Canada: An Overview of Taxation in Canada (6): Personal Taxable Income

Last Updated: November 27 1998

An Overview of Taxation in Canada: Personal Taxable Income - PricewaterhouseCoopers LLP

Individuals who are resident of Canada are subject to Canadian income tax on their worldwide income. Non-residents of Canada include only their income from carrying on a business or from providing personal services in Canada, plus three-quarters of certain capital gains on the disposal of Canadian property. Canadian investment income earned by non-residents is generally only subject to withholding tax that is often reduced or eliminated pursuant to the terms of various tax treaties.

In the calendar year during which an individual immigrates to or emigrates from Canada, he will be taxed as a "part-year resident". For that part during which he was a resident of Canada, he is subject to tax on his worldwide income and taxed only on his Canadian-source income for the remainder of the year while a non-resident.

The taxable income of an individual resident in Canada falls into a few main categories:

  • income from an office or employment ("employment income");
  • income from a business (computed much the same as corporate taxable income);
  • income from property (generally interest, dividend, rent and royalty income);
  • capital gains; and
  • other income (such as that from pensions, scholarships and research grants, less other allowable deductions like moving expenses and contributions to prescribed pension and retirement savings plans).

Dividends received from Canadian corporations by individuals resident in Canada are subject to a gross-up and tax credit mechanism, the effect of which is to reduce the taxation on dividends and thus minimise the impact of double taxation on the distribution of corporate earnings. The result of this mechanism is that Canadian dividends will generally be subject to a maximum combined federal and provincial tax rate in the range of 30% to 39%.

Dividends received from non-resident corporations do not receive this gross-up and credit treatment. Hence, they are taxed at a higher maximum marginal rate (44% to 54% depending on the province of residence) prior to the application of any foreign tax credit.

Dividends paid on a timely basis out of the non-taxable portion of the capital gains of a Canadian-controlled private corporation can be received tax-free by Canadian resident shareholders.

Gains (losses) realised on the disposition of capital property (generally, property that is not inventory) are regarded as capital gains (losses). Only three-quarters of such gains are included in Canadian taxable income. A capital gain is computed as the excess of proceeds over cost less expenses related to the disposition. Cost is the actual cost paid or, in certain circumstances, the fair market value of property at December 31, 1971 (the date capital gains became taxable in Canada) or the fair market value on the date the individual became a resident of Canada if the property was owned on that date. Capital losses are reduced to three-quarters of the loss otherwise calculated and can only be used to offset capital gains. Capital losses can be ordinarily carried forward indefinitely and carried back for three taxation years.

No statutory distinction is made between a short-term and a long-term capital gain. If a gain is a capital gain, only 75% is included in taxable income subject to tax at the ordinary federal and provincial tax rates.

Up to $500,000 of capital gains from qualifying small business shares or farm property can be exempt from tax.

Employment income includes various kinds of direct payments (both regular salary or wages and special allowances or bonuses) and taxable benefits (often called "fringe benefits") received or enjoyed by employees. Both amounts received from employers and from others by reason of the individual's employment will generally be caught in the tax net. Taxable benefits include:

  • value of employer-provided rent-free or low-rent housing;
  • imputed interest on interest-free or low-interest loans;
  • personal use of employer's automobile (prescribed taxable benefits must be computed);
  • value of free board or lodging (except at special work sites);
  • holiday trips, prizes and incentive awards related to job performance;
  • stock options; and
  • gifts, whether in cash or in kind.

A non-resident employed in Canada during the year or during a previous year is subject to Canadian income taxes on income from the duties of an office or employment performed by him in Canada. A non-resident who receives remuneration for employment from a Canadian resident, and who was resident in Canada in any previous tax year, may be subject to Canadian income taxes on that remuneration unless it is attributable to duties performed outside Canada and is subject to foreign income tax, or was paid for selling property, negotiating contracts, or rendering services for his employer in the ordinary course of the employer's business.

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
PricewaterhouseCoopers LLP
145 King Street West
Toronto, Ontario  M5H 1V8



For further information on taxation in Canada, enter a text search "PricewaterhouseCoopers" and "Canada" and "Mondaq Business Briefing".

Click Contact Link

PricewaterhouseCoopers LLP is a Canadian member firm of PricewaterhouseCoopers International Limited, an English company limited by guarantee.
In association with
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.