Newcomers

Residency status for tax purposes

Canada taxes its citizens based on residency not on citizenship. There are different types of residency statuses for tax purposes. As a volunteer, you will be mainly working with individuals who are residents and newcomers.

Newcomers are individuals who left another country to come and live in Canada. For example, someone who arrived in Canada in 2021 is considered a newcomer for the 2021 taxation year only.

A newcomer becomes a resident of Canada for income tax purposes when they establish significant residential ties in Canada. The individual usually establishes these ties on the date they arrive in Canada.

Residents are individuals who live in and have significant residential ties with Canada. An individual is considered a resident of Canada when they have at least one significant tie and several secondary ties in Canada. Most newcomers who move to Canada with the intentions of staying here are considered residents from the time they enter Canada.

Significant residential ties include:

• a home in Canada
• a spouse or common-law partner in Canada
• dependants in Canada

Secondary residential ties include:

• personal property in Canada, such as a car or furniture
• social ties in Canada, such as memberships in Canadian recreational or religious organizations
• economic ties in Canada, such as Canadian bank accounts or credit cards
• a Canadian driver’s license
• a Canadian passport
• health insurance with a Canadian province or territory

Residency status for international students is more complex. They may not establish significant residential ties with Canada if they return to their home country on a periodic basis or for a significant amount of time in the calendar year; or if they move to another country when not attending university in Canada. It is up to the student to determine their residency status for tax purposes.

Non-residents are individuals who normally live outside of Canada, or have no significant ties with Canada and spent fewer than 183 days in Canada. Generally speaking, newcomers are non-residents until the day of their arrival in Canada. They may also have a non-resident spouse if that person did not come to Canada with them.

Deemed residents are individuals who spent more than 183 days in Canada, have no significant ties with Canada, and are not considered residents of another country.

What you need to consider when filing a return for newcomers

Identification numbers

One of the most important steps when preparing a return using UFile CVITP is the identification section of the interview.

Newcomers may have an identification number other than a social insurance number (SIN), such as an individual tax number (ITN) or a temporary tax number (TTN). These numbers allow individuals to file their income tax return, and apply for benefits. The following table explains the different taxpayer-identification numbers as well as the information you need to consider in relation:

As a volunteer, you are not expected to provide assistance in filling out applications for an identification number.

If the individual wants more information about obtaining a SIN, refer them to Social Insurance Number - Overview.

Date of entry

The date of entry is the date when the individual became a resident of Canada for income tax purposes. This usually corresponds to the date the individual arrived in Canada. It is important to enter the exact date, as this could affect the amount of non-refundable tax credits that they may be entitled to.

In this example, the date of entry is August 10, 2021. Based on the date of entry, a newcomer’s first year in Canada can be split into two periods:

• when they were a non-resident of Canada (January 1 to August 9, 2021)
• when they were a resident of Canada (August 10 to December 31, 2021)

For most newcomers, the income earned before moving to Canada is non-taxable. It does not need to be included in the Total income section of the return. However, since this income is required to calculate certain benefits and credits, it is important to provide this information.

Information about a newcomer’s spouse

If the individual’s spouse or common-law partner is in Canada with them, proceed as usual.

If their spouse or common-law partner is living in a different country, it is still important for the individual to report that they are married or common-law, and report the spouse’s name and net income in Canadian dollars. The CRA needs this information in order to calculate the credits that the individual is entitled to in Canada. The non-resident spouse does not need to file a tax return and will not need to pay taxes on their foreign income. The individual might be able to claim an amount for their non-resident spouse or common-law partner that depended on them for support. It is important for the individual to save any of the documentation or receipts as proof of support, as they may be contacted by the CRA and asked to provide the information at a later date.

Note that a person is still considered married, even if they are not living with their spouse if the separation is for reasons other than a breakdown in the relationship.

Reporting foreign property over $100,000 (Canadian)

An individual does not have to report foreign property for the year they first become a resident of Canada.

However, if the individual owns foreign property and was a resident of Canada in any previous year, you should not prepare the return, since this is considered a complex tax situation.

This refers to foreign property owned, such as:

• bank accounts held abroad (interest)
• shares held in foreign corporations or shares held in a resident corporation but held outside of Canada
• vacant land abroad
• other income-earning foreign property

Foreign property does not include any personal use property, such as a primary residence, vacation home, or cottage.

Income earned inside and outside Canada

Newcomers must report any world income earned while they were a resident of Canada.

In some instances, an individual may also have earned Canadian-sourced income while they were a non-resident. They may be asked to report that income if they wish to apply for the GST/HST tax credit, the Canada child benefit (CCB), or other credits and benefits for which they qualify.

