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Canadian Tax Laws

By Expert Author: Ken Donaldson

Canadian Tax laws are implemented by both federal as well as provincial governments.According to the 1930 ruling of the Canadian Supreme Court:

• it is imposed by the tax rules of the country
• it is authorized by the legislature
• implemented by the public body
• revenue generated to be used for public utility

To impose tax, it should satisfy the rules laid down by the Constitution Act of 1867.In Canada there are two forms of taxation

• Direct Taxation
• Indirect Taxation

Direct Taxation is levied on people, property or transactions within the country or for people outside the province conducting transactions within the country. Sometimes direct taxation may not be implemented on the exports and it should not restrict the flow of inter-territorial trade flow.

The Canadian Revenue Agency is responsible for the collection of taxes in the country for both the federal and the provincial governments. The Canadian people evaluate the tax liability and then file their returns according to the tax norms. They themselves calculate the deductions, tax credits etc. and submit their returns to the local public agency authorized by the CRA. CRA is responsible for the checking of the errors in the calculation of the tax and then informing the individuals about it. If anyone who does not pay the taxes in the stipulated time will be penalized and beyond that the legal action might be taken against the defaulter.

CRA is responsible for collecting taxes in the manner mentioned below:

• income tax is collected in the provinces through a unified system
• corporate taxes for all the provinces
• the Harmonized Sales tax (HST) which is excess of GST in the provinces, is also collected by the CRA

Personal income taxes are one of the largest sources of revenues in Canada accounting for almost 40% of the total tax collected. Federal government imposes the maximum percentage of the personal taxes and the provincial agencies charges comparatively lower percentage of taxes. The higher income groups pay higher percentages compared to the low income groups. It is a progressive method of tax system. Only 50% of the income gained from capital investments by the individuals is charged. Income generated through dispute settlements and lawsuits are not taxed. The details of the taxation are available online in the CRA website for keeping the public updated with the changes. Tax saving schemes and retirement policies provide opportunities to the individuals to save their personal income tax. Companies and organizations are taxed on the profits generated through investment in the capitals. However this is however this is a very small percentage compared to the personal income tax.

On the basis of the income from different countries, the Canadian individuals and corporations may be charged. The countries, with which Canada has tax treaties, help in protecting the Canadians from double taxation. A citizen who is a non-resident may apply to CRA to avail such benefits under the International tax schemes. CRA also takes into account that no tax is diverted and hence a financial loss is not caused to the country.

Hence with the level of globalization and international transactions by the Canadians, the International taxation norms looked after by CRA is very critical.


Ken Donaldson is a Canadian Tax specialists. He also author of tax treaties, in this article he provides income tax tips. For more information you can visit Taxca.com.

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