Canada is a country with a lot of taxes and high taxes, which can often be overwhelming for newcomers and even long-time residents. You will need to get a grasp of the various types of taxes imposed at both the federal and provincial levels, including income tax, sales tax, and property tax, among others. Understanding these tax obligations is crucial, as it directly affects your financial planning and budgeting.
Moreover, it is essential to familiarize yourself with what to do and not do when it comes to filing your taxes, as well as knowing the deadlines to avoid penalties. This knowledge will not only help you navigate the Canadian tax system with confidence but also ensure that you maximize your deductions and credits where applicable.
You are usually considered a tax resident if you:
- Live in Canada permanently
- Have significant ties (home, spouse, dependents)
- Stay in Canada for 183 days or more in a year
Canada taxes people based on residency, not citizenship.
Once you become a tax resident, Canada taxes your worldwide income, even money earned outside Canada.
Your First Tax Return
- You must file a Canadian tax return (T1) for the year you become a resident.
- You only report income earned after your arrival date (not before).
- You need a Social Insurance Number (SIN) to file taxes.
Worldwide Income
After becoming a tax resident, you must report:
- Employment income (Canada & abroad)
- Self-employment income
- Rental income
- Investment income (interest, dividends, capital gains)
- Foreign pensions
- Income earned or received outside of Canada
Even if income is not brought into Canada, foreign income falls under the Canadian tax umbrella. There certain cautions if assets are significant and will not be brought into Canada or not immediate. Schedule a consultation for advice as what to do.
Foreign Assets & Reporting
If you own foreign assets (money, bank accounts, stocks, real estate):
- If total cost is over CAD $100,000, you need to file Form T1135
- Penalties are high.
Benefits & Credits for Newcomers
- You may qualify for:
- GST/HST credit
- Canada Child Benefit if you have children
- Provincial credits
- Filing a tax return is required to receive these benefits, even if you had little or no income.
If you own foreign assets or earn income from abroad, think about setting up a consultation. Contrary to online information, the CRA (Canada Revenue Agency) does pursue taxes owed beyond 10 years. There is no time limit. We have seen 16 years.
