Taxes are an important part of any country’s economy, it plays a significant role in funding public services such as healthcare, education, and infrastructure.
Canada is no exception to this, public institutions and social activities are funded with money gotten from taxes paid by citizens and residents of the country.
When you live, work, or study in Canada, you become part of the Canadian tax system, contributing to the country’s growth and development.
If as an international student in Canada, you’re curious about your tax responsibilities (you are wondering if you need to pay taxes), here is all you need to know about taxes for international students in Canada.
Do International Students Pay Taxes in Canada?
Yes, international students studying in Canada are generally required to pay taxes on the income they earn within the country.
You are only paying based on what you earn while working in the country as a student.
Now, before you start panicking, this does not mean every international student in Canada “MUST” pay tax.
No, not at all. Everyone’s situation is different. Your tax obligations depend on your circumstances, basically your tax residency status.
As an international student in Canada, your tax residency status is what determines your tax obligations.
It determines whether you will pay, what you are expected to pay, and how you pay.
Tax Residency
Your tax residency is determined by factors like the length of your stay, your ties to Canada, and your intentions for staying here in the country.
If you’re an international student and considered a “tax resident” in Canada, you must report your worldwide income to the Canada Revenue Agency (CRA).
Taxable Income
In Canada, income from certain sources is taxable even for international students. It is mostly not about how much you earn but what category your source of earnings belongs to.
Most student work part-time on campus while others work off-campus, some of these are subject to tax.
What income is taxable?
Here are some common sources of taxable income for international students in Canada:
- On-Campus Employment: If you work part-time on your campus or university, your earnings are subject to taxation.
- Off-Campus Employment: If you have a work permit and work off-campus, your income is also taxable.
- Scholarships and Awards: Some scholarships and awards may be considered taxable income, while others are exempt. If you want to check whether yours is taxable, you can contact your institution, they will give you every detail you need.
- Investment Income: Interest, dividends, and other investment income may also be subject to taxation.
Tax Filing
If you earned taxable income in Canada during the tax year (January 1st to December 31st), you must file a tax return by April 30th of the following year.
Even if you had no income, filing a tax return is very beneficial, with it, you may be eligible for tax credits and benefits.
Tax Credits and Benefits for international students in Canada
Tax credits and benefits are some of the good news that comes with filling your tax return in Canada as an international student.
Canada offers various tax credits and benefits that can help you reduce your tax liability and put more money back in your pocket.
Some of these include:
- Tuition Tax Credit: You may be eligible for a tax credit for the tuition fees paid during the tax year.
- Education Amount: As a student, you can claim an education amount for each month of study.
- GST/HST Credit: The Goods and Services Tax/Harmonized Sales Tax credit provides financial assistance to low and modest-income individuals.
Social Insurance Number (SIN)
To work in Canada and comply with tax requirements, you’ll need a Social Insurance Number (SIN) from Service Canada.
Your employer will need this unique number to deduct taxes from your paycheck, it is important for your tax reporting.
Why should we pay taxes as international students in Canada?
Truth is, no one enjoys paying taxes but we love to enjoy the benefits, we love enjoying what the authorities do for us with taxpayer’s money.
Paying taxes as an international student in Canada serves several important purposes and it also benefits both you as an individual and the Canadian society as a whole:
You should pay if you are in the tax category, below is why.
- Contribution to Public Services: Taxes play a significant role in funding essential public services and infrastructure, such as healthcare, education, public transportation, and social programs. Canada is no exception to this, taxes fund the public services every citizen enjoys. By paying taxes, you contribute to the development and maintenance of these services that benefit both residents and visitors in Canada.
- Fair Share of the Burden: When you work and study in Canada, you enjoy the same benefits and use the same public services as Canadian residents. Paying taxes is a way to give back to the system. It ensures that you share the financial burden of maintaining these services. This creates a fair and equitable system. Everyone pays for what they enjoy. No one is cheated.
- Building a Stronger Economy: All right, this is where the real benefits rest. When the government collects tax revenue, it reinvests the revenue into the economy, this helps to stimulate growth and create job opportunities for everyone including you as an international student in Canada. By contributing your share of taxes, you help support this economic development and contribute to the prosperity of Canada.
- Access to Tax Credits and Benefits: We all want tax credits and benefits, by filing a tax return and reporting your income, you become eligible for various tax credits and benefits. When you get these benefits, they can help you offset some of the costs associated with education and living expenses. This way, you get financial assistance and support during your time in Canada.
- Compliance with Canadian Laws: Accepting to study in Canada means you have agreed to obey the law of the land in every form. Part of this law requires you as a resident to comply with your tax obligation. Filing your taxes accurately and on time demonstrates your commitment to obeying the country’s laws and keeping a positive relationship between you and Canada.
