Once you leave Canada and establish U.S. residency, Canada’s role in your tax life changes but does not disappear. If you continue to receive income from Canadian sources, each type carries its own withholding rules, optional filing opportunities, and compliance obligations. Understanding what CRA requires after departure, and what it does not, keeps you from either over-filing unnecessarily or missing an obligation.
For many IT contractors, the ongoing compliance burden after departure is driven less by Canadian employment income and more by continued ownership of a Canadian corporation, rental property, or registered accounts. That is the practical focus of this guide.
This guide covers the ongoing Canadian filing requirements that apply to former residents now living in the United States. The departure-year return itself is addressed in the departure tax guide.
Your status after departure
Once you become a Canadian non-resident, you no longer file a full annual T1 return the way you did as a resident. The standard resident T1, which covers all worldwide income, applies only to Canadian residents.
As a non-resident, your Canadian tax obligations depend on whether you receive income from Canadian sources. If you have no Canadian-source income in a given year, you generally have no Canadian return to file. If you do receive Canadian-source income, whether CRA requires a return, or whether you can benefit from filing an optional one, depends on the type of income.
Part XIII withholding: the default mechanism
For most passive income paid to non-residents, Canada collects tax through withholding rather than an annual return. When a Canadian payer sends you dividends, interest, rental payments, RRSP withdrawals, or pension income, they are required to withhold Part XIII tax before releasing the funds. The rate is 25% of the gross amount unless a treaty reduces it.
Under the Canada-U.S. Tax Convention, the withholding rate on many types of income paid to U.S. residents is reduced. The treaty rates most relevant to former IT contractors include:
- Dividends: 15% for portfolio dividends; 5% if a corporate shareholder owns 10% or more of the voting shares
- RRSP withdrawals: generally 25% Part XIII withholding; periodic pension payments, including qualifying RRIF payments, may qualify for a reduced 15% rate under the Canada-U.S. Tax Convention
- Pension income: 15%
- Interest: 0% in most arm’s-length cases under domestic law and the treaty combined
The reduced rate is not applied automatically. Canadian payers generally require documentation establishing U.S. residency and eligibility for treaty benefits. Financial institutions commonly request IRS Form W-9 and may require additional residency certification depending on the institution and the type of income.
At year end, the payer issues an NR4 slip showing the gross income, the withholding applied, and the income code. You receive the NR4 rather than a T4 or T5. The NR4 is the document you and your U.S. tax adviser use when claiming the foreign tax credit on the withholding against your U.S. return.
When Part XIII withholding has been properly applied, no Canadian return is required for that income in most cases. The withholding satisfies Canada’s claim on the income.
Rental income: Section 216
If you continue to own Canadian rental property after departure, the default withholding on rental income is 25% of the gross rent. The Canadian property manager or agent, or the tenant in some cases, is required to withhold before remitting rent to you.
Filing a Section 216 return allows you to pay Canadian tax on your net rental income instead of 25% of gross. Because rental expenses often reduce net income substantially, Section 216 can result in a significantly lower Canadian tax bill.
The Section 216 return is separate from any other Canadian return you may file. It covers only the rental income and associated expenses. The Section 216 return calculates tax using the special non-resident tax computation applicable to Section 216 elections, which often produces a lower result than withholding on gross rent.
To use Section 216, you or your property manager must first have withheld and remitted the Part XIII amount, or arranged for reduced withholding under an NR6 undertaking. The NR6 should be filed before the first rental payment of the year for which reduced withholding is requested, and allows the agent to withhold based on estimated net income rather than gross. The Section 216 return is then filed by June 30 of the following year.
If you miss the NR6 filing and full withholding has not been remitted, you may still file a Section 216 return and receive a refund of excess withholding, but the mechanics depend on whether the payer has properly remitted. Property owners who manage this incorrectly can face penalties assessed against the payer, not the non-resident, so the property management arrangement matters.
