Tax Number in Canada: An Expats Guide

Embarking on the Canadian dream comes with its fair share of adventures, from exploring the vast landscapes to unraveling the mysteries of the tax system.

Yes, securing a tax number in Canada is as essential as your first Tim Hortons coffee on a frosty morning.

Fear not, dear expat, for this guide is your beacon through the fog, illuminating the path to obtaining your Canadian tax number.

Let’s dive in!

What Is A Tax Number?

A Taxpayer Identification Number (TIN) is an identification number used by the Internal Revenue Service (IRS) to administer tax laws.

It is issued by the Social Security Administration (SSA) or the IRS. The SSA issues a Social Security number (SSN), whereas the IRS issues all other TINs.

Taxpayer Identification Numbers

Social Security number “SSN”
Employer Identification Number “EIN”
Individual Taxpayer Identification Number “ITIN”
Preparer Taxpayer Identification Number “PTIN”

Why Do You Need A Tax Number?

A TIN must be furnished on returns, statements, and other tax-related documents. For example, a number must be furnished:

When filing your tax returns.
When claiming treaty benefits.

A TIN must be on a withholding certificate if the beneficial owner is claiming any of the following:

Tax treaty benefits (other than for income from marketable securities)
Exemption for effectively connected income
Exemption for certain annuities

What Is A Tax Identification Number In Canada?

Canadian residents and those who enter Canada with a work permit can usually apply for a social insurance number (SIN).

It’s a 9-digit identification number required to work in Canada and to get any benefits or services from the government.

But if you’re not eligible for a SIN (non-resident and international students), you’ll need an individual tax number (ITN).

Here’s what you should know about ITNs and how to apply.

An ITN is a unique 9-digit tax number issued by the CRA and used only to identify you for tax purposes. It also allows you to file a tax return.

Like any vital identification, you should keep your ITN confidential and secure to avoid fraud or identity theft.

Once you’ve been issued an ITN, it’s your unique number for future tax filing purposes as long as you’re in Canada.

What Are The Different Types Of Tax Identification Numbers In Canada?

Tax identification numbers (TINs) exist in Canada in various forms and are issued to residents and non-residents of Canada.

The descriptions below focus on residents of Canada – the persons for which a TIN is required to be collected for exchange of information purposes under the Common Reporting Standard.

Individuals

For individuals resident in Canada, their authorized tax identification number is their nine-digit Canadian Social Insurance Number (SIN) issued by Service Canada.

Every resident in Canada with income tax filing obligations (or in respect of whom an information return is to be made) must have (or obtain) a SIN.

SINs are confidential but must be furnished on request to financial institutions for tax reporting purposes.

For more information on the SIN, including how to apply for one, go to Service Canada.

Corporations

Corporations’ tax identification number is a unique nine-digit Business Number (B.N.) issued by the Canada Revenue Agency. Corporations resident in Canada have income tax reporting obligations and must have a B.N.

For more information on the B.N, including how to apply for one, go to Business Number (B.N.) registration.

Trusts

For trusts, their tax identification number is their eight-digit trust account number preceded by the letter “T” issued by the Canada Revenue Agency.

Trusts in Canada with income tax reporting obligations must have a trust account number.

For more information on the trust account number, including how to apply for one, go to Application for a Trust Account Number.

Partnerships

For partnerships, their tax identification number is a unique nine-digit Business Number (B.N.) issued by the Canada Revenue Agency.

Partnerships required to file a partnership return in Canada or with commercial affairs in Canada must have a B.N.

Do You Need An ITN?

Generally, if you are earning some source of income—other than employment income— and need to report that money to the CRA, you’ll need an ITN.

Let’s look at two scenarios:

Studying in Canada as an international student: Ahmed is an international student from Egypt who has enrolled in a graduate program at a Canadian university.

Although he doesn’t work in Canada, he receives income from a scholarship subject to Canadian tax regulations.

He’d also like to open a bank account in Canada. Ahmed must apply for an ITN to report income and open a Canadian bank account.

Selling Canadian property: John, a U.S. citizen, owns a vacation property in Canada but has decided to sell the property to a Canadian buyer.

Canadian tax laws require non-resident property owners like John to apply for an ITN before completing the sale.

The ITN allows the CRA to track the transaction and withhold any applicable taxes on the sale.

