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I am a Canadian citizen, but nonresident of Canada for tax purposes. I currently live in the US.

I have a savings account at a Canadian bank in Canada and have earned a little bit of interest, around $300 in 2015. As a nonresident of Canada I do not file taxes in Canada. Am I supposed to pay income tax on this interest earned? How do I do so?

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You should read up on the subject, as it is not straightforward. A good starting point is here: http://www.cra-arc.gc.ca/tx/nnrsdnts/ndvdls/nnrs-eng.html

  • As a nonresident you do have to pay tax on income from Canadian sources.
  • Your bank should be deducting income tax or withholding tax from your interest. You may need to tell them you are nonresident. They should be sending you a statement of what they have deducted.
  • if this is true for all your Canadian income you do not have to file a tax return. See here for more details of who has to file returns: http://www.cra-arc.gc.ca/tx/nnrsdnts/ndvdls/nnrs-eng.html
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No, as a Canadian citizen with USA residency you do not HAVE to file a Canadian tax return for this interest if you include it on your USA return. But you could if you wanted to.

The text I quoted below is from the USA Canada tax convention establishes that the tax liability may be paid only in the state of residence. (thank you brian who provided the link in the comments of another answer.) My interpretation is that the decision of which state (Canada or USA) to pay tax to would be up to the tax payer.

My research:

"Contracting State" is one of the two countries that agreed to this convention, USA or Canada.

A definition: https://www.hcch.net/en/instruments/conventions/specialised-sections/apostille/faq1

The expression "Contracting State" refers to a State which has consented to be bound by a Convention, whether or not that Convention has entered into force for that State (see Art. 2(1)(f) of the Vienna Convention referred to above; this is in contrast to the term "party", which refers to a State that has consented to be bound by a Convention and for which that Convention is in force).

The tax treaty itself, followed by text of its relevant sections: https://www.canada.ca/en/department-finance/programs/tax-policy/tax-treaties/country/united-states-america-convention-consolidated-1980-1983-1984-1995-1997-2007.html

Article I

Personal Scope

This Convention is generally applicable to persons who are residents of one or both of the Contracting States.

and:

Article XI

Interest

  1. Interest arising in a Contracting State and beneficially owned by a resident of the other Contracting State may be taxed only in that other State.
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  • The thing that confuses me though, is that the bank would still probably generate a T5 or whatever the tax form code is, and then wont Canada wonder why a tax slip has been generated but no tax return filed?
    – redfox05
    Mar 29 at 17:33
  • @redfox05 even if they did, the presence of a T5 doesn't trigger taxation, residency does. I imagine if the CRA pushed on this providing documentation of residency in another country would suffice to close the matter.
    – Tongfa
    Apr 1 at 21:21
  • yes thats the hope, sounds logical. Just checking as you hear horror stories where once they look at you for something, even if someone is found to be doing it right, they will look into EVERYTHING else with a microscope to find something just to make it worth their while and try to recoup their costs for even looking at you to start with. Hence the 'what if a generated T5 without a filing triggers something'. Just want to do it right lol, without fear :-)
    – redfox05
    Apr 12 at 14:57

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