Knowing how the taxation system works, both across Canada and in the various provinces and territories, is an important part of settling in Canada successfully.

Because Canada is a federation, taxation in Canada is a shared responsibility between the federal government and the various provincial and territorial governments. Canadian provinces and territories have the facility to levy taxes on income, consumption and wealth, as does the federal government.

Federal taxes are collected by the Canada Revenue Agency (CRA). Under tax collection agreements, the CRA collects and remits to the provinces:

  • provincial personal income taxes on behalf of all provinces except Quebec, through a system of unified tax returns;
  • corporate taxes on behalf of all provinces except Quebec and Alberta; and
  • that portion of the Harmonized Sales Tax (HST) that is in excess of the federal Goods and Services Tax (GST) rate, with respect to the provinces that have implemented it.

The Agence du Revenu du Québec collects the GST in Quebec on behalf of the federal government, and remits it to the federal government.

Both the federal and provincial/territorial governments impose income taxes on individuals. The federal government charges the bulk of income taxes, with the provinces and territories charging a somewhat lower percentage, except in Quebec. Income taxes throughout Canada are typically progressive, with the high income residents paying a higher percentage than the low income residents.

Where income is earned in the form of a capital gain, only half of the gain is included in income for tax purposes. The other half is not taxed.

Federal income tax rates

Taxable Income* Income tax rate(s)
The first $45,916 of taxable income 15%
PLUS
The next $45,915 of taxable income (on the portion of taxable income over $45,916 up to $$91,831) 20.5%
PLUS
The next $50,522 of taxable income (on the portion of taxable income over $91,831 up to $142,353) 26%
PLUS
The next $60,447 of taxable income (on the portion of taxable income over $142,353 up to $202 800) 29%
PLUS
All taxable income over $202,800 33%

*Taxable income is generally described as gross income or adjusted gross income minus any deductions, exemptions or other adjustments that are allowable in that tax year.

