If you wanna work in Canada, then you’ll need to pay tax!
As a working holidaymaker, you’ll be considered a non-resident for tax purposes and must pay tax on any Canadian-sourced income over certain thresholds.
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How much you pay typically depends on how much you earn because Canada’s tax system is progressive.
How much tax will I pay in Québec City?
If you go to work in Québec City, you must pay provincial tax as well as federal income tax on income over certain amounts.
Essentially, the Federal Government collects personal income taxes on behalf of all provinces except Quebec which has its own tax system.
If you are entitled to the federal basic personal credit you can earn up to $14,398 (for 2022) before paying tax. You can determine whether or not you’re entitled to personal tax credits by completing a TD1 form (more information below).
The federal tax rates in 2022
| Taxable Income For 2022 | Federal Tax Rate |
|---|---|
| On the first $50,197 of taxable income | 15% |
| From $50,197.01 up to $100,392 | 20.5% |
| From $100,392.01 up to $155,625 | 26% |
| From $155,625.01 up to $221,708 | 29% |
| Over $221,708 | 33% |
The provincial tax rates for Québec are as follows:
| Taxable Income 2022 | Quebec Tax Rates 2022 |
|---|---|
| First $46,295 | 15% |
| Over $46,295.01 up to $92,580 | 20% |
| Over $92,580.01 up to $112,655 | 24% |
| Over $112,655.01 | 25.75% |
*The basic personal amount for provincial tax in Québec is $16,143. This amount will be deducted from your taxable income.
You will see exactly how much tax is being deducted on your payslip each month along with any pension and insurance contributions. If your income is below the tax-free threshold, then you may be due a refund.
What happens with my taxes when I start my job in Canada?
When you start your first job in Canada, there are a couple of things you should keep in mind:
- Your Social Insurance Number (SIN)
- Your TD1 Forms
What is a SIN?
Your SIN is a unique number that is used to identify you for tax purposes in Canada. You’ll need one if you want to work in Canada. You’ll also need one to make sure you don’t get taxed more than you need to be.
To get your SIN, temporary residents must provide an original of one of the following:
- Work permit issued by IRCC or CIC
- Study permit issued by IRCC or CIC, that:
- Indicates the permit holder ‘may accept employment’ or ‘may work’ in Canada; or
- Is accompanied by a ‘confirmation to work off campus’ letter issued by IRCC or CIC
What is a TD1 form?
TD1 forms are federal and provincial tax forms that determine how much tax you should pay. These forms can tell your employer whether you’re due personal tax credits or not.
You need to fill out a TD1 when you start a job for the first time in Canada and:
- any time you get a new employer
- if you want to change credit amounts from previous years
- if you want to claim a deduction for living in a prescribed zone
- to increase the amount of tax deducted at source
If you work in Québec you should use the federal TD1 and provincial Form TP-1015.3-V, Source Deductions Return.
How do I complete the TD1 forms?
Just answer all the questions honestly! The main thing you need to be concerned about is the 90% rule.
In short, if you earned less than 90% of your income outside Canada then you should not claim the personal tax credit.
The Canada Revenue Agency (CRA) will not allow you to earn tax-free income in Canada if you didn’t earn 90% of your total income for that year in Canada.
In other words, if more than 10% of your income was earned outside Canada that year, then you should not claim the credits and make sure you enter 0 in box 13.
Remember, as a non-resident you will not be taxed on your foreign income in Canada but the Canadian Revenue Agency requires you to state the portion so they can consider whether you can avail of particular tax benefits.
What is a T4?
Your T4 is a statement of the income you earned throughout the year and how much tax you paid. You can use this information to file your tax return and claim back any overpaid tax.
Where can I get my T4?
You should receive your T4 by February following the tax year in which you worked in Canada. If you lose your T4 or didn’t get one, you should contact your employer directly.
Alternatively, our tax partner Taxback.com can help you to track down missing tax documents including your T4.
If you’ve any questions related to tax, please contact Taxback.com.
Oh and don’t forget to sign up to our working holiday jobs kit!
Want to claim a tax refund?
Do I need to file a tax return?
If you earn income in Canada, you should file a tax return by the deadline of 30 April 2022. So for example, if you have worked in Canada in 2021, then you should file your tax return for that year by 30 April 2021. However, you can file before then, and the faster you file the better as you will receive your refund quicker!
Filing your tax return is also the only way to claim back overpaid tax.
You can always file your tax return directly with the CRA but if that seems like too much hassle, Taxback.com will take care of everything from calculations to paperwork, missing documents retrieval and filing your tax return.
Can I claim expenses in Canada?
You may be eligible to claim certain expenses if you paid over the tax-free threshold for that year.
Examples of possible expenses include:
- Medical (for example – doctors visits, prescriptions, and surgery)
- Travel Expenses
- Tuition fees
- Donations
- Union dues
- Business (for example – rent, supplies, travel, and professional fees)
If you want to claim these, just make sure you retain any receipts and records for these expenses. Our tax partner Taxback.com can also tell you if you’re owed any expenses.
Can I claim a tax refund from Canada?
If you think you’ve overpaid tax, then you should file a tax return to claim it back. You may be due a refund if you overpaid income tax, pension, or employment insurance contributions.
How much you can claim depends on a number of factors, including:
- Your residency status
- How long you worked
- How many jobs you had
- Income you received from overseas
- How much tax you paid
- If a tax treaty is applicable
The easiest way to find out if you’re due a refund is to apply with our tax partner Taxback.com for a free estimate of your tax refund.
How do I file a tax return for Canada?
The deadline for filing tax returns in Canada and paying any balance of tax due is 30 April each year.
You can file your federal tax return directly with the Canadian Revenue Agency and your provincial tax return with Revenu Québec. You can also use our partner and tax preparer Taxback.com to do all the paperwork for you.
*Updated On 7 April, 2022