How to File RC381 for Inter-Provincial Transfers

Moving between Canadian provinces is common for newcomers. Perhaps you first settled in Ontario but found work in British Columbia, or you moved from Alberta to Quebec for school. When you earn income in more than one province during a single tax year, you may need to file CRA Form RC381, Inter-Provincial Transfers. This form ensures that the correct amount of provincial tax is calculated on your income.

What Is Form RC381?

Form RC381, officially titled "Inter-Provincial Transfers," is a CRA form used to allocate your income between provinces when you have earned income in multiple provinces during the tax year. Each Canadian province and territory has its own tax rates, so when you earn income across provincial boundaries, the CRA needs to know how to split your tax obligations correctly.

This form is part of the provincial tax calculation on your T1 General tax return. It works alongside the provincial tax forms (Form 428) for each province where you had income.

Who Needs to File RC381?

You need to file this form if any of the following apply:

• You moved from one province to another during the tax year and earned employment income in both provinces
• You had a business with a permanent establishment in more than one province
• You earned income from employment that was based in a province different from your province of residence on December 31

This situation is particularly common for newcomers who arrive in one city and then relocate for a job opportunity. For example, if you landed in Toronto in March and moved to Vancouver in August, you may have earned income in both Ontario and British Columbia.

Province of Residence on December 31

A key concept for Canadian taxes is that your province of residence on December 31 of the tax year is considered your primary province for tax purposes. This determines which provincial tax form (Form 428) you complete as your main form. However, if you earned income in another province, you still need to account for that through the RC381.

Step-by-Step Instructions for Completing RC381

Step 1: Gather Your Information

Before starting the form, collect the following:

• Your T4 slips from all employers during the year (each T4 shows the province of employment in Box 10)
• Records of any self-employment income and which province it was earned in
• Your moving dates if you relocated between provinces
• The total income you earned in each province

Step 2: Determine Your Income Allocation

For each province where you earned income, calculate the portion of your total income that was earned there. For employment income, this is straightforward: look at the province indicated on each T4 slip. For self-employment income, it depends on where your business had a permanent establishment.

Example: Sarah is a newcomer who worked in Ontario from January to July (earning $25,000) and then moved to BC where she worked from August to December (earning $30,000). Her total income is $55,000. She allocates $25,000 to Ontario and $30,000 to BC.

Step 3: Complete Part 1 of RC381

In Part 1, you list each province where you earned income and the amount earned in that province. You also calculate the percentage of your total income earned in each province. Using the example above:

• Ontario: $25,000 / $55,000 = 45.5%
• British Columbia: $30,000 / $55,000 = 54.5%

Step 4: Calculate Provincial Tax for Each Province

For each province listed, you calculate what your provincial tax would be if all your income had been earned in that province, then multiply by the percentage from Step 3. This ensures you pay the appropriate rate for each province's share of your income.

Step 5: Complete Part 2 - Transfer Calculation

Part 2 calculates the net transfer amount between provinces. The result is entered on your main provincial tax form (Form 428) for your province of residence on December 31.

Understanding Provincial Tax Rates

Provincial tax rates vary significantly across Canada. Here are some examples of the lowest bracket rates to illustrate why the RC381 matters:

• British Columbia: 5.06% on the first $47,937
• Ontario: 5.05% on the first $51,446
• Alberta: 10% flat on the first $148,269
• Quebec: 14% on the first $51,780 (note: Quebec has a separate tax system)

As you can see, moving from Alberta to BC could change your provincial tax rate significantly. The RC381 ensures you only pay Alberta rates on the income you earned while living there and BC rates on the rest. For more details on provincial tax rates, visit the CRA's page on Canadian income tax rates.

Special Situations for Newcomers

Arriving Mid-Year from Another Country

If you immigrated to Canada partway through the year and then moved between provinces before December 31, you have a more complex situation. You must first determine whether your income is Canadian-source income (earned after becoming a resident). Then, allocate the Canadian income between provinces using the RC381. For guidance on filing as a newcomer, see the CRA's newcomers page.

Remote Work Across Provinces

With remote work becoming more common, you might live in BC but work for an employer based in Ontario. In this case, the province of employment on your T4 determines where the income is allocated. If your T4 shows Ontario in Box 10 but you live in BC, you may need the RC381 to allocate taxes properly.

Quebec Residents

If you moved to or from Quebec, be aware that Quebec administers its own provincial income tax through Revenu Quebec. You will need to file a separate Quebec tax return (TP-1) in addition to your federal return. The RC381 does not replace Quebec's own inter-provincial allocation requirements.

Common Mistakes to Avoid

1. Ignoring the form entirely: If you moved provinces and do not file the RC381, the CRA may calculate your tax based only on your December 31 province, which could result in either an overpayment or underpayment.
2. Using the wrong province from your T4: Always check Box 10 on your T4 slips. Some employers may list their head office province rather than where you actually worked.
3. Forgetting about self-employment income: If you did freelance or contract work in multiple provinces, this income also needs to be allocated.
4. Not updating your address with the CRA: If you moved provinces, update your address with the CRA immediately. This affects your benefit calculations (like the GST/HST credit and child benefits) and ensures you receive correspondence at the correct address.

Where to Get Help

Filing the RC381 can be complex, especially for newcomers who are still learning the Canadian tax system. Here are some options:

• Use certified tax software like TurboTax, Wealthsimple Tax, or H&R Block, which will automatically generate the RC381 if needed based on your T4 information
• Visit a free tax clinic through the CVITP
• Contact the CRA directly at 1-800-959-8281 for questions about the form
• Check out our guide to GST/HST registration if you also have business income across provinces

Filing Deadlines

The RC381 is filed as part of your T1 General tax return. The deadline is April 30 for most individuals, or June 15 if you or your spouse is self-employed (though taxes owing are still due by April 30). Make sure you have all T4 slips from every province before filing.

For related tax guides, visit our articles on Schedule 8 for CPP contributions and T5018 for contract payments.

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