Becoming a permanent resident of Canada is a life-changing step—one that comes with many rights and responsibilities. Among the most significant obligations is understanding and meeting your tax responsibilities with the Canada Revenue Agency (CRA).
Unlike some countries where tax is only owed based on physical presence or source of income, Canada uses a residency-based taxation system, meaning once you become a permanent resident, you may be subject to tax on your worldwide income. Failing to understand your CRA obligations can lead to penalties, missed benefits, or legal complications.
In this guide, we’ll walk you through:
- Who is considered a Canadian resident for tax purposes
- When and how to file taxes
- What income must be reported
- Key benefits and deductions
- Important CRA links and deadlines
🔗 Canada Revenue Agency – Newcomers Guide
Who Is Considered a Resident for Tax Purposes?
In Canadian tax law, tax residency is not solely determined by immigration status—it’s based on your residential ties to Canada. However, as a new permanent resident, you are typically considered a resident for tax purposes from the date you land and establish primary residential ties.
Primary Ties That Indicate Residency:
- A home in Canada
- A spouse or common-law partner and dependents who move with you
- Personal property (furniture, vehicle)
- Provincial health insurance
The CRA will consider these primary ties when determining your residency start date.
When Do You Start Paying Taxes?
You become a Canadian tax resident on the date you first establish significant ties, usually your landing date as a permanent resident.
You are then required to:
- Report all worldwide income earned after that date
- File an income tax return for the portion of the year you were a resident
- Pay taxes on that income (after applicable credits and deductions)
If you worked or earned money in Canada before becoming a PR (e.g., as a student or temporary foreign worker), you may already have been required to file taxes during that period.
Do You Need to File a Tax Return?
Yes. In Canada, if you:
- Owe tax
- Want to receive any government benefits
- Want to apply for tax credits
- Or were asked to file by the CRA
Then you must file an income tax return, even if your income is low or you have no tax owing.
Deadlines:
- The regular deadline is April 30 of the following year.
- If you or your spouse is self-employed, it extends to June 15, but payment is still due by April 30.
Understanding the Tax Year
Canada’s tax year is based on the calendar year: January 1 to December 31.
As a new permanent resident, you will file a “part-year” return for the year you arrived. For example:
- If you landed on August 15, 2024
- You only report income from August 15 to December 31, 2024
- Income earned prior to arrival is reported for information purposes, not taxed
Reporting Worldwide Income After Becoming a Resident
Once you become a Canadian tax resident, you’re required to report income earned anywhere in the world.
This includes:
- Employment income from foreign companies
- Self-employment or freelance income
- Foreign rental property income
- Investment income (e.g., dividends, capital gains)
- Pensions or retirement income from another country
Even if your money was earned abroad and not brought into Canada, it must be reported. Canada has tax treaties with many countries to prevent double taxation.
Foreign Assets and the T1135 Form
If, after becoming a tax resident, you own foreign assets worth more than CAD $100,000, you must file Form T1135 – Foreign Income Verification Statement.
This includes:
- Bank accounts
- Stocks or bonds
- Rental properties
- Foreign pensions
Failure to disclose can lead to penalties of up to $2,500 per year, or more in serious cases.
Understanding Canadian Tax Brackets
Canada uses a progressive tax system, meaning higher income is taxed at higher rates. As of 2024, the federal tax brackets are:
| Taxable Income | Federal Rate |
|---|---|
| Up to $55,867 | 15% |
| $55,867–$111,733 | 20.5% |
| $111,733–$173,205 | 26% |
| $173,205–$246,752 | 29% |
| Over $246,752 | 33% |
Provincial rates apply on top of these, and each province has its own brackets.
🔗 Federal Income Tax Rates – CRA
What Are the Main Tax Credits and Deductions?
1. Basic Personal Amount
All residents can claim the basic personal amount—$15,000 (2024)—which means you won’t pay tax on the first $15,000 you earn.
2. Canada Workers Benefit (CWB)
For low-income workers, the CWB provides refundable credits—available when you file taxes.
3. GST/HST Credit
A tax-free quarterly payment to offset consumption taxes. You’ll receive it only if you file taxes.
4. Child Benefit (CCB)
If you have children under 18 and meet residence conditions, you may qualify for the Canada Child Benefit.
5. Tuition and Education Credits
If you or your dependents are studying in Canada, tuition paid to eligible institutions can be used to reduce your tax.
Registering for CRA Services
1. Get a Social Insurance Number (SIN)
You need a SIN to work and file taxes. Apply as soon as you land:
🔗 Apply for a SIN
2. Open a CRA My Account
This gives you secure access to:
- Notices of assessment
- Benefits payments
- Direct deposit setup
- Tax return status
Filing Taxes: Step-by-Step Process
Step 1: Gather Your Documents
You’ll need:
- T4 slips (if employed)
- T5 slips (if you earned investment income)
- Foreign income summaries
- Bank statements
- Proof of tuition, rent, or child care (if applicable)
Step 2: Choose a Filing Method
You can file:
- Online using certified software (e.g., TurboTax, Wealthsimple Tax)
- With a tax professional
- On paper (though slower)
Free software is available for simple tax situations.
🔗 List of CRA-Certified Software
Step 3: Submit and Wait
Once you file, the CRA will issue a Notice of Assessment. If you’re owed a refund, it will be sent via direct deposit or mailed check.
How the CRA Tracks and Communicates
You can expect communication from the CRA via:
- Secure online portal
- Official mail
- Phone (always verify for scams)
Be alert for CRA scams and always verify suspicious communications via your CRA My Account or the official CRA phone number.
What If You Miss a Tax Deadline?
Missing a tax deadline can lead to:
- Late-filing penalties (5% + 1% per month on balance due)
- Loss of benefits (CCB, GST/HST credits, etc.)
- Interest charges on outstanding taxes
If you cannot pay on time, contact the CRA to arrange a payment plan.
Non-Taxable vs Taxable Income
Examples of Non-Taxable Income:
- Gifts from family
- Lottery winnings
- Inheritance
- Certain disability benefits
Examples of Taxable Income:
- Employment income (even remote jobs for foreign companies)
- Freelance or gig income
- Capital gains
- Rental income (foreign or domestic)
If unsure, it’s best to declare and ask CRA for clarification rather than omit.
Special Notes for Sponsored Immigrants
If you were sponsored by a family member, your sponsor is financially responsible for your needs, but this doesn’t change your tax obligations.
You are still expected to:
- File taxes annually
- Report all income
- Apply for credits if eligible
CRA Audits and Reviews
The CRA may review your file or audit your taxes at random or if something seems incorrect.
Tips to avoid issues:
- Keep copies of documents for at least 6 years
- Never inflate expenses or claim benefits you’re not eligible for
- Use tax software that checks for errors
Final Thoughts: Get Ahead of Your Tax Obligations Early
Navigating the Canadian tax system can be overwhelming at first, but understanding your CRA obligations as a new permanent resident helps you:
- Stay compliant with federal laws
- Maximize financial benefits
- Build a strong record for future financial actions (e.g., mortgages, business loans, etc.)
Consider working with a certified tax advisor, especially in your first year. Filing your return accurately, on time, and with full disclosure will help you enjoy the benefits of living in Canada with peace of mind.
Key CRA Links for Newcomers:
- 🔗 CRA Newcomers to Canada
- 🔗 Tax Return Basics
- 🔗 Tax Treaties with Other Countries
- 🔗 CRA Contact Information
