Banking, Money and Taxes in Canada

With a sophisticated and safe banking system, it’s easy for newcomers to manage money, banking, and taxes in Canada. Connecting to your overseas bank accounts is straightforward, and paying for goods with local or international credit and debit cards is the norm. In fact, the Canadian financial sector is increasingly digital, making it easier than ever to handle day-to-day transactions.

Money in Canada

The official currency in Canada is the Canadian Dollar, which is divided into 100 cents and abbreviated as CAD or C$. The Bank of Canada issues polymer notes, which are designed for durability and security.

• Notes: 5 CAD, 10 CAD, 20 CAD, 50 CAD, 100 CAD
• Coins: 5 cents (nickel), 10 cents (dime), 25 cents (quarter), 1 CAD (loonie), and 2 CAD (toonie)

Canada is both a cash and card society, although you’ll find that digital payments now dominate. Most merchants accept both cash and cards, and contactless payments have become very popular. Digital wallets and online transfers are now widely used and often preferred for their convenience and speed. Despite the growth in digital payments, cash usage has surprisingly seen a slight uptick in recent times, even though its general share is declining.

Banking in Canada

Banking in Canada is supported by five major banks: Royal Bank of Canada, TD Canada Trust, Bank of Montreal, Bank of Nova Scotia, and Canadian Imperial Bank of Commerce. These banks offer easy access to accounts, a wide network of ATMs, Internet banking services, and branches in most major Canadian towns and cities.

If you’re considering international banking, options like HSBC, Citibank, and Bank of America are also present in Canada, offering additional flexibility.

In recent years, digital-only banks like Simplii Financial and EQ Bank have gained popularity, especially among tech-savvy consumers. These banks typically provide lower fees, higher interest rates on savings, and easier access through mobile apps, making them a flexible option worth considering.

Opening a bank account

It’s essential to open a Canadian bank account as soon as possible to settle in and handle transactions more smoothly. Most banks require a Social Insurance Number (SIN) and a government-issued photo ID to open an account. If you don’t yet have your SIN, some banks may allow you to open an account with other documents.

Many banks now also offer specialised accounts for newcomers, which often include fee waivers for the first year or even cash bonuses, giving you a head start. Some digital-only banks even allow you to set up accounts before you arrive in Canada, making the transition even more seamless.

Taxes in Canada

Paying Canadian income tax depends on several factors, one of which is residency. You are considered a Canadian tax resident if you stay in the country for more than 183 days a year. As a tax resident, you will be taxed on money earned anywhere in the world. If you are not a tax resident, you’ll only be taxed on income earned within Canada.

Canada operates with two tax systems: provincial and federal taxation. Tax rates are progressive, meaning the more you earn, the more you pay. High earners will find themselves in higher tax brackets, while lower earners will pay less.

Each province also sets its own rates, which can significantly impact how much tax you owe. For instance, provinces like Alberta tend to have more favourable tax policies than places like Quebec. 

Newcomers often face challenges when filing taxes, such as understanding residency status or missing out on benefits like the GST/HST credit or the Canada Child Benefit. Consulting a local tax specialist can be highly beneficial, ensuring you comply with the rules and take full advantage of any available benefits or deductions. Even if you have no income, filing your taxes annually keeps you eligible for various tax benefits that can significantly ease your financial burden during your early years in Canada.