Many university students, and individuals on gap years are starting to choose Canada as a destination to live and work for a short period, many of whom choose the summer break. As with most sought after destinations, high monthly rentals and living costs force tourists to take on employment to fund their stay. If you are living, and working in Canada, the chances are you are required to file a tax return at the end of the year, and a lot of workers will be entitled to receive a refund.
I was only in Canada for a month, do I still need to file a return?
Yes. If you have taken on employment in Canada and have income, you will need to file a tax return, no matter how short of a period you were here. Depending on how long you were in Canada will dictate whether you file as a tax resident, or non-resident.
Why should I file a tax return?
As well as being legally obliged to submit your return to CRA, there are also benefits to filing a tax return. If you are planning on residing in Canada for the next year or so, you may be entitled to receive a quarterly credit (free of charge!). You can only apply to receive the credit if you have filed a tax return. Non residents and tax residents are all entitled to receive a refund based upon their tax calculations.
Am I a tax resident or non-resident?
The most common way to determine your tax residency is the amount of time you have resided, or are planning on residing in Canada. Typically, if you reside in Canada for 6 months or longer, you will file your taxes as a tax resident. As with most things, there are exceptions to this rule of thumb. By speaking with a tax specialist or accountant, you will be able to confirm your tax residency. If you are unsure, please feel free to contact the Jackstaxback team.
I am a non-resident for tax purposes, how does this affect my refund?
As a non-resident, you are usually required to pay a flat tax rate of 25% on your income whilst in Canada. This is higher than usual, and quite unfair on short term foreign workers. Because of this, most non-residents actually owe money to CRA at year end when filing their taxes, as their employers usually fail to deduct enough tax from their income.
However, if 90% or more of your world income for the year is from Canada, you are awarded with a balance of Canadian tax credits, these will shelter you from paying tax on the first $11k (roughly) of your income. In most cases this results in individuals receiving a tax refund, rather than owing money to CRA.
We recommend that workers expecting to be considered as non-residents request their employers to tax their income at a higher rate, in anticipation of being required to pay 25% of tax o income.
Again, there are a lot of variables involved with calculating your refund eligibility, particularly when filing as a non-resident. If you have any questions, please get in touch.
If this information has left you with more questions than before, and you are unsure of your tax obligations, please send us an email. The experienced Jackstaxback team are more than happy to answer any questions you may have, after all, tax doesn’t have to be taxing.