Provincial/territorial tax rates for 2015

Filter
Province/Territory Income tax rate(s)
Alberta
  • 10% on the first $126,625 of taxable income, +
  • 12% on the next $25,325, +
  • 13% on the next $50,650, +
  • 14% on the next $101,300, +
  • 15% on the amount over $303,900
British Columbia
  • 5.06% on the first $38,898 of taxable income, +
  • 7.7% on the next $38,899 (on the portion of taxable income over $38,898 up to $77,797), +
  • 10.5% on the next $11,523 (on the portion of taxable income over $77,797 up to $89,320), +
  • 12.29% on the next $19,140 (on the portion of taxable income over $89,320 up to $108,460), +
  • 14.7% on the next $45,458 (on the portion of taxable income over $108,460 up to $153,918), +
  • 16.8% on the amount over $153,918
Manitoba
  • 10.8% on the first $31,465 of taxable income, +
  • 12.75% on the next $36,540 (on the portion of taxable income over $31,465 up to $68,005), +
  • 17.4% on the amount over $68,005
New Brunswick
  • 9.68% on the first $41,059 of taxable income, +
  • 14.82% on the next $41,060 (on the portion of taxable income over $41,059 up to $82,119), +
  • 16.52% on the next $51,388 (on the portion of taxable income over $82,119 up to $133,507), +
  • 17.84% on the next $18,593 (on the portion of taxable income over $133,507 up to $152,100), +
  • 20.3% on the amount over $152,100
Newfoundland and Labrador
  • 8.7% on the first $35,851 of taxable income, +
  • 14.5% on the next $35,850 (on the portion of taxable income over $35,851 up to $71,701), +
  • 15.8% on the next $56,309 (on the portion of taxable income over $71,701 up to $128,010), +
  • 17.3% on the next $56,309 (on the portion of taxable income over $71,701 up to $128,010), +
  • 18.3% on the amount over $179,214
Northwest Territories
  • 5.9% on the first $41,585 of taxable income, +
  • 8.6% on the next $41,587 (on the portion of taxable income over $41,585 up to $83,172), +
  • 12.2% on the next $52,047 (on the portion of taxable income over $83,172 up to $135,219), +
  • 14.05% on the amount over $135,219
Nova Scotia
  • 8.79% on the first $29,590 of taxable income, +
  • 14.95% on the next $29,590 (on the portion of taxable income over $29,590 up to $59,180), +
  • 16.67% on the next $33,820 (on the portion of taxable income over $59,180 up to $93,000), +
  • 17.5% on the next $57,000 (on the portion of taxable income over $93,000 up to $150,000), +
  • 21% on the amount over $150,000
Nunavut
  • 4% on the first $43,780 of taxable income, +
  • 7% on the next $43,780 (on the portion of taxable income over $43,780 up to $87,560), +
  • 9% on the next $54,793 (on the portion of taxable income over $87,560 up to $142,353), +
  • 11.5% on the amount over $142,353
Ontario
  • 5.05% on the first $42,201 of taxable income, +
  • 9.15% on the next $42,203 (on the portion of taxable income over $42,201 up to $84,404), +
  • 11.16% on the next $65,596 (on the portion of taxable income over $84,404 up to $150,000), +
  • 12.16% on the next $70,000 (on the portion of taxable income over $150,000 up to $220,000), +
  • 13.16 % on the amount over $220,000
Prince Edward Island
  • 9.8% on the first $31,984 of taxable income, +
  • 13.8% on the next $31,985 (on the portion of taxable income over $31,984 up to $63,969), +
  • 16.7% on the amount over $63,969
Quebec
  • 16% on the first $42,390 of taxable income, +
  • 20% on the next $42,390 (on the portion of taxable income over $42,390 up to $84,780), +
  • 24% on the next $18,370 (on the portion of taxable income over $84,780 up to $103,150), +
  • 25.75% on the amount over $103,150
Saskatchewan
  • 11% on the first $45,225 of taxable income, +
  • 13% on the next $83,989 (on the portion of taxable income over $45,225 up to $128,240), +
  • 15% on the amount over $129,214
Yukon
  • 6.4% on the first $45,916 of taxable income, +
  • 9% on the next $45,915 (on the portion of taxable income over $45,916 up to $91,831), +
  • 10.9% on the next $50,522 (on the portion of taxable income over $91,831 up to $142,353), +
  • 12.8% on the next $357,647 (on the portion of taxable income over $142,353 up to $500,000), +
  • 15% on the amount over $500,000

The above figures are subject to change.

Canadian employers are required to remit various types of payroll taxes to the different jurisdictions in which they operate. These may include the following:

Jurisdiction Type
Federal
  • Canada Pension Plan
  • Employment Insurance
Ontario
  • Employer Health Tax
Quebec
  • Quebec Pension Plan
  • Health Services Fund
  • Quebec Parental Insurance Plan
  • Commission des normes du travail
  • Workforce Skills Development and Recognition Fund
  • Compensation Tax
All provinces and territories
  • Workers' Compensation Premiums

The types and amounts of payroll taxes that are remitted are subject to change.

Companies and corporations pay tax on profit income and on capital. Tax is paid on corporate income at the corporate level before it is distributed to individual shareholders as dividends. A tax credit is provided to individuals who receive dividend to reflect the tax paid at the corporate level.

Corporate taxes are levied at the federal and provincial/territorial level. Moreover, corportate taxes are levied at varying rates depening on the size and/or type of business. In Alberta, for example, the combined federal/provincial corporate income tax rate is 25% for general businesses and 14% for small businesses.

Canada's corporate tax rate is viewed internationally as competitive and business-friendly; businesses in Canada generally pay a lower rate of corporate tax than businesses operating in the United States.

Federal corporate income tax rates in Canada

M&P = Manufacturing and Processing

CCPC = Canadian-controlled private corporation

Type of business 2014 2015 2016
General/M&P/Investment 15% 15% 15%
Small business 11% 11% 10.5%
Investment - CCPC 34.67% 34.67% 34.67%

Provincial/Territorial corporate tax rates

The Business Limit relates to income tax deductions available to Canadian corporations when filing Canadian corporate tax. The Business Limit is a set dollar amount that caps the amount of Small Business Deduction (SBD) that a Canadian corporation may receive.

