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Taxation (Other)

Canada - Taxation (Other)


In addition to income tax, there are a number of taxes in place in Canada which you may be liable for. However, wealth tax, inheritance tax and gift tax do not exist as separate entities and are usually calculated as income tax or capital gains tax.

The Canadian equivalent of VAT is goods and services tax, which is referred to as GST. This is a tax which is applied by the national government and which currently has a standard rate of 5%. This is applied across the country, although in Quebec it is overseen by the provincial government. Each province also has their own provincial sales tax, referred to as PST. This might also be called a retail sales tax in some areas. There are some provinces which do not have this type of taxation, so if you are in Alberta, Yukon, NW Territories or Nunavut you will only be expected to pay GST.

There are some provinces in which the GST and the PST have been merged and together they are known as the harmonised sales tax (HST). This applies in Newfoundland, Ontario, Nova Scotia, New Brunswick and British Columbia. The amount of tax applied will vary according to the region but can be anything from 12 to 15%. This is applied to goods and services and is usually already included in the purchase price.

There are some exemptions for sales tax. If you have diplomatic status, have Status Indian or if you are a charity or religious institution you may qualify for an exemption. However, there are no exemptions if you are simply a non-resident, you are expected to pay the same prices and taxes as Canadian residents. Those who are on a low income may qualify for a credit on GST. This is a payment made quarterly by the authorities and must be applied for.

Property taxes are payable in Canada and these are used by the local governments to raise money to provide services in local communities. This is the equivalent of the council tax in the UK. The homeowner is billed directly for these taxes and this money is paid directly to the local authority. The amount payable will be calculated on the value of the property and the area in which you live. If you are renting a property the cost of this tax is normally included in the rent that you pay.

In some provinces you will find that there are schemes to help those who are on low incomes and details of these can be obtained from the local authority. Property valuations are carried out by the local authority and each province has their own assessment board for this. The board decides on the market value for the property and then a tax rate is applied. The tax rate is reviewed annually. The amount you pay will include education tax which is used to fund the running of schools in the area.

In order to pay the property tax you can choose to make one payment each year or spread the cost and make monthly instalments. If you make payments late then you can be penalised for this, but most people choose to pay this via a direct debit system.

When you purchase a house you need to pay a transfer tax on the property. This can be up to 2% of the value of the property but this tax is not applied in all provinces and some buyers may qualify for an exemption.

Capital gains tax is another which is payable in Canada but if you are a Canadian citizen or permanent resident then you will not have to pay this on a house that is your main residence. A non-resident will have to pay CGT on the sale of a property. CGT is also payable on the sale of other assets, regardless of residency status, such as stocks, shares in a private company, bonds and property that is not a primary residence. CGT is payable on all sales over a certain figure but this varies according to the area and the type of sale. For example, the first $375,000 of a property sale is exempt from CGT and the tax is only paid on amounts made above that figure.


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