How to pay taxes strategically: a guide for Latinos in Canada

If you are a Latino living in Canada, you should know that paying taxes is an essential obligation that ensures the country functions properly and offers you legal benefits in protecting your savings. 

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However, paying taxes requires strategy. That's why I've designed this simple guide for newcomers and parents and grandparents of residents, which will teach you how to pay taxes using two key bank accounts: TFSA and RRSP, which allow you to use tax laws transparently to your advantage. Read on to the end and find out how and when it's appropriate to open them.

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TFSA and RRSP accounts: the key to paying taxes

TFSAs and RRSPs are government-regulated personal investment accounts designed to encourage strategic saving: TFSAs allow tax-free earnings, and RRSPs reduce annual tax payments. 

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How do they work?

TFSA and RRSP accounts work based on length of residence and current employment status. 

• TFSA (Tax-Free Savings Account): Ideal for newcomers. This account allows you to invest and withdraw without paying taxes on the earnings. No prior work history in Canada is required. It is perfect for emergency funds or a down payment on a home.

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• RRSP (Registered Retirement Savings Plan): This is very useful when you have job stability. Its function is to reduce taxes on your annual salary. It is not recommended when you first arrive, as the contribution limit depends on your declared income from the previous year in Canada.

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Eligibility: Who can open an account and who cannot?

Access to these plans is not automatic simply because you are in Canadian territory. There are legal requirements that condition their availability.

For the TFSA:

• Tax residents over the age of 18 who have a valid SIN (Social Security Number) are eligible to apply. 
• Tourists or visitors who do not maintain tax residency in the country are not eligible. 
• The main requirement is tax residency, but the document that gives access to the technical opening is a valid SIN.

For the RRSP:

• Residents with SIN who have already worked and declared income in Canada are eligible. 
• Newcomers who have not yet completed their first tax year or individuals without employment income are not eligible. 
• The main requirement is to have had earned income, but the document that actually enables access to your quota is the Notice of Assessment (NOA): a document issued by the government.

Key note: The requirement that enables you to open an account is your Social Security Number (SIN). However, for RRSPs, the document that actually enables you to save is the Notice of Assessment (NOA), which is the summary sent to you by the government after your first tax return.

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The risk of penalties

The Canadian system is based on the applicant's good faith, but if its rules are broken, it severely punishes the error. 

• For example, if you deposit more money than allowed into a TFSA, the government will charge you a penalty of 1% per month on the excess amount.
• For a resident parent who has not been properly advised and deposits CAD 20,000 believing they have room to do so without yet being a tax resident, the penalty could be CAD 200 per month until the money is withdrawn. More information at: Official link (CRA): Tax payable on non-resident contributions - TFSA

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These errors are common when it is assumed that having an open bank account is the same as having the legal right to use these tax benefits. 

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If you are considering opening one of these accounts for your retirement plan, verify your tax status. Answer these questions:

• Do you spend more than 183 days in Canada? Do you have financial ties here? If you are unsure whether the government considers you a tax resident, you could be accumulating fines instead of savings.

• Are you sure your tax payment plan is legally viable? Many banks open accounts without verifying immigration or tax status, but the applicant is responsible to the CRA. An error in the "residence" date can nullify years of savings.

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To protect your money in matters of retirement and residency, expert advice is essential.

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Legal representation for newcomers

At Immiland Canada, we are available to answer your questions and help you avoid mistakes in your financial process. We have a team of regulated professionals committed to helping new immigrants to Canada, and we assist them every step of the way.

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If you would like an analysis of your case to optimize savings and avoid penalties, schedule an appointment with our experts.

I hope this topic is useful for successfully planning your tax payments. Thank you very much for reading. Don't miss our next blog on theWorking for Workers Acts in Ontario, effective January 2026.

With love,

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Immiland Canada

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