Taxation in Canada

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Taxation in Canada

Income Tax

The Fiscal year is 31 March to 1 April. The personal income tax % is lower than the UK.

• $0 - $40,726: 15%

• $40,726 - $81,452: 22%

• $81,452 - $126,264: 26%

• Over $126,264: 29%

You must submit a tax return if you are a individual Canadian residents or a non-residents who earns their income in Canada. You submit the T1 (for individuals) and T2 (for corporations) to your local Canada Revenue Agency tax centre.

Approximately 70% of the government's income comes from taxation in Canada.

Corporation Tax

The corporate income tax rate for 2009 is 19%.

What is GST and HST?

They are both taxes similar to VAT (value-added tax).

The Canadian Goods and Services Tax (GST) is a tax added to the sale of all products except certain necessities' including groceries, residential rent, medical services, most farm products and livestock, most fishery products, etc. These are classed as Zero-rated (0%). You cannot charge GST/HST but you can claim input tax credits (ITC).

Harmonized Sales Tax (HST) rate is 13% and applies to the same goods and services as GST. It is the consumer who pays the GST/HST. Businesses that are registered for the GST/HST are called registrants. Of the 13%, 5% is federal and the remaining 8% is provincial.

All provinces except Alberta charge sales taxes as well. In some provinces the provincial sales taxes (PST) are harmonized with GST, others don't charge PST and the remaining provinces apply the PST to the sale price and GST. As you can see it is not standard so you will to seek advice about what to charge, if it applies to you.

You must register for GST/HST when you no longer qualify for as a small supplier because your total worldwide taxable supplies of goods and services exceed the small supplier limit of CAD$30,000 in a single calendar quarter or in four consecutive calendar quarters.

Registering for GST/HST can be done at the same time as applying for your BN. If you don't have a BN, it will be issued at the same time as the GST/HST registration number. If you are a sole trader you will be asked to supply your social insurance number (SIN). You can apply on-line at the Canadian Revenue Agency website, call +1-800-959-5525, mail or fax the necessary forms or use an accountant or visit your local Canadian Tax Office.

When do I file my GST/HST returns?

You have to file your returns according to the schedule established by your reporting period, which is issued to you by the Canadian Revenue Agency. This period is based on your annual taxable supplies of goods and services made in Canada. e.g. Annual taxable GST of CAD$1,500,000 or less.

• Issued reporting period - annual

• Optional reporting period - quarterly or monthly

You can file your GST/HST returns using different options:

• Over the Internet using GST/HST NETFILE

• By telephone using GST/HST TELEFILE

• GST/HST EDI (electronic data interchange) filing

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