Income taxes in Canada constitute the majority of the annual revenues of the Government of Canada , and of the governments of the Provinces of Canada . In the fiscal year ending March 31, 2018, the federal government collected just over three times more revenue from personal income taxes than it did from corporate income taxes .
109-575: Tax collection agreements enable different governments to levy taxes through a single administration and collection agency. The federal government collects personal income taxes on behalf of all provinces and territories. It also collects corporate income taxes on behalf of all provinces and territories except Alberta. Canada's federal income tax system is administered by the Canada Revenue Agency (CRA). Canadian federal income taxes, both personal and corporate income taxes, are levied under
218-515: A registered retirement savings plan ). As of June 30, 2024, CPP Investments (CPPI) manages over C$ 646 billion in investment assets for the Canada Pension Plan on behalf of 22 million Canadians. CPPI is one of the world's largest pension funds. The CPP mandates all employed Canadians 18 years of age and over to contribute a prescribed portion of their earnings income (with an equal matching amount contributed by their employer) to
327-591: A CRA employee is 45 years old. Under the Financial Administration Act , the CRA is designated under Schedule V as a separate agency outside of the core public administration, which allows the CRA to establish different job classifications, pay rates, and enter into labour negotiations differently from other government departments and agencies. Consequently, the job classifications used by CRA may not align with those typically used in other parts of
436-608: A federally administered pension plan. The plan is administered by Employment and Social Development Canada on behalf of employees in all provinces and territories except Quebec, which operates an equivalent plan, the Quebec Pension Plan . Because the Constitutional authority for pensions is shared between the provincial and federal governments, stewardship for the CPP is jointly shared. As a result, major changes to
545-694: A given tax year. Income is generally reported through the T-series forms, with the number corresponding with a specific type of income situation. Individual taxpayers will report their income using the T1 return . Corporations and trusts respectively use the T2 and T3 forms. Employers use the T4 form to issue a statement of remuneration paid for individual employees, which is then submitted to employees for T1 filing purposes Lastly, any investment income or capital gains earned by
654-581: A lower rate applicable to income that qualifies for the federal small business deduction, and the higher rate to all other forms of income. While some provinces adhere to the business limit for the lower rate set by the federal governments, other provinces choose to maintain their own rate. The Canada Revenue Agency collects the Goods and Services Tax (GST) (the Canadian federal value added tax ) of 5 per cent in all provinces. In Quebec, under an agreement with
763-612: A lower tax regime compared to almost every other country. Prior to the war, Canadian federal governments relied on tariffs and customs income under the auspices of the National Policy for most of their revenue, and the provincial governments sustained themselves primarily through their management of natural resources (the Prairie Provinces were paid subsidies by the federal government as Ottawa retained control of their natural resources). The Liberal Party considered
872-405: A notice of assessment. The notice of assessment provides a summary of each entity's income, credits and deductions. If a taxpayer disagrees with an assessment, they may file an appeal which may lead to challenging the assessment in tax court. Once a tax return is assessed, it may be subject to review. In some cases, a tax return could be reviewed before being assessed. After an objection is filed,
981-561: A single department, Customs and Excise, between 1918 and 1927. In 1927, the Department of National Revenue Act was enacted by Parliament, which changed the name of the department from Customs and Excise to National Revenue, while retaining its earlier mandate. The Department of National Revenue would gain increasing responsibility as new social programs, such as the Canada Pension Plan , and new streams of revenue, such as
1090-489: A sustainable path for this particular plan, given the indefinite existence of a government, it is not typical of other public- or private-sector pension plans. A study published in April 2007 by the CPP's chief actuary showed that this type of funding method is "robust and appropriate" given reasonable assumptions about future conditions. The enhancement to the CPP will be fully funded, meaning that each generation will pay for
1199-482: A taxpayer is reported in a T5 form. Depending on the complexity of a taxpayer's income situation, supplementary forms outside of the T-series may need to be completed. For income tax purposes, trusts are treated as a taxable entity by the Income Tax Act . A legal representative of an estate of a deceased person may have to file a T3 return for the estate if it has properties that has not been distributed. Unlike
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#17327724676401308-460: A third-party provider in order to use the system. As of the 2019 tax year, the vast majority of taxpayers file their taxes electronically (90.3%) while increasingly fewer taxpayers (9.7%) use the traditional paper method. Most taxpayers (56.5%) rely on EFILE to submit their return, meaning that most Canadians generally seek out tax professionals when preparing their annual returns. Many benefits, such as Canada Child Benefit (CCB), are determined by
1417-601: Is Quebec's version of the Canada Pension Plan. The QPP is managed by Retraite Québec , which was formed from a merger of the Commission administrative des régimes de retraite et d'assurances (CARRA) and the Régie des rentes du Québec (RRQ) in 2016. Closely mirroring the CPP, the QPP is a contributory earnings-related pension plan that pays benefits in the event of the earner becoming disabled, retiring, or dying. Both Quebec and