Filter
Province/Territory Type of business 2014 2015 2016 Business Limit

Alberta

General/M&P/Investment 10% 10/12% 12%  
Small business 3% 3% 3% $500,000

British Columbia

General/M&P/Investment 11% 11% 11%  
Small business 2.5% 2.5% 2.5% $500,000

Manitoba

General/M&P/Investment 12% 12% 12%  
Small business 0 0 0 $425,000

New Brunswick

General/M&P/Investment 12% 12% 12%  
Small business 4.5% 4% 4% $500,000

Newfoundland and Labrador

General/Investment 14% 14% 14%  
M&P 5% 5% 5%  
Small business 3/4% 3% 3% $500,000

Northwest Territories

General/M&P/Investment 11.5% 11.5% 11.5%  
Small business 4% 4% 4% $500,000

Nova Scotia

General/M&P/Investment 16% 16% 16%  
Small business 3% 3% 3% $350,000

Nunavut

General/M&P/Investment 12% 12% 12%  
Small business 4% 4% 4% $500,000

Ontario

General/Investment 11.5% 11.5% 11.5%  
M&P 10% 10% 10%  
Small business 4.5% 4.5% 4.5% $500,000

Prince Edward Island

General/M&P/Investment 16% 16% 16%  
Small business 4.5% 4.5% 4.5% $500,000

Quebec

General/Investment/M&P 11.9% 11.9% 11.9%  
Small business (non M&P-M&P) 8% 8% 8% $500,000
From 2017 to 2020, the general corporate tax rate in Quebec will be gradually reduced by 0.4 of a percentage point. The rate reductions will take effect on January 1 of each of the aforementioned years. The general corporate tax rate will be reduced from the current rate of 11.9% to 11.8% in 2017, 11.7% in 2018, 11.6 % in 2019 and, finally, 11.5% in 2020.

Saskatchewan

General/Investment 12% 12% 12%  
M&P 10% 10% 10%  
Small business 2% 2% 2% $500,000

Yukon

General/Investment 15% 15% 15%  
M&P 2.5% 2.5% 2.5%  
Small business 3/4% 3% 3% $500,000

The above figures are subject to change.

The federal government levies a value-added tax of 5%, called the Goods and Services Tax (GST), and, in five provinces, the Harmonized Sales Tax (HST). The HST is a combination of the GST and Provincial Sales Taxes (PST).

The provinces of British Columbia, Saskatchewan and Manitoba levy a retail sales tax, and Quebec levies its own value-added tax, which is called the Quebec Sales Tax. The province of Alberta and the territories of Nunavut, Yukon and Northwest Territories do not levy sales taxes of their own.

For many newcomers to Canada, the method of applying consumption/sales taxes at the point of sale can appear confusing. For example, an individual may enter a retail store in Ontario and wish to purchase an item that is priced at $10.00. When he or she pays for the item, the invoice total after taxes have been added will be $11.30; this is the total amount that he or she will pay for the item.

Current sales tax rates

Filter
Province/Territory HST GST PST Total sales tax
Alberta   5%   5%
British Columbia   5% 7% 12%
Manitoba   5% 8% 13%
New Brunswick 15%     15%
Newfoundland and Labrador 15%     15%
Northwest Territories   5%   5%
Nova Scotia 15%     15%
Nunavut   5%   5%
Ontario 13%     13%
Prince Edward Island 15%     15%
Quebec   5% 9.975% 14.975%
Saskatchewan   5% 5% 10%
Yukon   5%   5%

The above figures are subject to change.

An excise tax (sometimes called a special excise duty) is an inland tax on the sale, or production for sale, of specific goods or a tax on a good produced for sale, or sold, within a country or licenses for specific activities.

Both the federal and provincial/territorial governments impose excise taxes on certain items such as cigarettes, gasoline (petrol), alcohol, and vehicle air conditioners. A great bulk of the retail price of cigarettes and alcohol, for example, are excise taxes. Canada has some of the highest rates of taxes on cigarettes and alcohol in the world. It is generally accepted that higher prices deter consumption of these items, which have been deemed to increase public health care costs stemming from those who use them. Excise taxes are seen as both a deterrent from initial consumption and as a means for the government(s) to pay for the public costs of individuals' consumption of these goods.

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