If you’re a newcomer in Canada or have returned to Canada after spending an extended period outside the country, you may be required to file an income tax return.
The information in this article will help you familiarize yourself with the fundamentals of Canada’s income tax system and help you prepare yourself for the tax filing season in March and April. Here are six things you should know.
1. What is a tax return and when is it due?
An income tax return is a comprehensive account of the previous calendar year’s (January 1 to December 31) income and deductions, along with federal, provincial and territorial taxes paid and owed. It also helps determine if you’re entitled to a refund from the government of some or all of the tax that was deducted from your income during that year.
In Canada, income tax returns for individuals (other than self-employed individuals) any given calendar year are due by April 30th of the following year. Note that there is a penalty for not filing your returns on time.
2. The CRA administers taxes in Canada
In Canada, both, the federal and provincial/territorial levels of government impose personal income tax on individuals. This means that you will pay two types of income tax: federal income tax and provincial/territorial income tax, depending on your province/territory of residence as of December 31st of previous year.
The Canada Revenue Agency (CRA) administers the tax laws for the federal, territorial and most provincial governments. The only exception is Quebec where Revenu Quebec administers its own provincial income tax.
3. Your requirement to file an income tax return is determined by your residency status in Canada
If you’re a permanent resident (PR) or a deemed resident of Canada, you are required to file a tax return for the entire tax year or part of the tax year you’ve lived in Canada. In some cases, non-residents may be required to file their returns too. Even if you’re not required to file a tax return, it is recommended to do so to take advantage of the benefits.
Generally speaking, if you are a resident of Canada, you should file a tax return if:
- You’ve had a Canadian or international source of income
- You owe the government money or want to claim a refund or benefit
- You want to claim goods and services tax/harmonized sales tax (GST/HST) credit or any provincial credits
- You were contacted by the CRA to file a tax return
- You’ve received any kind of tax benefits from the government or earned income from selling capital property
The Government of Canada provides detailed information on taxation for newcomers in Canada. It outlines the basics and walks readers through the process of completing their tax returns.
4. Filing tax returns has certain benefits
As a resident, deemed resident or non-resident, if you don’t have any Canadian income and have been in Canada for a very short time (less than 183 days in a year), you may not be required to file a tax return. However, filing tax returns has certain benefits:
- GST/HST credits, the Canada Child Benefit (CCB), the Canada Worker Benefit formerly known as Working Income Tax Benefit and other provincial or territorial benefits and credits.
- A tax refund is issued when you didn’t earn enough income during the year or you paid excess tax. The government sends you back all or part of the taxes you’ve already paid.
Note: A majority of benefits and credits in Canada are income based and eligibility is often determined by your income tax return (T1).
5. Your SIN (Social Insurance Number) and tax slips are required documents when filing a tax return
Aside from providing your basic personal information such as your name and address, you will need the following:
- Social Insurance Number (SIN).
- For recent newcomers, you will need to provide employment and income information prior to your arrival in Canada.
- Details for dependents (spouse, children or elderly parents).
- If you’re already employed in Canada, you will need your T4 slips. These are provided by employers.
- For entrepreneurs or business owners, you’ll need to show income earned and expenses paid.
- You’ll need to report foreign income after moving to Canada or foreign assets over $100,000.
- Medical expense receipts for yourself, your spouse or children.
- Childcare expense receipts.
If you’re an international student in Canada, learn more about filing tax returns in our article: Confused about tax returns? Everything you need to know as an international student.
6. Your first tax return as a newcomer in Canada has to be mailed to CRA
If you have a modest income and a simple tax situation, a volunteer from the Community Volunteer Income Tax Program (CVITP) may be able to do your taxes for you, for free. You can find a tax preparation clinic near you through the CRA web page or by using the MyCRA mobile web app.
Canada’s tax system may seem complicated but the right knowledge and resources makes it easier to comprehend and navigate. Stay tuned to Arrive articles and webinars to be better informed and set yourself up for financial success in Canada.
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This article offers general information only and is not intended as legal, financial or other professional advice. A professional advisor should be consulted regarding your specific situation. While information presented is believed to be factual and current, its accuracy is not guaranteed and it should not be regarded as a complete analysis of the subjects discussed. All expressions of opinion reflect the judgment of the author(s) as of the date of publication and are subject to change. No endorsement of any third parties or their advice, opinions, information, products or services is expressly given or implied by Royal Bank of Canada or its affiliates.