We file tax returns regularly for temporary foreign workers and international students who are new to Canada within the tax year. There is often confusion surrounding newcomers’ obligations to file a tax return if they arrived at the end of the tax year, but did not actually take up employment or have any income before the end of the tax year.
What are your tax obligations?
If you arrived in Canada and did not take up employment or generate any income while residing in Canada, then you technically are not required to file a tax return unless you receive a letter from CRA (Canada Revenue Agency) demanding that you file a tax return.
What are the financial benefits to filing a Canadian tax return even if you had zero Canadian income?
There are certainly financial benefits to filing a Canadian tax return if you were residing in Canada but did not earn any income. If you are a newcomer tax resident you will often receive a tax refund when filing a tax return even if you did not have any income. In British Columbia tax residents can receive a $75 tax credit (refund) if they file a tax return without even reporting any income.
What are the logistical benefits to filing a Canadian tax return even if you had zero Canadian income?
When becoming a tax resident in Canada you are required to report your date of arrival on your first tax return that is filed with CRA. If you arrive in Canada at the end of the tax year, but do not file a tax return because you did not have any income, this can create processing errors by CRA when a tax return is subsequently filed the following year without the recording of a date of entry. This type of error results in CRA changing individuals’ status to ‘non-resident’ as they have no record of a date of entry. It can be quite problematic correcting ‘non-resident’ tax status with CRA, who are notoriously slow at implementing changes.
Benefits of filing for students
International students who are new to Canada that did not have earnings can benefit from filing a tax return. In order to record tuition credits with CRA a tax return must be filed for the period in which the tuition credits are earned, even if there was no income during that period. To benefit from your tuition credit which can be carried over into subsequent tax years it is certainly beneficial to file a tax return.
Application for GST/HST credit
Individuals who have earnings under a certain threshold are entitled to receive a quarterly (4 times a year) cheque from the Government. In order for the government to assess individual’s entitlement to receive this benefit, a tax return must be filed with CRA. If you are a newcomer to Canada and wish to apply to receive this benefit in the next tax year you must file a tax return in order to apply. Waiting 12 months to file a tax return can result in individuals missing out on over $500 in benefit payments.
Questions and assistance with tax filing
If you have any questions about the benefits of filing a tax return even if you did not have any Canadian income, please do not hesitate to contact us at team@jackstaxback.com or comes visit us at our Vancouver based office*. We will be more than happy to assist you with your queries and the processing of your tax return.
*At the date of publishing our Vancouver office is not open for visits due to COVID-19. Please reach our team via email – team@jackstaxback.com