1526-505: Is also available. Their values are contained on line 300 of either the document "Schedule 1 - Federal Tax", or "General Income Tax and Benefit Guide", of each year by year General Income Tax and Benefit Package listed. The personal exemption is listed as it always applies. Additional deductions may be applied depending on eligibility, see. The most common additional deductions are Canada Pension Plan (CPP), Employment Insurance (EI) and employment credit. Exempt amounts are calculated, multiplied by
1635-421: Is based on the principle of mandatory self-assessment. Taxpayers, comprising both businesses and individuals, must complete a tax return every year determine whether they owe taxes or will receive a refund. For individual tax returns, returns are generally due on April 30 for the preceding tax year. For other entities, such as charities, corporations, sole proprietorships, partnerships, or self-employed individuals,
1744-441: Is determined using five tax brackets and tax rates. Non-refundable tax credits are then deducted from tax payable before credits for various items such as a basic personal amount, dependents, Canada/Quebec Pension Plan contributions, Employment Insurance premiums, disabilities, tuition and education and medical expenses. These credits are calculated by multiplying the credit amount (e.g., the basic personal amount of $ 11,038 in 2013) by
1853-472: Is free to determine its own definition of taxable income. To maintain simplicity for taxpayers, however, Quebec parallels many aspects of and uses many definitions found in the federal tax system. Quebec chooses to receive part of its health and social transfers in tax points instead of cash. To compensate for this, federal personal income taxes on income earned in Quebec are reduced by 16.5% of federal tax. This
1962-786: Is payable on account earnings). Corporate taxes include taxes on corporate income in Canada and other taxes and levies paid by corporations to the various levels of government in Canada. These include capital and insurance premium taxes; payroll levies (e.g., employment insurance, Canada Pension Plan, Quebec Pension Plan and Workers' Compensation); property taxes; and indirect taxes, such as goods and services tax (GST), and sales and excise taxes, levied on business inputs. Corporations are subject to tax in Canada on their worldwide income if they are resident in Canada for Canadian tax purposes. Corporations not resident in Canada are subject to Canadian tax on certain types of Canadian source income (Section 115 of
2071-538: Is referred to as the Quebec Abatement. The following historical personal federal marginal tax rates of the Government of Canada come from the website of the Canada Revenue Agency . They do not include applicable provincial income taxes. Data on marginal tax rates from 1998 to 2018 are publicly available. Data on basic personal amounts (personal exemption taxed at 0%) can be found on a year by year basis
2180-436: Is required to file a T4 return, that is, a T4 summary for total wages paid by the business, and T4 slips for wages paid to each employees, to the CRA. The CRA is responsible for collecting several taxes on behalf of the federal government, and most provincial and territorial governments (except Quebec), including personal income taxes , corporate taxes , sales taxes , fuel charges , and certain excise taxes as defined under
2289-668: Is responsible to Parliament through the minister of national revenue ( Marie Claude-Bibeau since 2023). The day-to-day operations of the agency are overseen by the commissioner of revenue (Bob Hamilton since 2016). Prior to Confederation , the collection of taxes and customs duties was the responsibility of the Department of Customs in each of the British North American colonies. In 1867, Parliament enacted legislation which established two separate departments, Inland Revenue, and Customs. Until end of World War I ,
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#17327724676402398-532: Is subject to oversight by the federal and provincial governments. The Liberal government of Prime Minister Lester B. Pearson established the Canadian Pension Plan in 1965. Beginning in January 2024, a second earnings ceiling will be introduced, also known as CPP2. The first ceiling will be $ 68,500, while the second ceiling will be $ 73,200. The second ceiling is calculated "in accordance with
2507-575: Is the revenue service of the Canadian federal government , and most provincial and territorial governments. The CRA collects taxes , administers tax law and policy , and delivers benefit programs and tax credits. Legislation administered by the CRA includes the Income Tax Act, parts of the Excise Tax Act , and parts of laws relating to the Canada Pension Plan , employment insurance (EI), tariffs and duties . The agency also oversees
2616-419: Is used for determining several income-tested social benefits provided by the federal and provincial/territorial governments. Further deductions are allowed in determining "taxable income", such as capital losses, half of capital gains included in income, and a special deduction for residents of northern Canada. Deductions permit certain amounts to be excluded from taxation altogether. "Tax payable before credits"
2725-693: The Constitution Act, 1867 , which assigns to the legislature of each province the power of "Direct Taxation within the Province in order to the raising of a Revenue for Provincial Purposes". The courts have held that "an income tax is the most typical form of direct taxation". Canada levies personal income tax on the worldwide income of individual residents in Canada and on certain types of Canadian-source income earned by non-resident individuals. The Income Tax Act , Part I, subparagraph 2(1), states: "An income tax shall be paid, as required by this Act, on
2834-408: The Excise Tax Act , which requires many entities to register for a GST/HST account and remit GST/HST collected. These entities include sole-proprietors, partnerships, and corporations. Not-for profit organizations, are normally exempt for income tax purposes, but are required to register for GST/HST accounts under the current rules. GST/HST returns are due monthly, quarterly, or annually depending on
2943-404: The Excise Tax Act . As a separate agency, the CRA maintains partnerships and agreements with provincial, territorial, and other levels of government to administer non-harmonized sales tax programs on a cost-recovery basis. Personal income taxes The Canada Revenue Agency collects most individual income taxes in Canada . Canada uses tax brackets to determine an individual's tax obligations,
