U.S. Citizens and Green Card Holders in Canada

A special problem arises where a U.S. citizen (or a green card holder) becomes a tax resident in Canada.

Under the provisions of the U.S. Internal Revenue Code, a U.S. citizen remains subject to U.S. income taxation on his income from worldwide sources even if he takes residence outside the United States. Thus, where a U.S. citizen becomes a tax resident in Canada, his income is subject to income taxation both in Canada and the U.S.

The double-taxation which may arise in this situation is avoided under special provisions of the Income Tax Act and the Canada-U.S. Income Tax Convention (1980). Specifically, pursuant to Article XXIV (Elimination of Double Taxation) of the Canada-U.S. Income Tax Convention, both Canada and the U.S. have agreed to provide foreign tax credits to the U.S. resident residing in Canada.