If you’re a newcomer in Canada or have returned to Canada after spending an extended period outside the country, you may be required to file an income tax return. Canadian taxes like every other developed country depends on your province and you’re earning.
Taxes are enjoyed by everybody and it is compulsory that all taxes are paid. Citizens often enjoy these taxes in the health care sector. It technically falls under the jurisdiction of the provincial governments. For this reason, when you become a Canadian citizen your health care will be issued by the province.
Generally, these health cards from Ontario or Saskatchewan for example will allow you access to universal healthcare across the county. Many new Canadian citizens are interested in bringing their family members to the country; this often includes elderly parents or grandparents. Many governments are strict with this policy, as older individuals may need access to health care services.
Canada’s tax system
Canada’s tax system is similar to that of many countries. Employers and other payers usually deduct taxes from the income they pay you, and people with business or rental income normally pay their taxes by installments.
In Canada, both, the federal and provincial/territorial levels of government impose personal income tax on individuals. This means that you will pay two types of income tax: federal income tax and provincial/territorial income tax, depending on your province/territory of residence as of December 31st of the previous year.
Many of the benefits people enjoy in Canada are made possible through taxes. Canada’s tax system pays for roads, schools, health care, social security, and public safety. Each year, you determine your tax obligation by completing an income tax and benefit return and sending it to the CRA.
An income tax return is a comprehensive account of the previous calendar year’s (January 1 to December 31) income and deductions, along with federal, provincial, and territorial taxes paid and owed. It also helps determine if you’re entitled to a refund from the government of some or all of the tax that was deducted from your income during that year.
As a resident, deemed resident or non-resident, if you don’t have any Canadian income and have been in Canada for a very short time (less than 183 days in a year), you may not be required to file a tax return. However, filing tax returns has certain benefits:
- GST/HST credits, the Canada Child Benefit (CCB), the Canada Worker Benefit formerly known as Working Income Tax Benefit, and other provincial or territorial benefits and credits.
- A tax refund is issued when you didn’t earn enough income during the year or you paid excess tax. The government sends you back all or part of the taxes you’ve already paid.
Aside from healthcare, the government uses the taxes paid to fund other sectors to get them improved to a certain standard. They make use of the taxes to pay for projects like the construction of public schools which in turn will provide jobs for her citizens, construction of roads as well and transfer payments from financially better off provinces to others.
Tax revenues are used to decrease the divide between the rich and poor by evening out the playing field. The level of income tax may surprise newcomers planning to become Canadian citizens. For example, individuals from Saudi Arabia may be surprised by income tax, as it does not exist in their home country.
Social Insurance Number
As a newcomer to Canada, you will need a social insurance number (SIN). The SIN is a nine-digit identification number that is unique, personal, and confidential. The CRA uses it to identify you for income tax and benefits purposes.
You have to give your SIN to anyone who prepares tax information slips (such as a T4 slip) for you. For recent newcomers, you will need to provide employment and income information prior to your arrival in Canada.
If Service Canada gave you a temporary SIN (starting with the number 9) or if the CRA gave you a temporary tax number (TTN) or an individual tax number (ITN), and you decide to become a permanent resident of Canada, you have to apply for a SIN with Service Canada.
Once this new SIN has been assigned to you, do not use any other SIN, TTN, or ITN that was previously assigned to you. If you do not already have a SIN, you can apply for one at the nearest Service Canada office.
Corporate Tax Rates
The federal government has been trying to make the country conducive and appealing for business, to that effect the taxes have been reduced and foreign direct investment has been encouraged.
Many will argue that governments should tax corporations higher as they have much more money to spare than individual citizens. However, this view can sometimes harm economies more than help them.
As a result, factories, research facilities and offices will be created across the country supplying jobs, training, and financial security to many Canadian citizens.
Canadian-US Dual Citizens
An important aspect for Canadian-US dual citizens is that individuals will likely have to file tax returns in both countries. Usually, dual citizens living and working in Canada do not have to pay income tax to the US, as their level of taxation is higher in Canada.
However, it is important for individuals to research and ask questions on this topic if it relates to them. For example, US citizens are required to file an FBAR form if they have assets worth higher than $10,000 outside of the country.
Failure to complete these forms can result in financial penalties. These American regulations can affect many dual citizens living and working in Canada.
Advantages: Canadians are accepting of tax rates because we can see the direct benefits of our tax dollars. Especially through health services and public schools. Obviously, it can be discouraging when scandals occur with government officials mismanaging their spending at the expense of the taxpayers.
Fortunately, in terms of internal corruption, Canada scores very well on the Corruption Perceptions Index. In general, Canadians trust their government. Canada is a great and safe place to live, start a business and raise a family, no matter your opinion on the tax system.