3052-619: The Goods and Services Tax (GST) were gradually introduced over the latter half of the 20th century. In 1993, EFILE was first made available to Canadian taxpayers wishing to submit their taxes electronically. In 1999, the Chrétien government introduced legislation that would transform Revenue Canada from a department to a new agency, the Canada Customs and Revenue Agency. This change was intended to reduce duplication in tax administration, streamline services to Canadians, and provide
3161-425: The 1996 reforms. The unfunded liabilities reported in the last few reports are: Using the "open group approach" ("one that includes all current and future participants of a plan, where the plan is considered to be ongoing into the future, that is, over an extended time horizon"), the plan is reported to have assets in excess of $ 2.5 trillion. This approach uses a different definition of the term "assets". "Assets" are
3270-408: The 2019 tax year. The agency was also tasked with delivering emergency financial benefits to Canadians on behalf of the federal government, processing millions of applications through its IT systems. The CRA is led by the minister of national revenue and the commissioner of revenue, who functions as the agency's chief executive officer (CEO). The minister is accountable to Parliament and Cabinet for
3379-685: The Board of Management. The Board of Management consists of 15 members appointed by the Governor in Council , of which 11 are appointed by the provinces and territories, 2 by the federal government, with the remaining seat filled by the commissioner of revenue, who is an ex-officio member of the board. Board members are typically appointed for a term of three years. The board develops the CRA's Corporate Business Plan each year, which sets out objectives, performance expectations, and financial allocations within
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3488-881: The CCRA, Citizenship and Immigration Canada and the Canadian Food Inspection Agency on border protection and immigration enforcement. Following the CBSA spin-off, the CCRA was rebranded as the Canada Revenue Agency, with its strategic direction pivoting towards enforcing compliance with Canada's tax laws and delivering benefits to Canadians. Due to the COVID-19 pandemic , the CRA joined several other government departments in transitioning to temporary remote work arrangements. The CRA also extended deadlines for filing returns and payments for
3597-420: The CPP (including those that alter how benefits are calculated) require the approval of at least seven Canadian provinces representing at least two-thirds of the country's population. A province may choose to opt out of the Canada Pension Plan, as Quebec did in 1965, but must offer a comparable plan to its residents. Any province may establish an additional or supplementary plan anytime, as under section 94A of
3706-445: The CPP could be restructured to achieve sustainability again. As a result of this public consultation process and internal review, the following key changes were proposed and jointly approved by the federal and provincial governments in 1997: As of 2019 , the prescribed employee contribution rate was 4.95% of a salaried worker's gross employment income between $ 3,500 and $ 57,400, to a maximum contribution of $ 2,668. The employer matches
3815-420: The CPP enhancement will be calculated based on a forty-year period, using the best forty years to calculate the benefit. This calculation effectively allows seven years to be dropped from the benefit calculation (for an individual who begins contributing at age 18 and ends at age 65). In October 2018, the average monthly benefits for a new retirement pension (taken at age 65) was just over $ 664.00 per month, and
3924-441: The CPP legislation and [taking] into account the growth in average weekly wages and salaries in Canada". The primary benefit provided by the CPP a monthly retirement pension. Currently, this is equal to 25% of the average earnings on which CPP contributions were made over the entire working life of a contributor from age 18 to 65 in constant dollars. The earnings upon which contributions are made are subject to an annual limit, which
4033-483: The CRA either as a lump-sum or in quarterly instalments. While most taxpayers file only through the CRA, Quebec residents file separately with the CRA and Revenu Québec each year. Taxes for provincial corporations in Canada are administered by the CRA, except for provinces of Alberta and Quebec. Ontario previously administered corporate taxes until 2008, after which the CRA took over responsibility collecting these taxes. The provinces maintain dual tax rates, with
4142-637: The CRA for all provinces and territories except Quebec and Alberta. Provinces and territories subject to a tax collection agreement must use the federal definition of "taxable income", i.e., they are not allowed to provide deductions in calculating taxable income. These provinces and territories may provide tax credits to companies, often in order to provide incentives for certain activities such as mining exploration, film production, and job creation. Quebec and Alberta collect their own corporate income taxes, and therefore may develop their own definitions of taxable income. In practice, these provinces rarely deviate from
4251-463: The CRA is required to reassess a tax return "with all due dispatch" according to subsection 165(3) of the Income Tax Act . This may have different meanings depending on how busy the CRA is, the time of year, and other factors. Subsection 165(3) says: On receipt of a notice of objection under this section, the Minister shall, with all due dispatch, reconsider the assessment and vacate, confirm or vary
4360-414: The CRA's assessment of a particular return may appeal the assessment. The appeal process starts when a taxpayer formally objects to the CRA assessment, on prescribed form T400A. The objection must explain, in writing, the reasons for the appeal along with all the related facts. The objection is then reviewed by the appeals branch of the CRA. An appealed assessment may either be confirmed, vacated, or varied by
