Moving to Canada for work? Learn more about your tax obligations while working in Canada
Every year, Canada issues thousands of Work Permits – an official document that allows non-residents to legally work in the country for a pre-defined period and under certain conditions.
With today’s globalized economy, transferring employees to different regions has become common to multinational companies. While this change can be thrilling and exciting for employees, there is a lot of important implications that must be considered before you decide to work in Canada.
We listed below a few things you should be aware of when it comes to the Canadian tax system.
Canada Revenue Agency
The Canada Revenue Agency, or CRA, is the official government body that enforces nationwide tax laws, international treaties as well as social benefits and incentives delivered through the national tax system. As a taxpayer, you are obligated to file annual tax returns with the Agency.
- Tax Residency in Canada
Canada’s tax system considers an individual to be a resident of Canada for tax purposes when he/she spends 183 or more days of a fiscal year in the country. In addition to that, individuals may also be considered factual residents of Canada when they have significant ties with the country, including a home, spouse or common-law partner and dependents. It is important to know your residency status for income tax purposes and to understand your tax obligations to Canada.
- Personal Income Tax
A Canadian taxpayer (this includes factual residents) is required to report income earned worldwide, including employment and investments. Legally, the country where you earn your income has first right to tax, therefore the government may credit you for the taxes already paid internationally – and only claim eventual differences in tax rates. This means that, if you are a Canadian resident earning income abroad, you generally should not be paying double taxes.
- Social Insurance Number (SIN)
Foreign workers with a valid work permit must obtain their Social Insurance Number upon arrival in Canada. This number is an individual registration with the Canadian tax system and allows residents to access employment and government programs.
- Social Security Programs
Workers in Canada have access to social security programs such as the Canada Pension Plan (CPP) and the Employment Insurance (EI). Most employers make the mandatory contributions for their employees through their payrolls.
- Personal Income Tax Returns
If you are a resident of Canada for tax purposes, you must file your Tax Return on an annual basis. The Canadian tax system follows a calendar year (January to December) and returns are due on April 30 of the following year. If you are self-employed, the deadline to file your return is June 15 – however, even as a self-employed, if you owe tax, the payment must be made before April 30.
- Foreign Property Held by a Canadian Taxpayer
Taxpayers don’t have to declare property owned and held in a foreign country if in total the foreign property held is less than CAD $100k, at cost. If you hold foreign property that is over CAD $100k, at cost, the detail of this property need to be specified and declared, in addition to filling an annual tax return.
Specified foreign property includes:
- Bank accounts held abroad
- Debt securities and shares of foreign corporations held directly or indirectly through your Canadian broker
- Real estate
- Other tangible and intangible properties located outside Canada
It does not include:
- Properties used or held exclusively in the course of carrying on an active business
- Registered pension fund investments.
- Foreign investment held in Canadian-registered mutual funds
- Shares of a foreign affiliate (in this case other forms need to be completed)
- International Tax Treaties
Canada has tax agreements with multiple countries which aim to avoid double taxation, as well as to eliminate tax evasion. In certain circumstances, Canadian Tax Residents may take advantage of these treaties and continue to be a tax resident in their home countries.
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