Tax information for international students in Canada
For a lot of international students in Canada, one of the common worry and uncertainty is to determine their Canadian income tax responsibilities. This uncertainty stems from the fact that not all international students are obligated to file Canadian income taxes, nor are they always eligible for tax refunds or credits. This guide will help you understand the criteria for determining whether you need to file a Canadian tax return as an international student and provide you with valuable insights into the process of completing it.
Determining whether you need to file taxes as an international student
When international students have tax obligations towards the Canadian government, owe them some taxes or are eligible to receive tax refund or credits, then they should file their tax returns with CRA. Therefore, working for a Canadian company signifies that both resident Canadians and non-resident individuals, including international students, should file their taxes. As such, international students who work in Canada may either be required to pay taxes to fill their tax obligations or qualify for a tax refund depending on their financial situation.
Eligibility for tax credits and benefits as an international student depends on their residency status, which, in turn, is determined by various factors that play a role in their tax obligations and entitlements.
Tax Filing Obligations for International Students in Canada
International students who have lived in Canada, even for part of the year, may have the need to complete a tax return. Filing a tax return for the current year is advisable if any of the following circumstances apply to you –
- You are expecting a tax refund
- You have tax liabilities for the year
- You want to receive benefit and credit payments
Even if you did not earn any income during the year, it can still be advantageous to file a tax return. This allows the Canada Revenue Agency (CRA) to assess your eligibility for –
- The goods and services tax/harmonized sales tax (GST/HST) credit
- Receiving the Canada child benefit
- Other benefits provided by specific provincial or territorial programs
Failure to file a required tax return could result in fines and penalties from the CRA. Moreover, it may jeopardize your visa application in the future, as your tax history could raise flags.
You can still benefit from tax savings in Canada, even if you're not working in the country or don't owe any taxes. One way to do this is by carrying forward your tuition tax credit to the next tax year, which can help reduce your tax liability in the future.
Moreover, if you, as a student, don't need to use the tuition tax credit yourself, you have the option to transfer it to eligible family members who can make use of it to lower their tax bills. This provision allows you to optimize the value of this tax credit, ensuring that it doesn't go to waste and can be of benefit to those who can use it effectively.
Every resident in the country must submit their returns utilizing their provincial package for general income tax and benefits applicable as of 31st of the fiscal year. Income should be indicated on the return, which is derived from both domestic and foreign sources. In Canada as a resident of the state, you should pay tax for an income, from every origin. However, it is possible to avoid its payment through foreign tax credit from other states’ authorities.
Non-residents and those considered deemed non-residents should utilize an income tax package tailored specifically for their status, accounting for non-resident and deemed non-resident tax requirements.
If you are an international student in Canada, you should be aware that you can make use of tuition credits by utilizing the T2202/T2202A form. These are usually provided by your educational institution.
Documents you would need to file taxes as a student
Here’s the list of documents that you would need to file your taxes as an international student.
- Social Insurance Number (SIN)
- T2202 Form: This document displays the tuition fees you have paid during the tax year. You can access and download your T2202 form through the MyUCW Student Portal.
- T4 Form: Your employer provides this form, which details your employment earnings and deductions for the tax year.
- T4A Form: If you have received a scholarship or bursary, you will receive a T4A slip indicating the full amount, even if you are eligible for a scholarship exemption to exclude this amount from your taxable income. It is the student's responsibility to determine the applicable scholarship exemption amount.
- Interest Tax Slips (e.g., T3 or T5) from financial institutions: If applicable, please contact your financial institution to obtain a copy of these forms.
- Receipts for Donations to Canadian Charities: Maintain receipts as proof if you have made donations to Canadian charities.
- Medical Receipts for Out-of-Pocket Expenses: Keep records of out-of-pocket medical expenses for tax purposes.
Claiming benefits and credits as an international student
Canadian resident students should include those who have developed strong residential ties in Canada. These ties include ownership or rental of a house in Canada, possession of a Canadian bank account and/or driving licence, cohabitation with a spouse or dependent children, or involvement in other substantial relationships with the nation’s society. These international students fall under the same category of Canadians and get such things as GST credits, tuition carry-forward credits, as well as some provincial ones – credits or tuition rebates.
However, students spending less than six months or 183 days and with minimal home bond are tagged as non-residents. Benefits & tax credit cannot be extended to non-residents. This means that their obligation is simply to submit a tax return in case they have outstanding tax payable, or are eligible for a refund as a result of excess tax paid in Canada against any income earned.
They include deemed non-residents who are students in Canada with significant residential ties on this country and other countries with tax treaty arrangements with Canada. It is a CRA’s practice to decide on a case-by-case basis the residency status. However, if you are not sure of whether you are a non-resident or even a resident then the best option would be to consult the Canada Revenue Agency (CRA) personally.