Canada - Other taxes and levies

Canada - Other taxes and levies

Taxation of international executives

Related content

Social security tax

Are there social security/social insurance taxes in Canada? If so, what are the rates for employers and employees?

Canada has an extensive social security system that confers benefits for disability, death, family allowances, medical care, old age, sickness, and unemployment. These programs are mainly funded through wage and salary deductions and employer contributions.

An employee’s responsibility is comprised of two parts: Canada Pension Plan (CPP) and Employment Insurance (EI). Contributions made by an employee to CPP or EI are creditable against that individual’s federal and provincial income tax liability. The credits are calculated at the lowest federal and provincial tax rates.

Type of insurance

Paid by employer

Paid by employee

Total

Canada Pension Plan

4.95%

4.95%

9.90%

Employment Insurance

2.63%

1.88%

4.51%

Total

7.58%

6.83%

14.41%

Canada Pension Plan/Quebec Pension Plan

CPP is required to be deducted from an individual’s remuneration if the individual is employed in Canada, between age 18 and 70, and receiving pensionable earnings. The employer is responsible for withholding and remitting the individual portion and remitting a matching employer portion to the tax authorities. The maximum employer and employee contributions to the CPP for 2016 are each CAD2,544. Individuals residing in Québec contribute to the Québec Pension Plan (QPP) instead of the CPP program. The maximum employer and employee contributions to the QPP for 2016 are each CAD2,737.

Employment insurance

EI is a federal payroll tax required to be deducted from an individual’s remuneration if the individual is employed in Canada and is receiving insurable employment earnings. There is no age limit for deducting EI premiums. Like the CPP contribution, the employer is responsible for withholding and remitting the individual’s portion as well as remitting the employer portion (1.4 times the individual contribution) to the tax authorities. The maximum employee contribution for 2016 is CAD 955 and the corresponding maximum employer contribution is CAD1,1337.

Individuals residing in Quebec contribute a reduced El amount (2016 maximum of CAD 772 per employee and a maximum employer premium of CAD 1, 081 employer). However, they must also contribute to the Quebec Parental Insurance Plan (QPIP). The maximum contributions to QPIP for 2016 are CAD for the employee and CAD 548 for the employer. CPP and EI premiums are assessed based on earnings and the rates are adjusted each year based on actuarial calculations prepared by the federal government.

Gift, wealth, estate, and/or inheritance tax

Are there any gift, wealth, estate, and/or inheritance taxes in Canada?

There is no gift tax in Canada. However, income tax may arise since the assets gifted are treated as being disposed of at fair market value. There are certain exceptions for gifts to a spouse.

Rules pertaining to income splitting must also be considered. In certain circumstances, if the item gifted is an income-producing asset or is used to purchase an income-producing asset, the income is attributed back to the taxpayer. This is generally the case for gifts to the spouse and minor children and low-interest loans to non-arm’s length persons.

No federal or provincial estate tax or inheritance tax is imposed in Canada. However, to the extent that a Canadian resident has accrued capital gains or losses, these will be realized on death. For income tax purposes, an individual is considered to have disposed of capital property at its fair market value on the date of death. Taxable capital gains may result but provisions exist to enable a surviving spouse or other specified beneficiaries to inherit the original cost base and thereby defer recognition of the gain. Appropriate planning is required to obtain this result.

Non-resident individuals may be subject to Canadian tax on death to the extent that they own Taxable Canadian Property (TCP). The most common types of TCP affected by the deemed disposition on death are Canadian real estate and shares in a private corporation owning real estate in Canada.

There is no wealth tax in Canada.

Although there is no estate or inheritance tax per se, many provinces charge a probate fee to validate the deceased’s will and confirm the authority of the estate’s executor or, where no will exists, distribute the assets of the estate according to provincial family law. The probate fee is generally applied to the fair market value of the assets flowing through the will. Planning opportunities exist to help minimize the tax through joint ownership, trusts, designation of beneficiaries, and other means.

Real estate tax

Are there real estate taxes in Canada?

