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I called the CRA many times regarding my question but I wasn't able to get an answer and they kept redirecting me to different people and departments.

I am now a PR in Canada, Before coming to this country I worked for 3 years with a friend on some free mobile apps (all free games), of course we weren't tracking any expenses or purchased software since there is no income tax there. the apps didn't generate a lot of money for a very long time but we kept working, now after coming to Canada the apps started making more money and I am working on new apps.

I will pay taxes on the new apps, but what about the old stuff ? I really don't see it fair to pay taxes for those especially I won't be able to claim any expenses, but I don't want to get in trouble of course. few things to note:

  • I am not taking any interest on any money in the bank.
  • the revenue from the old apps exceeded 30,000 CAD
  • everything is free and the whole revenue is from Ads in the apps, I never collected GST/PST from anyone, I am using the Business form (T2125) to report this income since I registered a business name, should I enter my income in the "Gross Sales, commissions or fees" field ? is there a special case where you are providing everything for free ?
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As a resident of Canada for tax purposes, you are liable for taxes on your worldwide income. This means income earned during the year from anywhere in the world is taxable on your Canadian return. There may be a question as to whether you are liable for taxes in your prior country, on these continuing royalties, depending on that country - I make no comment on that.

Sidenote: the CRA isn't going to particularly care if your app is 'free', but collects ad revenue. Revenue is revenue, regardless of whether your business model is free-to-play or pay-to-play.

Final comment: whether the tax is "fair" or not isn't particularly relevant. Tax treatment is what it is, regardless of what may be 'fair' in a given circumstance. However, I will parry your comment with this hypothetical: Why would it be 'fair' for you to have 30k in income go untaxed, when someone working as a stock clerk would have to pay tax on their 30k in income? You may be falling into the all too common trap of "a tax on me is unfair, a tax on anyone else is necessary to keep society running".

  • Thanks for your reply Grade, much appreciated, I am not saying taxes in general aren't fair, but usually you get paid for your work once you finish it, with my situation I worked hard for years before coming to Canada to build a code base without much income, now after arriving here I am required to pay for the OLD work income, this is what I consider unfair, how I can claim and track thousands of dollars for old expenses for that work now? – MKH Apr 11 '18 at 18:28
  • @MKH So more 'fair' would be for you to pay no taxes at all? If you have already claimed your expenses previously in tax filings in another country, it is doubtful you could use them now. BUT if you haven't claimed them before, it is possible you might be able to claim them against your Canadian income. – Grade 'Eh' Bacon Apr 11 '18 at 20:09
  • there is no taxes in the previous country, that's why I have zero receipts, and invoices for all the work, I am not sure why you think I won't be paying anything, I did a lot of work here which I will pay for, my issue is only the work I did years ago and didn't make any profits until now – MKH Apr 11 '18 at 20:25
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    @MKH You do need to declare and pay tax on any income received after becoming a tax resident in Canada, no matter the source of the income, and no matter when you did the original work that is giving rise to the income now. To the extent you may be able to deduct current or past expenses from your income, you should seek professional advice from a tax accountant. There may be a better way to structure your business to reduce your taxes. Omitting an income source isn't a valid approach. – Chris W. Rea Apr 11 '18 at 20:35
  • Thanks Chris, I think I better stay in the safe side and report everything – MKH Apr 12 '18 at 1:04

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