There’s a tax threshold on income earned in Canada, which means if you earn over a certain amount, you’ll be taxed on that income.
But how much is the Canadian tax threshold?
You can earn an income of up to $11,809 in 2018 ($11,635 in 2017) before paying any tax your earnings.
Canadian tax rates are progressive, meaning the more you earn (over the tax-free allowance), the more tax you must pay. As well as federal tax, you’ll also have to pay the provincial tax rate for British Columbia on income over a certain amount.
The B.C. basic personal amount for 2018 was $10,412. Most individuals can earn up to this amount without paying provincial tax.
The tax rates for 2018 are detailed below.
*This is your taxable income – basic personal amount is deducted before this.
With each payslip, your employer will deduct taxes from your income. After the end of the tax year, you should file a tax return to check if the correct amount of tax has been deducted over the course of the year. If your income is below the tax-free threshold, you may be entitled to a refund of all of the tax that you paid.
If you have underpaid tax during the tax year, you’re legally obliged to file a tax return and to pay the balance due.
Tax season usually starts in February for the preceding year and the deadline for filing taxes is the end of April of the following year. In other words, tax returns for the 2018 tax year will be due on 30 April 2019.
What is a SIN?
Everyone who wants to work in Canada needs a Social Insurance Number (SIN). A SIN is a nine-digit number you’ll need to pay tax and access government programs. 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 fill in federal and provincial personal tax credit forms when you start a new job, so your employer can determine 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.
You’ll need to fill out a TD1 when you start a job for the first time in Canada and:
- anytime 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
The 90% rule
Your eligibility for personal tax credits is calculated on the TD1.
If 90% of your income was sourced in Canada in the tax year, then you’ll be entitled to the personal credits. If not, then you shouldn’t claim the credits on the federal and provincial TD1 forms.
If more than 10% of your income was earned outside Canada, 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 Irish income in Canada, but the Canada Revenue Agency requires you to state the portion so they can consider whether you can avail of particular tax benefits.
What is a T4?
After the end of the tax year (typically February), your employer will issue your T4.
This is a statement of 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 claim a tax refund!
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
How do I file a tax return?
Every taxpayer in Canada, including those on temporary visas (such as working holiday visas), are legally obliged to file a tax return where they had to pay tax for the year.
The deadline for filing your tax return and paying any balance of tax due is usually April 30th of the following tax year. The tax return that you file on or before April 30th will relate to the previous year’s income. In other words, a tax return filed on April 30th 2018 must relate to your 2017 earnings.
While the deadline to file is April 30th you can choose to file from around mid-February. It is always advisable to file as early as possible and to avoid the ‘deadline rush’.
Filing your 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 you can use tax filing experts, Taxback.com, who’ll do all the paperwork for you.
Want to claim a tax refund?
Your residency status
Before you file your tax return, you need to determine your Canadian residency status.
It’s important to file your return under the correct residency status so that you can 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 to stay for that amount of time and then leave Canada, it’s very likely that you should file as a non-resident for tax purposes.
We know this is a lot to take in, so if you need help figuring it out, head over to Taxback.com’s 24/7 Live Chat where a member of their team will be happy to answer any tax questions you might have!
Am I due a tax refund?
This depends on a number of factors including whether or not you overpaid tax. Overpayments of tax in Canada can be broken into three categories:
- Overpayment of income tax
- Overpayment of Canadian Pension Plan (CPP)
- Overpayment of Employer Insurance (EI)
By using the Taxback.com’s online tax calculator you can easily get a free estimate of how much your refund will be worth.