Are you considering migrating to Canada? If you are, it is important to understand how tax works in said country. There are many different taxes in Canada. For example, some taxes are federal, and some are provincial. The government uses tax money to fund programs that directly benefit its citizens. In fact, the government spends over $200 billion CAD every year on programs like health care, free education, and many more. About 30% of the government’s revenue Is made from personal income taxes.
Curiously, Canada did not tax its people before 1917. Thus, Canada was tax-free for 50 years after independence. The government wanted Canada to be tax-free to encourage immigration. Even while countries like the United States implemented taxes, Canada funded itself through natural resources. However, World War I brought heavy expenses for Canada. Therefore, the government decided to impose a war-time tax. This tax remained after the war to pay the large debt. Tax has continued to today, though it serves mostly for the benefit of Canada’s citizens.
Sales Taxes
Sales tax refers to a percentage of your purchases that will be added to your subtotal and taken by the government. There are a few of these taxes that you should be aware of. First is the GST (Goods and Services Tax). This tax is 5% of your purchases and is collected by the federal government. Thus, the GST is found in every part of Canada. In fact, it is the only sales tax that applies to the whole country.
The other types of tax are provincial. Thus, they can change depending on the province that you live in. The PST (Provincial Sales Tax) can vary between 6% to 9.975% of your purchase. Curiously, Alberta is the only province with no sales tax. That makes living in Alberta worth considering. Currently, Québec is the province with the highest sales tax. You can visit this page at the Retail Council of Canada’s website to find each province’s current tax rates.
Finally, you might find that some provinces have neither GST nor PST. Instead, these provinces have HST (Harmonized Sales Tax). The HST simply adds the GST and PST into one percentage for simplicity. For example, Ontario’s HST is 13%. Therefore, you pay 13% in tax, but 5% is federal and 8% is Ontario’s.
In closing, not all purchases are taxed. Thankfully, basic commodities like most groceries, health and dental care, and feminine hygiene products are tax-free. Additionally, it should be noted that tax is not usually included in price tags. Therefore, it is a good idea to know your province’s tax rates. In this way, you can calculate how much you will spend on your purchases.
Income Tax
Canada has a progressive or graduated tax system. What does that mean? In essence, those who make more money will pay more money. However, it is not as simple as it sounds. The amount of taxes you pay is determined by tax brackets. As an example, you pay 15% of your income if you make less than $45500 every year. This is the first bracket. If you make more than that, but less than $93000, you pay 20.5% for any earnings beyond $45500. Naturally, this is the second bracket. Of course, as brackets increase, rates increase as well.
Income tax is collected by the CRA (Canada Revenue Agency). Coincidentally, the CRA also determines who is required to pay taxes. Generally, only residents of Canada are required to pay income taxes. However, this does not mean only permanent residents. If the CRA considers you a factual or esteemed resident, you also must pay taxes. In simpler terms, living in Canada for enough time will mean paying income tax, even if you are not a permanent resident.
Where Does Tax Money Go?
The Canadian government uses tax money on services and programs that benefit its citizens. Alternatively, you could say that your tax money comes back to you, but in a different manner. One of the most obvious of these benefits is Canada’s health care coverage. Another well-known program is free primary and secondary education. Finally, some other investments include emergency services, roads and highways, garbage and recycling collection, and parks and playgrounds.
Now you know a little more about the way that Canada functions. Taxes are for the benefit of citizens, and Canada would not be the country it is without these funds. You can visit us at Gentium Immigration if you would like to learn more about this great country. We are committed to helping you migrate successfully. In fact, you can request a free pre-consultation by completing this brief survey. You can expect a response within 48 hours of completion. We hope to hear from you soon!
