Tax Residency

Canada and the US each have strict domestic rules regarding tax residency. Under each country’s domestic tax laws, Americans who spend a significant amount of time in Canada while dating their fiancé(é) might find themselves being tax residents of both countries simultaneously.

This situation is not ideal as it increases the chance that an American will be exposed to double taxation. It therefore may be preferable to establish a singular tax residency. Establishing a singular tax residency also simplifies tax filing obligations.

In cases where an individual’s tax residency is unclear, note that the Canada-US Tax Treaty (the “Treaty”) can be helpful. The Treaty features tiebreaker rules that evaluate an individual’s facts and circumstances to determine which country has a stronger claim to a person’s residence. The Treaty overrides domestic tax rules; for example, American Green Card holders who demonstrate various facts under the Treaty can be deemed tax residents of Canada, if so desired. Retaining a US Green Card while living in Canada as a Canadian tax resident is challenging, however, and may not be ideal.

Indeed, to avoid applying the Treaty factors and to ensure that all US tax obligations are severed, some Americans who move to Canada after marrying a Canadian choose to relinquish their US citizenship or give up their status as US Green Card holders/permanent residents.