and keeps the Canadian home available rather than leasing it out. With a home in both countries, the permanent-home test can’t decide, so the tie-breaker moves to centre of vital interests (Folio S5-F1-C1, paragraph 1.49).

The visa matters only for the first step. The courts treat a green-card holder as a US resident for the treaty’s purposes (Folio paragraph 1.44). A TN worker is a US resident under US rules once they meet the substantial presence test: at least 31 days in the current year, and 183 days over three years counting all of this year’s days, a third of last year’s and a sixth of the year before (IRS, Substantial presence test).

Swap one fact and the answer flips. If Dev’s spouse and kids had stayed in Vancouver, the centre of vital interests could well stay in Canada, and he’d remain a factual resident taxed on world income.

Can Form NR73 confirm I’m a deemed non-resident?

It can get you the CRA’s opinion, which isn’t the same as a binding answer. In its residency tool, the CRA tells someone leaving Canada with treaty ties abroad to complete Form NR73 “to get CRA’s opinion on whether you would be considered a deemed non-resident of Canada” (CRA, Determining your residency status). The folio says that opinion is based entirely on the facts you give and “is not binding on the CRA” (Folio paragraph 1.55).

Where you need certainty before a move, the folio points to an advance income tax ruling, which the Rulings Directorate may issue “in appropriate circumstances,” generally only where all the facts can be known before the departure (Folio paragraph 1.56). Whether to file Form NR73 when you leave weighs the form on its merits. If you’re still deciding how to leave cleanly, how to become a non-resident of Canada covers the ordinary route.

This guide is general information, not tax advice for your specific situation. Which points apply, and how, depends on your facts.