Tax Filing Guide for Newcomers to Canada

What Every Immigrant Needs to Know

Welcome to Canada! If you are a newcomer and an immigrant in the Great White North, there are a lot of things you need to learn, aside from finding your way around your neighborhood. One of which is tax filing.

This guide will teach you about Canada’s tax structure and how to file your first tax return as a newcomer.

An Overview of Canada’s Tax Structure

Canada adopts a graduated or progressive tax system, meaning the more one earns, the higher the tax to pay. In Canada, you pay the rate in the lowest bracket and the highest rate for each additional dollar. This is also called the marginal tax rate.

To give an example, let’s say you earn $1. In that case, you’ll pay 10%. On the second dollar, you’ll pay 20%. On the third dollar, you’ll be on the hook for 30%. But this does not mean that you will pay 30% of the $3. Instead, you will be paying a total of just $0.60, which is equivalent to an average tax rate of 20%.

As of 2024, these are the federal tax brackets:

• 15% on the first $53,359 of taxable income
• 20.5% on income between $53,359 and $106,717
• 26% on income between $106,717 and $165,430
• 29% on income between $165,430 and $235,675
• 33% on income over $235,675

Note that provinces and territories have their own tax brackets in addition to the federal rates.

Tax Obligations of Newcomers in Canada

For those who recently immigrated to Canada, one of the first things you need to know is your tax obligations associated with your new Canadian residency status to prepare properly for your first Canadian income tax return.

The tax rules of an individual, especially for someone who is a newcomer in Canada, will depend on whether they are considered a Canadian resident. If you are legally admitted to Canada as a permanent or temporary resident (worker or student), the Canada Revenue Agency (CRA) and Revenu Quebec (for newcomers of Quebec) will consider you to be a tax resident if you have established significant residential ties with Canada.

A criterion will help determine if you have residential ties with Canada. For example, some factors that will be considered are whether you have a home, a spouse, or a dependent child in Canada and whether you have been in the country for over six months in a year. Secondary ties are where you work, where your assets are located, and other factors.

If, based on the criterion, you are considered a Canadian tax resident and still have significant residential ties to your home country, wherein Canada has a tax treaty with, that will be used to determine your country of tax purposes based on the tie-breaker criteria in the treaty. This is to ensure that your income won’t be taxed twice.

A Look at Income Sources and Taxable Income

If a new immigrant is considered a tax resident, that person will be taxed in Canada on their worldwide income from the day they settle down in the country. This includes the income they earn that they continue to receive from their home country after they arrive in Canada. However, that foreign income may be subjected to a home country tax unless a treaty exists between Canada and that foreign country.

In some cases, double taxation can still occur even if Canada is in a tax treaty with a newcomer’s home country. This may happen when the taxation in Canada and the foreign country does not occur in the same taxation year.

Tax Deductions and Credits Available to Newcomers in Canada

Here are three specific tax benefits newcomers in Canada can benefit from:

GST/HST Credit

This tax credit is a rebate on the sales tax you have paid to purchase goods and services. The calculation will be based on your family’s net income and the number of your dependent children.

Once considered a Canadian resident, you must file the RC151 GST/HST Credit application form. You will receive payments every three months if eligible for this benefit. Couples should file their tax returns on time each year to continue receiving these payments.

Canada Child Benefit (CCB)

This is a tax-free monthly payment paid to eligible families to help raise children under 18. This tax benefit may also include the child disability benefit and other related provincial and territorial programs. You must apply for this tax benefit using Form RC66, Canada Child Benefits Application, and RC66SCH, Status in Canada/Statement of Income. You and your spouse (if you have one) must file your tax returns on time annually to get these payments.

Climate Action Incentive Payment (CAIP)

You may receive this tax benefit to offset the cost of federal pollution pricing. Your eligibility may depend on the province where you live. When you file your tax return, your application may automatically be considered. However, if you are a newcomer and haven’t filed a tax return, you can apply manually by mailing in form RC66 (if you have children) or RC151 (if you do not have any children).

Here are additional deductions newcomers in Canada should be aware of:

Moving Expenses

You could deduct eligible moving expenses if you moved to Canada to work or start a business.

Tuition and Education Credits

You may qualify to claim this credit if you or a dependent attended a post-secondary institution.

Medical Expenses

Any out-of-pocket medical expenses such as prescriptions, dental care, or hospital fees may be deducted if they exceed a certain percentage of your income.

How To File Your First Tax Return in Canada

The deadline for filing taxes in Canada will fall on April 30, 2025. However, as early as February 17, you can file your taxes as CRA’S NETFILE service will open for electronic submissions on this date.

Filing taxes will involve fathering tax documents, relating that information to a tax preparer, and submitting it to the CRA. Submissions can be made online or through mail. Once the CRA reviews your return, you will receive a notice of assessment (NOA), which contains important information such as the tax you owe or the amount you can refund. This document will also tell you your tax advantage account contribution limits, such as RRPs and tax-free savings accounts for the tax year.

Here are the simple steps you may need to do to prepare for your first tax return in Canada as a newcomer:

Step 1: Prepare your first tax return

Take an inventory of the assets you owned on your arrival in Canada. You must determine the market value of each on the date of your entry into Canada.

Step 2: List your foreign and Canadian income during the year of your immigration

To do this, you may seek the assistance of your tax consultant or other tax professional in Canada.

Step 3: File your Canadian tax returns

File out your first income tax return by April 30 of the year following the year in which you moved to Canada.

Common Tax Filing Mistakes to Avoid

Whether you are new in Canada or were born and raised there, filing taxes can be tricky. Here are common mistakes you should avoid:

Mistake 1: Filing Late

If you miss the filing deadline, you will be penalized. So, even if you can’t pay your entire tax bill by the deadline, it is best to file on time to avoid additional penalties.

Mistake 2: Not Reporting Foreign Income

If you are considered a Canadian resident for tax purposes, you need to report your worldwide income. You can be penalized with fines when you fail to report your foreign income.

Mistake 3: Not Claiming All Credits and Deductions

As a newcomer, do not miss out on credits like GST/HST or moving expenses. Whenever possible, claim all eligible credits and deductions. To lower your tax bill.

The Takeaways

Newcomers to Canada may be considered tax residents depending on a criterion that helps determine their residential ties with Canada. If you are considered a Canadian tax resident, you must file your taxes on time, take advantage of credits and deductions, and avoid filing mistakes.

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