Tax Implications When Canadian Residents Marry Non-residents
Author: Brad Howland
First Posted: Oct. 7, 2010
Taxpayers should inform Canada Revenue Agency after marrying a non-resident to minimize the impact on benefit payments and allow correct calculation of the spousal amount.
Your spouse will most likely continue to be a non-resident of Canada until actually immigrating to Canada, as long as he/she is a resident of a country that Canada has negotiated a tax treaty with. The list of treaty countries includes most countries you might think of, with some notable exceptions (e.g. Taiwan). New, non-resident spouses living in non-treaty countries may be deemed by CRA to be residents of Canada for income tax purposes as of the date of marriage, since having a spouse in Canada is considered to be a major residential tie.
Marriage to a non-resident spouse can disrupt benefit payments (GST/HST Credit, Canada Child Tax Benefit, or Working Income Tax Benefit payments). You should inform CRA of your change in marital status by submitting Form RC65 to your tax centre as soon as possible after tying the knot. You may need to provide additional documentation to CRA, such as a copy of the marriage certificate and documentation of net income (which can take the form of a letter signed by both spouses).
If you don't tell CRA about your marriage right away, you may find benefit payments will be temporarily suspended after filing your tax return, and you could be required to pay back benefit payments previously received. CRA will be justified in pursuing these tactics until it has documentation of your spouse's net income. It takes time for that information to percolate through the system, so it is best to submit Form RC65 as soon as possible.
File your tax return for the year of marriage as "married" and provide your spouse's name and social insurance number (if he/she has one). Report your spouse's net income for the entire year on Page 1 of the return in Canadian dollars, even if the income is not taxable in Canada because the spouse is a non-resident. CRA needs to know the spouse's net, worldwide income for calculation of benefit payments and confirmation of the allowable "spousal or common-law partner amount."
You can claim the spousal amount on Line 303 of Schedule 1 for a non-resident spouse, if your spouse depends on you for support and his/her net income is low enough. Your situation should comply with the conditions in Interpretation Bulletin IT-513R. Proof of support is required:
"To support a personal tax credit claim for a non-resident spouse, child or grandchild, an individual has to provide (with the income tax return on which the tax credit is claimed) proof of the amounts contributed by the individual as support of the spouse, child or grandchild. Such proof will usually consist of receipts for post office or bank money orders, cancelled cheques that were payable to and negotiated by the spouse, child or grandchild, or receipts from private agencies established for the purpose of transferring money or goods to residents of other countries."