Taxation for Expats in Canada



Apart from the keys to your new home, one important thing you should be prepared for before migrating to Canada (or any foreign country for that matter) is the basic knowledge of the tax guidelines applicable to your residence status.

“Double taxation” is a critical issue for expatriates, wherein an expat ends up paying tax in his home country and the country where is working. Aside from consulting a tax expert, it would help to check the Tax Treaties Canada signed with more than 60 countries to avoid double taxation.

Temporary or permanent Canadian residents who are within the territory for more than 183 days; or, temporarily stay in Canada periodically; or have established residential ties in the country through familial or social affiliations or through personal and real properties are liable for income tax on their worldwide income, and a provincial tax whose rate varies for different provinces.

Income tax rates

Federal income tax rates are based on income brackets where higher income earners pay more taxes. Provincial income tax, which is commonly 50% of the federal income tax, is being collected by the national government on behalf of all the provinces except for Quebec and Alberta.

The federal tax rates for 2011 for each income bracket are as follows:

• 15% on the first $41,544 taxable income
• 22% on taxable income from $41,545 to $83,088 
• 26%on taxable income from $83,089 to $128,880
• 29% on taxable income over $128,800

Non-residents who render services in Canada other than continuous employment such as lecturers, consultants, and artists must withhold 15% of their gross income and may also need to file an income tax return.

It with worth noting that expatriates who do not complete 5 years of Canadian residency can enjoy tax savings through the Immigration Trust and on the departure tax. Visit Tax-Services.Ca for more information.

Tax returns in Canada are due on April 30th of the year after the tax year (January 1 to December 31). Tax credits are only paid after an income tax return is filed even if there is no income to be reported.

Expatriates are exempted from reporting income from family trusts where the expatriate is not the settler, meaning he is the one who established the fund or created a trust wherein the beneficiaries are his children. If an expat in Canada establishes a trust where he is not the settler, but merely the beneficiary, he then doesn't need to report the income of the fund.

Although taxation can be a tough and confusing at times, it is of chief importance whether you are a temporary or permanent resident of a country, especially in Canada.