| Canada Income Tax Rates Personal income of individuals in Canada is calculated by adding provincial / territorial tax to federal income tax. In some Canadian provinces / territories, an additional surtax or surtaxes are also added to the provincial / territorial taxes (i.e. Nova Scotia, Ontario) to calculate the final tax. In 2009, Canada federal income tax rates vary progressively between 15% - 29%, with an annual CAN 10,320 federal income tax relief available for individuals. However, adding the provincial taxes, combined Canada tax rates for individuals may go up to 48.25% (i.e. in Nova Scotia) for taxable income exceeding CAN 126,264.
Canada Federal Income Tax Rates for 2009Taxable Income / Tax Rate %
CAN 0 - 40,726 15%
CAN 40,726 - 81,452 22%
CAN 81,452 - 126,264 26%
Above CAN 126,264 29%
Personal Income Tax Relief for All Taxpayers - Federal Basic Personal Amount: The federal basic personal amount is increased to CAN 10,320 in 2009 from CAN 9,600 in 2008, allowing individuals to earn more income before paying federal income tax.
Canada Provincial / Territorial Income Tax Rates for 2009Alberta (AB) Combined Federal & Provincial Tax Rates 2009
Taxable Income / Tax Rate %
CAN 0 - 40,726 25%
CAN 40,726 - 81,452 32%
CAN 81,452 - 126,264 36%
Over CAN 126,264 39%
AB Basic Personal Amount for 2009: CAN 16,775
Tax Rate: 10.0%
British Columbia (BC) Combined Federal & Provincial Tax Rates 2009
Taxable Income / Tax Rate %
CAN 0 - 35,716 20.06%
CAN 35,716 - 40,726 22.70%
CAN 40,726 - 71,433 29.70%
CAN 71,433 - 81,452 32.50%
CAN 81,452 - 82,014 36.50%
CAN 82,014 - 99,588 38.29%
CAN 99,588 - 126,264 40.70%
Over CAN 126,264 43.70%
BC Basic Personal Amount for 2009: CAN 9,373
Tax Rate: 5.06%
Manitoba (MB) Combined Federal & Provincial Tax Rates 2009
Taxable Income / Tax Rate %
CAN 0- 31,000 25.80%
CAN 31,000 - 40,726 27.75%
CAN 40,726 - 67,000 34.75%
CAN 67,000 - 81,452 39.40%
CAN 81,452 - 126,264 43.40%
Over CAN 126,264 46.40%
MB Basic Personal Amount for 2009: CAN 8,134
Tax Rate: 10.80%
New Brunswick (NB) Combined Federal & Provincial Tax Rates 2009
Taxable Income / Tax Rate %
CAN 0 - 35,707 24.65%
CAN 35,707 - 40,726 29.50%
CAN 40,726 - 71,415 36.50%
CAN 71,415 - 81,452 38.00%
CAN 81,452 - 116,105 42.00%
CAN 116,105 - 126,264 43.00%
Over CAN 126,264 46.00%
NB Basic Personal Amount for 2009: CAN 8,605
Tax Rate: 9.65%
Newfoundland & Labrador (NL) Combined Federal & Provincial Tax Rates Including Surtax 2009
Taxable Income / Tax Rate %
CAN 0 - 31,061 22.70%
CAN 31,061 - 40,726 27.80%
CAN 40,726 - 62,121 34.80%
CAN 62,121 - 81,452 37.50%
CAN 81,452 - 126,264 41.50%
Over CAN 126,264 44.50%
NL Basic Personal Amount for 2009: CAN 7,778
Tax Rate: 7.70%
Nova Scotia (NS) Combined Federal & Provincial Tax Rates Including Surtax 2009
Taxable Income / Tax Rate %
CAN 0 - 29,590 23.79%
CAN 29,590 - 40,726 29.95%
CAN 40,726 - 59,180 36.95%
CAN 59,180 - 81,236 38.67%
CAN 81,236 - 81,452 40.34%
CAN 81,452 - 93,000 44.34%
CAN 93,000 - 126,264 45.25%
Over CAN 126,264 48.25%
NS Surtax Rate (included in all above tax rates): 10%
Surtax is on NS Tax Greater Than: CAN 10,000
Person with only Basic Personal Amount - Surtax Starts at Taxable Income of: CAN 81,236
NS Basic Personal Amount for 2009: CAN 7,981
Tax Rate: 8.79%
