The Canadian tax system
Taxation in Canada is essential to provide and maintain the standard of public services and facilities.
As a resident, you have the right and responsibility to determine your income tax status and pay the required tax each year. This is done by completing an Income Tax and Benefit Return where you report your income, claim deductions and benefits and calculate your federal, provincial or territorial tax.
Determining residency status in Canada?
The Canada Revenue Agency or CRA defines a resident of Canada as one with significant residential ties in Canada. Becoming a resident comes with the added responsibility of paying an income tax.
Newcomers who applied for and received permanent resident status or an approval-in-principle from the IRCC are residents of Canada for tax purposes once they establish residential ties to Canada.
Residential ties here include:
- A home in Canada
- A spouse or common-law partner and dependents who moved to Canada to live with you
- Personal property
- Social Ties in Canada
Newcomers can complete Form NR74 Determination of Residency Status (Entering Canada) to clarify their residency status with the CRA.
Getting a Social Insurance number
The CRA uses a Social Insurance number or SIN to identify you for income tax purposes. It is a unique and confidential number essential for all residents, including Citizens, permanent or temporary residents. You can submit an application for a SIN number with Service Canada. The 9-digit number allows you to:
- Receive tax benefits and credits
- Work in Canada and
- Open bank accounts in Canada
For cases where you cannot get a SIN, the CRA can issue a temporary tax number (TTN) that can be used to get benefits and credits and file taxes.
Filing Income tax returns
The most common reasons to file your income tax return are to:
- Pay tax for the year
- Claim a refund
- Claim and receive credits and benefits OR
- If the CRA sends you a request to file a return
A complete list of circumstances can be found on the Canadian government site.
The CRA allows you to file your Income tax returns Online through certified tax software or on paper -mailed to a tax centre. Related information required to complete your tax return can be found in your income tax package and the Canadian government’s Newcomers to Canada 2022 guide.
Free tax clinics and online tutorials can also help guide you as a newcomer in Canada.
Tax Benefits and Credits?
Tax Benefits and Credits help you financially support yourself when dealing with added responsibilities or economic hardships. This includes:
- GST/ HST credit and climate action incentive payment- A tax-free quarterly payment for people with a low to modest income.
- Canada child benefit- Helps parents with the cost of raising a child under 18 years.
Deadline for filing an Income Tax Return
In most cases, the deadline for filing your 2022 tax return is on or before April 30, 2023. Failure to meet the deadline can result in interest, penalties, and disruptions to benefit and credit payments.
Effects of the PSAC strike
According to a CRA announcement on April 19, some CRA services will be delayed or unavailable during the strikes.
It further elaborated that Canada child benefits will remain untouched and continue to be issued per schedule.
The CRA also has no plans to extend the tax filing deadlines, and tax returns will continue to be accepted throughout the strike.
Newcomers can still apply for and get issued Social Insurance Numbers as it falls under the government’s essential services. However, applicants must be prepared for processing delays and increased wait times in call centres due to labour strikes.