The issue of declaring income earned in Ukraine is one of the most difficult and important for newly arrived Ukrainians in Canada. Many mistakenly believe that if taxes have already been paid in Ukraine or if funds are transferred to a Ukrainian bank card, then the Canada Revenue Agency (CRA) has no jurisdiction over this. However, the reality is different. If you live in Edmonton and are integrating into Canadian society, you are most likely required to declare all your worldwide income. In this article, we will take a detailed look at why this is the case, how double taxation avoidance works, and what special features exist for entrepreneurs (sole proprietors).
Determining your status: Tax resident or visitor?
The foundation of the Canadian tax system is the concept of tax residency, which is fundamentally different from immigration status. Having a CUAET visa, work permit, or even a PR card is not the only factor. The main criterion is having so-called “close ties” (residential ties) to Canada.
If you have come to Edmonton, rented long-term accommodation, enrolled your children in a local school, obtained AHCIP (Alberta Health Care Insurance Plan) medical insurance, opened a Canadian bank account, and purchased a car, then from a tax law perspective, you become a “de facto resident” of Canada for tax purposes. This usually happens from the moment you arrive. Even if you are in the country for less than 183 days but have already established these ties, you are considered a resident from the date of arrival. Tax resident status requires you to report all your income earned anywhere in the world to Canada, not just in Canada.
Worldwide Income Principle
Canada uses a worldwide income taxation system. This means that as a tax resident, you must include absolutely all cash receipts in your Canadian tax return (T1 General): salary from your Ukrainian employer, income from self-employment, pension payments, interest on deposits in Ukrainian banks, income from renting real estate in Ukraine, and dividends.
It is important to understand that it does not matter to the Canadian tax authorities in which currency and to which account (Ukrainian or Canadian) you received these funds. Even if the money never crossed the Canadian border and remained on a PrivatBank or Monobank card, it is still considered your income, which is subject to declaration. The amounts must be converted into Canadian dollars at the average annual exchange rate of the Bank of Canada.
A trap for sole proprietors: working for Ukraine from Edmonton
Special attention should be paid to Ukrainian IT specialists and freelancers who continue to work as sole proprietors while physically residing in Edmonton. This is one of the most common situations that leads to tax misunderstandings. According to Canadian law, if you perform work while sitting at your laptop in your apartment in Edmonton, this income is considered to have its source in Canada, even if the customer is located in Kyiv or the United States and the payment is made to a Ukrainian account.
In this case, you are effectively self-employed in Canada. The tax rate for sole proprietors in Ukraine (usually 5%) is significantly lower than Canadian income tax rates, which in Alberta can reach 25-30% or more depending on the total amount of income. Since you are physically working in Canada, Canada has the primary right to tax this income. You are required to report this income on Form T2125 (Statement of Business or Professional Activities) as part of your Canadian tax return.
Avoiding double taxation
The good news is that there is a double taxation agreement between Canada and Ukraine. This document protects you from having to pay the full tax twice. The mechanism works through a so-called foreign tax credit.
In practice, it works like this: you first declare your income in Ukraine and pay the applicable taxes there (for example, 5% for sole proprietors or 19.5% for salaries). Then, when filling out your Canadian tax return, you indicate your total income and calculate your Canadian tax. You subtract the amount of tax already paid in Ukraine from the Canadian tax amount. However, since Canadian taxes are usually higher, you will most likely have to pay the difference to the Canadian treasury. For example, if the Canadian tax on your income is 25% and you paid 5% in Ukraine, you will pay the remaining 20% in Canada. This is not double taxation, but a surcharge to bring your tax rate up to the Canadian level.
Asset reporting: Form T1135
In addition to reporting income, there is another important requirement that is often overlooked. If the total value of your foreign property (real estate in Ukraine, money in Ukrainian bank accounts, shares in Ukrainian companies, etc.) exceeds CAD 100,000 at any time during the year, you are required to file Form T1135 (Foreign Income Verification Statement).
It is important to note that this does not include real estate for personal use (for example, an apartment in Ukraine where your parents live for free or which is closed). But if you rent out this apartment, it becomes an income-generating asset and its value is included in the $100,000 limit. The penalties for not filing this form are very high — $25 for each day of delay, up to a maximum of $2,500 per year, even if you do not owe a single dollar in taxes.
CUAET one-time assistance and assistance in Alberta
As for the financial assistance that many Ukrainians received upon arrival (CAD 3,000 for adults and CAD 1,500 for children from the federal government), the situation is simpler here. This one-time payment is considered social assistance, which is not taxable. You do not have to pay tax on it, but it should still be reported in the appropriate fields of your tax return so that the tax authorities can see the source of your funds, but it will not increase your tax liability.
The same applies to most provincial benefits in Alberta (e.g., Alberta Works income support) — they usually come with a T5007 tax form, which must be included in your tax return, but they are often not taxable or have a specific tax regime that does not increase your final tax bill.
Alberta specifics
When you live in Edmonton, you pay both federal and Alberta provincial taxes. Alberta has one of the most favorable tax systems in Canada. It has relatively high “basic personal amounts” — the amount of income on which you pay no tax at all (approximately CAD 21,000 for provincial tax). This means that if your total annual income from Ukraine and Canada is less than this threshold, you may not have to pay any tax at all, but you are still required to file a tax return in order to receive benefits such as the Canada Carbon Rebate and GST/HST credit.
Conclusion
So, if you live in Edmonton, rent accommodation, and live here, you must declare all your income from Ukraine. Concealing this information is illegal and can lead to serious fines and problems with your immigration status in the future, as your tax history is often checked when applying for PR. The best strategy is to be transparent in your reporting and use the Foreign Tax Credit mechanism to credit taxes paid in Ukraine, which allows you to remain honest with the law and avoid double taxation.