What new Canadians should know about the tax system
By Mark Gollom, CBC News
Posted: Apr 28, 2012 8:06 AM ET
Last Updated: Apr 28, 2012 8:02 AM ET
New Canadians can take advantage of a number of ways to reduce taxes. (iStock)
When Tahir Mazari arrived in Canada in 1999 from Afghanistan, filing his taxes for the first time was a challenging task.
"At the beginning it was difficult for me [knowing] what to do, but some of my friends helped me," he said. "We [didn’t have] that system in our country. It was very new to us."
Mazari now volunteers in Ottawa at ACORN Canada to help new Canadians with their taxes come tax time.
"Usually they come to file their taxes, but they are not familiar with the documents," he said.
Canadians who have lived in the country all their lives struggle every year to file their taxes, but new immigrants not familiar with the system may face even greater challenges.
"The whole concept can be quite foreign to somebody, no pun intended," said Brian Quinlan, an accountant with Toronto-based Campbell Lawless.
"Sometimes new people to Canada are afraid a little bit, depending where they're from and what their background is. They might be afraid of 'big government.'"
A number of community groups and chartered accountant organizations provide free tax clinics at various locations to lower income Canadians and and recent immigrants.
The Canadian government also hosts the Community Volunteer Income Tax Program – a partnership between the Canada Revenue Agency and community organizations who host tax clinics and arrange volunteers.
The CRA provides training, tax software, and a network of CVITP coordinators across the country to help the community organizations and volunteers deliver the program.
The CVITP says it helps more than half a million Canadians file their tax returns every year.
Filing tips
Quinlan offered a few tips for new Canadians when it comes to filing their taxes.
He said they may be eligible for credits like the GST credit,Canada Child Tax Benefit, Universal Child Care Benefit credits or credits for rent or property taxes.
"It’s good to file, because a lot of our credits are based on your tax return. So if the government doesn’t know your income, you won't get these credits sent to you."
Quinlan noted that moving expenses can be written off if you're coming to Canada to take a job or for self employment.
As well, new Canadians should be reminded that new homebuyers could be eligible for the First-Time Home Buyers $5,000 tax credit.
New Canadians also needn’t worry about being taxed on assets they bring in when they arrive, Quinlan said.
"There’s no real tax implication of bringing assets in. You’re not taxed on the amount coming in.
"When you become a resident it's just like you bought all of those assets the day you became a resident here. So if you sell it in a year at a gain, Canada's only going to tax that gain from the day you arrived," he said.
Immigrants who know they will be coming to Canada can also set up what's known as an immigrant trust before they arrive, which allows them to get a deferral of tax of five years on some of the income they’re generating outside of Canada. The disadvantage is that it only makes financial sense for people with major assets, since it generally costs tens of thousands in legal and financial fees to set up a trust.
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