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Social Security Contributions

In 2023, Canadian-resident employees must pay up to CAD 3,754.45 for government pension plan contributions and up to CAD 1,002.45 for employment insurance premiums. Quebec employees have different maximum contributions: CAD 4,038.40 for the Quebec government pension plan, CAD 781.05 for employment insurance, and CAD 449.54 for the Quebec parental insurance plan.

Starting from 1 January 2019, both the Canadian and Quebec government pension plans began phasing in an enhanced contribution over seven years. The enhanced portion is deductible, while a tax credit equal to 15% of the lesser of the non-enhanced amount payable or the required base premiums for the year is available for federal tax calculations.

Self-employed individuals contribute double the employee rate (up to CAD 7,508.90 in Canada, or CAD 8,076.80 in Quebec for 2023) and can deduct half of the base contribution and all of the enhanced contribution. The non-deductible portion is eligible for a tax credit. While they are not required to pay employment insurance premiums, they can choose to do so. In Quebec, self-employed individuals must contribute up to CAD 798.98 to the Quebec parental insurance plan.

Consumption Taxes

Federal Goods and Services Tax (GST)

The GST is a 5% federal tax on most goods and services supplied in Canada. It is a value-added tax (VAT) applied at various stages of production and distribution. However, certain supplies are either zero-rated (taxed at 0%) or exempt, such as used residential property, and most health care, educational, and financial services. Zero-rated supplies include basic groceries, medical and assistive devices, prescription drugs, feminine hygiene products, agriculture and fishing products, and most international freight and passenger transportation services.

Typically, businesses charge GST on sales and pay GST on purchases, then remit the net tax (the difference between GST charged and GST paid) or claim a refund. They can claim input tax credits for GST paid on expenses related to taxable and zero-rated supplies, but not for expenses related to tax-exempt supplies.

Harmonized Sales Tax (HST)

Five provinces have harmonized their sales tax with the GST, forming a single HST that combines the 5% GST with a provincial component. The HST applies to the same tax base and follows the same rules as the GST. Businesses do not need to register separately for GST and HST; both are managed under a single tax return by the Canada Revenue Agency (CRA). The HST rates are: [HST rates would follow here].

ProvincesHST rate (%)
New Brunswick15
Newfoundland and Labrador15
Nova Scotia15
Ontario13
Prince Edward Island15

GST/HST and the Digital Economy

Non-Resident Vendors

Non-resident vendors “carrying on business in Canada” must register for GST/HST even without a physical presence in the country. The GST/HST rules for non-resident vendors without a physical presence include:

  • Foreign-based digital businesses supplying intangible personal property and services to Canadian consumers must register and collect GST/HST under a simplified regime.
  • GST/HST applies to all short-term accommodation supplies by private residential property owners facilitated through digital platforms, affecting non-resident accommodation platforms.
  • GST/HST applies to goods located at fulfillment warehouses in Canada and sold to Canadian consumers by:
    • Non-resident vendors selling directly to consumers.
    • Online marketplace platforms facilitating sales of goods by non-registered vendors to Canadian consumers.

Provincial Retail Sales Tax (PST)

British Columbia, Manitoba, and Saskatchewan levy PST in addition to the 5% GST at rates of 7%, 7%, and 6%, respectively, on most tangible personal property, software, and certain services. PST generally does not apply to goods, software, and services acquired for resale, with registered vendors able to claim a resale exemption. Exemptions also exist for manufacturing, farming, and fisheries. Each province’s tax authority administers PST separately from the CRA, and PST paid on business inputs cannot generally be claimed as a credit.

Alberta and the three territories (Northwest Territories, Nunavut, and Yukon) do not impose a retail sales tax, but the GST applies.

Specific Provincial Rules

British Columbia (BC) PST:

  • Out-of-province vendors selling taxable goods, software, or telecommunication services to BC customers must register if annual revenue exceeds CAD 10,000.
  • Marketplace facilitators must collect and remit BC PST on sales made through their platforms and charge BC PST on marketplace services provided to resellers.

Manitoba PST:

  • Businesses without a physical presence in Manitoba must register if they provide audio/video streaming services, sell taxable goods through online marketplaces, or book taxable accommodation through online platforms.

Saskatchewan PST:

  • Out-of-province sellers must register if they facilitate retail sales of tangible personal property, taxable services, or insurance contracts and collect payments for marketplace sellers. They are exempt if sales occur through registered online accommodation platforms or marketplace facilitators.

Quebec Sales Tax (QST)

Quebec’s VAT, similar to GST/HST, is 9.975%, resulting in a combined rate of 14.975% with GST. Registrants charge QST on taxable supplies and can claim input tax refunds. Non-residents with no physical presence in Quebec, making digital supplies to specified Quebec consumers, must register under a specified system. Digital platforms controlling key transaction elements must register for QST on sales to Quebec consumers. Quebec’s QST system is harmonized with federal GST/HST measures on the digital economy. Operators of distribution platforms and short-term accommodation platforms must register and collect QST on sales to Quebec consumers.

