This blog focuses on taxation imposed on foreign workers or non-residents of Canada who are willing to establish or buy a business in Canada or migrated through Intra-Company Transfer program. Both Federal and Provincial government will levy taxes in Canada including variety of other taxes.
You may not be familiar with Canadian tax laws if you are new to the Canadian business world. This article will provide a basic overview of taxes in Canada for small-business owners or an intra-company transferee.
Taxes and deductions imposed on a salaried individual in Canada.
Canada’s tax system is a Progressive Tax System meaning it will increase with increase in a taxable income. It is similar for residents or non-residents of Canada. These taxes will be excised only on the income earned from Canadian business or sources. Being a foreign worker; below is the list of taxes and deductions you will bear:
- FEDERAL TAX: These are the taxes levied by federal government In Canada. These are applicable on every Canadian citizens or immigrants and are same for everyone living anywhere in Canada. Federal taxes are calculated applying appropriate tax bracket on taxable income. Taxable income is gross income subtract tax deductions.
For 2023, the Federal tax brackets and the personal tax credit amounts are increased by an indexation factor 1.063 (a 6.3% rise).
For instance, if you’re taxable income is more than $53,359; the first $53,359 will be taxed at 15%, the next $53,358 of taxable income is taxed at 20.5%, the next $58,713 of taxable income is taxed at 26%, the next $70,245 of taxable income is taxed at 29.32% and any income above $235,675 is taxed at 33.00%.
- PROVINCIAL TAX: Provincial taxes are imposed by provincial government of Canada depending on in which province you are living. Except Quebec, all provinces and territories use the same taxable income calculation for federal tax purposes. However, they apply their own tax rates and tax brackets to that income figure.
Below is the list of tax rates in every province of Canada
- CANADA PENSION PLAN (CPP): It is a monthly retirement pension, taxable benefit that replaces part of your income when you retire. If you qualify, you will receive CPP retirement pensions for the rest of your life. All Canadians between the age of 18 and 70 must contribute to CPP. Employers and employees contribute equally on earnings between the Basic Exemption amount and Year’s Maximum Pensionable Earnings (YMPE). Your earnings determine how much you contribute to the CPP. Your average earnings over your entire working life determine how much you get each month. The minimum age for receiving a pension is 65. You can receive it at any age, from 60 to 70.
For 2023, the contribution rates from employer and employee will rise to 5.95% from 5.7% in 2022.
- EMPLOYMENT INSURANCE (EI): Your employer will deduct EI Premiums from your wages if you work in an insurable job. EI premiums can be deducted at any age. EI is temporary financial assistance that you can use to while you are unemployed, looking for work, or upgrading your skills. In 2023, the employee EI premium rate will be $1.63 per $100.
SAMPLE ICT SALARY SLIP FOR REFERENCE:
Hopefully by now you must have understood how the Canadian tax system works for an Immigrant individual landing in Canada on a Work permit. It is important to know the tax laws that apply to your situation, how to file tax returns, and any tax deductions that you may be eligible for. You will need 12 such salary stubs to claim 200 points on your CRS (Comprehensive Ranking System) to obtain your Permanent residency (PR) of Canada.
If you’re also looking to migrate to Canada and worried about your taxes, we’re here for you . Schedule a Strategic meeting with Our Experts and get your immigration journey handled by an Immigration lawyers!!