Immigrating to Canada involves understanding personal income, how much tax should be reported, what deductions can be claimed, and how much tax is owed after deductions. All of these calculations are the responsibility of the taxpayer. While the calculation work can be entrusted to an accountant, providing comprehensive and accurate information is a prerequisite for successful tax reporting. Here, we briefly introduce some knowledge about personal income tax in Canada, hoping to assist new Chinese immigrants in understanding the Canadian tax system and preparing for family tax planning.
The subjects of personal income tax
The main subjects of personal income tax in Canada are "tax residents," who must report income from all over the world to Canada. The definition mainly considers the following factors:
1. Primary residence;
2. Residential ties to Canada or abroad;
3. Duration of stay in Canada.
"Tax residents" include individuals who reside abroad but have residential ties to Canada. Additionally, an individual who does not have a "residential tie" to Canada but stays in Canada for 183 days or more within a year will also be considered a "tax resident" and must report income to Canada.
The distinction between "tax residents" and "non-tax residents" is a concern for new immigrants. Some believe that as long as they leave Canada and do not return, they automatically become non-tax residents and no longer need to report income or pay taxes to Canada. Others think that as long as they do not work in Canada or enjoy Canadian benefits, they are non-tax residents and can avoid taxes. However, immigration lawyers point out that this is a one-sided understanding of non-tax residents. Non-tax residents are individuals who have moved out of Canada and completely severed their residential ties with Canada, and their global income does not need to be reported in Canada; non-tax residents can apply from the date of departure or the date they severed residential ties with Canada.
However, generally speaking, it is not easy for non-tax residents to apply; individuals must leave Canada for more than two years to qualify as non-tax residents. If they are married or have children under 18, the entire family must leave to qualify. The difference between tax residents and non-tax residents lies in whether the individual's global income needs to be reported and taxed in Canada. Anyone residing in Canada or having residential ties to Canada must report their global income. If they have already paid local personal income tax overseas, the tax can be credited against the tax owed in Canada. However, since Canada's personal income tax rates are higher than those of many countries, it is likely that additional tax will need to be paid in Canada, while non-tax residents do not need to report and pay taxes on overseas income.