Canada

There are several factors that determine an individual’s tax residency in Canada such as having a permanent domicile in the country or having business or social ties to the country. In any case, an individual who spends 183 days or more per year in the country may be considered a tax resident.

Tax residents are subject to federal income tax and provincial/territorial income taxes on their worldwide income. Non-residents are taxed on their income and capital gains derived from Canada.

Federal Income tax is progressive ranging from 15% to 33%.

Each territory or province levies its own income tax. Both taxes combined create effective tax rates ranging from 48% in Saskatchewan and Yukon, to 54% in Nova Scotia.

Fifty per cent of capital gains are included in taxable income and taxed at applicable tax rates. Non-eligible and eligible dividends from Canadian corporations are grossed up by 17% and 38%, respectively. Eligible dividends are those from Canadian public corporations or those from entities that are not controlled private corporations. Interest and rental income are treated as ordinary income.

Municipalities levy property taxes and land transfer taxes. There is no inheritance tax, however; an individual who dies is deemed to have disposed of any capital property immediately before death. This can result in any accrued capital gains being subject to income tax, and all provinces and territories impose probate fees or administrative charges for probating a will. There is no tax on net wealth in Canada.

The federal goods and services tax (GST) applies on most goods and services and is levied at a rate of 5%.

British Columbia, Manitoba, and Saskatchewan each levy retail sales tax at 7%, 8%, and 5%, respectively.

New Brunswick, Newfoundland and Labrador, Nova Scotia , Ontario, Prince Edward Island have a fully harmonized sales tax that includes the GST. The tax rate is 15%, except in Ontario where it is 13%.

Quebec’s sales tax is 9.975%, resulting in an effective tax rate of 14.975%.

Neither Alberta, Northwest Territories, Nunavut and Yukon levy a retail sales tax. However, the GST is applicable in those jurisdictions.

Regarding corporate taxation, resident entities are subject to federal and provincial taxes on their worldwide income. The federal tax standard rate is 15%, whereas provincial tax rates range from 11% to 15%. To know more about Canadian corporate taxation, legal framework and tax treaties visit incorporations.io/canada.

This should not be construed as tax advice. We have access to a global network of qualified attorneys and accountants who can give you the proper advice for your particular circumstances. Contact us for further information.