The sale or other transfer of real estate (including the transfer of shares in real estate companies) is subject to a real estate transfer tax imposed by the province or territory where the real estate is located. Rates vary among provinces. Municipalities also levy annual property taxes on residential, commercial, and industrial real estate.

Sales/VAT tax

Are there sales and/or value-added taxes in Canada?

Canada levies a federal goods and services tax (GST) which is a value-added tax that applies to most goods and services in Canada. The GST rate is 5 percent.

Five provinces (Prince Edward Island, Ontario, Nova Scotia, New Brunswick, and Newfoundland and /Labrador) have harmonized their provincial sales taxes with the GST to create the harmonized sales tax (HST). The HST applies to the same base of taxable goods and services as the GST. The HST rate is 13 percent in Ontario, New Brunswick, and Newfoundland/Labrador. The HST rate is 15 percent in Nova Scotia and 14 per cent in Prince Edward Island. New Brunswick proposes to increase its HST to 15 per cent effective from July 1, 2016.

In addition, three provinces (British Columbia, Saskatchewan and Manitoba) have a provincial sales tax (PST) that generally applies to the sale of goods as well as some intangibles and services. The general PST rates range from 5 percent to 8 percent.

In addition, the province of Quebec applies the provincial Quebec Sales Tax (QST) on most goods and services at a rate of 9.975%. The QST is also a value-added tax and applies generally the same as the GST/HST.

Unemployment tax

Are there unemployment taxes in Canada?

EI premiums are required to be deducted from an individual’s remuneration if the individual is employed in Canada and is receiving insurable earnings. There is no age limit for deducting EI premiums. The employer is responsible for withholding and remitting the individual’s portion as well as remitting the employer portion (1.4 times the employee’s contribution) to the tax authorities.

Other taxes

Are there additional taxes in Canada that may be relevant to the general assignee? For example, customs tax, excise tax, stamp tax, and so on.  

Local taxes

Municipal tax (property tax) is assessed on the owner of real property according to the value of the property (generally, the tax is in the range of 1 percent to 2 percent of the property’s assessed value per year). The rates vary among municipalities.

Provincial Health Premiums

Although these are not actual income taxes, the provinces of British Columbia, Ontario and Quebec levy provincial health premiums on the income of individuals who are subject to income tax in those jurisdictions.  Residents of British Columbia are required to make monthly Provincial Health Premium payments under the province’s Medical Service Plan (MSP) based on taxable income over CAD 22,000 (maximum annual premium is CAD 900 for single individual, CAD 1,632 for family of two and CAD 1,800 for a family of three or more).  Residents of Ontario are required to pay a Provincial Health Premium as part of their Ontario tax liability, based on their taxable income over CAD 20,000 (maximum annual premium is CAD 900)  - Residents of Quebec are required to pay a Quebec Health Services Fund, based on their income calculated for Quebec income tax purposes over CAD 14,000 (maximum annual premium is CAD 1,000).  

The Ontario and Quebec health premiums are calculated and added to the provincial income taxes calculated on the tax returns of individuals who are residents, or part-year residents, of those jurisdictions.

Employer Health Tax

The following provinces and territories impose a tax on employers based on the total annual salaries earned by employees who report to work, or are deemed to report for work, at an office or other permanent location of the employer within the relevant jurisdiction:

Province/Territory  Maximum EHT Rate
Ontario 1.95%
Quebec 4.26%
Manitoba 2.15% (see note below)1
Newfoundland & Labrador 2.00%
Northwest Territories 2.00%
Nunavut 2.00%

The relevant provincial EHT legislation requires an employer to include the salary of any non-resident employee earned from working in the province with the salaries of the employer’s regular employees who report for work there, even when there is no chargeback to the Canadian company for that salary.

Footnote:

1For Manitoba, first $1.25 Million of annual payroll is exempt from Health Tax; the next $1.25 million is subject to a levy of 4.3%; and any amount greater than $2.5 million is subject to a levy of 2.15%. 

© 2016 KPMG LLP, a Canada limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

Connect with us

 

Request for proposal

 

Submit

KPMG's new digital platform

KPMG International has created a state of the art digital platform that enhances your experience, optimized to discover new and related content.