- Opportunities for Future Residency: If you plan to stay in Canada after completing your studies, a positive tax history will help you achieve your target. Canada won’t be willing to keep you if you are not good at obeying the country’s law. Having a clean tax record shows that you have been responsible and reliable during your stay in the country.
In summary, paying taxes as an international student in Canada is a civic duty that supports the country’s growth and development. You shouldn’t avoid it.
It gives you the opportunity to contribute to the well-being of Canadian society, access various tax benefits, and abide by the country’s laws and regulations.
How international students pay tax in Canada
As a student who is employed in Canada, if you wish to pay your tax, your employer has the responsibility to deduct income taxes from your pay and submit them to the Canada Revenue Agency (CRA).
The deductions are calculated based on the details you provided on your TD1 form, which outlines your eligibility for tax credits and deductions.
If you are an international student who is self-employed or has other types of income, you must personally calculate your taxes and file a tax return.
How much tax do I have to pay in Canada as a student?
The amount of tax you need to pay in Canada as a student isn’t a one-size-fits-all answer.
It depends on various factors like your income, tax credits you qualify for, and whether you worked part-time or not.
If you worked but earned less than the basic personal amount, which is a non-refundable tax credit, you won’t owe any taxes.
The basic personal amount changes each year. It was $14,398 for the 2022 tax year and $15,000 for the 2023 tax year, it can be higher in years to come.
If you find calculating your tax tricky, it can be tricky sometimes but you don’t have to worry!
Instead of struggling with math formulas, there is a better option you can use: the TurboTax calculator or you consult the services of an expert.
The TurboTax calculator helps you determine how much tax you’ll owe based on your specific financial situation.
So, let TurboTax handle the number-crunching while you focus on your studies and everything else.
An illustration of tax calculation for an international student in Canada
Let’s take a look at how taxes work for international students in Canada using an example:
Meet Nelson, Nelson is an international student studying in Canada. Nelson receives a scholarship of $15,000 for the year and also works part-time, clocking 20 hours a week at a rate of $15 per hour.
To calculate Nelson’s total income for the year, I add his scholarship and part-time earnings:
Scholarship: $15,000
Part-time earnings: $15 x 20 hours x 52 weeks = $15,600
Total Income: $15,000 + $15,600 = $30,600
Nelson’s total income amounts to $30,600 for the year. As an international student in Canada, he’ll be required to pay federal and provincial taxes on this income.
The actual amount of taxes he owes depends on the tax rates in his specific province and his tax credits and deductions.
So, for Nelson to ensure compliance with Canadian tax laws and contribute fairly to Canadian society, he needs to keep records of his income and expenses.
He also needs to report his income to the Canada Revenue Agency. If you are an international student in Canada, you can emulate Nelson.
Do international students get tax refunds in Canada?
Yes, international students in Canada get tax refunds depending on your circumstances and tax situation.
Tax refunds are applicable if you have paid more taxes throughout the year than you owe based on your income, deductions, and credits.
To determine whether you are eligible for a tax refund, you need to file a tax return with the Canada Revenue Agency (CRA).
As an international student, you should report your worldwide income earned in Canada. You should report earnings from any scholarships, earnings from part-time work, or other taxable income.
Below are factors that will determine whether you receive a tax refund or not:
- Your Tax Credits and Deductions: Some tax credits and deductions can reduce your tax liability, and this may result in a refund. For example, this can occur in tuition tax credits, education amounts, and other applicable credits.
- Overpaid Taxes: If your employer deducted more taxes from your paychecks than necessary, you may be entitled to a refund when you file your tax return.
- Provincial Tax Differences: Some provinces offer additional tax credits or have different tax rates, this can affect your overall tax liability and potential refund.
As you can see, you need to keep accurate records of your income, expenses, and any applicable tax documents to ensure you claim all eligible deductions and credits accurately.
If you are confused by the tax system in Canada, you can use software like TurboTax or seek advice from a tax professional.
It’s common to get confused by the system, so don’t be shy, ask for help and you will get one.
A professional can guide you through the process and help you maximize any tax refunds you may be entitled to.
Final Thoughts
Navigating the world of taxes in a new country may seem daunting, but when you have the right information, it becomes a breeze.
As an international student in Canada, your tax contributes to the country’s progress and development.
You should always pay, especially if you have the intention of staying in the country after your studies.
Remember to keep track of your income, deductions, and credits, and don’t hesitate to seek advice from tax professionals or your educational institution’s financial services if you have any questions.
Happy studying, happy living, and happy tax filing!