Prince Edward Island (PE) Combined Federal & Provincial Tax Rates Including Surtax 2009
Taxable Income / Tax Rate %
CAN 0 - 31,984 24.80%
CAN 31,984 - 40,726 28.80%
CAN 40,726 - 63,969 35.80%
CAN 63,969 - 81,452 38.70%
CAN 81,452 - 98,143 42.70%
CAN 98,143 - 126,264 44.37%
Over CAN 126,264 47.37%
PE Surtax Rate (included in all above tax rates): 10%
Surtax is on PE Tax Greater Than: CAN 12,500
Person with only Basic Personal Amount - Surtax Starts at Taxable Income of: CAN 98,143
PE Basic Personal Amount for 2009: CAN 7,708
Tax Rate: 9.80%
Ontario (ON) Combined Federal & Provincial Tax Rates Including Surtaxes 2009
Taxable Income / Tax Rate %
CAN 0 - 36,848 21.05%
CAN 36,848 - 40,726 24.15%
CAN 40,726 - 64,882 31.15%
CAN 64,882 - 73,698 32.98%
CAN 73,698 - 76,440 35.39%
CAN 76,440 - 81,452 39.41%
CAN 81,452 - 126,264 43.41%
Over CAN 126,264 46.41%
ON Surtax Rate (included in all above tax rates): 20%
Surtax is on ON Tax Greater Than: CAN 4,257
Person with only Basic Personal Amount - Surtax Starts at Taxable Income of: CAN 64,882
ON Surtax Rate (included in all above tax rates): 36%
Surtax is on ON Tax Greater Than: CAN 5,370
Person with only Basic Personal Amount - Surtax Starts at Taxable Income of: CAN 76,440
ON Basic Personal Amount for 2009: CAN 8,881
Tax Rate: 6.05%
Québec (QC) Combined Federal & Provincial Tax Rates Net of Federal Tax Abatement 2009
Taxable Income / Tax Rate %
CAN 0 - 38,385 28.53%
CAN 38,385 - 40,726 32.53%
CAN 40,726 - 76,770 38.37%
CAN 76,770 - 81,452 42.37%
CAN 81,452 - 126,264 45.71%
Over CAN 126,264 48.22%
QC Basic Personal Amount for 2009: CAN 10,455
Tax Rate: 20.00%
Saskatchewan (SK) Combined Federal & Provincial Tax Rates 2009
Taxable Income / Tax Rate %
CAN 0 - 40,113 26.00%
CAN 40,113 - 40,726 28.00%
CAN 40,726 - 81,452 35.00%
CAN 81,452 - 114,610 39.00%
CAN 114,610 - 126,264 41.00%
Over CAN 126,264 44.00%
SK Basic Personal Amount for 2009: CAN 13,269
Tax Rate: 11.00%
Northwest Territories (NT) Combined Federal & Territorial Tax Rates 2009
Taxable Income / Tax Rate %
CAN 0 - 36,885 20.90%
CAN 36,885 - 40,726 23.60%
CAN 40,726 - 73,772 30.60%
CAN 73,772 - 81,452 34.20%
CAN 81,452 - 119,936 38.20%
CAN 119,936 - 126,264 40.05%
Over CAN 126,264 43.05%
NT Basic Personal Amount for 2009: CAN 12,664
Tax Rate: 5.90%
Nunavut (NU) Combined Federal & Territorial Tax Rates 2009
Taxable Income / Tax Rate %
CAN 0 - 40,726 19.00%
CAN 40,726 - 81,452 29.00%
CAN 81,452 - 126,264 35.00%
Over CAN 126,264 40.50%
NU Basic Personal Amount for 2009: CAN 11,644
Tax Rate: 4.00%
Yukon (YT) Combined Federal & Territorial Tax Rates 2009
Taxable Income / Tax Rate %
CAN 0 - 40,726 22.04%
CAN 40,726 - 80,595 31.68%
CAN 80,595 - 81,452 32.16
CAN 81,452 - 126,264 38.01%
Over CAN 126,264 42.40%
YT Surtax Rate (included in all above tax rates): 5%
Surtax is on YT Tax Greater Than: CAN 6,000
Person with only Basic Personal Amount - Surtax Starts at Taxable Income of: CAN 80,595
NU Basic Personal Amount for 2009: CAN 10,320
Tax Rate: 7.04%
About Canada Income TaxIncome taxes in Canada constitute the majority of the annual revenues of the Government of Canada, and of the governments of the Provinces of Canada. In the last fiscal year, the Canadian government collected roughly three times more personal income taxes than it did corporate income taxes.
