New to Canada? Tax Tips for Immigrants – A Complete Guide by a Montreal CPA Firm Near You

Introduction

Moving to Canada is exciting, but the tax system can feel overwhelming for newcomers. Many immigrants mistakenly assume that they only pay tax on income earned in Canada. In reality, once you establish Canadian tax residency, you are required to report your worldwide income, claim eligible credits, and comply with CRA filing rules. Understanding the tax system early helps avoid penalties, maximize refunds, and qualify for important benefits. This guide explains exactly what new Canadians must know about taxes during their first year and beyond.

Legal and Regulatory Framework

Canadian tax residency is determined by residential ties, including where you live, where your spouse and children live, where your home is, and where your personal property and social ties are located. Under section 2 of the Income Tax Act, Canadian residents are taxed on worldwide income from the date they become residents. Newcomers must file a Canadian T1 tax return, report foreign assets on Form T1135 if thresholds are met after residency begins, and apply for benefits such as GST/HST credits and the Canada Child Benefit (CCB). Canada uses a self-assessment tax system requiring individuals to keep detailed records.

Key Court Decisions

In Thompson v. Canada, the court emphasized that residency depends on the totality of personal and economic ties, not immigration status. In Cohen v. Canada, a newcomer was deemed resident even without permanent residency because they established primary ties in Canada. In Brooks v. Canada, the court explained that tax residency begins the moment significant residential ties are established. These cases show how CRA views residency for immigrants.

What Newcomers Must Do in Their First Tax Year

New immigrants must: file a tax return to become eligible for benefits, report worldwide income earned after arrival, prorate credits for the part-year period, understand their residency date, and maintain records of foreign income and assets. CRA requires accurate reporting for months before and after residency.

Reporting Worldwide Income

Once you become a resident, you must report: employment income, self-employment income, rental income, investment income, pension income, foreign dividends, foreign interest, and cryptocurrency transactions. Income earned before becoming a Canadian resident is not taxed in Canada, but you must report it on your tax return to determine eligibility for benefits and credits.

Foreign Asset Reporting (T1135)

If, after becoming a resident, you own foreign assets with a cost greater than $100,000, you must file Form T1135. This form applies to: foreign stocks, cryptocurrency held on foreign exchanges, rental property abroad, foreign bank accounts, and certain trusts. Penalties for failing to file are substantial—starting at $2,500 per year.

Deemed Acquisition Rules

When you become a resident, all your foreign assets are deemed acquired at their fair market value on your residency date. This helps ensure that only future gains (after arrival) are taxed in Canada.

Benefits Newcomers May Qualify For

New residents may receive: the GST/HST credit, the Canada Child Benefit (CCB), provincial benefits, the Canada Workers Benefit (CWB), and tuition credits if enrolled in school. These benefits require accurate and timely tax filing, even if you have no income.

Common Mistakes Newcomers Make

New immigrants often: fail to report foreign income, misunderstand residency dates, miss T1135 filings, fail to apply for benefits, assume that foreign tax treaties eliminate all Canadian tax, or fail to keep records of foreign assets and income. CRA audits newcomers frequently because of cross-border reporting mismatches and data sharing agreements with foreign governments.

Special Considerations

1. Foreign Pensions

Some are taxable in Canada; others receive treaty relief.

2. Foreign Corporations

Newcomers who own companies abroad may be subject to complex reporting rules.

3. Cryptocurrency

Foreign crypto exchanges or wallets create T1135 obligations.

4. Dual Tax Residency

Canada’s tax treaties include tie-breaker rules to avoid double taxation.

Mackisen Strategy

At Mackisen CPA Montreal, we help newcomers establish their residency date, file their first Canadian tax return, report worldwide income properly, handle T1135 requirements, claim all benefits, and ensure compliance with tax treaties. We also provide full planning for professionals, investors, international students, and newcomers with complex foreign assets.

Real Client Experience

A newcomer from Europe avoided penalties after we corrected their residency date and filed missed foreign reporting forms. An international student who became resident qualified for GST credits after we filed their first return. A newcomer with foreign rental property correctly reported deemed acquisition rules and avoided double taxation. A family from the Middle East received full CCB benefits after we prepared part-year returns.

Common Questions

Do I pay tax on income earned before coming to Canada? No, but you must report it for benefit calculations. Do permanent residents file differently? No—tax residency is based on ties, not immigration status. Do I need to file if I have no income? Yes—to receive benefits. What if I own property abroad? It may trigger T1135 reporting.

Why Mackisen

With more than 35 years of combined CPA experience, Mackisen CPA Montreal ensures newcomers understand and comply with all Canadian tax rules while maximizing benefits and minimizing tax. We help you start your new life in Canada with confidence and financial clarity.