World income is income from all sources both inside and outside Canada. This could be employment or pension income, social assistance and worker’s compensation benefits, and investment income.

Non-refundable tax credits

The amount a newcomer can claim for non-refundable tax credits is proportional to the number of days in the year they were considered to be a resident of Canada. The amounts that can be claimed are calculated based on their Date of entry.

However, the individual may be able to claim all of their non-refundable credits, if their taxable income in Canada represents 90% or more of their world income. This is known as the 90% rule.

When preparing a return using UFile CVITP, you will have to provide information about the individual’s income during the non-resident portion of the year. This is so the software can determine if the 90% rule applies when calculating the non-refundable tax credits. You must report:

• Canadian sourced income (excluding Part XIII) earned, such as income from employment in Canada, income from a business carried on in Canada, or taxable part of scholarships/fellowships/bursaries from Canada
• Canadian source Part XIII income PLUS foreign sourced income, such as interest and dividends, rental income, pension income including Old Age Security, Canada Pension Plan, and Quebec Pension Plan

If you are preparing a paper return, ask the individual if their taxable income in Canada represents 90% or more of their world income to determine if they qualify for the 90% rule. If they meet the requirements, use forms 5013-SA, Schedule A - Statement of World Income – Non-Residents of Canada and 5013-SB, Schedule B - Allowable Amount of Non-Refundable Tax Credits - Non-Resident of Canada to do your calculations and attach them to the return.

Benefits and other credits

Newcomers may be entitled to the following benefits and credits:

• Canada child benefit (CCB)
• Goods and services tax/harmonized sales tax (GST/HST) credit

To apply for these benefits, additional forms must be completed by the newcomer:

• To apply for the GST/HST credit, Form RC151, GST/HST Credit Application for Individuals Who Become Residents of Canada must be completed for the year they became a resident of Canada
• To apply for the Canada child benefit (CCB) and to register children for the GST/HST credit, the RC66, Canada Child Benefits Application includes federal, provincial, and territorial programs and the RC66SCH, Status in Canada and Income Information for the Canada Child Benefits Application forms should be completed and sent to the CRA

As a volunteer, it is not your responsibility to help fill out these forms. For assistance regarding benefits, including these forms, individuals can contact the Benefits enquiries line at 1-800-387-1193 or visit Tax credits and benefits for individuals on Canada.ca.

Canada workers benefit

Newcomers cannot claim the Canada workers benefit on line 45300 of the federal return because they were not resident in Canada for the whole year.

Federal foreign tax credit

An individual may be able to claim this credit for foreign income they received from outside Canada and reported on their Canadian tax return. Tax treaties with other countries may affect whether they are eligible for this credit.

Foreign income and foreign taxes must be converted to Canadian dollars. Use the applicable Bank of Canada exchange rate in effect on the day the individual received these amounts. If they received a monthly pension or multiple payments at different times during the year, use the average annual exchange rate.

For more information, refer to the Federal foreign tax credit.

RRSP contributions

Generally, individuals cannot make or claim a contribution to a registered retirement savings plan (RRSP) if this is the first year they are completing a tax return in Canada. However, if they made RRSP contributions during the year and have RRSP contribution room that they accumulated when living in Canada previously, they can claim an RRSP deduction. The individual can go to My Account or call the CRA if they think they have some RRSP contribution room but are unsure of the amount.

For more information, refer to T4055, Newcomers to Canada 2020.

Slips required:

• T4 – Statement of Remuneration Paid (Sunny Market Ltd.)

• T4 – Statement of Remuneration Paid (Tutoring for Success)

• T5007 – Statement of Benefits

Jeet and Mia immigrated to Canada from Indonesia on March 1, 2021. Jeet’s world income outside of Canada in 2021 was $3,000 CAN, which he earned as an employee at a school in Indonesia. Mia’s world income outside of Canada in 2021 was $1,600 CAN as an employee of the same school. Mia did not have any income earned in Canada. Jeet and Mia don’t own any property.

Points to remember:

• It is the first time Jeet and Mia complete a tax return. They don’t have Canadian citizenship. Under CRA question topic, answer Yes to Are you filing an income tax return with the CRA for the very fist time? and No to Do you have Canadian citizenship?

• Check Immigrant, emigrant, non resident taxpayer, you are a Canadian resident and your spouse immigrated to Canada in the year on the Interview setup page

• On the Immigrant, emigrant or non-resident page, select You immigrated to Canada in 2021. Then, enter Jeet’s Date of entry (March 1, 2021). Since Jeet and his wife have the same Date of entry and have been living together since that date, you can leave the next field blank.