John will need an ITN to sell his Canadian property legally and ensure any relevant taxes are collected and reported accurately to the CRA.

Here’s who else might need an ITN:

A non-resident who is applying to waive or reduce Canadian withholding tax
A non-resident who needs to file an Underused Housing Tax (UHT) return
A non-resident individual who is filing Special Elections and Returns (SERs)

What Documents Do You Need To Apply For An ITN?

The application process requires you to provide supporting documentation to verify your identity and tax status.

Be sure to organize this before you begin filling out the form.

You must submit certified or notarized copies of several documents that include your name, date of birth, and a photograph.

These documents would include:

A valid passport
A driver’s licence
A study permit or student authorization
A government-issued identity card

Photocopied documents won’t be returned to you, and the government could ask you for additional documentation as your application is processed.

How Does The ITN Application Process Work?

Take an umbrella, for instance; you want to avoid getting caught in the rain with one. Please apply for your ITN well before you think you’ll need it. Here’s how:

Apply online: Complete and submit Form T1261—Application for a Canada Revenue Individual Tax Number (ITN) for Non-Residents on the CRA website.

Apply via mail: Mail your signed application and supporting documents directly to the CRA.

Please review your application for errors before you submit it. This will help you avoid any processing delays.

Once the CRA receives your application, you can expect to get a response in writing within 6 to 8 weeks. Still waiting to hear something?

If you’re in Canada or the U.S., call 1-866-223-4403; outside Canada and the U.S., call 1-705-669-5130.

What Is A Business Number In Canada?

A business number (B.N.) is a standard identifier for businesses, legal entities, and non-profit organizations in Canada.

It consists of nine unique digits issued to every business by the Canada Revenue Agency for tax-related purposes.

The number acts as a tax I.D. and makes it easy for businesses to streamline their operations when engaging federal, provincial, and municipal governments.

A business number is handy when filing income taxes, corporate taxes, payroll deductions, excise duties, and handling export and import accounts.

Many provincial governments also require businesses to have a B.N. when applying for permits, licences, and Workers’ Compensation.

What Is The Purpose Of Business Registration?

Nearly all businesses, except for sole proprietorships, must register in the respective provinces where they plan to do business.

In any case, business registration is not optional since it is a legal requirement in all territories.

The purpose of registering your business is to make sure that you comply with trade and industry laws in your territory.

Registration also ensures the federal government recognizes your business as a legal entity. This means you can carry out your operations legally without any hindrances.

Having a business number minimizes the chances of mistaken identity since the number will remain the same during the lifecycle of your business.

This guarantees certainty and consistency in your interactions with all levels of government and other businesses.

Most importantly, registering your business ensures tax compliance.

The Canada Revenue Agency (CRA) has a record of your business dealings, making it easy to file a tax return. You also enjoy various tax benefits when your business is registered.

Which Canadian Businesses Need Registration?

Not all businesses in Canada need registration. There is an exception for sole proprietorships, which can legally operate without registration.

In some provinces like Newfoundland and Labrador, sole proprietorships or partnerships do not need to register their business names or apply for a business number.

Other ways to qualify for exemption include:

You are the sole employee.
Your total revenues before expenses are less than $30,000 over the last 12 months.
Your business does not involve the importation and exportation of goods.

How Do You Get A Business Number In Canada?

The process of applying for a business number in Canada depends on where you plan to set up the business.

All provinces and territories except Quebec have the exact requirements for B.N. registration.

When registering your business, you need to provide the following information:

Type of business
The names of the owners
Social insurance numbers and occupation of all the owners
Legal business name (or the name you want to use)
Trading name
Contact information
The physical address of your business
Brief description of your primary business activities
An estimate of expected sales

Registering a business in Canada is easy. You can register by mail, phone, fax, or online through the province’s business registration website.

Registering by mail or fax

Download the RC1 form from the CRA website
Print the form and fill in your details
Mail or fax the filled RC1 form to your nearest CRA office or tax centre

Registering by phone

Download and print the RC1 form from the CRA website
Call the CRA business inquiries line (1-800-959-5525) during hours of service
Answer all the questions in the RC1 form

Online business registration

Visit the CRA website
Fill in the RC1 form
Wait for a confirmation letter from the CRA

Registering a business name in Canada

After obtaining your business number, you need to register your business name. Except for sole proprietorships, all Canadian businesses have to register their names.