Canadian federal income taxes, both personal and corporate are levied under the provisions of the Income Tax Act. Provincial and territorial income taxes are levied under various provincial statutes.
The Canadian income tax system is a self-assessment regime. Taxpayers assess their tax liability by filing a return with the Canada Revenue Agency by the required filing deadline. Canada Revenue Agency will then assess the return based on the return filed and on information it has obtained from employers and financial companies, correcting it for obvious errors. A taxpayer who disagrees with Canada Revenue Agency's assessment of a particular return may appeal the assessment. The appeal process starts when a taxpayer formally objects to the Canada Revenue Agency assessment. The objection must explain, in writing, the reasons for the appeal along with all the related facts. The objection is then reviewed by the appeals branch of Canada Revenue Agency. An appealed assessment may either be confirmed, vacated or varied by the Canada Revenue Agency. If the assessment is confirmed or varied, the taxpayer may appeal the decision to the Tax Court of Canada and then to the Federal Court of Appeal.
Provincial and Territorial Personal Income Taxes in CanadaProvinces and territories that have entered into tax collection agreements with the federal government for collection of personal income taxes ("agreeing provinces", i.e., all provinces and territories except Quebec) must use the federal definition of "taxable income" as the basis for their taxation. This means that they are not allowed to provide or ignore federal deductions in calculating the income on which provincial tax is based.
Provincial and territorial governments in Canada provide both nonrefundable tax credits and refundable tax credits to taxpayers for certain expenses. They may also apply surtaxes and offer low-income tax reductions.
Canada Revenue Agency collects personal income taxes for agreeing provinces / territories, and remits the revenues to the respective governments. The provincial/territorial tax forms are distributed with the federal tax forms, and the taxpayer need make only one payment - to CRA - for both types of tax. Similarly, if a taxpayer is to receive a refund, he or she receives one cheque or bank transfer for the combined federal and provincial / territorial tax refund. Information on provincial rates can be found on the Canada Revenue Agency's site.
Quebec: Quebec administers its own personal income tax system, and therefore is free to determine its own definition of taxable income. To maintain simplicity for taxpayers, however, Quebec parallels many aspects of and uses many definitions found in the federal tax system.
Income Not Taxed in CanadaThe following types of income are not taxed in Canada (this list is not exhaustive):
- gifts and inheritances;
- lottery winnings;
- winnings from betting or gambling for simple recreation or enjoyment;
- strike pay;
- compensation paid by a province or territory to a victim of a criminal act or a motor vehicle accident;
- certain civil and military service pensions;
- income from certain international organizations of which Canada is a member, such as the United Nations and its agencies;
- war disability pensions;
- RCMP pensions or compensation paid in respect of injury, disability, or death;
- income of First Nations, if situated on a reserve;
- capital gain on the sale of a taxpayer's principal residence;
- provincial child tax credits or benefits and Québec family allowances;
- Working income tax benefit;
- the Goods and Services Tax or Harmonized Sales Tax credit (GST/HST credit) or Quebec Sales Tax credit; and
- the Canada Child Tax Benefit.
Canada Corporate Income Tax RatesCanada tax rates for corporations for 2009 is 19% plus Provincial / Territorial taxes, making the effective tax rate a maximum of 35%.
A corporation is resident in Canada if its mind and management is located in Canada or if control is exercised in Canada. In addition to this common law test of residency, there is a statutory expansion of the rule so that all corporations incorporated in Canada after April 26, 1965 are deemed to be resident in Canada. A resident corporation is taxed by Canada on its worldwide income, including capital gains, without regard to the source of income. General corporate tax rates go up to 35% in 2009.