4469-410: The CRA's business operations. As such, it cannot enforce or interpret legislation on behalf of the agency, and does not have access to taxpayer information. The CRA maintains four advisory committees to assist it in operational planning and decision-making as it relates to different sectors or issues. Advisory committees consist of tax professionals, lawyers, accountants, and community leaders that help
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4578-418: The CRA's operations, and in matters pertaining to tax and benefit administration in Canada. The current minister is Marie-Claude Bibeau, who was appointed on July 26, 2023. The commissioner is the CRA's CEO. The commissioner manages the day-to-day operations of the agency, and advises the minister on the duties and functions of the CRA as prescribed by legislation. The current commissioner is Bob Hamilton, who
4687-707: The CRA. If the assessment is confirmed or varied, the taxpayer may appeal the decision to the Tax Court of Canada and then to the Federal Court of Appeal . Unlike the United Kingdom and the United States , Canada had avoided charging an income tax prior to the First World War . The lack of income tax was seen as a key component in Canada's efforts to attract immigrants, as Canada offered
4796-420: The Canada Revenue Agency's website. Individuals in Canada generally pay income taxes on employment and investment income to the province in which they reside on December 31 of the tax year. This ensures that taxpayers who live in one province and work in another, or who move from one province to another in most cases only have to file a tax return for one province. Individuals with business income have to pay tax on
4905-482: The Canadian Income Tax Act ). Effective January 1, 2012, the net federal corporate income tax rate in Canada was 15%, or 11% for corporations able to claim the small business deduction; in addition, corporations are subject to provincial income tax that may range from zero to 16%, depending on the province and the size of the business. The taxes payable by a Canadian resident corporation depend on
5014-669: The Canadian Constitution, pensions are a provincial responsibility. The CPP Fund is a professionally managed investment fund, overseen by the CPP Investments (CPPI), an independent organization that reports to the federal and provincial governments. The CPPI's investment strategy is guided by a set of principles that emphasize long-term benefits security, a focus on quality, and a commitment to sustainability and responsible investment practices. CPPI also regularly reports on its investment performance and activities and
5123-474: The Chief Actuary's study of April 2007, noted above). The same study reports that the reserve fund was expected to run out by 2015. This impending pension crisis sparked an extensive review by the federal and provincial governments in 1996. As a part of the review, the federal government actively conducted consultations with the Canadian public to solicit suggestions, recommendations, and proposals on how
5232-613: The Goods and Services Tax (GST) has been replaced by the Harmonized Sales Tax (HST). The Harmonized Sales Tax combines the national GST and the provincial sales tax into a single tax. The HST is administered by the CRA. Each province that has Harmonized Sales Tax receives its portion of the HST from the CRA. In 2013, British Columbia removed HST after public protests against the newly taxed items under HST that were not taxed under
5341-617: The National Policy was dismantled, and income tax has remained in place ever since. The constitutional authority for the federal income tax is found in Section 91, Paragraph 3, of the Constitution Act, 1867 , which assigns to the federal Parliament power over "the raising of Money by any Mode or System of Taxation". The constitutional authority for the various provincial income taxes is found in section 92 paragraph 2 of
5450-530: The PST/GST system. Canada Pension Plan The Canada Pension Plan ( CPP ; French : Régime de pensions du Canada ) is a contributory, earnings-related social insurance program. It is one of the two major components of Canada 's public retirement income system, the other being Old Age Security (OAS). Other parts of Canada's retirement system are private pensions, either employer-sponsored or from tax-deferred individual savings (known in Canada as
5559-467: The RRSP contribution room may be reduced with a pension adjustment if you are part of another plan, reducing the ability to use RRSP contributions as a deduction. Deductions which are not directly linked to non-taxable income exist, which reduce overall taxable income. A key example is RRSP contributions, which is a form of tax-deferred savings account (income tax is paid only at withdrawal, and no interim tax
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#17327724676405668-559: The Social Security Tribunal. All CPP benefits in pay are indexed annually to the Consumer Price Index. From 1966 to 1986, the contribution rate was 3.6%. The rate was 1.8% for employees (and a like amount for their employers) and 3.6% in respect of self-employed earnings. Contribution rates began rising by 0.2% per year in 1987. By 1997, this had reached combined rates of 6% of pensionable earnings. By
5777-618: The United States, families cannot file joint returns. A partnership is not a taxable entity for income tax purposes and its income is taxed in the hands of its partners. Individual taxpayers can file by paper, telephone, or electronically. Taxpayers have two methods for filing electronically: NETFILE, which is for individuals who file their own tax returns, and EFILE, used for professional tax preparers that file on behalf of their clients. Taxpayers that prepare their own taxes through NETFILE generally need to obtain tax filing software from
5886-627: The Whole on July 25, 1917 but faced resistance. Wartime expenses forced the Tories to re-consider their options and in 1918, the wartime government under Sir Robert Borden , imposed an income tax to cover expenses. Despite the new tax, the Canadian government ran up considerable debts during the war and was unable to forgo income tax revenue after the war ended. With the election of the Liberal government of Prime Minister William Lyon Mackenzie King , much of
