Each level of government in Canada (federal, provincial, and municipal) has jurisdiction to impose different taxes.
Income Tax
The Income Tax Act (Canada) is a federal statute which sets out the rules for income tax across the country. Income tax is collected from individuals (humans), corporations, and trusts. It may also be collected from other legal entities recognized under the laws of foreign jurisdictions. For Canadian income tax purposes, such foreign legal entities will be treated as one of the taxable entities recognized in Canada.
Provinces also have their own income tax legislation. In Ontario, the Income Tax Act (Ontario) imposes income tax on individuals and trusts, and the Corporations Tax Act (Ontario) imposes tax on corporations. Generally, the rules for provincial income tax are identical to the rules for federal income tax. The major difference federal and provincial income tax is the tax brackets and tax rates.
The Canada Revenue Agency (CRA) enforces and collects both federal and provincial income tax, and remits the taxes collected to the provinces (with some exceptions for some provinces).
Sales Tax
The rules for the Goods and Services Tax (GST) are contained in Part IX of the Excise Tax Act (Canada). Some provinces also impose their own provincial sales tax or retail sales tax. Other provinces, including Ontario, have implemented the Harmonized Sales Tax (HST), whereby the federal and provincial portion of the sales tax is administered and collected together, and then the provincial portion is remitted to the province. The HST rate in Ontario is 13%.
The HST is a value added tax, which means that net tax is imposed only on the profit or value-added component of the sale price to the seller. This is implemented by permitting an input tax credit on HST paid to be deducted against the HST collected by the taxpayer.
Excise Tax
In addition to the GST/HST, the Excise Tax Act (Canada) also imposes special excise taxes on some insurance premiums, air transportation, telecommunication services, petroleum products, fuel-inefficient vehicles, and air conditioners for cars.
The Excise Act, 2001 (Canada) and the Excise Act (Canada), which are two separate statutes, impose excise duties on spirits, wine, tobacco products, cannabis products, and beer.
When goods are made in Canada, excise tax is payable when the goods are delivered to the buyer. When goods are imported into Canada, excise tax is payable by the importer at the time the goods are imported.
Customs Tariffs
Importers engaged in importing commercial goods into Canada are subject to Customs Tariffs, which are administered by the Canada Border Services Agency.
Property Tax
Property taxes are imposed by municipalities. They are normally applied as a percentage of the assessed value of land, buildings, and other real estate. The assessed value for determining the property tax amount may be determined by a number of different factors, including acquisition cost and fair market value.
Land Transfer Tax
When you buy land or an interest in land in Ontario, you pay Ontario’s land transfer tax. Land includes, but is not limited to, any buildings, buildings to be constructed, and fixtures (such as light fixtures, built‑in appliances and cabinetry).
Land transfer tax is normally based on the amount paid for the land, in addition to the amount remaining on any mortgage or debt assumed as part of the arrangement to buy the land. In some cases, land transfer tax is based on the fair market value of the land.
The City of Toronto also imposes its own land transfer tax, at the same rate as the Ontario land transfer tax.
First‑time homebuyers in Ontario may be eligible for a refund of all or part of the land transfer tax.
Non‑Resident Speculation Tax
Effective April 21, 2017, a 15% Non-Resident Speculation Tax is imposed on the purchase or acquisition of an interest in residential property located in the Greater Golden Horseshoe (including the Greater Toronto Area) by individuals who are not citizens or permanent residents of Canada or by foreign corporations (foreign entities) or taxable trustees. This new tax is in addition to Ontario’s Land Transfer Tax.
The above is not an exhaustive list of all the taxes imposed in Canada, but is meant to outline some of the taxes commonly faced by taxpayers.