close
Share with your friends

Canada - Other taxes and levies

Canada - Other taxes and levies

Taxation of international executives

1000

Related content

Social security tax

Are there social security/social insurance taxes in Canada? If so, what are the rates for
employers and employees?

Canada has an extensive social security system that confers benefits for disability, death, family allowances, medical care, old age, sickness, and unemployment. These programs are mainly funded through wage and salary deductions and employer contributions.

An employee’s responsibility is comprised of two parts: Canada Pension Plan (CPP) (or the Québec Pension Plan for employees working in Québec) and Employment Insurance (EI). Contributions made by an employee to CPP, QPP or EI are creditable against that individual’s federal and provincial income tax liability. The credits are calculated at the lowest federal and provincial tax rates.

Type of insurance

Paid by employer

Paid by employee

Total

Canada Pension Plan

5.10%

5.10%

10.20%

Employment Insurance

2.268%

1.62%

3.888%

Total

7.368%

6.72%

14.088%

Canada Pension Plan/Quebec Pension Plan

CPP contributions are required to be deducted from an individual’s remuneration if the individual is employed in Canada, aged between age 17 and 71, and receiving pensionable earnings. The employer is responsible for withholding and remitting the individual portion and a matching employer portion to the CRA, or to the MRQ in regards to QPP contributions.

The maximum employer and employee contributions to the CPP for 2019 are each CAD2,749. Individuals residing in Québec contribute to the Québec Pension Plan (QPP) instead of the CPP program. The maximum employer and employee contributions to the QPP for 2019 are each CAD2,991.

Employment insurance

EI is a federal payroll tax required to be deducted from an individual’s remuneration if the individual is employed in Canada and is receiving insurable employment earnings. There is no age limit for deducting EI premiums. Like the CPP contribution, the employer is responsible for withholding and remitting the individual’s portion as well as remitting the employer portion (1.4 times the individual contribution) to the tax authorities. The maximum employee contribution for 2019 is CAD860 and the corresponding maximum employer contribution is CAD1,204.

Individuals residing in Québec contribute a reduced El amount (2019 maximum of CAD664 per employee and a maximum employer premium of CAD929). However, they must also contribute to the Québec Parental Insurance Premium plan (QPIP). The maximum contributions to QPIP for 2019 are CAD402 for the employee and CAD563 for the employer. EI premiums are remitted to the CRA and QPIP premiums are remitted to the MRQ.

CPP and EI premiums are assessed based on employment and (for CPP only) self-employment earnings and the rates are adjusted each year based on actuarial calculations prepared by the federal government. QPP and QPIP premiums are also assessed on earnings and the rates are adjusted each year based on actuarial calculations prepared by the Québec government.

Gift, wealth, estate, and/or inheritance tax

Are there any gift, wealth, estate, and/or inheritance taxes in Canada?

There is no gift tax in Canada. However, income tax may arise since the assets gifted are treated as being disposed of at fair market value. There are certain exceptions for gifts to a spouse.

Rules pertaining to income splitting must also be considered. In certain circumstances, if the item gifted is an income-producing asset or is used to purchase an income-producing asset, the income is attributed back to the taxpayer. This is generally the case for gifts to the spouse and minor children and low-interest loans to non-arm’s length persons.

No federal or provincial estate tax or inheritance tax is imposed in Canada. However, to the extent that a Canadian resident has accrued capital gains or losses, these will be realized on death. For income tax purposes, an individual is considered to have disposed of capital property at its fair market value on the date of death. Taxable capital gains may result but provisions exist to enable a surviving spouse or other specified beneficiaries to inherit the original cost base and thereby defer recognition of the gain. Appropriate planning is required to obtain this result.

Non-resident individuals may be subject to Canadian tax on death to the extent that they own Taxable Canadian Property (TCP). The most common types of TCP affected by the deemed disposition on death are Canadian real estate and shares in a private corporation owning real estate in Canada.

There is no wealth tax in Canada.