• Answer the next two questions in UFile:

  • Canadian sourced income (excluding Part XIII income) earned when you were not a resident of Canada

    • In Jeet’s situation, enter his Source of income as Income from employment in Canada and the amount of $0.00, since he did not have any Canadian sourced income while he was not a resident of Canada

  • Canadian source Part XIII income PLUS foreign sourced income earned when you were not a resident of Canada

    • In Jeet’s situation, enter the Name of country as Indonesia, his foreign source of income as Net employment income, and the amount of $3,000

• Follow the same instructions as above, for Mia’s tax return. Her Net employment income while not a resident of Canada is $1,600

• Income earned prior to immigration will not show in the solution, since it is only used to calculate benefit and credit eligibility

  • Jeet’s Basic personal amount and Spouse or common-law partner amount were reduced. These amounts have been prorated by UFile based on the amount of time he has been in Canada

• Click Interview setup, in the left side menu, then click Social assistance, worker’s compensation (T5007/RL-5). Complete the following steps when entering Jeet’s T5007 information:

  • Enter Yes to the question Did you live with your spouse or common-law partner when you received the social assistance benefits?

  • Choose Family Head when asked to Select the person whose name appears on the slip

  • Select Original as response to the question Is this an amended slip? since the slip has not been amended.

Information slips for Jeet:

T4 – Statement of Remuneration Paid (Sunny Market Ltd.)

T4 – Statement of Remuneration Paid (Tutoring for Success)

T5007 – Statement of Benefits

Slips required:

• T4 – Statement of Remuneration Paid (Pete’s Market)

• T4 – Statement of Remuneration Paid (Janitor's Inc.)

• T5007 – Statement of Benefits

Martin immigrated to Canada from France on February 1, 2021. Martin’s world income outside of Canada in 2021 was $5,000 CAN, which he earned as an employee at a market in France. Martin’s wife, Simonne, still lives in France.. Simonne’s net income in 2021 was $2,800 CAN, earned as an employee in a grocery store. In this scenario, Simonne’s net income was already converted using the annual exchange rate as per the Bank of Canada. Martin and Simonne don’t own any property.

Points to remember:

• It is the first time Martin completes a tax return. He doesn’t have Canadian citizenship. Under CRA question, answer Yes to Are you filing an income tax return with the CRA for the very fist time? and No to Do you have Canadian citizenship?

• Check Immigrant, emigrant, non resident taxpayer, you are a Canadian resident and your spouse immigrated to Canada in the year in the Interview setup page. On the same page, also check the boxes for Employment income and employment insurance benefits (T4, T4E/RL-6) and Social assistance, worker’s compensation (T5007/RL-5)

• On the Immigrant, emigrant or non-resident page, select You immigrated to Canada in 2020. Then, enter Martin’s Date of entry (February 1, 2021).

• Answer the next two questions in UFile:

  • Canadian sourced income (excluding Part XIII income) earned when you were not a resident of Canada

    • In Martin’s situation, enter his Source of income as Income from employment in Canada and the amount of $0.00, since he did not have any Canadian sourced income while he was not a resident of Canada

  • Canadian source Part XIII income PLUS foreign sourced income earned when you were not a resident of Canada

    • In Martin’s situation, enter the Name of country as France, his foreign source of income as Net employment income, and the amount of $5,000

• Since Simonne still resides in France, a tax return is not required

• Under Spouse interview type, you will be asked to answer the question What information will you provide for your spouse? In this case, you will select Net income only

• Under Spouse – basic information topic, enter known information. You must enter $2,800 in the field next to Net federal income of your spouse OR net world income in Canadian dollars, if your spouse is a non-resident of Canada as this is the net income of Simonne while living in France. Answer No to the question Did your spouse receive universal child care benefits in 2021?

• Income earned prior to immigration will not show in the solution, since it is only used to calculate benefit and credit eligibility

  • Martin’s Basic personal amount and Spouse or common-law partner amount were reduced. These amounts have been prorated by UFile based on the amount of time he has been in Canada

• Complete the following steps when entering Martin’s T5007 information:

  • Click Interview setup, in the left side menu, then check the box next to Social assistance, worker’s compensation (T5007/RL-5).

  • Enter No to the question Did you live with your spouse or common-law partner when you received the social assistance benefits?

  • Select Original as the response to the question Is this an amended slip? since the slip has not been amended.

Information slips for Martin:

T4 – Statement of Remuneration Paid (Pete's Market)

T4 – Statement of Remuneration Paid (Janitor's Inc.)

T5007 – Statement of Benefits