Canadian corporation as a non-resident shareholder: Form 5471 and GILTI
If you retained ownership of your CCPC after departure, dividends paid to you as a non-resident shareholder are subject to Part XIII withholding. The departure tax guide covers the deemed disposition on your shares at departure; this section focuses on ongoing obligations once the corporation continues operating.
The corporation itself remains a Canadian entity and continues to file T2 returns, remit payroll deductions, and operate under domestic corporate tax rules. What changes is your status as a shareholder. Each dividend paid to you requires withholding, and the corporation is the payer for Part XIII purposes.
The corporation’s status should be reviewed after departure rather than assumed. Changes in shareholder residency can affect access to the small business deduction, certain tax incentives, and the taxation of retained earnings.
Beyond dividends, significant ongoing U.S. reporting obligations may apply depending on the nature of the corporation’s activities. Form 5471 reporting and the GILTI regime commonly arise for U.S.-resident shareholders of Canadian corporations. For many incorporated IT contractors, these U.S. reporting obligations become more significant than the Canadian T2 filing itself after relocation. The interaction with PFIC rules can be complex and requires U.S. tax advice specific to the corporation’s structure and income profile. These are U.S.-side obligations addressed by your U.S. tax adviser. The Canadian CPA ensures the corporation continues to file correctly as a Canadian entity and that dividends are reported and withheld properly.
Canadian employment income as a non-resident
If you continue to provide services to a Canadian employer or client after departure and receive employment income, the Canadian employer may still be required to withhold income tax from those payments even though you are a non-resident. The obligation depends on whether the services are performed in Canada or in the United States.
Income from services performed entirely in the United States is often not subject to Canadian income tax solely because the client or payer is Canadian. The analysis differs depending on whether you are an employee, independent contractor, or operating through a corporation. If a Canadian payer continues to withhold Canadian tax in error, the excess can be recovered through a non-resident T1 return.
If you provide services in Canada, even temporarily, the Canadian-source income from those services is taxable in Canada. If it is a short-term stay, treaty relief may be available in certain circumstances, depending on factors such as days worked in Canada, the employer structure, and whether remuneration is borne by a Canadian permanent establishment. The conditions of Article XV are fact-specific and should be confirmed before assuming relief applies.
Former IT contractors who provide occasional consulting services in Canada after establishing U.S. residency should track their Canadian workdays and the income earned on those days. Whether a Canadian filing obligation arises depends on the facts, the nature of the services, and the availability of treaty relief.
Canadian pension income: Section 217
Certain Canadian-source income that does not otherwise require a return, including Old Age Security, Canada Pension Plan, and some registered pension income, can be included on an optional Section 217 return. Section 217 allows certain non-residents to elect to calculate Canadian tax on eligible income using an alternative tax calculation that may result in less tax than the Part XIII withholding already deducted.
For most former IT contractors in their active working years, Section 217 is not immediately relevant because the primary Canadian-source income is usually corporate dividends, RRSP withdrawals, or rental income rather than pension benefits. It becomes more relevant after age 60 or 65 when CPP, OAS, and registered pension income begins.
A Section 217 election allows certain non-residents to calculate Canadian tax using an alternative method that may reduce tax compared with Part XIII withholding. The benefit depends on your total Canadian-source income in the year. The Section 217 return is a specific form of T1 return and must be filed by June 30 of the year following the income year. Non-residents expecting to file Section 217 returns may also be able to request reduced withholding in advance through Form NR5.
If OAS is part of the picture, note that the OAS recovery tax can interact with the Section 217 calculation in ways that affect whether the election produces a benefit. This is worth reviewing with a CPA once CPP and OAS begin.
GST/HST as a non-resident
If you were registered for GST/HST as an IT contractor and you leave Canada, your GST/HST obligations depend on whether you continue to make taxable supplies in Canada.
If you no longer carry on commercial activity in Canada, you can apply to close your GST/HST account. There is no automatic deregistration when you leave Canada; you need to formally request cancellation. Failing to close the account while not remitting can attract interest and penalties.
