Canadian Immigrants: Tax Tips You Need to Know

Whether refugees from conflicted countries are looking to start anew for themselves and their families, or disgruntled Americans are looking to escape a government they do not agree with, immigration to Canada has never been a hotter topic.

According to a March 10 Ipsos Poll, some 19 per cent of Americans would consider moving to Canada if Republican frontrunner Donald Trump became the next US president. In addition, since the fall, Canada has welcomed close to 25,000 Syrian refugees with open arms.

In the latter instance, on top of learning the language, finding housing, employment and getting used to a new life, immigrants have a lot to consider when coming to Canada, especially during tax season. Tax and financial advisors can help in their roles as educators, advocates and stewards of family resources for newcomers.

Here in Canada the tax filing rules are quite different, depending on where you come from. Because we tax worldwide income in Canadian funds, all newcomers to Canada should determine whether they are, in fact, residents for tax purposes. It is residency that determines the requirement to file the return in Canada, whereas the US system, for example, is based on not citizenship.

There are a lot of grey areas around residency. Under the Residency-Overview topic in Knowledge Bureau’s EverGreen Explanatory Notes, “A Canadian resident is not a defined term in the Income Tax Act. However, S. 250(3) states that, ‘a person resident in Canada includes a person who was at the relevant time ”ordinarily resident” in Canada.’”

All the factors in a particular situation will be considered to determine if a taxpayer is a resident for tax purposes. Non-residents, according to CRA, routinely live in another country throughout the year and do not have residential ties in Canada, or they stay in Canada for less than 183 days in the tax year.

The major factor is your residence. Residential ties to Canada include: a home in Canada, a spouse or common-law partner or dependants who remain in Canada, and personal property that is left in Canada, such as a car or furniture. Also considered are social and economic ties in Canada.

Other ties that may be relevant include a Canadian driver’s licence, Canadian bank accounts or credit cards, and health insurance with a Canadian province or territory. Residential ties that you maintain or establish in another country may also be relevant.

Canadian immigrants can find out more information about the rules and programs available here.

Once residency status is determined, the individual can then determine what the tax implications of earning various sources of income are. Tax returns must be filed if the immigrant has to pay tax or wants to claim a refund. Even in cases where the newcomer did not make any income in the tax year, a return must be filed to determine eligibility for GST/HST credits, Canada Child Benefit, and, if applicable, payments from certain provincial/territorial programs. Special consideration may be given to refugees to enable more immediate access to certain refundable tax credits.

According to Canadavisa.com, there are many additional assistance programs people can align themselves with to aid in making the move to Canada; for example, the Federal and Quebec Skilled Worker Program or the Family Class Sponsorship programs.

Immigrants can look into these kinds of programs themselves to find out what category they fall under after answering some questions through the Government of Canada questionnaire. (The application will then be considered by an immigration officer in accordance with the Immigration and Refugee Protection Act, according to the website.)

Whether fleeing political strife and war, or simply looking to Canada as a place for themselves and their families to flourish in the future, immigrants need to know what will be expected of them. Providing an interpretation of how to navigate complicated government programming and tax rules is a great way for professional tax and financial advisors to add value and engage with a community of prospective new clients.

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