Personal Tax Return Filing for 2018
T1 tax returns and T1135 filing for 2018 will start from Monday, February 18, 2019, at 8:30 a.m. (Eastern Time). Any prior year filing (i.e., for 2015, 2016, 2017) including T1 Amendments must be completed before 11:59 p.m. local time on Friday, January 25, 2019. During this period CRA’s EFILE and ReFILE services will stop transmission of return in order to convert its system to prepare for the next filing season.
Missing Information Slips
If you have not received information slips such as T4, T4A, T3, T5, RRSP or any other slip by the last date of February next year, you can log in to my CRA Account to download the information slips. Employer’s corporates are required to forward the slips to the last known address by the end of February next year. However, if you still find that the information is not available in my CRA Account, you can use your last payment information to include in your tax return when you are filing a paper tax return. Also, you can amend (T1-ADJ) your return by using my CRA Account when information is available.
The following receipts must be attached with a T1 Return at the time of paper filing to avoid any delays in the processing of your return:
- Medical Expenses
- RRSP contributions
Foreign Income Verification
T1135-Foreign Income Verification Statement
All Canadians are required to report their worldwide income as well as any assets outside Canada over $100,000 by using form T1135. But this is most common mistakes new immigrants are doing by not declaring the foreign income or assets each year. It increases their hassle when they decide to bring back the proceeds of the income or assets from the foreign country. Because if T1135 is not filed each year then CRA considers all the money received as income on the year of receipt and are subject to tax in Canada. These foreign reporting forms provide information to CRA about the foreign assets as well as income on the foreign assets. This also ensures CRA that the Canadian residents are paying taxes on income earned on foreign assets.
How to avoid double taxation in Canada?
Foreign Tax Credit
Canadian resident for tax purposes or deemed Canadian residents who were present in Canada for 183 days or more in a taxation year are taxed on their worldwide income. So, they have to report their foreign income on their tax return in Canada and may be subject to double tax on foreign income. In almost all the countries except some places in the middle east, there are taxes on income generated by anyone. So, foreign income may have been subject to foreign taxes, accordingly, in order to avoid double taxation on the same income, a foreign tax credit is available to Canadian taxpayers who have paid foreign income taxes. Taxpayer gets the credit for the foreign taxes they paid in the foreign country and it reduces their overall tax payable in Canada. By granting a foreign tax credit, double taxation is avoided. Foreign business income tax credit if not needed in the current year then it can be carried back 3 years or carried forward for 10 years.
The Canadian government has signed tax treaties with several countries to avoid double taxation. Treaties are very specific to a particular country. So, use the provisions of the tax treaty whenever it is favorable to reduce overall taxes.
Residence of individuals for income tax purposes in Canada
According to the income tax law, residency is very important. Residence for tax and immigration are different. One person can be a resident of Canada but may not be a resident of Canada for tax purposes. An individual is taxed on worldwide income for the full year if he/she resides in Canada.
An individual can be a resident of Canada for the purpose of income taxes if he meets the following conditions:
- Having a residence (i.e, owned or rented) that is available in Canada to live in
- Having immediate family members living in Canada such as a spouse and/or minor children.
- Maintaining social ties and personal property in Canada such as memberships in a Canadian organization, having a driver license, provincial health card, bank accounts, principal residence, etc.
Secondary indicators are less important when determining residence for tax purposes.
Deemed full-year resident of Canada
A non-resident can be a resident for tax purposes if he/she physically present in Canada for 183 days or more in a taxation year and will be taxed on worldwide income. For the purpose of counting the number of days, even a part of the day is considered as a full day.
A part-year resident of Canada
A person that starts fresh in Canada or makes a clean break from Canada is taxed on the worldwide income for a part of the year. All deductions will be applicable for the part of the year in which he/she was present in Canada. All non-refundable tax credits are pro-rated and only allowed for the period of residence in Canada.