5995-815: The Yukon, Northwest Territories, and Nunavut, co-located with existing Service Canada offices. There are three NSCs located across the North: As of the 2018-19 fiscal year, the CRA employed about 43,908 people, making it the largest organization within the federal government by personnel. Despite being headquartered in Ottawa, only about 12,000 employees are based in the National Capital Region. Of these employees, 32,598 (74.2%) were indeterminate or permanent employees, 1,251 (2.8%) were students, and 10,057 (22.9%) were contract employees. The average age of
6104-405: The age of 65 who become disabled in a severe and prolonged fashion, and a monthly survivor's pension to the spouse or common-law partners of contributors who die (having made sufficient contributions). An application must be filed at least six months in advance in order to receive CPP benefits. If an application for disability pension is denied, an appeal can be made for reconsideration, and then to
6213-433: The agency improve its service delivery within a specific area. The current advisory committees are as follows: The CRA's headquarters are located in Ottawa, and is responsible for several agency-wide functions, including ministerial reporting, corporate planning, human resources , information technology, communications, and interpreting tax legislation. Headquarters is divided into five program branches, which help deliver
6322-783: The agency's core mandate around tax and benefits administration, and seven corporate branches, which deliver services that support the day-to-day operations of the CRA. Outside of its headquarters, the CRA's operations across Canada are divided into four regions, which help to carry out the agency's operations in different regions of the country. Each region is headed by an assistant commissioner, who oversees activities in their region, including that of tax centres (TCs) and tax services offices (TSOs) in their area of responsibility. Tax centres are responsible for intaking and processing individual and business tax returns. There are four tax centres located across Canada, each assigned their own geographic areas of responsibility, which may vary depending on
6431-469: The agency's mandate and the agency's current name. The CRA is the largest organization in the Canadian federal public service by number of personnel, employing 54,933 people and has an operating budget of $ 5.1 billion as of the 2018–19 fiscal year. The agency's headquarters are based in Ottawa, itself divided into five program branches, which directly support the CRA's core responsibilities, and seven corporate branches, which deliver internal services within
6540-399: The agency. The Board of Management is divided into four committees, Audit, Governance and Social Responsibility, Human Resources, and Resources, and one subcommittee, Service Transformation. These committees allow for a detailed review of items brought before the board, and establish work plans for their respective activities each year. The Board of Management is not directly involved with
6649-408: The assessment or reassess, and shall thereupon notify the taxpayer in writing of the Minister's action. Residents of Canada are required to file an individual income tax return every year. Non-residents may have to file a tax return under certain circumstances where they directly earn income in Canada, which can be rental payments, stock dividends, or royalties that a non-resident earns in Canada during
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#17327724676406758-449: The base portion of the benefit. These calculations are similar but follow different formulae. When calculating the base portion of the CPP, there is a general drop-out provision that enables the lower-earnings years in a contributor's contributory period to be dropped from the calculation of the average. Since 2014, the lowest 17% of earnings are dropped in this way, accounting for up to eight years of contributory earnings. Benefits under
6867-403: The benefits it receives. Contributions made to the enhancement will be directed into a separate account. The chief actuary submits a report to Parliament every three years on the financial status of the plan. Future reports will report on both the base and enhanced components of the plan. As noted in the 27th Actuarial Report on the Canada Pension Plan, if one uses the "closed group approach",
6976-499: The business income to the province in which it was earned. If it was earned in more than one province, it is allocated based on a formula in the Income Tax Regulations. In addition to the income tax levied as a percentage of taxable income, two provinces, Prince Edward Island and Ontario, levy surtaxes as a percentage of tax over a certain threshold. Quebec administers its own personal income tax system, and therefore
7085-558: The corresponding TSO where applicable: National Verifications and Collections Centres are responsible for non-complex files related to collection, verification, and validation that do not involve in-person interaction. These new facilities were introduced by the agency in 2016 as part of an effort to modernize the Agency's services. There are three NVCCs located across Canada: In 2019, the CRA opened introduced Northern Service Centres to access to tax services and assistance for residents in
7194-485: The declining share of the workforce that was covered by an employer defined-benefit pension plan, which had fallen from 48% of men in 1971 to 25% by 2011. They were given additional impetus by moves on the part of the government of Ontario to launch the Ontario Retirement Pension Plan , a supplementary provincial pension plan intended to begin in 2018. Unlike the existing, or base, CPP,
7303-536: The direction of then Finance Minister Paul Martin , CPP Investments (CPPI) was created in 1997 as an organization independent of the government to monitor and invest the funds held by the CPP. In turn, the CPPI created the CPP Reserve Fund. The CPP Investment Board is a Crown corporation created by an Act of Parliament. It reports quarterly on its performance, has a professional management team to oversee
7412-484: The earnings threshold will be phased in over two years starting in 2024. Workers and their employers will contribute 4% on earnings in this range (i.e., earnings above the normal earnings limit and below the new, higher one). To ease the impact of the increased contribution on near-term disposable income, worker contributions will become tax-deductible. The base CPP is funded on a "steady-state" basis, with its current contribution rate set so that it will remain constant for