If you continue carrying on business that is connected to Canada, GST/HST obligations may continue even after becoming a non-resident. The GST/HST treatment of services provided to Canadian clients from the United States depends on detailed place-of-supply and zero-rating rules under the Excise Tax Act and should be reviewed individually. Whether a particular supply is taxable, zero-rated, or outside the scope of Canadian GST/HST depends on the nature of the service, the recipient’s status, and where the supply is considered to be made.
Notifying CRA of your non-resident status
When you leave Canada, CRA may not automatically recognize that you have become a non-resident. The departure return signals your non-resident status for the departure year, but ongoing non-resident obligations are managed at the payer level through withholding requirements.
For financial institutions and pension administrators paying you income after departure, you should notify them of your non-resident status and U.S. address so they apply the correct Part XIII withholding and issue NR4 slips rather than T4 or T5 slips. If they continue issuing resident slips, your U.S. return may report income that Canadian reporting has characterized differently. Correcting that afterwards is possible but adds complexity.
CRA offers Form NR73 for taxpayers seeking CRA’s opinion on residency status. Because the form requires extensive disclosure and is not mandatory, professional advice should be obtained before submitting it. In straightforward departures where the facts clearly support non-resident status, most practitioners do not recommend filing NR73.
Foreign reporting requirements (T1135)
Once you become a Canadian non-resident, the foreign reporting requirements that apply to Canadian residents generally cease to apply. Canadian residents who hold foreign property with a cost exceeding CAD $100,000 are required to file Form T1135 each year. As a non-resident, you are no longer subject to this filing obligation. For most departing Canadians, the departure-year return is the final year in which a T1135 filing obligation may apply.
This is a point of genuine concern for many departing Canadians who accumulated significant foreign investments while resident. For most individuals, the T1135 obligation ends once Canadian tax residency ends.
Provincial filing as a non-resident
You do not file a provincial income tax return after becoming a non-resident, even if you previously filed a Quebec TP-1, Ontario, or another provincial return. Provincial income tax applies to residents. Once you are a Canadian non-resident, provincial income tax obligations effectively end for most income types.
An exception applies to income earned through a business with a permanent establishment in a province. In that case, provincial allocation calculations can still be relevant even for a non-resident individual. This situation is uncommon for former IT contractors who have fully departed, but worth noting if any Canadian business activity continues after departure.
Coordinating Canadian and U.S. filing
The Canada-U.S. Tax Convention has a mutual agreement procedure for cases where both countries are asserting tax on the same income or taking inconsistent positions. For most former IT contractors, the coordination between the Canadian and U.S. returns is handled at the foreign tax credit stage: withholding paid to Canada is claimed as a foreign tax credit on the U.S. return, reducing the U.S. tax on the same income.
The ordering matters: if the U.S. return is filed without properly accounting for Canadian withholding credits, the result is paying tax twice on the same income. Your U.S. tax adviser should receive documentation of all Canadian-source income and the Part XIII withholding paid each year so the foreign tax credits are claimed correctly.
What to organize each year
For each year you receive Canadian-source income as a non-resident, the following documents are relevant:
- NR4 slips from financial institutions, pension administrators, and corporations showing Canadian income and withholding applied
- property management statements if you hold Canadian rental property, including the NR6 status for the year
- corporate dividend resolutions and the withholding remitted by the corporation to CRA
- any T4 slips if you performed services in Canada
- documentation of days spent in Canada for work purposes, if any
- your U.S. foreign tax credit claim for the preceding year, to confirm Canadian withholding was credited correctly
Annual Canadian filing obligations after departure are generally lighter than what was required as a resident. The administrative burden comes from maintaining accurate records of each Canadian income stream, ensuring the correct withholding rate is applied at the payer level, and coordinating with the U.S. return. Working with both a Canadian CPA and a U.S. tax adviser each year is the clearest path to avoiding duplication and missed credits.
The RRSP guide covers withholding on RRSP withdrawals after departure in more detail. The departure tax guide covers what was required in the departure year itself.