New to Canada: Tax Guide for Newcomers

When Do You Become a Tax Resident?

Tax residency depends on significant residential ties to Canada:

Significant Ties

• Home in Canada (owned or rented)
• Spouse or common-law partner in Canada
• Dependants in Canada

Secondary Ties

• Personal property in Canada (car, furniture)
• Social ties (memberships, clubs)
• Canadian driver's license
• Canadian bank accounts
• Provincial health insurance

Your Residency Date

Usually the date you arrive with intent to settle in Canada. This could be your landing date or the date you establish significant ties.

Your First Canadian Tax Return

What to Report

• Canadian income: From residency date to December 31
• Foreign income: Earned after becoming resident
• Pre-arrival income: Generally not reported

Filing Deadline

• April 30 of the following year
• File even if you arrived late in the year
• File even if you have no income (to get benefits)

Applying for Benefits

GST/HST Credit

• Complete Form RC151 (GST/HST Credit Application)
• Payments start the quarter after approval
• Based on prior year income (may be zero for newcomers)

Canada Child Benefit

• Complete Form RC66 (Canada Child Benefits Application)
• Provide proof of immigration status
• May need to wait 18 months if temporary resident

Climate Action Incentive

• Automatic once you file tax return
• Paid quarterly to eligible provinces

Foreign Assets: T1135 Reporting

If you have more than $100,000 CAD in specified foreign property:

First Year Exemption

• T1135 not required in your first year as a resident
• Reporting begins in your second year
• Still must report foreign income in first year

What Must Be Reported

• Foreign bank accounts
• Stocks in foreign corporations
• Foreign rental properties
• Foreign bonds and loans

What's Exempt

• Personal-use property
• Assets in RRSP, TFSA, RESP
• Canadian mutual funds holding foreign investments

Foreign Income Sources

Employment Income

After becoming resident, report worldwide employment income. Foreign tax paid may qualify for foreign tax credit.

Investment Income

• Foreign interest, dividends: Report on Canadian return
• Convert to CAD using exchange rate on receipt date
• Claim foreign tax credit for withholdings

Rental Income

• Report net rental income from foreign properties
• May need to file in foreign country too
• Claim foreign tax credit to avoid double taxation

Tax Treaties

Canada has tax treaties with many countries to prevent double taxation:

• Determine which country can tax specific income
• Provide reduced withholding rates
• May offer tie-breaker rules for residency

Common Treaty Countries

• United States
• United Kingdom
• India
• China
• Most European countries

Bringing Assets to Canada

Deemed Disposition at Immigration

Upon becoming resident, most assets are deemed acquired at fair market value. This resets your cost base for Canadian tax purposes.

Tax-Free Step-Up

• Gains accrued before immigration are not taxed in Canada
• Keep records of FMV at immigration date
• Only future gains (after arrival) are taxable

Exceptions

Certain Canadian property (real estate, business assets in Canada) doesn't get stepped up—it's always subject to Canadian tax.

RRSP Contribution Room

• No RRSP room from pre-arrival years
• Room builds only from Canadian earned income
• First year: 18% of Canadian earned income
• Unused room carries forward

TFSA Contribution Room

• Room accumulates only while you're resident AND 18+
• No room for years before immigration
• 2025 limit: $7,000
• Partial year: Full year's room applies

Provincial Health Insurance

Most provinces have waiting periods:

• Ontario: 3 months
• BC: 3 months
• Alberta: 3 months

Consider private insurance during waiting period. Premiums may be tax-deductible as medical expenses.

Getting a SIN

• Required for working and filing taxes
• Apply at Service Canada office
• Bring immigration documents
• Usually issued immediately

Common Newcomer Mistakes

• Not filing: Miss out on benefits even with no income
• Forgetting foreign income: Must report worldwide income
• Wrong residency date: Can affect tax calculations
• Not keeping records: FMV at arrival is important
• Ignoring T1135: Significant penalties for non-compliance

Helpful Resources

• CRA Newcomers page: Information for new residents
• Tax treaty information: Check if your country has a treaty
• Settlement agencies: Often offer free tax help
• Community tax clinics: Free help for simple returns

Checklist for Newcomers

• ✓ Get SIN as soon as possible
• ✓ Open Canadian bank account
• ✓ Apply for provincial health insurance
• ✓ Record fair market value of assets at arrival
• ✓ File tax return by April 30
• ✓ Apply for GST/HST credit (Form RC151)
• ✓ Apply for CCB if you have children (Form RC66)
• ✓ Report foreign income after residency date
• ✓ Consider T1135 requirements for year 2