7521-465: The employee contribution, effectively doubling the employee's contributions. Self-employed workers must pay both halves of the contribution, or 9.9% of their pensionable income, when filing their income tax return. These rates have been in effect since 2003. The federal government and its provincial counterparts moved to enhance the Canada Pension Plan to provide working Canadians with more income in retirement. These changes were principally motivated by
7630-400: The enhancement to the Canada Pension Plan will be fully funded, meaning that benefits under the enhancement will slowly accrue each year as an individual works and makes contributions. Additionally, the enhancement will be phased in over a period of seven years, starting in 2019. When fully mature, the enhanced CPP will provide a replacement rate of one third (33.33%) of covered earnings, up from
7739-522: The federal definition of "taxable income" as the basis for their taxation. This means that they are not allowed to provide or ignore federal deductions in calculating the income on which provincial tax is based. Provincial and territorial governments provide both non-refundable tax credits and refundable tax credits to taxpayers for certain expenses. They may also apply surtaxes and offer low-income tax reductions. Canada Revenue Agency collects personal income taxes for agreeing provinces/territories and remits
7848-483: The federal government, Revenu Québec administers the GST to businesses, and administers Quebec's own Quebec Sales Tax (QST). The Goods and Services Tax was introduced in 1991 at 7 per cent added to the value of most sales of goods and services. The GST was reduced to 6 per cent in 2006 and 5 per cent in 2008, the current rate. In Prince Edward Island , New Brunswick , Newfoundland and Labrador , Nova Scotia and Ontario
7957-415: The federal tax base in order to maintain simplicity for taxpayers. Ontario negotiated a tax collection agreement with the federal government under which its corporate income taxes would be collected on its behalf by the CRA starting in 2009. In Canada, corporate income is subject to corporate income tax and, on distribution as dividends to individuals, personal income tax. To avoid this "double taxation" of
8066-401: The gross-up is 38% and the dividend tax credit is 15.0198% (for 2017), reflecting the higher corporate income tax rate paid by larger corporations. Provincial and territorial governments also provide dividend tax credits to reflect provincial/territorial corporate income tax. Canada Revenue Agency The Canada Revenue Agency ( CRA ; French : Agence du revenu du Canada ; ARC )
8175-543: The income reported on the T1 returns. If returns are not filed, taxpayers may not be able to obtain benefits they are entitled to. Registered Retirement Savings Plan (RRSP) contribution room also depends on the taxpayer's reported income. Employees normally have income tax withheld on each paycheque by their employers, who remit the tax withheld together with payroll taxes to the CRA. Contractors (and most pensioners) are normally required to pay instalments for income tax to CRA during
8284-514: The lowest tax rate and the result is tax credits that reduce the total amount of tax owed. The rates above do not account for federal surtax nor surtax reduction prior to 2001. The following types of income are not taxed in Canada (this list is not exhaustive): Note that, the method by which these forms of income are not taxed can vary significantly, which may have tax and other implications; some forms of income are not declared, while others are declared and then immediately deducted in full. Some of
8393-412: The lowest tax rate. This mechanism is designed to provide equal benefit to taxpayers regardless of the rate at which they pay tax. A non-refundable tax credit for charitable donations is calculated at the lowest tax rate for the first $ 200 in a year, and at the highest tax rate for the portion in excess of $ 200. Donations can result in a reduction in taxes of between 40 and 60% of the donation depending on
8502-518: The majority of federal revenue came from customs and excise duties, but as the war effort placed increasing pressure on government finances, the Borden government introduced a personal income tax in 1917. While intended to be a temporary measure at first, the federal government has since continued to levy personal income taxes, and are now the largest source of revenue for the federal government. Both Inland Revenue and Customs were eventually merged into
8611-422: The maximum amount in 2019 was $ 1,154.58 per month. Monthly benefits are adjusted every year based on the Consumer Price Index. CPP benefit payments are taxable as ordinary income. The standard age for receiving the retirement pension is age 65; however, individuals may begin collecting a permanently reduced pension as early as age 60 or defer payment until age 70 to increase the monthly payment. For those who take
8720-409: The mid-1990s, the 3.6% contribution rate was not sufficient to keep up with Canada's aging population, and it was concluded that the "pay-as-you-go" structure would lead to excessively high contribution rates within about 20 years, due to Canada's changing demographics , increased life expectancy , a changing economy , benefit improvements, and increased usage of disability benefits (all referenced in
8829-463: The new maximum.) Workers earning the 2016 maximum covered wage of $ 54,900 a year would receive an additional $ 4,390 annually (approximately $ 365.83 monthly). To finance the expanded pensions and maintain the soundness of the plan, contributions to the CPP by workers and their employers will each rise 1% from current levels to 5.95% over the existing band of covered earnings. This increase will be phased in over five years starting in 2019. The increase to
8938-399: The next 75 years, by accumulating a reserve fund sufficient to stabilize the asset/expenditure and funding ratios over time. This system is a hybrid between a fully funded one and a " pay-as-you-go " plan. In other words, assets held in the CPP fund are by themselves insufficient to pay for all future benefits accrued to date but sufficient to prevent contributions from rising any further. While