The name you choose cannot be the same as any other existing entity. You must select a unique name that reflects your products or services.

There are online search tools that make the process of finding a unique business name easier by identifying existing companies registered under the same name.

You can also pay a third-party provider to perform the search.

Once you select your preferred business name, pay the required registration fee and obtain a Master Business License (MBL).

The MBL document indicates the registration and expiry dates so you know when to renew your registration.

You can use your MBL for various dealings like conducting business activities and opening bank accounts.

How Do Freelancers Get A Tax Number In Canada?

Being an employee and an independent contractor reveals two very different worlds.

You can earn extra money if you freelance evenings and weekends while working a nine-to-five.

This also increases your taxable income for the year and can put you into a higher tax bracket.

Once you hit a particular tax bracket, each additional dollar you earn gets taxed at the new rate — not your overall income.

For example, Suppose the tax rate for incomes below $75,000 was 25%, and the tax rate for $75,001 – $100,000 was 30%.

If you earn $60,000 from your full-time job and $20,000 from your freelance role in a tax year, only the dollars you earn above $75,001 are taxed at 30%.

Your first $75,000 is taxed at 25%. We call this the marginal tax rate.

As long as you’re providing a service or selling a product with an expectation of profit, you’re considered self-employed.

This means on top of completing your standard personal tax forms, you’re legally required to report your self-employment income and expenses to the Canada Revenue Agency (CRA).

There needs to be a way to avoid paying taxes as a self-employed individual.

The good news is that you have a wide range of possible expenses you can claim to lower your tax owing by maximizing your tax deductions, ultimately saving you money.

So be sure to claim all of your eligible costs.

How Do You Report Your Self-employment Income As A Freelancer?

Instead of getting a T4 form that reports all your employment income and the taxes your employer sent to the Canada Revenue Agency (CRA), you’ll need to report your self-employment income.

This is done on a specific tax form, the T2125.

You’ll also need to send in any tax you owe yourself, along with Canada Pension Plan or Quebec Pension Plan premiums (lots more below).

You use the T2125 form, also known as the “Statement of Business or Professional Activities,” to report how much self-employment income you earned and the expenses you paid to support your business.

Then, any tax owing is calculated on your net income — the amount of income left over after you subtract all your expenses.

You’ll also need to send in any tax you owe yourself, along with Canada Pension Plan or Quebec Pension Plan premiums.

Are Taxes Higher In Canada Compared To Other Countries?

When it comes to taxes, Canada and the U.S. are often compared. Some people believe taxes are higher in Canada, while others believe they are higher in the U.S.

It depends on several factors, including your income level, your deductions, and the state or province in which you live.

It is a common misconception that Canada has the highest taxes in the world. However, Canada’s tax burden is relatively moderate compared to other developed countries.

According to the Organization for Economic Cooperation and Development (OECD), Canada’s total tax revenue as a percentage of GDP was 13.1% in July 2024, below the OECD average of 34.2%.

When you compare this to other developed countries, Canada’s taxation level is quite reasonable.

The tax system in Canada is progressive, which means that high-income earners pay a higher percentage of taxes than low-income earners.

The federal government collects fees on income, consumption, and wealth, while the provinces collect them on property and income.

The top marginal tax rate for federal taxes is 33%, which applies to incomes over $200,000. The top marginal tax rate for provincial taxes varies by province but is generally around 50%.

Canadians also pay various fees, including payroll, fuel, and sin taxes (on tobacco and alcohol).

Canada has a relatively high tax burden compared to other developed countries.

There is no doubt that high taxes can impact the economy, but it is essential to consider the other side of the equation.

After all, they are also used to fund vital services like healthcare and education. They can also be used to help reduce inequality and poverty.

It is important to remember that the impact of high taxes on the economy is sometimes positive.

In some cases, such as when they are used to fund vital services or reduce inequality, they can have a positive impact.

Conclusion

And just like that, you’re at the end of our trail through the Canadian tax wilderness. Armed with your tax number, you’re now ready to navigate the financial landscapes of Canada with ease.

Remember, securing your tax number is more than just a bureaucratic checkbox; it’s your key to participating fully in the Canadian economy and society.

So, hold it high like a proudly hoisted Canadian flag on Canada Day. Welcome to the fold, and here’s to your new adventures in Canada.

Happy exploring!

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