Filing taxes for the first time as a Canadian resident? Here’s what you need to know

posted on February 24, 2019

By Canadian Immigrant Magazine |

Canada welcomed as many as 310,000 new immigrants to Canada in 2018. Their new plan is to gradually increase that number to 350,000 by 2021. What does this all mean? It means there will be many newcomers filing Canadian taxes for the very first time.

If this is your first year in Canada, welcome! Filing as a newcomer may seem complicated, but it doesn’t have to be, especially if you prepare your taxes using Canada Revenue Agency (CRA) recommended tax software like UFile. Still, you may be wondering where to start, how credits work, and when you become a resident in the eyes of the CRA. We’ve got some handy tips to keep in mind to make your first return simple.

Qualifying for credits — the 90% rule
As a new resident in Canada, your tax credits will be determined by something called the 90% rule. This simply means that if you had no income, or if 90 per cent or more of your total income while you were living outside of Canada is Canadian-earned, you will be allowed to claim full credits just like any other year-round resident of Canada. Otherwise, you may see your tax credits prorated based on the number of days you’ve resided in Canada. In order to determine whether you qualify under the “90% rule,” you need to track the income you gained for the portion of the year you were not in Canada. This includes the income you earned in another country. You will not be taxed on that income, but it will be considered toward the “90% rule.”

When are you considered a “factual resident”?
You might physically enter Canada on a certain date, but when does that date become your official date of entry? In order for the CRA to consider you a resident of Canada, you need to have established residential ties during that year. So, what does the CRA consider “significant residential ties”? Generally speaking, you need both the location of your home, and the place of residence of your spouse and dependents to both be in Canada in order for the CRA to consider you a factual resident.

Other considerations can include personal property (furniture, clothing), economic ties (a job or business in Canada, bank accounts), provincial medical insurance cards, provincial driver’s licence, the list goes on. If you do not have what the CRA considers as significant residential ties, you will be considered as a non-resident even if you are physically in Canada at the time. The moment you have established significant residential ties with Canada, make sure to apply for you Social Insurance Number or SIN to be able to work and file your income tax return.

When are you considered a “deemed resident”?
The CRA does not consider you a Canadian resident unless you have established significant residential ties. However, if you have stayed in Canada for over half the year, you are labelled as a “deemed resident.” For students or employees on contract, this means you should take careful note of your residency status. The rules for income tax filing are different for deemed residents than factual resident. You may claim your full credits, but you should expect to pay a surtax instead of provincial taxes.

Importance of filing your tax return for new residents
Once you have established your residential ties to Canada, it is important to file that first tax return in order to start receiving benefits, such as the GST credit and the Canada Child Benefit. Only by filing a tax return can you claim these benefits.

Ask an expert
There’s no need to feel overwhelmed by it all. For more information on finding out your residential status, consult the CRA website. If you’re using UFile software for taxes, assistance from our tax experts is always just a call or click away!

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