Taxation System

In Canada, roads, public utilities, schools, health care, economic development and cultural activities are paid for by the residents of Canada. The federal, provincial and municipal governments collect money from individuals and companies to help pay for government programs and services. Common types of taxes are income taxes, sales taxes, property taxes, and business taxes (if you own a business).

Income Tax

This individual tax is collected by the Canada Revenue agency. Canadian residents fill in an income tax return every year.

Sales Tax

In Canada, three types of sales taxes are levied. These are as follows:

  • Provincial sales taxes (PST), levied by the provinces
  • Goods and Services Tax (GST), a value-added tax levied by the federal government
  • Only some provinces have the combined Harmonized Sales Tax (HST) which is a value-added tax, a single, blended combination of the PST and GST. This is used in Ontario, (formerly) British Columbia, and the Atlantic provinces; New Brunswick, Newfoundland and Labrador, Nova Scotia and Prince Edward Island. The HST is collected by the Canada Revenue Agency, which then remits the appropriate amounts to the participating provinces.

Every province except Alberta has implemented either a provincial sales tax or the Harmonized Sales Tax. The federal GST rate is 5 percent, effective January 1, 2008.

The territories of Yukon, Northwest Territories, and Nunavut have neither the HST nor territorial sales taxes and only the GST is collected. This is because the cost of living in the North is so high and the residents of these outlying areas are heavily subsidized by the federal government.

If you would like to find out more information about your taxes in Canada, you can visit The Canada Revenue Agency website or you can get assistance from the agency to file your first tax return here.

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