Moving to Canada: Essential Tax Rules Every New Resident Must Understand | Cross-Border Tax Guide 

Last updated: Dec 2,  2025

Learn when Canadian tax residency starts, how worldwide income is taxed, and how to report foreign assets. A complete cross-border tax guide for newcomers to Canada. 

Relocating to Canada is an exciting transition, but most newcomers quickly realize that tax residency in Canada does not operate the same way as immigration status. Understanding the moment you actually become a Canadian tax resident, how Canada taxes worldwide income, and the compliance requirements surrounding foreign assets is essential for a smooth financial landing. Government websites tend to offer only high-level commentary, and as practitioners who routinely assist new residents, we consistently see the same gaps in understanding. This guide is designed to fill those gaps with clear, actionable explanations rooted in real Canadian and international tax rules. 

1. Understanding When You Become a Canadian Tax Resident

The question of residency is the foundation of Canadian tax planning because Canada taxes residents on worldwide income. Many newcomers assume that their residency begins on the date their visa is issued or when they first enter the country, but this is not how the Canada Revenue Agency assesses tax residency. Canada uses a factual residency approach, meaning residency starts when your personal, economic, and social ties establish that Canada has become your home. A home available to you in Canada, a spouse or dependents settled here, and meaningful residential ties generally indicate that residency has begun. Secondary indicators—such as a Canadian driver’s license, provincial health insurance, bank accounts, or long-term accommodations—help reinforce that tie.

It is important to emphasize that immigration status does not determine tax status. You can hold a temporary visa yet be considered a resident for tax purposes, or you may arrive in Canada as a permanent resident but remain a non-resident for tax purposes if your ties are not yet established. The key is the shift of your “centre of vital interests” to Canada, and understanding that date is essential because everything else flows from it.

2. How Canada Taxes Worldwide Income After You Arrive

Once you become a tax resident of Canada, the country taxes you on global income from that date forward. This includes employment income earned after arrival, investment income accruing after residency begins, and capital gains arising on post-arrival appreciation. What often surprises newcomers is that Canada does not tax any income earned before you became a resident, even if you received the funds after your arrival. For example, salary earned overseas before your move is not taxable in Canada simply because the employer paid it late.

Where complexity arises is with income that overlaps the residency date, such as stock-based compensation, RSUs with cross-border vesting schedules, bonus payments tied to pre- and post-residency employment, and self-employment income earned across a transitional period. In these cases, allocation is required. The CRA typically expects taxpayers to prorate income based on the number of days worked before and after arriving in Canada or according to the grant-to-vest period for equity compensation. These sourcing requirements are technical and often reviewed by the CRA in cross-border cases, so getting them right from the start avoids future reassessments.

3. Reporting Foreign Assets: The T1135 Requirement 

A major misconception for newcomers is that foreign assets held personally must always be declared as taxable income. That is not accurate. However, Canada does impose a foreign asset reporting obligation through Form T1135. If the cost of your foreign investment property exceeds CAD $100,000 at any point during the year, you must file this form. The threshold is based on cost, not market value, which frequently catches newcomers off guard.

Foreign brokerage accounts, U.S. or overseas stocks, foreign rental properties, interests in non-Canadian corporations, cryptocurrency held on foreign exchanges, and foreign bank accounts all typically qualify as “specified foreign property.” While the form itself does not trigger tax, failing to file it can result in substantial penalties. This filing is often reviewed by the CRA, and newcomers with established foreign investment portfolios or international financial ties should ensure compliance from their first Canadian tax year onward.

4. Treatment of Foreign Pensions and Retirement Accounts

Many individuals moving to Canada arrive with accumulated retirement savings in IRAs, 401(k)s, employer pensions, European retirement schemes, Asian provident funds, or other foreign plans. Canada generally expects foreign retirement accounts to be reported, and the taxation of these accounts depends heavily on treaty provisions. Under the Canada–U.S. tax treaty, for example, IRAs and 401(k)s typically maintain tax-deferred treatment in Canada, meaning the annual growth inside the plan is not taxed immediately. Withdrawals are taxable, but treaty coordination often prevents double taxation.

For non-U.S. pensions, the rules vary significantly. Some international pensions lose tax-deferred status and become subject to annual Canadian taxation on investment growth. Others require special elections or reporting to preserve deferral. The timing and structure of withdrawals are also key considerations, especially when moving from a high-tax treaty country. Bringing foreign retirement funds into the Canadian tax system without understanding the relevant treaty protection is one of the most common mistakes newcomers make.

5. Pre-Arrival Planning Opportunities Newcomers Should Consider 

Many of the most valuable tax strategies available to newcomers must be implemented before they become Canadian residents. Individuals holding U.S. mutual funds, U.S.-domiciled ETFs, or foreign investment vehicles that may be classified as offshore investment funds under Canadian rules should consider restructuring their portfolios before arrival. Canada often imputes income on these investments, so selling them pre-residency avoids ongoing complexity and provides a clean “step up” in cost base.

Similarly, timing of equity compensation is critical. The exercise of stock options or the vesting of RSUs near your arrival date can significantly affect tax sourcing. Engaging in strategic transactions- such as realizing capital gains before residency or crystallizing gains on assets that will receive a Canadian cost base step-up; can create long-term tax efficiencies. For business owners, settling accounts receivable, restructuring ownership, or closing out pre-residency income streams often prevents future administrative headaches. Thoughtful planning before residency can often eliminate issues that would otherwise persist for years.

6. Credits and Benefits Available to Newcomers 

Once you are considered a resident, you may qualify for several Canadian credits and benefits, depending on your income level and family situation. The GST/HST credit and the Climate Action Incentive Payment are two of the more common refundable benefits available to newcomers, although eligibility usually begins after filing your first Canadian tax return. Families with children may also qualify for the Canada Child Benefit once residency is established and the children are living with you in Canada. Provinces offer additional refundable credits, but eligibility often depends on the timing of your arrival within the tax year and the province in which you settle.

Final Thoughts: A Smooth Transition Starts With Proper Tax Positioning 

Canada’s tax system is comprehensive, and newcomers often underestimate the importance of determining their tax residency date, reporting foreign assets correctly, and understanding how worldwide income is taxed. Cross-border complexities; especially involving foreign investments, equity compensation, pensions, and business arrangements, require careful navigation. With proper planning, newcomers can avoid CRA reviews, prevent double taxation, and position themselves for long-term financial stability in their new country.

If you are planning a move to Canada or have recently arrived, professional cross-border tax guidance can ensure that your transition is efficient, compliant, and optimized for your long-term financial goals.