Net wealth/worth taxes

There are no net wealth/worth taxes in Canada.

Inheritance, Estate, and Gift Taxes

There are no federal or provincial/territorial inheritance, estate, or gift taxes in Canada. However, when an individual dies, it is assumed that they have disposed of any capital property immediately before death. This can result in accrued capital gains being taxed as income, as explained under Capital Gains in the Income Determination section. Additionally, most provinces and territories impose probate fees or administrative charges for probating a will.

Property Taxes

Property taxes in Canada are levied by municipalities based on the estimated market value of real property within their boundaries. Provinces and territories also impose property taxes on land outside municipalities. Typically, a general property tax is levied on property owners, while some municipalities have a separate business tax payable by occupants using the property for business. These taxes are based on the property’s rental value, with rates set annually by municipalities. School taxes, generally based on real property value, are imposed by local/regional school boards or the province/territory.

British Columbia Speculation and Vacancy Tax (SVT)

British Columbia imposes an annual SVT on residential property in certain urban centers, targeting foreign and domestic homeowners who do not pay BC income tax, including those leaving homes vacant. The SVT rates are:

  • 2% for foreign investors and satellite families.
  • 0.5% for British Columbians and other Canadian citizens/permanent residents not in a satellite family.

Exemptions are available for most principal residences, qualifying long-term rental properties, and specific cases such as home renovation, illness, and divorce. A non-refundable tax credit may be available for some owners.

All residential property owners in SVT areas must:

  • Make a declaration online by 31 March of the following year.
  • Pay any tax owing by the first business day in July (4 July in 2023).

Each owner of a property must complete a separate declaration, even if married to another owner. Owners with multiple properties must complete declarations for each. Failure to file results in a 2% tax rate assessment regardless of residency or exemption.

Federal Tax on Canadian Housing Owned by Non-Residents

Starting 1 January 2022, an annual 1% federal underused housing tax applies to non-resident, non-Canadian-owned residential properties considered vacant or underused. Certain residential property owners must file an annual declaration for each property by 30 April of the following year, even if exempt from the tax. Significant penalties apply for failing to file. The tax generally targets non-Canadian citizens/permanent residents, with exemptions for properties leased to qualified tenants for a minimum period annually. Penalties and interest for 2022 returns are waived if filed and paid by 30 April 2024.

Land Transfer Tax

All provinces and territories in Canada impose a land transfer tax or registration fee on purchasers of real property within their jurisdiction. These taxes are typically calculated as a percentage, often on a sliding scale, of the sale price or assessed value of the property and are payable at the time of property title registration. Rates vary across provinces and territories, ranging from 0.02% to 5%, with potential higher rates for non-resident purchasers. Some exemptions or refunds may apply, and additional land transfer taxes may be levied in certain municipalities.

British Columbia (BC)

In BC, a 20% land transfer tax is imposed on certain foreign entities and trusts purchasing residential property in specific regions. Relief and refunds are available under certain conditions, such as for Canadian controlled limited partnerships and foreign individuals becoming Canadian citizens or permanent residents.

To combat tax evasion, BC requires detailed disclosure of beneficial ownership information for property acquisitions involving trusts, partnerships, or corporations.

Ontario

Ontario imposes a 25% land transfer tax on foreign entities and taxable trustees purchasing residential property, with exemptions and rebates available in specific situations. Before 30 March 2022, this tax applied to residential property in the Greater Golden Horseshoe region, including Toronto.

Nova Scotia

Nova Scotia imposes a 5% land transfer tax on non-residents purchasing residential real property, with exemptions for those becoming residents within six months of the transaction.

These land transfer taxes aim to regulate property ownership and ensure fair taxation across provinces and territories.

Luxury Tax

As of September 1, 2022, a tax is imposed on sales for personal use of:

  • Luxury cars and personal aircraft with a retail price exceeding CAD 100,000, and
  • Boats with a retail price exceeding CAD 250,000.

The tax is calculated as the lesser of:

  • 20% of the value above the sales price threshold, or
  • 10% of the full value of the luxury car, boat, or personal aircraft.

Excise Tax

Excise duties are imposed on various items such as spirits, wine, beer, malt liquor, tobacco, and vaping products at different rates. Duty is payable on domestically manufactured goods at the point of packaging and on imported goods by the importer at the time of importation. Excise tax is also applied to automobile air conditioners, fuel-inefficient automobiles, aviation fuel, gasoline, diesel fuel, and certain insurance premiums.

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Emran Shaikh

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