As a newcomer, you may have some questions about your tax obligations. Here's what you need to know about it.
Immigration also requires compliance with your host country's tax laws. However, there is a lot of confusion when it comes to income tax returns for newcomers: are they obliged to do so or not, do they also have to pay taxes in their country of origin and what happens to the foreigner's income? So many questions to which Jean-François Poulin, international tax partner at Raymond Chabot Grant Thornton, provides some answers.
Determine tax residency
The first thing you need to do is determine your tax residence, as income tax obligations in Canada depend directly on it. In fact, your obligations are based on your tax residency status, not citizenship.
To do this, you must take into account several elements, including residential connections with Canada, but also the duration, purpose, intention and continuity of residence in Canada.
This Canada Revenue Agency (CRA) page will help you better understand these concepts (canada.ca/fr/agence-revenu/services/impot/impot-international-non-residents/renseignements-ont-deplaces/determination -your- residence status.html)
“If you are tax resident in Canada, this means that you must file an income tax return here and declare income from all sources and from global sources,” explains Jean-François Poulin. So we are talking about labor income, business income, but also rental income. In other words, if you own property in your country of origin that earns you rent, you must report this on your Canadian income tax return.
Don't have Canadian residency status? In this case, you will only be taxed on your Canadian income.
To produce or not?
Jean-François Poulin points out that you are not obliged to file a tax return if you have not earned any income. The same applies if our income for the tax year is about $15,000 and you don't have to pay taxes. But in this case, it could deprive us of several credits, such as those for the GST at the federal level or the Solidarity at the provincial level, or even the Canada Child Benefit or the Quebec Family Allowance. “However, you should know that these credits are calculated in proportion to the number of days that have passed since our arrival in Canada. For example, 25% if you have spent three months in the country,” he adds.
To avoid double taxation, especially if you are a foreign worker on a work visa, you must also check whether there is a tax treaty between Canada and your previous country of residence. For example, under this Agreement you may be considered a non-resident of Canada for tax purposes. In this case, you would be taxed in your home country, creating a credit that you can apply on your Canadian tax return.
“In addition, a foreign worker transferred to Canada could choose to continue paying their social security contributions in their country of origin and not in Canada,” mentions Jean-François Poulin, who adds that many companies do not deal with these concepts is familiar and that the employee finds out too late that he could have made this choice.
- If you have doubts about your tax residence, do not hesitate to consult a professional to avoid mistakes that could cost you dearly.
- Most countries have a system for electronically exchanging tax information. So if you are considered a Canadian tax resident but receive rental income from your previous country of residence, don't forget to declare this on your Canadian tax return, otherwise you will inevitably get caught by the tax office!
- If you have any questions about your tax return, you can contact the fast online tax filing service Impō (impo.ca), the personal tax subsidiary of Raymond Chabot Grant Thornton.