Principal Issues: Is there a period of exemption from income tax for new immigrants to Canada?
Position: No.
Reasons: Under the Canadian income tax system a person's liability for tax is based on his or her status as a resident of Canada. The liability for income tax begins on the date that the person becomes resident.
September 10, 2009
XXXXXXXXXX
Dear XXXXXXXXXX :
The office of the Honourable Jason Kenney, Minister of Citizenship, Immigration and Multiculturalism, forwarded to me a copy of your correspondence, which I received on July 7, 2009, concerning whether an income tax exemption exists for new immigrants to Canada.
Under the Canadian income tax system, a person's liability for income tax is based on his or her status as a resident of Canada. An individual becomes a resident of Canada for income tax purposes when that person establishes significant residential ties in Canada. The liability for income tax begins on the date that the person becomes a resident. For a new immigrant, the date he or she becomes a resident would usually be the date of arrival in Canada. There is no provision in the Income Tax Act to exempt tax during a period of settlement.
Residential ties can include a home in Canada, a spouse or a common-law partner and dependants who move to Canada to live with the individual, personal property such as a car or furniture, and social ties in Canada. Additional information about the meaning of "residential ties" and how to determine an individual's residence status is available in Pamphlet T4055, Newcomers to Canada - 2008, and in Interpretation Bulletin IT-221R3 (Consolidated), Determination of an Individual's Residence Status. You can find these publications and other relevant information on the Canada Revenue Agency Web site at www.cra.gc.ca/tx/nnrsdnts/ndvdls/nwcmr-eng.html.
Individuals who are residents of Canada during a tax year are subject to Canadian income tax on their world income from all sources. Individuals may be residents of Canada for only part of a year, in which case they will only be subject to Canadian tax on their world income during the part of the year in which they are residents of Canada. During the other part of the year, the individuals will be taxed as non-residents.
Residents of Canada for part or all of a tax year must file a tax return if they owe tax or want to receive a refund because they paid too much tax in a tax year. Even if the individuals have no income to report or tax to pay, they should file an income tax return to receive certain payments or credits for which they may be eligible. These benefits and credits can include the goods and services tax/harmonized sales tax credit, the Canada Child Tax Benefit, the Universal Child Care Benefit, and provincial or territorial credits.
I trust that the information I have provided will be helpful.
Sincerely,
Jean-Pierre Blackburn, P.C., M.P.
Minister of National Revenue
Rita Ferguson
519-645-5261
2009-033285