Facts About Canada

Taxes in Canada

Taxes in Canada fund federal, provincial/territorial, and municipal public services, including healthcare, education, transportation, social benefits, courts and policing, and national defence.

At a glance — Taxes in Canada
Admin Canada Revenue Agency (CRA); Revenu Québec (QC)
Scope Federal, provincial/territorial, municipal
Main types Personal & corporate income tax; GST/HST; PST/QST/RST; payroll (CPP/QPP, EI, QPIP); property; excise & customs
Key dates T1: Apr 30 (self-employed file by Jun 15; balance due Apr 30). T2: 6 months after year-end (balances often due in 2–3 months).
Portals CRA My Account / My Business Account; Revenu Québec services (QC)


Canada uses a mixed system of income, consumption, payroll, property, and excise taxes. Most administration is handled by the Canada Revenue Agency (CRA) at the federal level and by provincial agencies where applicable (notably Revenu Québec).

Overview

Canada’s tax system is shared across three levels of government:

  • Federal – personal and corporate income tax; the Goods and Services Tax (GST); excise duties; customs; payroll programs; benefits administration.
  • Provincial/territorial – personal and corporate income tax (harmonized with federal rules in most jurisdictions); provincial sales taxes or harmonized sales tax; resource royalties; fees and levies.
  • Municipal – property tax and user fees (set and collected locally).
Who is taxed
  • Residents of Canada are generally taxed on worldwide income and may claim credits/deductions under federal and provincial rules.
  • Non-residents are taxed on certain Canadian-source income (e.g., employment, business carried on in Canada, taxable Canadian property) and may be subject to withholding on passive income (treaty relief may apply).

Administration

  • The Canada Revenue Agency (CRA) administers federal taxes and most provincial/territorial income taxes through a single return system.
  • Revenu Québec separately administers Quebec income tax, Quebec Sales Tax (QST), and some payroll programs; Quebec residents typically file both federal and provincial returns.
  • Taxpayers interact online via CRA My Account and My Business Account portals (filing, payments, instalments, and correspondence).

Personal income tax

Canada uses a progressive personal income tax with federal brackets and additional provincial/territorial brackets. Rates and thresholds are indexed and can change annually.

Illustrative example (individual)

Example only — use current CRA/provincial rates.

  1. Employment income: $60,000
  2. RRSP contribution: $5,000 → net income now $55,000
  3. Eligible Canadian dividends: $500 → apply gross-up & dividend tax credit
  4. Capital gain: $2,000 → include the legislated fraction in income
  5. Subtotal taxable income → apply current federal & provincial brackets
  6. Subtract non-refundable credits (e.g., basic personal amount, CPP/EI, medical, etc.)
  7. Result: net federal + provincial tax payable
  8. Compare to source deductions → refund or balance due


Taxable income and common inclusions

  • Employment income (T4 slips), self-employment/business income (T2125), interest and other investment income (T5), dividends (gross-up and dividend tax credit system), and capital gains (only a legislated fraction of the gain is included in income).
  • Certain benefits and credits are administered via the tax system (e.g., Canada Child Benefit (CCB), GST/HST credit, Canada Workers Benefit).

Deductions and adjustments (examples)

  • Registered Retirement Savings Plan (RRSP) contributions (subject to annual limits).
  • Union/professional dues; certain moving expenses (eligibility rules apply); child care expenses; carrying charges and interest for investment income (limitations apply).
  • For the principal residence, a gain may be eligible for the principal residence exemption (reporting still required).

Non-refundable vs refundable credits

  • Non-refundable credits (e.g., basic personal amount, age amount, disability amount, eligible medical expenses) reduce tax payable but not below zero.
  • Refundable credits/benefits (e.g., GST/HST credit, CWB) may generate payments even if no tax is owed.

Capital gains and dividends (concepts)

  • A prescribed inclusion rate determines what portion of a capital gain is taxable; rates are set by law and can vary by taxpayer type or thresholds. See current CRA guidance on inclusion rules.
  • Dividends from Canadian corporations are “grossed up” with an associated dividend tax credit; enhanced rates apply to eligible dividends.

Self-employment and instalments

  • Self-employed individuals may need to remit quarterly instalments if net tax exceeds thresholds.
  • They are responsible for their own CPP contributions (or QPP in Quebec) on self-employment earnings and, where applicable, for registering/charging GST/HST or QST once they exceed the small supplier threshold (commonly $30,000 in taxable supplies over 12 months; special rules may apply).

Filing and deadlines

  • Standard personal return (T1) due April 30 of the year following the tax year.
  • Self-employed individuals (and their spouse/common-law partner) have until June 15 to file, but any balance owing is due April 30.
  • RRSP contributions made in the first 60 days of the year can generally be applied to the prior tax year.

Payroll contributions

Employers withhold and remit income tax and contributions to social programs:

  • CPP/QPP – Canada Pension Plan (outside Quebec) or Quebec Pension Plan (Quebec).
  • EI – Employment Insurance (with Quebec Parental Insurance Plan (QPIP) providing parental benefits in Quebec).
  • Employer remittances are due on schedules based on size and compliance history. Employers also issue annual slips (e.g., T4, RL-1 in Quebec).
Program Applies where Notes
CPP All provinces/territories except Quebec Employee and employer contributions up to an annual pensionable earnings limit.
QPP Quebec Administered by Retraite Québec; similar structure to CPP with Quebec-specific rates/lids.
EI Nationwide Employee and employer contributions; reduced rates may apply for certain plans.
QPIP Quebec Separate employee/employer contributions for parental benefits.