Although there is no estate or inheritance tax per se, many provinces charge a probate fee to validate the deceased’s will and confirm the authority of the estate’s executor or, where no will exists, distribute the assets of the estate according to provincial family law. The probate fee is generally applied to the fair market value of the assets flowing through the will. Planning opportunities exist to help minimize the tax through joint ownership, trusts, designation of beneficiaries, and other means.

Real estate tax

Are there real estate taxes in Canada?

The sale or other transfer of real estate (including the transfer of shares in real estate companies) is subject to a real estate transfer tax imposed by the province or territory where the real estate is located. Rates vary among provinces. Municipalities also levy annual property taxes on residential, commercial, and industrial real estate.

Sales/VAT tax

Are there sales and/or value-added taxes in Canada?

Canada levies a federal goods and services tax (GST) which is a value-added tax that applies to most goods and services in Canada. The GST rate is 5 percent.

Five provinces (Ontario, New Brunswick, Nova Scotia, Prince Edward Island, and Newfoundland and Labrador) have harmonized their provincial sales taxes with the GST to create the harmonized sales tax (HST). The HST applies to the same base of taxable goods and services as the GST. The HST rate is 13 percent in Ontario. The HST rate is 15 percent in New Brunswick, Nova Scotia, Prince Edward Island, and Newfoundland and Labrador.

Three provinces (British Columbia, Saskatchewan and Manitoba) have a provincial sales tax (PST) that generally applies to the sale of goods, and in some cases, intangibles, services insurance contacts. The PST is not a value added tax and is not recoverable. The general PST rates range from 6 percent to 8 percent (up to 20 percent on certain goods).

In addition, the province of Québec applies the provincial Québec Sales Tax (QST) on most goods and services at a rate of 9.975 percent. The QST is also a value-added tax and applies generally the same way as the GST/HST. However, Québec has implemented new QST rules that require certain suppliers of services, intangibles, and in some cases goods, located outside Québec to register under a new simplified QST registration system and collect QST effective 1 January 2019 or 1 September 2019 depending on their specific facts.

In addition to the GST/HST, QST, and PST, some provinces also levy special unrecoverable taxes on certain specific goods and services such as alcohol, fuel, tobacco and insurance.

Unemployment tax

Are there unemployment taxes in Canada?

Employment Insurance (EI) premiums are required to be deducted from an individual’s remuneration if the individual is employed anywhere in Canada and is receiving insurable earnings (generally consists of cash remuneration and certain taxable benefits). There is no age limit for deducting EI premiums. The employer is responsible for withholding and remitting the individual’s portion as well as remitting the employer portion (1.4 times the employee’s contribution) to the CRA. The employee’s premiums are reported on their T4 statement for the relevant calendar year and a portion of those premiums may be claimed as a non-refundable credit on the employee’s Canadian tax return.

Other taxes

Are there additional taxes in Canada that may be relevant to the general assignee? For example, customs tax, excise tax, stamp tax, and so on.  

Local taxes

Municipal tax (property tax) is assessed on the owner of real property according to the value of the property (generally, the tax is in the range of 1 percent to 2 percent of the property’s assessed value per year). The rates vary among municipalities.

Provincial Health Premiums

Although these are not actual income taxes, the provinces of British Columbia (“BC”) and Ontario and the Northwest Territories and the Territory of Nunavut levy provincial health premiums on the income of individuals who are subject to income tax in those jurisdictions. Residents of BC are required to pay monthly Medical Services Plan (“MSP”) premiums to the BC Ministry of Finance under that province’s Medical Service Plan based on taxable income over CAD26,000 the maximum annual premium is CAD450 for a single individual aged 19 years or older, and CAD900 for a family consisting of two adults and any number of children under the age of 19 during 2019). The BC government has announced that MSP premiums will be eliminated effective from 1 January 2020 onwards as a result of the introduction of the new BC Employer Health Tax at the start of 2019 (see the additional information provided below regarding this new tax).

Residents of Ontario are required to pay a Provincial Health Premium as part of their Ontario tax liability, based on their taxable income over CAD20,000 (maximum annual premium is CAD900). The Ontario health premiums are calculated and added to the provincial income taxes calculated on the tax returns of individuals who are residents, or part-year residents, of that province.

