Canadian Tax

A tax is a payment collected by local, provincial, territorial, and national governments from individuals or businesses. It covers the costs of general government services, goods, and activities.

The Canadian tax system is progressive, meaning the more you earn, the more income tax you pay. The rates of these taxes vary by tax type and jurisdiction.

Types of taxes in Canada

Individual Income Tax

Personal income tax is calculated based on several factors. These include your total income and individual and/or family incomes. It also considers the deductions and credits you claim.
Personal income tax is progressive, meaning the tax rate increases as income increases.

Corporate/Business Income Tax

Corporate/Business income tax is calculated based on a business’s income. Therefore, the higher a corporation’s profits, the higher its tax rate.
Corporate income tax is also progressive, but the tax rate is lower than the personal income tax.

Sales Tax

Sales tax is a flat tax, meaning the rate is the same for all sellers of goods and services.

Different types of Sales tax.

  • Goods and services tax (GST): GST is a federal tax applied to most goods and services purchased in Canada. The GST rate is 5%.
  • Harmonized sales tax (HST) is a federal and provincial tax on goods and services.
  • Provincial sales tax (PST): This tax is collected in British Columbia, Saskatchewan, and Manitoba. In Manitoba, it is known as Retail Sales Tax (RST). In Quebec, it is known as Quebec Sales Tax (QST) (French: Taxe de vente du Québec or TVQ).

Excise Tax

This tax is levied and licensed on various goods, including beer, wine, spirits, tobacco, cannabis, and vaping products. Other items include fuel-inefficient vehicles, automobile air conditioners, certain petroleum products, and insurance premiums. The federal government collects this tax.

There are also many other taxes in Canada, like

  • Property taxes: Charged by local governments on the value of land and buildings.
  • Luxury Tax- Calculating the luxury tax on certain vehicles, aircraft and vessels
  • Customs tariff- Current rates for customs duties and tariffs
  • Fuel charge- Registering for, reporting and paying the fuel charge on certain types of fuel and combustible waste
  • International and non-resident taxes
  • Trust income tax (T3RET T3)
  • Business or professional income (T2125)
  • Partnership income (T5013 forms)
  • Underused Housing Tax (UHT-2900)
  • Air Travellers Security Charge
  • Carbon Tax – this is scrapped in 2025

Different ways to submit Canadian tax

Online
Online tax filing through the Canada Revenue Agency (CRA) website is the fastest and easiest way to file taxes.
You will need to create a CRA My Account. A CRA account will give access to your tax information. It allows for electronic tax filing. You can also view your tax refund status.

By mail
You can mail your completed tax return to the CRA. If you prefer filing by mail, you can download the tax return from the CRA’s website. Then print it out. You will need to mail the completed return to the CRA.
This option is slower, but it is still a valid way to submit taxes.

By a professional tax adviser
You can also file your taxes with a professional tax advisor. They will help you gather all the necessary information. They will also file your taxes on your behalf. They can also answer any questions you have about your tax return. This option can be expensive, but it can save you time and hassle if you have a complex tax situation.

Software options for filing your Canadian tax return

When choosing tax preparation software, it is essential to consider your individual needs and circumstances. You can use free software if your tax situation is simple. You may need a paid software program if your tax situation is complex. Alternatively, you might consider hiring a professional tax advisor.

TurboTax is the most popular tax preparation software. It offers features such as electronic filing and a maximum refund guarantee.

H&R Block is another popular tax preparation software. It offers various features. One of these features is a tax interview assistant. This assistant can help you identify all the deductions and credits for which you are eligible.

Wealthsimple Tax is free tax preparation software designed for Canadians with simple tax situations. It is easy to use and offers a variety of features. There is also a tax return review service, which can help ensure your return is filed accurately and on time.

SimpleTax is another free tax preparation software designed for Canadians with simple tax situations.

StudioTax is free tax preparation software designed for Canadians with complex tax situations. It is easy to use. It offers a variety of features. A tax return review service is included. This service can help ensure your return is filed accurately and on time.

uFile is a tax software program available to all Canadians. It is easy to use and offers a variety of features, including a tax return review service. This service can help ensure your return is filed accurately and on time.

GenuTax Standard software and annual tax updates for future years are free.