Did you know that Canada welcomes 300,000 international students across its borders every year? It’s true! And it’s really easy to see why Canada is so popular with travelling students.
The North American nation is known for its high-quality education offering, its stunning destinations, and for being an open-minded country.
With this in mind, if you’re an international student in Canada it’s likely that tax will be the last thing you’ll want to think about – especially if your home country doesn’t have an automatic tax filing requirement. You’d likely rather be spending time exploring your new city, socialising and making friends (and studying of course!).
Having said that, it’s extremely important to remain complaint with the Canadian tax authorities as this is one of your visa requirements. But don’t worry, we’re here to help! So here’s five things every international student in Canada should know about tax.
(1) Am I considered a Resident or Non-Resident for tax purposes?
Your residency status is hugely important when it comes to being taxed in Canada. So, if you’re not sure whether you fall into the category of resident or non-resident, here are some tips to help you figure it out:
A resident of Canada is someone who has established residential ties (more on these below!) to the country.
A non-resident is someone without such ties, and who resides in Canada for less than 183 days of the year.
A deemed resident is someone who doesn’t have significant residential ties in Canada, but stays there for 183 days or more during a calendar year. Deemed residents also shouldn’t be considered residents of their home country under the terms of any tax treaty between Canada and that country.
Residents and deemed residents are both responsible for paying Canadian taxes.
You might be considered a deemed non-resident for tax purposes if you establish significant residential ties with Canada and are considered a resident of another country with which Canada has a tax treaty. Both non-residents and deemed non-residents are required to pay tax on income you receive from Canadian sources and these taxes are dependent on the type of income you receive.
What are ties to Canada?
Ties taken into consideration:
- A spouse or common law partner
- House or apartment (own or renting)
- Personal property such as furniture or a vehicle
- Social ties (memberships of recreational, religious or professional organisations in Canada)
- Economic ties-bank account, credit cards, investments
- Canadian health insurance (BC Health, Alberta Health, etc.)
- Canadian driver’s license or passport
- You’re permanently employed in Canada
- You plan to stay in Canada past your working holiday visa and are applying for permanent residency
- Canada is the place where you customarily live
- You spent more than 183 days in Canada (many people think this is the most important factor to consider, but that isn’t necessarily the case). Make sure that the majority of the other factors apply to you too.
(2) Do I have to file a tax return?
If you are an international student in Canada, you may have to file a Canadian income tax return – particularly if you have earned income in the country (from teaching/research assistantships, other employment, and investment and business income etc). Generally, students also have to report income they receive from outside of Canada.
Once you have worked out your residency status you’ll be ready to file your tax return!
Note: if you are a non-resident or a deemed non-resident and you don’t have any Canadian source income, then you are not required to file a Canadian tax return.
(3) Am I entitled to any tax credits in Canada?
Yes! If you’re an international student with Canadian source income (or you’re considered a resident), then you can claim tuition credits and you’ll also be eligible for benefits such as the harmonised sales tax credit.
Although, if you’re new to Canada and are filing your taxes for your first year, you will need to indicate the date you first arrived in the country when you are claiming the credits. This is because you weren’t resident for the full year and are therefore not entitled to the full allotment of credits.
(4) Can I claim any expenses?
You may be eligible to deduct certain expenses from your tax payments. Moving expenses such as transportation and storage of personal effects, travel, and temporary accommodation may be considered eligible deductions under certain circumstances.
Although, you can’t deduct moving expenses if your only income at the new location is scholarship, fellowship, or bursary income that is entirely exempt from tax under the current legislation. You may also deduct childcare expenses, Registered Retirement Savings Plan (RRSP) contributions, and union dues.
Remember! If you are claiming expenses, it’s very important to keep your receipts.
(5) What do I need in order to file a tax return?
Here’s a useful checklist to follow:
1) Determine your residency status
2) Organise your SIN (social insurance) or ITN (individual tax) number
3) You’ll need details of the tuition fees you have paid for the tax year (T2202A)
4) Have your T4 (employment income and deductions) form close at hand
5) You’ll need your T4A (scholarships and bursaries) form too!
6) Don’t forget your receipts for expenses!