As international students studying in Canada, it may be necessary for you to file a Canadian income tax return. To understand how you will be taxed in Canada, it’s important to determine your residency status.
Determining Residency Status for International Students in Canada
When it comes to income tax, international students studying in Canada are categorized into different types of residents based on their residency status. These categories include residents (including those who only reside in Canada part of the year), non-residents, deemed residents, and deemed non-residents.
Your residency status is determined by the residential ties you have with Canada, and it is essential to know your status to understand how you will be taxed in Canada.
Understanding Residential Ties for Canadian Tax Purposes
Residential ties are factors that determine an individual’s connection or relationship to Canada for tax purposes. These ties may include:
- Having a home in Canada
- Moving to Canada with a spouse, common-law partner, or dependents
- Social connections in Canada
- Other relevant residential ties, such as a Canadian driver’s license, bank accounts, credit cards, or health insurance with a Canadian province or territory.
Determining your residency status
If you are an international student studying or carrying out research in Canada, it is essential to determine your residency status to understand your tax obligations.
Residency status is based on the residential ties you have with Canada, which include having a home, spouse, common-law partner, or dependents in Canada, as well as social and other ties, such as a Canadian driver’s license, bank accounts, credit cards, or health insurance with a Canadian province or territory.
Generally, if you return to your home country periodically or for an extended period during the year, or if you move to another country when not attending university in Canada, you may not have significant residential ties with Canada. However, many international students establish significant residential ties while studying or carrying out research in Canada.
Understanding Your Tax Obligations in Canada
In Canada, tax obligations vary based on your residency status, which is determined by your residential ties with the country. Here are the filing requirements for each status:
- Newcomers to Canada who have established significant residential ties with the country must follow the filing requirements for residents.
- Non-residents of Canada who have not established significant residential ties must follow the filing requirements for non-residents.
- Deemed residents must follow the filing requirements for deemed residents.
- Deemed non-residents must follow the same rules as non-residents of Canada.
Canada’s tax system works similarly to that of many other countries, with taxes deducted from employer-paid income and those with business or rental income required to pay taxes by installments.
Determining your eligibility for benefits in Canada is tied to the completion of the “Tax and Benefit Return.” Even if your income is non-taxable or NIL, filing this return can help you claim various credits and benefits, such as the tuition tax credit, transfer of unused tuition fees, GST/HST credit, and Canada child benefit (CCB). By filing, you can also carry forward any unused credits to future years. Note that some of these benefits may be available through provincial-related programs.