Employees who live and/or work in either Nunavut or the Northwest Territories are subject to a Health Tax equal to 2 percent of their taxable remuneration earned from working in either of those two territories, and their employers are responsible for deducting and remitting the health taxes.

Employer Health Tax

The following provinces and territories impose a tax on employers based on the total annual salaries earned by their employees who report to work, or are deemed to report for work, at an office or other permanent location of the employer located within the relevant jurisdiction:

Province/Territory Maximum EHT Rate
   
Ontario 1.95%
Québec 4.26%
British Columbia (new for 2019) 1.95% (See note 1 below)
Manitoba 2.15% (see note 2 below)
Newfoundland and Labrador 2.00% (see note 3 below)

The relevant provincial EHT legislation requires an employer to include the salary of any non-resident employee earned from working in the province with the salaries of the employer’s regular employees who report for work there, even when there is no chargeback to the Canadian company for that salary. The EHT is remitted to the relevant provincial or territorial authority responsible for administering this tax.

1 - The British Columbia Employer Health Tax became effective from 1 January 2019 onwards. Annual BC payrolls that total CAD500,000 or less are exempt from this tax. Annual BC payrolls of CAD500,000 to CAD1,500,000 are subject to EHT at 2.925 percent on the portion that exceeds CAD500,000. If the annual BC payrolls exceeds CAD1,500,000, the entire payroll amount for the year is subject to an EHT levy of 1.95 percent with no portion being exempt.

2 - For Manitoba, the first CAD1.25 Million of annual payroll is exempt from Health Tax and the next CAD1.25 million is subject to a levy of 4.3 percent. However, if the employer’s total payroll in the province exceeds CAD2.5 million, the entire total payroll in Manitoba is subject to a levy of 2.15 percent, including the first CAD1.25 million.

3 - Effective from 1 January 2019 onwards, the first CAD1.3 million of an employer’s total payroll is exempt from the Newfoundland and Labrador Payroll Tax.

Foreign Financial Assets

Is there a requirement to declare/report offshore assets (e.g., foreign financial accounts, securities) to the country/territory's fiscal or banking authorities?

Foreign property reporting requirements

Canadian residents are required to file the following information returns, in addition to their personal income tax returns, if they:

  • own “specified foreign property” (generally, foreign bank and securities accounts, investments in foreign corporations, partnerships and trusts and interests in foreign real estate, except when used solely for recreational purposes by the taxpayer), the total cost of which exceeds CAD 100,000 at any time in the tax year (Form T1135)
  • transfer or loan any amount, directly or indirectly, to a non-resident trust or to a controlled foreign affiliate of a non-resident trust (Form T1141)
  • receive distributions from, or are indebted to, non-resident trusts in which they are beneficially interested (Form T1142)
  • have ownership in a non-resident corporation or trust that is a foreign affiliate or a controlled foreign affiliate (Form T1134).

The deadline for filing these annual information returns is generally the same as for the individual's Canadian tax return. Failure to file any of these information returns on a timely basis may result in the assessment of penalties.

A taxpayer is exempt from having to file a T1134, T1135, T1141 or a T1142 in the first year of becoming a resident of Canada provided the taxpayer was never a Canadian resident in any prior year.

Footnote:

1For Manitoba, first $1.25 Million of annual payroll is exempt from Health Tax and the next $1.25 million is subject to a levy of 4.3%. However, if the employer’s total payroll in the province exceeds $2.5 million, the entire total payroll in Manitoba is subject to a levy of 2.15%, including the first $1.25 million.
2The first $1.2 million of an employer’s total payroll is exempt from the Newfoundland and Labrador Payroll Tax.

The deadline for filing these annual information returns is generally the same as for the individual's Canadian tax return. Failure to file any of these information returns on a timely basis may result in the assessment of penalties.

A taxpayer is exempt from having to file a T1134, T1135, T1141 or a T1142 in the first year of becoming a resident of Canada provided the taxpayer was never a Canadian resident in any prior year.

© 2019 KPMG LLP, a Canada limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

KPMG International Cooperative (“KPMG International”) is a Swiss entity.  Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm.

Connect with us

 

Want to do business with KPMG?

 

loading image Request for proposal