Canada has a progressive tax system, which means that the more money you make, the more tax you will owe. The federal Income Tax Act and its rules, as well as provincial and territorial sales tax, corporation tax, and other legislation, oversee Canada’s tax system. Non-residents of Canada are normally taxed exclusively on their income from Canadian sources, whereas residents of Canada are taxed on their worldwide income.
Here is all you need to know about the Tax systems in Canada;
1. How the Canadian Tax system works
By April 30 of the current year, Canadians must prepare and file their personal tax returns for the previous year (from January 1 to December 31). To put it another way, you must prepare and file your taxes for the months of January through December 2021 by April 30, 2022.
To find out if you owe taxes to the government or if you’re getting a refund for some or all of the tax that was taken from your income, look at your taxes, which include all of your income for the year as well as your claims for tax credits and deductions. Note: If you lived in Québec on December 31, you’ll need to file both a federal (to the CRA) and a provincial (to Revenu Québec) return.
2. Income Tax
Each year, the Canada Revenue Agency (CRA) collects income tax from individuals who work in Canada. You must file an income tax return each year, detailing your finances in order to determine how much tax you owe. The majority of the annual revenue received by the Canadian government comes from income tax. It’s also vital to remember that you must keep track of all receipts and costs, including your transportation pass and tuition payments receipts. This is useful for producing and supporting income reports, as well as being eligible for CRA and provincial government deductions.
3. Payroll Taxes
Employers are subjected to a payroll tax in order to support different social programs such as old-age pensions and health care. The payroll tax rate varies per province, although it usually ranges from 4 to 8% of an employee’s gross salary or compensation.
The total amount of taxable income for each employee is the first step in computing payroll taxes. Salaries, wages, tips, bonuses, and commissions are all examples of sources of income. You have three payroll duties to employees as an employer:
1) Wage Payment – You must pay your employees at least the minimum wage specified by the province or territory in which they work.
2) Payroll Deductions – you must withhold and remit payroll deductions, such as income tax, Canada Pension Plan (CPP), and Employment Insurance (EI)
3) Paying payroll taxes – you are required to pay payroll taxes, such as the Quebec Pension Plan (QPP) in Quebec or the Canada Pension Plan (CPP) outside of Quebec.
4. Provincial/Territorial Income Tax
While you must calculate and pay your provincial or territorial income tax in addition to the federal taxes you owe, all forms and documentation normally combine the two. You can be eligible for further deductions at the provincial or territorial level, so look into it thoroughly.
5. Property Transfer Tax
When a property in Canada is sold, a Property Transfer Tax (also known as Land Transfer Tax) is incurred, and it is usually paid by the buyer. This tax is not imposed in every province. If you’re thinking about purchasing a home in Canada, you’ll want to know how much property transfer tax you’ll have to pay.
6. GST and HST
In Canada, the GST (Government Sales Tax) is levied on the majority of services and commodities. These identical services and items are subject to the HST (Harmonized Sales Tax), which is collected by the provinces. These fees are charged at the time of purchase. GST refund credits may be available if your income falls below a specific level.
7. Carbon Tax applies in Canada
Emissions are directly priced through carbon taxes. In general, this implies that greenhouse gas emitters—typically, fuel producers and distributors—pay a certain amount per tonne of carbon dioxide generated from the combustion of carbon-based fuels. To encourage emitters to reduce emissions, the price is generally gradually increased over time, giving individuals and businesses time to adjust and adopt less carbon-intensive habits.
Emissions are directly priced through carbon taxes. In general, this implies that greenhouse gas emitters—typically, fuel producers and distributors—pay a certain amount per tonne of carbon dioxide generated from the combustion of carbon-based fuels. To encourage emitters to reduce emissions, the price is generally gradually increased over time, giving individuals and businesses time to adjust and adopt less carbon-intensive habits.
The federal government’s Pan-Canadian Framework on Clean Growth and Climate Change has established a carbon tax benchmark, which calls for carbon prices to begin at a minimum of $10 per tonne this year and increase by $10 per year until they reach $50 per tonne in 2022, in order to meet Canada’s commitment under the recent Paris Agreement emissions goals (in which countries agreed to work toward limiting global temperature increases to 1.5 degrees Celsius). Provinces that do not develop their own carbon pricing scheme by 2019 would face a nationally enforced carbon tax (or “backstop”), according to the proposal.
8. How to prepare and file taxes
We recognize that there are several tax filing methods available, but we’ve made it simple for students to prepare and file their taxes. Simply enter your income, claim your deductions, and maximize your return to receive the most money back. Here’s how to do it:
Create an account if you’re new to H&R Block’s tax software. If you used H&R Block’s tax software last year, you may use the same login and password to access the 2020 version. Start a fresh return if you’re filing your first tax return.
If you used H&R Block’s tax software last year, go here to learn how to get a head start on your 2020 return by transferring some of your data from the previous year.
Fill in your personal information on the GET STARTED page. You’ll also need to provide the information for your spouse or common-law partner, as well as any dependents.
You may import your tax information (such as your slips) from the CRA/Revenu Québec into your 2020 return for free when you reach to the QUICK ENTRY page.
You can skip this stage and manually enter your slips (such as a T4), tax certificates (such as the T2202), and receipts on the SMART SEARCH page if you don’t have any slips to import or are uncertain about utilizing this service. You can input a receipt or form on the PREPARE tab if you don’t see one here.
Select the topic you wish to add to the PREPARE tab to view the applicable tax credits (such as Unused tuition amounts and student loans). You’ll be able to pick the tax credits and deductions you wish to claim as well as reply to government-mandated questions as you go through the page.
You can share your credits with a spouse (if appropriate) or transfer them to a spouse or another family member on the WRAP-UP page to maximize your return. Before you file, you’ll be able to notice any problems in your return and correct them. In addition, you’ll be able to get a summary of your tax computations!
You’ve arrived at the FILE tab. You can either NETFILE (submit your return online) or print and mail a paper version to the CRA or Revenu Québec.
Congratulations – the most difficult part is over! You may obtain a PDF copy of your return and request an expedited NOA on the following sites, as well as view partner offers and provide feedback on how we can improve our software.