Consumption taxes: GST/HST and PST/QST

Canada levies a federal Goods and Services Tax (GST) at 5%. Some provinces combine their sales tax with the GST into a single Harmonized Sales Tax (HST). Others maintain separate provincial sales taxes (PST/QST/RST). Small suppliers may be exempt from registration until they exceed thresholds; voluntary registration may offer input tax credit advantages.

GST/HST/PST by province/territory (overview)

(Rates can change. Confirm with the CRA or provincial authorities.)

Province/Territory Sales tax type Total typical rate (overview)
Newfoundland and Labrador HST 15%
Nova Scotia HST 15%
New Brunswick HST 15%
Prince Edward Island HST 15%
Ontario HST 13%
Quebec GST 5% + QST Combined application; QST administered by Revenu Québec
British Columbia GST 5% + PST Provincial PST rules and exemptions apply
Saskatchewan GST 5% + PST Provincial PST rules apply
Manitoba GST 5% + RST Provincial RST rules apply
Alberta GST only No provincial sales tax
Yukon GST only No territorial sales tax
Northwest Territories GST only No territorial sales tax
Nunavut GST only No territorial sales tax

Corporate income tax

  • Corporations pay federal and provincial/territorial income taxes. Rates depend on whether a corporation is a Canadian-controlled private corporation (CCPC) and whether it claims the small business deduction (on active business income up to the small business limit).
  • Investment income in CCPCs may be subject to additional refundable taxes and a refundable dividend tax on hand (RDTOH) mechanism.
  • Scientific Research and Experimental Development (SR&ED) incentives and other credits may reduce tax.
  • Corporations file a T2 return, typically within six months of year-end; balances are often due two or three months after year-end, with monthly or quarterly instalments for larger taxpayers.

Property tax and land transfer taxes

  • Municipalities fund local services primarily through property tax based on assessed values and local mill rates.
  • Some provinces levy land transfer tax (or deed transfer tax) on real estate purchases; additional municipal surcharges may apply in select cities.

Excise duties and customs

  • Federal excise duties apply to products such as alcohol, tobacco, fuel, and cannabis; special stamps, licensing, or reporting may be required.
  • Customs duties may apply to imported goods under the Customs Tariff; trade agreements can reduce or eliminate duties.

International tax, treaties, and anti-avoidance

  • Canada maintains an extensive network of tax treaties to reduce double taxation and withholding.
  • The General Anti-Avoidance Rule (GAAR) addresses abusive tax avoidance transactions.
  • Non-residents are subject to Part XIII withholding on certain passive income (commonly 25% absent a treaty reduction) and Part I tax on Canadian-source business/employment income. Special elections may apply to rental and timber income.

Compliance, audits, and disputes

  • CRA issues Notices of Assessment/Reassessment. Taxpayers may file a Notice of Objection within prescribed timelines; appeals proceed to the Tax Court of Canada if unresolved.
  • Interest and penalties may apply to late filing, late payment, failures to remit, or gross negligence.
  • Taxpayers can request adjustments to prior returns and may use the Voluntary Disclosures Program to correct past non-compliance.

Key filing dates (summary)

Taxpayer/group Return due date Balance due date Notes
Individuals (T1) April 30 April 30 Standard filers
Self-employed (T1) June 15 April 30 Spouse/CLP of self-employed also gets June 15 filing deadline
Corporations (T2) 6 months after year-end Typically 2–3 months after year-end Instalments may apply
T4/T5 slips (employers/payers) End of February — Information returns to CRA and recipients

See also

External links

FAQs

Do I need to file a return if I had little or no income?

You may still wish to file to receive refundable credits/benefits and to establish RRSP room. Filing may also be required to report certain income or recover withholding.

How are capital gains taxed?

Only a legislated fraction of a capital gain is included in income (the inclusion rate); check CRA for current rules and thresholds that may apply.

What is the difference between RRSP and TFSA for tax?

RRSP contributions may be deductible and withdrawals are taxable; TFSA contributions are not deductible and withdrawals are generally tax-free. Both have annual limits.

When must a freelancer register for GST/HST?

Once your worldwide taxable supplies exceed the small supplier threshold in a 12-month period (most commonly $30,000), registration and charging GST/HST usually become mandatory (some activities have special rules).

I live in Quebec—do I file twice?

Typically yes: a federal T1 with CRA and a provincial TP-1 with Revenu Québec. Quebec also administers QST, QPP, and QPIP.

What if I disagree with my assessment?

File a Notice of Objection with CRA within the time limit. If unresolved, you may appeal to the Tax Court of Canada.

What counts as tax evasion versus avoidance?

Tax evasion is illegal (e.g., hiding income); tax avoidance uses legal provisions to minimize tax. Transactions that abuse the object/spirit of the law may be challenged under the GAAR.

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