Tax Tips for Newcomers to Canada
Allan Madan, CA
Are you a newcomer or know someone who is? Read this blog to learn more about Canadian taxes and the deductions and credits that are available to you.
As a resident of Canada you are liable for Canadian income taxes on your worldwide income. You become a resident of Canada for income tax purposes when you establish significant residential ties in Canada. You can usually establish these ties on the date you arrive to Canada.
Significant ties include:
- A home in Canada either rented or owned
- A spouse in Canada
- Dependents in Canada (such as children)
File a Tax Return
As a resident of Canada you must file a tax return if you:
- Have to pay tax; or
- Want to claim a refund
Even if you have not received income in the year, you have to file a tax return to continue receiving the benefits and credit payments that you are entitled to. The filing due date for personal tax returns is April 30 of the following year.
Complete Your Tax Return
There are three areas on your tax return that must be completed during preparation.
Identification: Complete the entire identification area on page 1 of your tax return. This is used to assess your tax return and calculate your GST/ HST credit, plus any benefits you may be entitled to under the Canada child benefit.
Date of entry in Canada: When completing this area on your return, enter the date you became a resident of Canada for income tax purposes.
Partner Information: Enter your partner’s net world income for the year.
Benefits You Can Claim
Canada Child Benefit:
If you have kids, claim the Canada Child Benefit. This is a tax-free monthly benefit payment made to eligible families to help them with the cost of raising children under 18 year of age. Families with children under age 6 will receive an annual tax-free benefit of up to $6,400 per child. Those with children between the ages of 6 and 17 will receive up to $5,400 annually. Households with children with annual income below $30,000 will receive the maximum payment.
To apply for the Canada Child Benefit , fill out and send form RC66, Canada Child Benefits Application to the Canada Revenue Agency (CRA).
GST/ HST Credit:
The GST/HST credit is a tax-free quarterly payment that helps individuals and families with low-income offset all or part of the GST/HST that they pay. You no longer have to apply for this credit, the CRA will automatically determine if you are eligible for the credit when you file your next tax return. The credit is determined by the number of children that you have registered for the Canada Child Tax Benefit or the GST/HST credit; and your family net income.
Deductions You Can Claim
You can deduct contributions made to a Canadian registered retirement savings plan. The maximum deduction limit is the lesser of:
- 18% of your prior year’s income
- $25,370 (2016)
Pension Income Splitting:
If you and your partner were residents of Canada on December 31, 2015, you can elect to split your pension income. To make this election, you and your spouse or common-law partner must complete and attach Form T1032.
Generally, you cannot deduct moving expenses. However, if you entered Canada to attend courses as a full-time student enrolled in a program at an educational institution, and received a taxable Canadian scholarship, you may be eligible to deduct your moving expenses.
If you make spousal or child support payments, you may be able to deduct the amounts you paid, even if your former spouse or common-law partner does not live in Canada.
Make sure you consider these tips if you are a newcomer to Canada, and claim all the tax credits and deductions that are available to you.
The information provided on this page is intended to provide general information. The information does not take into account your personal situation and is not intended to be used without consultation from accounting and financial professionals. Allan Madan and Madan Chartered Accountant will not be held liable for any problems that arise from the usage of the information provided on this page.
My spouse, 4 kids under the age of 10 and I became PR of Canada in July this year. I still retain my job in my home Country and travel back and forth Canada every month to see my family. I am being taxed in my home country, am I taxable as per the Canadian standard? if yes, how can we save maximally on taxes? My spouse isn’t currently working.
Yes, you are taxable in Canada on your worldwide income. However, you can claim a foreign tax credit on your Canadian tax return for part or all of the foreign taxes paid. You should also claim the spousal tax credit since your spouse is not working.
I have a question for you regarding capital gains claimed on the sale of a property outside of Canada. This relates to year 2012 tax return and this property was our principal residence till we moved into Canada. Now in 2015 we sold our principal residence in Canada but we had a loss instead of a gain. Can I amend my tax return to change the capital gain claimed in 2012 ?
You cannot amend your 2012 tax return to change the capital gain. You cannot deduct the loss on the sale of a principal residence in 2015.
I will be landing in Canada soon as a permanent resident. Apart from the initial proof of funds ,I intend to transfer my savings and proceeds from investments to a Canadian bank account from my home country within about 3 to 4 months after the landing. Kindly clarify if the wire transferred funds will be treated as worldwide income ,or is there any exemption for newcomers as this can be treated as settlement funds and not income.
Hi Nithin, you can transfer your overseas savings to Canada that you accumulated prior to becoming a tax resident of Canada without having to pay Canadian income taxes on the amount transferred.
Hello madan, I landed in Canada as a pr in Feb. I have applied ccb for 2 kids. I was confused in mentioning previous year income. I had mentioned the amount that I have come to Canada rather than mentioning whole amount of previous year.
Can I send the corrected form once again. Does my ignorance impact me due to sending the initial form without full knowledge. Could you please suggest
Hi Prajwal, send the corrected form. You may be required to payback some of the CCB received.
I have a question about new immigrants to Canada. My friends told me whe we are filing the tax return for the first time, we will get a welcome Canada amount, just like a tax refund from CRA. Is there any kind of amount from the govt. to the new comers?
Hi Liby, there is no such amount.
Hi, I am a Canadian PR but I only spent about 12 hours in Canada for my new migrant `landing’ procedure, and left Canada immediately after. I presume this means I am not (yet) a Canadian tax resident as I have not yet established significant ties. Is it possible for me to avoid future taxes on my investment income if I gift my investment assets to my father, who is a not a Canadian tax resident, before I actually start living in Canada? If I live in Canada for several years and then leave Canada permanently, and then my father gifts the investment assets back to me, will I liable for any tax on that? Thank you.
Hi Alex, You are not a tax resident of Canada, since you do not have significant ties to Canada.
If you gift your investments prior to coming to Canada to your father, then you will not have to pay tax in Canada on income derived from those investments. Once you permanently leave Canada, your father can gift the investments back to you, and you will not have to pay tax in Canada on the gift received. However, the CRA could argue that you never really gifted the investments to your father, since it was always your intention for your father to return the investments to you. As a result, the CRA could impose tax on the income earned on the investments.
I am a newcomer living in Mississauga ON. I am now ready to submit my tax return for 2018 but am not sure what address to mail my return to. Some say, it should be mailed to the Sudbury office, whereas others suggest Winnipeg office. Can you help?
When mailing returns or documents to the CRA, always send them with a tracking number, so if they are misplaced, you have proof of submission.