Who shall file Canada Income Tax returns

Income Statement Template for Excel Free Download
November 21, 2022

Who shall file Canada Income Tax returns

The Canada Revenue Agency (CRA) administers income tax matters for every person in Canada. As per rule normal income tax year for Canada starts from January 1 and ends on December 31. There are different tax submission forms as well as tax payment deadlines for Salaried Individuals, Self-employed and Corporations. There are six types of income tax filings which includes:

  1. Personal Income Tax
  2. Business or Professional Income
  3. Corporation Income Tax
  4. Trust Income Tax
  5. Partnership Income Tax
  6. International and non-resident taxes

First step of filing a return is finding “who should file”. So, this article will go step by step with the process.

  1. Residency Status

Step 1: Residential ties with Canada:

Primary Residential Ties:

  • a home in Canada
  • a spouse or common-law partner in Canada
  • dependants in Canada

Secondary Residential Ties:

  • personal property in Canada, such as a car or furniture
  • social ties in Canada, such as memberships in Canadian recreational or religious organizations
  • economic ties in Canada, such as Canadian bank accounts or credit cards
  • a Canadian driver’s licence
  • a Canadian passport
  • health insurance with a Canadian province or territory

Step 2: Residency status and its tax implications:

Resident status after leaving Canada:

  • One will be considered factual resident of Canada, if one maintain significant ties with Canada under following conditions,
  • Working temporarily outside Canada
  • Vacating outside Canada
  • Commuting (going back and forth daily or weekly) from Canada to one’s place of work in the United States
  • Attending school in other country
  • Residential ties:

Residential ties may include:

Secondary residential ties that may be relevant include:

  • personal property in Canada, such as a car or furniture
  • social ties in Canada, such as memberships in Canadian recreational or religious organaizations
  • economic ties in Canada, such as Canadian bank accounts or credit cards
  • a Canadian driver’s licence
  • a Canadian passport 
  • health insurance with a Canadian province or territory
  • Who Should File Income tax return:

Now starting with the first and most important part that is who should file Income Tax return. There are three separate elements to consider,

  • You live in Canada Permanently
  • Canadian Residents:

Those who live and work in Canada, want to receive credits and benefits

  • Immigrants:

Those who left other countries and settled in Canada which set up significant ties will make you “Resident of Canada for Income tax Purposes”.

Help to newcomers in understanding theCanada tax system is a long topic that will be covered in our other article that is “Introduction of Canada Tax System to Newcomers to Canada”.

  • Someone died:

It is important to inform CRA because,

  • Diseased might be paying tax installments
  • Diseased might be receiving GST/HST, CWB or CCB Credit
  • Deceased was a child for whom GST/HST or CCB credit payments as paid
  • Indigenous Peoples:

Indigenous Peoples are subject to same rules and regulations of income tax as are for other Canadian resident except in case of exemption eligible Income under section 87 of the Indian Act.

  • You leave Canada Temporarily or permanently
  • Factual Residents:

Person who kept significant ties with Canada while living or travelling outside the country. That person will be considered resident for Income tax purposes.

Examples:

  • working temporarily outside Canada
  • teaching or attending school in another country
  • commuting (going back and forth daily or weekly) from Canada to your place of work in the United States (U.S.)
  • vacationing outside Canada
  • spending part of the year in the U.S., for example, for health reasons or on vacation
  • Federal Government employees:

Government employees posted outside the Canada are usually factual candidates or deemed residents of canada for Income tax purposes.

  • Leaving Canada (Emigrants)

For example,

  • You leave Canada to live in another country
  • You sever your residential ties with Canada

Whereas severing residential ties means, you give up your main ties with Canada like,

  • You give up your home in Canada and establish permanent ties with any other country
  • Your spouse and dependents leave Canada
  • You dispose of personal property and break social ties with Canada
  • You live in Canada Temporarily
  • Non-residents of Canada:-
  • Live less than 183 days
  • Do not have significant ties
  • Non-residents of Canada with rental income:-
  • Receive rental from real and immovable properties
  • Deemed Residents:-
  • Live more than 183 days
  • Do not have significant ties
  • International students:-
  • International students studying in Canada
  • Seasonal Workers:-
  • Seasonal agricultural worker from other country.

In the end we would like to thank you for reading this brief article, we are in process it upload a new blog soon on each income tax filing.

Writer: Sohail Wahid Bux (MBA, FCCA)

Leave a Reply

Your email address will not be published. Required fields are marked *