Taxation in Canada: An Overview Other Taxes - PricewaterhouseCoopers LLP
Taxes are imposed in Canada by three levels of government - federal, provincial, and municipal. Previous articles in this overview series have discussed the income, capital and sales taxes levied by the federal and provincial governments. The following comments briefly on some of the other taxes that may apply in particular circumstances:
Social Security/Payroll Taxes: Employees are currently required to contribute 3.2% (maximum $1,069) of annual pensionable earnings to the Canada or Quebec Pension Plan. Equal amounts are required from an employer. Employees must also contribute 2.7% (maximum $1,053) of annual insurable earnings for federal employment insurance. The employer's contribution is 1.4 times that of the employee. Self-employed individuals must contribute to the Canada or Quebec Pension Plan (maximum $2,138), but not to employment insurance.
Several provinces, including Manitoba, Ontario, Quebec and Newfoundland, impose payroll taxes to assist in funding provincial health and/or education services.
Workers' compensation payroll levies are also required. These work injury insurance payments vary depending on the type of business and the related claim/accident experience.
Custom and Excise Duties: Federal custom duties at various rates apply to a wide range of goods imported into Canada. Canada uses the Harmonised System for classification of imported goods. This is the same system used throughout Western Europe and Japan. Duties charged on goods subsequently exported from Canada can be recovered. The importation of goods originating in the United States or Mexico is governed by the North American Free Trade Agreement ("NAFTA"). Under this agreement custom duties were either eliminated or will be phased out over the next few years.
Domestically-manufactured spirits, beer, tobacco, gasoline and related products are subject to a form of tax called "excise duties". Exemptions from these excise taxes are available under certain circumstances.
Property and Business Taxes: All municipalities (cities and towns) levy modest annual taxes on real property (both residential and commercial) to finance local expenditures. The provinces usually impose a tax on real property outside municipal boundaries.
Land Transfer Taxes: Certain provinces levy a tax or fee upon the transfer and/or registration of immovable property such as land. This tax is normally based on a percentage the fair market value of the property sold. Rates generally range from 0.25% to 2%, but exemptions can apply depending on the type of transfer. In some cases, however, direct or indirect transfers to non-residents of undeveloped or agricultural land may attract transfer taxes at much higher rates.
Taxes on Natural Resources: Most provinces effectively impose a tax on forestry operations via the sale of logging licenses or charging of stumpage fees. The provinces also levy a royalty upon petroleum and natural gas production or a tax on mining operations.
Gift and Inheritance Taxes: No gift taxes are imposed but income from property (including cash) transferred to a spouse or minor child may be attributed back to the transferor for income tax purposes. There are no estate, death or inheritance taxes. However, for income tax purposes there is a deemed disposition of certain properties on death or emigration. This can result in capital gains - 75% of which would be included in taxable income.
The information provided herein is for general guidance on matters of interest only. The application and impact of laws, regulations and administrative practices can vary widely, based on the specific facts involved. In addition, laws, regulations and administrative practices are continually being revised. Accordingly, this information is not intended to constitute legal, accounting, tax, investment or other professional advice or service.
While every effort has been made to ensure the information provided herein is accurate and timely, no decision should be made or action taken on the basis of this information without first consulting a PricewaterhouseCoopers LLP professional. Should you have any questions concerning the information provided herein or require specific advice, please contact your PricewaterhouseCoopers LLP advisor, or:
David W. Steele
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Toronto, Ontario M5H 1V8
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