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Income Tax

Income Tax

In Canada, the federal Government of Canada collects personal income taxes on behalf of all provinces and territories, except Quebec. In addition the federal government also collects corporate income taxes on behalf of all provinces and territories, except Alberta and Quebec. Canada's federal income tax system is administered by the Canada Revenue Agency (CRA). Taxes are levied under the provisions of Canada's Income Tax Act

Individual income taxes are paid annually based on income derived during the calendar year. Canadian residents must file a T1 Tax and Benefit Return for individuals. (Corporations file a T2.) Filing is due April 30, except for self-employed individuals and their spouses who have until June 15. (Any tax balance owing, however, is due on or before April 30 and any outstanding balances remitted after April 30 may be subject to interest charges.) The amount of income tax to be paid by an individual is based on his/her taxable income, that is all income earned minus deductions, credits and allowed expenses for the tax year.

Personal income tax can be paid (or collected) via a variety of mechanisms, including: payment on tax filing, wherein individual payments are made with following remittance of the T1 income tax return; deduction at source, where income tax is deducted by the employer directly from an individual's pay and remitted to the CRA by the employer on behalf of the employee; or installment payments, where an individual pays taxes at intervals throughout the calendar year.

Note that employers may also deduct the employee's Canada Pension Plan (CPP) or Quebec Pension Plan (QPP) contributions, as well as Employment Insurance (EI) and Provincial Parental Insurance (PPIP) premiums directly from the employee's pay, remitting on behalf of the employee.


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