Canadian Tax Law

Among Organization for Economic Co-operation and Development countries, taxation level in Canada is considered average. According to one report, around 70% of the Canadian government's income comes from taxation.

Great Income Tax

Canada Revenue Agency

It is the responsibility of Canada Revenue Agency to collect the federal taxes in Canada. On the basis of tax collection agreements, the Canada Revenue Agency collects and remits to the provinces :

• Except Quebec, Canada Revenue Agency collects provincial personal income taxes.
• Canada Revenue Agency collects corporate taxes all over Canada except Alberta and Quebec.
• Provincial sales tax in Labrador, Nova Scotia, New Brunswick and Newfoundland are collected by the Canada Revenue Agency.

Personal Income Taxes

Both the provincial and federal governments in Canada charge income taxes on individuals. Income tax is an important source of revenue for provincial and federal governments in Canada. Compared to provincial government, the federal government charges most of the income taxes. Income taxes throughout the country are progressive; this means individuals with high income need to pay more than individuals with low income.

Corporate Taxes

Corporations and firms in Canada pay tax on capital and profit income. The share of corporate taxes is not that much. At the corporate level, tax is paid on corporate income. After that, it is passed on to individual shareholders in the form of dividends. A tax credit is offered to those who get the dividend. This signifies that the tax is paid at the corporate level. This credit does not get rid of the double taxation of the income. By following capital cost allowance guidelines, corporations can lower the capital cost.

Sales Taxes

Federal and provincial sales tax rates at the retail level on goods and a few services are :

• Alberta 0+ 5%= 5 %
• British Columbia 7% + 5% = 12%
• Manitoba 7% + 5% = 12%
• Ontario 8% + 5% = 13%
• Prince Edward Island 10% + 5% = 15.5%
• Quebec 7.5% + 5% = 12.875%
• Saskatchewan 5% + 5% = 10%

Excise Taxes

Both the provincial and federal governments in Canada charge excise taxes on inelastic goods such as alcohol, cigarettes and gasoline. A great deal of the retail price of alcohol and cigarettes are excise taxes.

Inheritance Taxes

You do not need to pay any inheritance taxes in Canada.

International Taxation

Residents of Canada pay income taxes on the basis of their worldwide income. The best part about Canadian tax law is that it protects their citizens against double taxation with the help of foreign tax credit. Foreign tax credit allows taxpayers to deduct taxes from their Canadian income tax.