Question: I am planning to move to Canada next year. What do I need to know about my Canadian tax obligations when I enter?
Answer: If you are just entering Canada next year, there’s really nothing you need to do in terms of taxes here right away. However it’s best to familiarize yourself with the tax filing requirements going forward.
Note: the country you’re leaving may have some requirements as you leave, but you have no tax obligations in Canada until you become a tax resident and/or start earning income here.
After December 31 of the year in which you enter Canada, you’ll need to file your first Canadian tax return. This return will be due in April (if you and your spouse are not self-employed; in June if you or your spouse are self-employed) of the following year.
On your Canadian tax return every year you will report all your world income from all sources and be taxed according to Canadian tax law. Earnings might include:
- Salary from a job
- Profit from self-employment
- Rent from real estate
- Interest, dividends or capital gains on taxable assets
Bringing Assets to Canada
You will not be taxed on assets you bring into Canada, but once they are here you will be taxed on any additional income they earn.
Example:
Jamila moves to Canada in March and transfers her savings in the amount of $50,000 to a Canadian bank account. By December 31 of that year, those funds have earned $125 in interest. She will not pay any tax on the funds she transferred, but she will have to declare the $125 of interest earnings on her Canadian tax return and pay tax.
Foreign Assets in excess of CAD100,000
One thing to be aware of is that if you have assets (cash, real estate, investments, etc) in your home country or any country other than Canada, you may be required to make an annual reporting of those assets on form T1135 Foreign Income Verification Statement.
Owning foreign assets, rather than Canadian assets, doesn’t mean you’ll pay extra tax. There’s just a special form on which you have to report them. Some foreign assets are exempt from this reporting.
Hello Sunny,
I’ll be moving from my home country in Africa to canada in 2025. My family and I are canadian permanent residents. I ean about US $110K as a consultant, paid in a US bank account by a US firm, and earn US $24K gross as a salaried employee in my country. I can keep both income if I move to Canada by working remotely.
My husband is planning to also move to canada in 2025 and find work there. Our son is a college student living in Canada. Daughter is going to college next year in canada. We’ve been residents since 2023 but have not filed tax yet since we don’t live in the country. My 21 yo son files taxes (we pay for his living expense and tuition). My son is US citizen but we’re not. Money earned in united states is tax free.
I’d like to know the best way to report income and lower my taxes starting year, keeping in mind that the goal is to earn canadian citizenship.
Should the us company pay me in a Canadian bank account? We’re also planning to purchase a real estate in canada (first time buyers) if it helps.
We’d like to hire an advisor in order to guide us ahead of time.
Thanks.
Hi Aissa. Unfortunately I can’t comment on what approach will help you earn citizenship, as that is not my area of expertise.
In terms of your tax obligations, you’re correct that you had no obligation to report income or file returns in Canada before you came to reside here. Once you settle here and establish a domicile (e.g. by purchasing a home or entering into a residential lease), you will become a tax resident of Canada. From that point forward, you must report all world income on your Canadian income tax return, regardless of where the payer is located or what bank account the amounts are deposited in.
As an employed individual, the best route for reducing your taxes is by contributing to Registered Retirement Savings Plan (RRSP). However, you will not be able to do this in the year in which you enter Canada. Each individual has a limit to how much they can contribute, and that contribution room is earned by reporting earned income on prior years’ returns. therefore you will not have any RRSP room until after you’ve filed your first tax return in Canada.
Another route for reducing your taxes is to use part of the tax credits earned by your children by attending post-secondary educational institutions authorized to issue T2202 Education Amounts slips. As their parents, you can apply part of your children’s credit to your own return to reduce your taxes. The amount you can apply is limited, and any amounts over that limit must be applied to the child’s own return.
Once you enter Canada, your son will be considered to be a tax resident of Canada as well, if he isn’t already (rules for students can vary when they live in a different country from their parents, but if the student and their parents are in Canada, they’re typically considered to be tax residents of Canada). Please get in touch if you’d like to have a conversation about your options, and we’ll do our best to help.