A Canadian corporation is required to file an income tax return for each taxation year, which is generally twelve months. The return is due six months after the corporation's year-end. Payments of tax are made on a monthly basis with the final balance of tax due two or three months after the corporation's year-end, depending on the corporation's tax status. Interest and penalties are imposed for failure to make adequate monthly instalments and on final balances overdue. Certain transactions, such as amalgamations and those resulting in an acquisition of control or a change in Canadian controlled private corporation (CCPC) status, cause a deemed year-end with the requirement to file a tax return for that period.
There is no provision for consolidated tax returns. Each member of the corporate group files a separate tax return.
Provincial income taxes are paid on the basis of an allocation of taxable income between the provinces where the corporation has a permanent establishment. The average weighting of revenues and salaries and wages between the permanent establishments is the basis for the allocation of business income. Alberta, Ontario and Quebec each has its own corporate tax administrations and require the separate filing of provincial corporate tax returns. The CRA administers the collection of income taxes for the other provinces and territories through the filing of a combined federal and provincial tax return. Ontario has announced that it intends to eliminate its separate provincial return beginning in 2009.
Canada Corporate Income Tax Federal RatesCanada federal corporate income tax rate for 2009 is 19%.
Canada corporate income tax rates before Provincial / Territorial taxes will decrease as follows:
19% effective January 1, 2009
18% effective January 1, 2010
16.5% effective January 1, 2011
15% effective January 1, 2012
Canada Provincial / Territorial Corporate Tax RatesCanada tax rates for provinces and territories have two rates for income tax - a lower tax rate and a higher tax rate. Those taxes are to be added on to Canada federal corporate tax rates above.
Lower tax rate: The lower rate applies to either:
- the income eligible for the federal small business deduction; or
- the income based on limits established by the particular province or territory.
Higher tax rate: The higher rate applies to all other taxable income.
Provincial and Territorial Canada Tax Rates Except Quebec and Alberta: The following table shows the income tax rates for provinces and territories (except Quebec and Alberta, which do not have corporation tax collection agreements with the CRA). These rates are in effect on January 1, 2009, and some may change during 2009.
Province or territory / Lower Tax Rate - Higher Tax Rate
Newfoundland and Labrador 5% - 14%
Nova Scotia 5% - 16%
Prince Edward Island 2.1% - 16%
New Brunswick 5% - 12%
Ontario 5.5% - 14%
Manitoba 1% - 13%
Saskatchewan 4.5% - 12%
British Columbia 2.5% - 11%
Yukon 4% - 15%
Northwest Territories 4% - 11.5%
Nunavut 4% - 12%
Combined Federal and Provincial Income Tax Rates for Income Earned by a General Corporation in Canada, 2009Jurisdiction / General M&P Income / General Active Business Income / Investment Income
British Columbia 30.0% 30.0% 30.0%
Alberta 29.0% 29.0% 29.0%
Saskatchewan 29.0% 31.0% 31.0%
Manitoba 32.0%/31.0% 32.0%/31.0% 32.0%/31.0%
Ontario 31.0% 33.0% 33.0%
Québec 30.9% 30.9% 30.9%
New Brunswick 32.0%/31.0% 32.0%/31.0% 32.0%/31.0%
Nova Scotia 35.0% 35.0% 35.0%
Prince Edward Island 35.0% 35.0% 35.0%
Newfoundland 24.0% 33.0% 33.0%
Canada Other TaxesCanada Property Tax Rates: The municipal level of government is funded largely by property taxes on residential, industrial and commercial properties. These account for about ten percent of total taxation in Canada.
Canada Excise Taxes: Both the federal and provincial governments impose excise taxes on inelastic goods such as cigarettes, gasoline, alcohol, and for vehicle air conditioners. A great bulk of the retail price of cigarettes and alcohol are excise taxes. The vehicle air conditioner tax is currently set at $100 per air conditioning unit. Canada has some of the highest rates of taxes on cigarettes and alcohol in the world. These are sometimes referred to as sin taxes.
