As a newcomer to Canada, understanding the Canadian tax system can be challenging. However, it is essential to ensure you comply with all tax requirements and avoid any penalties.

In this blog post, we will discuss the basics of the Canadian tax system and what every newcomer should know.

What Is the Canadian Tax System?

The Canadian tax system is administered by the Canada Revenue Agency (CRA)—a federal agency responsible for collecting taxes and enforcing tax laws. The CRA collects taxes on behalf of the federal, provincial, and territorial governments, including income tax, sales tax, and property tax.

Income Tax

Income tax is the most significant source of revenue for the federal government, and it is collected from individuals and corporations based on their income. Every year, individuals must file a tax return with the CRA that summarizes their income, deductions, and credits for the previous year.

Tax Deductions and Credits

Deductions and credits can reduce your taxable income and lower your tax bill. Some of the most common deductions and credits for individuals include the basic personal amount, which every taxpayer can claim, and the Canada Child Benefit, a tax-free monthly payment for families with children.

Goods and Services Tax (GST)

The Goods and Services Tax (GST) is a federal tax of 5% that is added to most goods and services in Canada. Some goods and services are exempt from the GST, including most groceries, health care, and financial services.

Provincial and Territorial Taxes

In addition to federal taxes, Canadians also pay provincial and territorial taxes, which vary depending on where they live. For example, in Ontario, the provincial tax rate starts at 5.05%, while in Quebec, it starts at 15%.

Tax Filing Deadlines

The tax filing deadline for individuals is April 30th of each year; any taxes owed must be paid by this date to avoid penalties and interest charges. Self-employed individuals have until June 15th to file their tax returns, but any taxes owed are still due April 30th.

What Should Newcomers Know about the Canadian Tax System?

Residency Status

Your residency status is crucial when it comes to taxes in Canada. If you are a Canadian resident, you are required to report your worldwide income to the CRA. However, if you are a non-resident, you only have to report income earned in Canada.

Tax Treaties

Canada has tax treaties with many countries to prevent double taxation. If you are a newcomer to Canada and have income from another country, it is essential to determine whether there is a tax treaty between Canada and that country.

Tax-Free Savings Account (TFSA)

The Tax-Free Savings Account (TFSA) is a popular savings vehicle in Canada that allows you to save money tax-free. Any income earned in a TFSA is not taxed, and you can withdraw your money anytime without paying taxes.

Registered Retirement Savings Plan (RRSP)

The Registered Retirement Savings Plan (RRSP) is another popular savings vehicle in Canada that allows you to save for retirement while reducing your taxable income. Contributions to an RRSP are tax-deductible, and any income earned in an RRSP is not taxed until it is withdrawn.

At Computek College, we offer the Accounting, Payroll, and Tax Diploma Program (APAT), which includes training on Canadian tax laws and regulations. Our program is designed to provide students with the knowledge and skills necessary to succeed in a career in accounting and payroll administration. If you are a newcomer to Canada and interested in pursuing a career in accounting or payroll, the APAT program at Computek College is the right choice for you.

Call us at 416-321-9911 or check out our website to get started!