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Banks & Taxes in Canada
A Comprehensive Guide about Opening a Bank Account and Managing Your Taxes
When moving abroad, especially if you are a working expat, managing finances in Canada is something you will have to do. Finances include things like opening a bank account and understanding the tax system. This section will cover such issues and much more.
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Understanding bank accounts and the tax system in Canada is something you will have to come to grips with when moving to the Great White North, especially if you will be working and earning an income there. As an employed person in Canada, you will be expected to pay your taxes, but Canada has tax treaties with several countries to help you avoid double taxation in Canada and your home country.
From opening a bank account as a non-resident to the best banks in Canada, and even information on the country’s income rate, and how taxes work for those expats who are self-employed or run their own business, this section will enable you to confidently establish and manage your finances in Canada.
How to Open a Bank Account in Canada
If you are wondering how to open a bank account in Canada as a non-resident, this sub-section will explain all you need to know. Your first question might be if you can even open a bank account in Canada. The answer is yes, it is entirely possible for an expat who is not Canadian, nor a resident, to open an account in the Great White North. Keep in mind that with some branches, you may need to physically go to their establishment to open your account; for others, it is entirely possible to do so online. Read more about this below.
Required Documents to Open a Bank Account
The required documents to open a bank account as a non-resident in Canada are pretty basic:
- A second form of ID (e.g., driver’s license or credit card)
- Immigration papers
- Social Insurance Number
Different banks may require different documents, so it’s best to check with your chosen branch for full information.
Open a Bank Account Online for Canadian Non-Residents
With some branches, it is entirely possible to open a bank account even before you arrive. One of the myths of online banking is that it is not safe or secure. In reality, it is quite the opposite. The Canada Deposit Insurance Corporation (CDIC) covers all online deposits. If the online system fails (which is extremely unlikely), you will be covered up to 100,000 CAD (75,242 USD). Investment products (such as bonds, stocks, and mutual funds) however, are not covered.
Setting up a Canadian bank account online is a quick and easy process. Information and detailed instructions on how to do so are typically found on the bank’s website. The typical documents required are:
- Immigration papers
- Temporary residence permit, work, or study permit (if applicable)
If you are opening your bank account online, it might be a good idea to contact the bank beforehand in case you have any questions or need help navigating the online process. You can e-mail, call, or even chat online depending on your bank of choice. They will inform you of any additional documents that may be required. Please note that you may also have to visit the branch in person once you arrive in Canada.
Top Banks in Canada
The six top banks in Canada that dominate the market are:
- Royal Bank of Canada
- TD Bank
- Bank of Montreal
- Canadian Imperial Bank of Commerce
Top International Banks in Canada
You can find international banks from several different countries in Canada including the US, Japan, Singapore, Germany, China, France, Taiwan, India, Switzerland, and more. Some top international banks include:
- Bank of America Canada
- Wells Fargo
- Bank of China
- BNP Paribas
- UBS Bank
- HSBC Bank Canada
Best Online Banks in Canada
There are many benefits to online banking. For most people, it is more convenient and faster to get things done via the internet. Pricing is a significant benefit of online banks. You can read more about this below under Bank Fees and Minimum Deposit. Types of online banks include savings, high-interest savings, checking, Tax-Free Savings Account (TFSA), hybrid, youth, and senior accounts.
Some of the top online banks in Canada are:
- Scotiabank Online
- RBC Online
- CIBC Online
- First Ontario Online
Bank Fees and Minimum Deposit
Bank fees in Canada range anywhere between 4 CAD (3 USD) to 30 CAD (23 USD) per month. While no minimum deposit is needed at most banks to open an account, there is a minimum monthly balance that banks require you to keep if you want your monthly fees waived. This amount is usually somewhere in the range of 3,500 CAD (2,634 USD).
Bank fees can include monthly checking account fees, ATM fees, transfer fees, foreign transaction fees, checkbook fees, fees for debit transactions over the monthly limit (usually 1 CAD (less than 1 USD) per transaction), stop payment fees, Non-Sufficient Funds (NSF) fees, overdraft fees, paper statement fees, check certification fees, and plenty more.
No-Fee Bank Accounts
No-fee bank accounts in Canada are available for youth, students, seniors getting the Guaranteed Income Supplement (GIS), and Registered Disability Savings Plan (RDSP) beneficiaries. You may also want to consider online-only banks as these typically come with no monthly costs and unlimited transactions.
Some of the banks offering no-fee accounts are:
- BMO Bank of Montreal
- RBC Royal Bank
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What is the Tax System in Canada?
The sales tax in Canada is called the Harmonized Sales Tax (HST), and it is 13%. Eight percent of this tax goes to the provincial government, and 5% goes to the federal government. Unlike in European countries, this tax is only added at the end once you are ready to pay. This means that the price you see on a tag while shopping may not be the final price you will have to pay.
Types of Tax in Canada
Apart from sales, the tax system in Canada also includes other types of taxes such as income, property (read our Housing section link for more information on this), and, if you are a business owner, business taxes.
The federal, provincial, and municipal governments collect tax from companies and individuals to pay for government programs and services such as roads, public utilities, schools, health care, cultural activities, and economic development. Taxes are collected by the Canada Revenue Agency (CRA). People considered Canadian tax residents for tax purposes (not the same as residents for immigration purposes) file their taxes every year where they list their taxable income, deductions, and tax credits to calculate how much tax they owe.
Once your tax return is complete and the CRA confirms your calculations are correct, you will either be owed a refund or owe a balance. If you are owed a refund, you will receive a direct deposit in your account (typically after two weeks). If you filed your return by mail, it could take four to six weeks.
If you owe a balance, you need to pay by April 30 or the next business day if this date falls on a weekend or holiday.
There are penalties if you file your taxes late and you will have to pay interest on top of that so make sure you submit on time!
What is the Income Tax Rate in Canada?
The tax brackets in Canada for 2019 are:
|Income (CAD)||Income (USD)||Tax Rate|
|< 47,630||< 35,818||15%|
|210,371 <||158,191 <||33%|
Keep in mind that provinces and territories each have their own rates as well for tax on salaries. For more information, you will need to look at the government website of your specific territory and/or province.
Income Not Taxed in Canada
Some forms of income are not taxed in Canada. This includes:
- Gifts and inheritances
- Death benefits from a life insurance policy
- Lottery winnings
- Winnings from betting or gambling
- Strike pay
- Income from a TFSA
- Compensation paid by a province or territory to a victim of a criminal act or motor vehicle accident
- Certain civil and military service pensions
- Income from certain international organizations (e.g., United Nations)
- War disability pensions
- RCMP pensions
- Income of First Nations if on a reserve
- Capital gain on sale of taxpayer’s principal residence
- Provincial child tax credits or benefits and Québec family allowances
- Working income tax benefit
- GST, HST, QST, or SST credit
- Canada Child Tax Benefit
Self-Employed Taxes Canada
The CRA has specific criteria and rules to determine whether you are self-employed or not. Make sure you meet the standards for this status. Here are some examples of workers who may be considered self-employed in Canada:
- Chiropractor working from home office
- Lawn-care company owner
- Childcare provider at an in-home daycare
- Uber driver
- Real estate agent
- Contract writer
- Seller on eBay
The good news for self-employed people is that expenses related to your business are tax-deductible. This includes:
- Business operations
- Office and home office
- Entertainment and travel
- Cost of checks
- Yearly dues for commercial and trade organizations
- Parking fees
- Private health service plan premiums
- Interest on vehicle payments
- Office cleaning supplies
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