9047-489: The operation of various aspects of the CPP reserve fund and to plan changes in direction, and a board of directors that is accountable to but independent from the federal government. The board reports annually to Parliament through the federal Minister of Finance . Quebec is the only province that opted out of the CPP upon its formation in 1965; the government of Quebec runs its own pension program. The Quebec Pension Plan ( QPP ; French: Régime des rentes du Québec; RRQ )
9156-478: The organization. The CRA also has operations throughout the rest of Canada, including 4 Tax Centres (TCs), 3 National Verifications and Collections Centres (NVCCs), and 25 Tax Services Offices (TSOs), organized into four regions: Atlantic, Ontario, Quebec, and Western. During the 2017 tax year, the CRA collected approximately $ 430 billion in revenue on behalf of federal and provincial governments, and administered nearly $ 34 billion in benefits to Canadians. The CRA
9265-427: The pension early (the majority), the reduction factor is 0.6% for each month that benefits are received before age 65 (to a maximum reduction of 36%, at age 60). For those who defer, the adjustment rate is 0.7% for each month that one delays in receiving it, to a maximum increase of 42% at age 70. There is no financial benefit to delaying beyond age 70. The CPP also provides disability pensions to eligible workers under
9374-409: The plan has an enormous unfunded liability. As of December 31, 2015, the CPP's unfunded liability was $ 884 billion, which is the difference between its liabilities ($ 1.169 trillion) and its assets ($ 285 billion). While the unfunded liability has been increasing with every published Actuarial Report, the assets as a percentage of liabilities using the closed group approach has also been increasing since
9483-716: The probable need to introduce an income tax if their negotiation of a free trade agreement with the United States in the early 20th century succeeded, but the Conservatives defeated the Liberals in 1911 by opposing free trade. The Conservative Party opposed income tax as it wanted to attract immigrants primarily from the United Kingdom and the United States, and it wanted to give immigrants an incentive to come to Canada. Then Canadian Finance Minister Sir Thomas White 's new "Income War Tax Act" bill went into Committee of
9592-470: The province of the taxpayer and type of property donated. This tax credit is designed to encourage more generous charitable giving. Certain other tax credits are provided to recognize tax already paid so that the income is not taxed twice: Provinces and territories that have entered into tax collection agreements with the federal government for collection of personal income taxes ("agreeing provinces", i.e., all provinces and territories except Quebec) must use
9701-488: The provisions of the Income Tax Act . Provincial and territorial income taxes are levied under various provincial statutes. The Canadian income tax system is a self-assessment regime. Taxpayers assess their tax liability by filing a return with the CRA by the required filing deadline. CRA will then assess the return based on the return filed and on information it has obtained from employers and financial companies, correcting it for obvious errors. A taxpayer who disagrees with
9810-474: The public service. Executives, management, and students are generally not represented by a union. However, the majority of CRA employees are represented by Union of Taxation Employees , which is a component of Public Service Alliance of Canada . Auditors, investigators and computer systems employees are represented by Professional Institute of the Public Service of Canada . The Canadian tax system
9919-625: The quarter (25%) provided previously. Additionally, the maximum income covered by the CPP will increase by 14% by 2025 (projected by the Chief Actuary of Canada to be $ 79,400 in 2025, compared to the projected normal limit of $ 69,700 in the same year in the 28th Actuarial Report on the CPP ). The combination of the increased replacement rate and increased earnings limit will result in individuals receiving retirement pensions that are 33% to 50% higher, depending on their earnings across their working years. (The maximum retirement pension will increase by 50% but will require 40 years of contributions on earnings at
10028-629: The rates of which are set by the Department of Finance . Personal income taxes are levied by both the federal government and provincial governments, each with separate rates, but are collected together with the exception of Quebec. Based on individual earnings, employers will typically deduct income tax, in addition to Canada Pension Plan (CPP) or Quebec Pension Plan (QPP) and Employment Insurance (EI) deductions from an employee's paycheque. However, taxpayers that rely on rental or investment income, or are self-employed generally do not have taxes automatically deducted from their pay, must remit tax payments to
10137-585: The registration of charities in Canada , and enforces much of the country's tax laws. From 1867 to 1999, tax services and programs were administered by the Department of National Revenue, otherwise known as Revenue Canada. In 1999, Revenue Canada was reorganized into the Canada Customs and Revenue Agency (CCRA). In 2003, the Canada Border Services Agency (CBSA) was created out of the CCRA, leading to customs being dropped from
10246-406: The revenues to the respective governments. The provincial/territorial tax forms are distributed with the federal tax forms, and the taxpayer need make only one payment—to CRA—for both types of tax. Similarly, if a taxpayer is to receive a refund, he or she receives one cheque or bank transfer for the combined federal and provincial/territorial tax refund. Information on provincial rates can be found on
10355-422: The same income, the personal income tax system, through the gross-up and dividend tax credit (DTC) mechanisms, provides recognition for corporate taxes, based notional federal-provincial corporate tax rates, to taxable individuals resident in Canada who receive dividends from Canadian corporations. A dividend from a small business ("Canadian-controlled private corporation") is grossed-up by 17 per cent, meaning that
10464-531: The shareholder includes 117 per cent of the dividend amount in income, to reflect the pre-tax income of the small business out of which it has paid the dividend. This income is taxed at the shareholder's personal income tax rate, but a part of the tax is offset by a 10.5217% dividend tax credit (for 2017) to reflect the federal tax paid at the corporate level. There are also provincial dividend tax credits at different rates in different provinces. For dividends from other Canadian corporations, i.e., "eligible dividends",