Canada Payroll Taxes: Ontario levies a payroll tax on employers, the "Employer Health Tax", of 1.95% of payroll. Eligible employers are exempt on the first $400,000 of payroll. This tax was designed to replace revenues lost when health insurance premiums, which were often paid by employers for their employees, were eliminated in 1989.
Quebec levies a similar tax called the "Health Services Fund". For those who are employees, the amount is paid by employers as part of payroll. For those who are not employees such as pensioners and self-employed individuals, the amount is paid by the taxpayer.
Premiums for the Employment Insurance system and the Canada Pension Plan are paid by employees and employers. Premiums for Workers' Compensation are paid by employers. These premiums account for 12% of government revenues. These premiums are not considered to be taxes because they create entitlements for employees to receive payments from the programs, unlike taxes, which are used to fund government activities. The funds collected by the Canada Pension Plan and by the Employment Insurance are in theory separated from the general fund. It should be noted that Unemployment Insurance was renamed to Employment Insurance to reflect the increased scope of the plan from its original intended purpose.
Employment Insurance is unlike private insurance because the individual's yearly income impacts the received benefit. Unlike private insurance, the benefits are treated as taxable earnings and if the individual had a mid to high income for the year, they could have to repay up to the full benefit received.
Canada Health and Prescription Insurance Tax: Ontario charges a tax on income for the health system. These amounts are collected through the income tax system, and do not determine eligibility for public health care. The Ontario Health Premium is an additional amount charged on an individual's income tax that ranges from $300 for people with $20,000 of taxable income to $900 for high income earners. Individuals with less than $20,000 in taxable income are exempt.
Quebec also requires residents to obtain prescription insurance. When an individual does not have insurance, they must pay an income-derived premium. As these are income related, they are considered to be a tax on income under the law in Canada.
Other provinces, such as British Columbia, charge premiums collected outside of the tax system for the provincial medicare systems. These are usually reduced or eliminated for low-income people.
Alberta does not levy any taxes or premiums for its provincial medicare.
Canada Estate Tax: Since the government of Pierre Trudeau repealed Canada's inheritance tax in 1972, estates have been treated as sales (a "deemed disposition") upon death, except where the estate is inherited by a surviving spouse or common law partner. Tax owing is paid by the estate, and not by the beneficiaries. Registered Retirement Savings Plans and Registered Retirement Income Funds are wound down, and the assets are distributed to beneficiaries are treated as withdrawals, i.e., they are taxed as part of the income of the estate at the normal applicable personal income tax rates with no reduction for capital gains. Non-registered capital assets are treated as having been sold, and are taxed at the applicable capital gains tax rates. Interest or other income from non-registered non-capital assets that is accrued up to the date of death is taxed on the final tax return of the deceased as the normal tax rates, and is not included on the tax return of the estate.
International Taxation in Canada: Canadian individuals and corporations pay income taxes based on their worldwide income. They are protected against double taxation through the foreign tax credit, which allows taxpayers to deduct from their Canadian income tax otherwise payable from the income tax paid in other countries. A citizen who is currently not a resident of Canada may petition the CRA to change his status so that income from outside Canada is not taxed.
Canada Goods and services Tax (GST) / Sales Tax RatesCanada federal government imposes a 5% Goods and services Tax (GST) on sales within or imports to Canada, with a number of exceptions. All Canada provinces except Alberta have a consumption tax on goods, some provinces also tax services.
Among the provinces, separate sales tax rates are as follows:
Alberta: No PST
Saskatchewan: 5%
Manitoba and British Columbia: 7%
Quebec: 7.5%
Ontario: 8%
Prince Edward Island: 10%
Northwest Territories, Nunavut and Yukon: No PST
The provinces of New Brunswick, Newfoundland and Labrador, and Nova Scotia have harmonised their sales tax with Canadian federal government's Goods and services Tax (GST) at 13%.
Quebec adds the federal tax to the price on which the provincial tax applies, resulting in a total tax at the cash register of 12.88%, which is included in the market price of goods and services.
In other Canada provinces, Goods and services Tax (GST) and provincial sales taxes are added to the bill separately at the point of sale.
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