If you go to Canada, you’ll need to pay tax on your income – that is unless you earn under the tax-free threshold of $11,809 in 2018 (or $11,635 in 2017).
Canadian tax rates are progressive, meaning the more you earn (over the tax-free allowance), the more tax you need to pay.
Oh, and as well as federal tax, you’ll need to pay the provincial tax rate for Ontario on income over a certain amount.
The tax rates for 2018 are detailed below.
The Ontario Basic Personal Amount has also been increased to $10,359 for 2018 from $10,171 in 2017 meaning you can earn up to this amount without paying provincial tax.
Each time you’re paid you can see how much tax is deducted by looking at your payslip.
What’s a SIN?
Everyone who goes to work in Canada needs a Social Insurance Number (SIN). This is a 9 digit number you need in order to pay your taxes. You can even apply for your SIN before you arrive in Canada with our partner Taxback.com
Do I need to fill in any tax forms?
You’ll need to complete federal and provincial personal tax credit forms when you start a new job so your employer knows how much tax to withhold from your wages.
A TD1 is a federal, provincial and personal tax credit form used to determine how much tax you should pay on your income.
There are a number of times when you may need to complete a TD1 form:
- when you have a new employer
- if you want to change credit amounts from previous years
- if you want to claim the deduction for living in a prescribed zone
- if you want to increase the amount of tax deducted at source
See the forms here:
Federal Td1 Form 2018
The 90% rule
Your eligibility for personal tax credits is calculated on the TD1, which you will fill out when you start your new job in Canada.
One of the biggest rules you need to consider is the 90% rule. Basically, if 90% of your income was sourced in Canada in the tax year, then you will be entitled to the personal credits. If not, then you shouldn’t claim the credits on the federal and provincial TD1 forms.
To sum up, if more than 10% of your income was earned outside Canada, then you should not claim the credits and make sure to enter 0 in box 13 on the form.
Remember, as a non-resident you will not be taxed on your Irish income in Canada but the Canada Revenue Agency requires you to state the portion so they can consider whether you are entitled to avail of particular tax benefits.
What’s a T4?
After the end of the tax year (typically in February), your employer will issue your T4. This states your earnings for the previous year and shows how much tax you paid.
The best thing about your T4 is that you can use it to apply for a tax refund.
Am I due a Canadian tax refund?
You may be due to claim a tax refund if you overpaid income tax, Canadian Pension Plan or Employer Insurance.
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
Want to claim a tax refund?
To find out if you’re due tax back you’ll need to file a tax return in Canada.
By using Taxback.com’s online tax calculator, you can easily get a free estimate of how much your refund will be worth.
How do I file a Canadian tax return?
Even if you’re on a temporary visa in Canada, such as a working holiday, you’re legally obliged to file a tax return.
The deadline for filing your tax return and paying any balance of tax due is usually 30 April of the following tax year. The tax return that you file on or before 30 April relates to the previous year’s income.
In other words, a tax return filed on 30 April 2019 must relate to 2018 earnings.
While the deadline to file is 30 April, you can file from around mid-February. It’s a good idea to file as early as possible and to avoid the deadline rush.
Remember, filing a tax return is the only way to claim a refund of tax.
You can file your tax return directly with the Canadian tax authorities or tax filing experts, Taxback.com will do everything for you!
Your residency status
You should file your tax return under the correct residency status to stay compliant with Canadian tax authorities.
A few factors determine your status, including:
- residential ties you have in Canada
- purpose and permanence of your stays abroad
- your ties abroad
If you’re on a 1 or 2 year Working Holiday Visa and plan on staying for exactly that amount of time before leaving Canada, you should file as a non-resident for tax purposes.
If this is all a bit much and y0u need help to figuring things out, head over to Taxback.com’s 24/7 Live Chat service and a member of their team will be more than happy to answer any tax related questions you might have.