10573-415: The sum of (1) the CPP's current assets and (2) the present value of future contributions for the next 150 years, totalling $ 2.544 trillion. Unlike most pension plans, the unfunded liability is not reported on the balance sheet of the Canada Pension Plan's financial statements. Consequently, the balance sheet reports that the CPP's assets exceed its liabilities by $ 269 billion as of March 31, 2015. Under
10682-511: The tax administration with more flexibility in corporate planning, and in forming relationships with provincial, territorial, and Indigenous governments. The CCRA was given a broad mandate that covered taxation, customs, and border protection. This arrangement only lasted until December 2003, when the Canada Border Services Agency was spun off from the CCRA due to issues relating to interdepartmental collaboration between
10791-500: The tax deadline may vary widely. Penalties may be imposed if returns are received after the deadline, or any outstanding amounts owed are also subject to penalties and daily compounded interest. Additionally, taxpayers that repeatedly fail to report income over several tax years, or make false statements or omissions may be subject to penalties, which may vary depending on the severity of a taxpayer's actions. The CRA processes most tax returns with very limited review and promptly issues
10900-460: The tax exemptions are based on statutory enactments, others (like the non-taxability of lottery winnings) are based on the non-statutory common law concept of "income". In certain cases, the deduction may require off-setting income, while in other cases, the deduction may be used without corresponding income. Income which is declared and then deducted, for example, may create room for future Registered Retirement Savings Plan (RRSP) deductions. But then
11009-492: The taxable income for each taxation year of every person resident in Canada at any time in the year." After the calendar year, Canadian residents file a T1 Tax and Benefit Return for individuals. It is due April 30, or June 15 for self-employed individuals and their spouses, or common-law partners. It is important to note, however, that any balance owing is due on or before April 30. Outstanding balances remitted after April 30 may be subject to interest charges, regardless of whether
11118-606: The taxing authority. Individuals who have overpaid taxes or had excess tax deducted at source will receive a refund from the CRA upon filing their annual tax return. Generally, personal income tax returns for a particular year must be filed with CRA on or before April 30 of the following year. An individual taxpayer must report his or her total income for the year. Certain deductions are allowed in determining "net income", such as deductions for contributions to Registered Retirement Savings Plans , union and professional dues, child care expenses, and business investment losses. Net income
11227-518: The taxpayer's filing due date is April 30 or June 15. The amount of income tax that an individual must pay is based on the amount of their taxable income (income earned less allowed expenses) for the tax year. Personal income tax may be collected through various means: Employers may also deduct Canada Pension Plan /Quebec Pension Plan (CPP/QPP) contributions, Employment Insurance (EI) and Provincial Parental Insurance (PPIP) premiums from their employees' gross pay. Employers then send these deductions to
11336-464: The type of corporation that it is: If a public corporation has complied with certain prescribed conditions under Regulation 4800(2), it can elect, or the Minister of National Revenue can designate it, not to be a public corporation. Other types of Canadian resident corporations include Canadian subsidiaries of public corporations (which do not qualify as public corporations), general insurers and Crown corporations. Corporate income taxes are collected by
11445-606: The type of return: Tax services offices are field offices which handle more complex audit and collection files for the agency, generally those which involve direct interaction with taxpayers. While TSOs are present in every province, the territories do not currently have active TSOs, and are instead under the jurisdiction of TSOs located in other parts of Canada. Tax services offices are sometimes divided into branch offices for organizational purposes. There are twenty-five TSOs situated across Canada, and are organized as follows, with any branch offices indicated in indented bullets under
11554-399: The volume of sales. If sales are less than $ 30,000 per year, a business may qualify as smaller suppliers, who are not required to register for GST/HST. An employer is required to withhold income tax and payroll taxes, such as CPP and EI, and to remit the withheld amount to the CRA monthly, quarterly, or annually depending on the amount of withholding. By the end of every February, an employer
11663-401: The year. Once a tax return is filed, a tax refund will be available if the tax withheld or the instalments are more than tax owing calculated on the tax return. If the tax return results in a balance due, it must be paid in full by the due date or interest will accrue daily. The Goods and Services Tax (GST) or Harmonized Sales Tax (HST), collectively referred to as GST/HST, are governed by
11772-487: Was $ 58,700 as of 2020. However, under changes being phased in by 2025, the pension benefit will rise to 33.33% of earnings on which contributions were made, and the maximum amount of income covered by the CPP will rise by 14% from the projected 2025 limit of $ 69,700 to $ 79,400. The CPP enhancement will serve as a top-up to the existing, or base, CPP. For individuals who work and make contributions in 2019 or later, enhanced components of benefits will be calculated and added to
11881-414: Was appointed to the position on August 1, 2016. The commissioner is supported by the deputy commissioner, who fulfils specific duties and assignments provided to them by the commissioner, and acts for the commissioner in the event of absence or incapacity. The current deputy commissioner is Brigitte Diogo, who was appointed to the position on April 11, 2022. The minister and commissioner are supported by
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