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Employment Taxation for Expats in Canada

Submitted: October 2014

Residence

Once you have stayed Canada for more than 183 days for the purpose of earning income, you will be considered resident for the whole of that tax year. As a resident you will be taxable on your worldwide income and gains, even if you only became resident part of the way through the year. If you remain non-resident you will only be taxed Canadian-sourced income, and certain capital gains.

 

Tax Rates and Allowances

The tax year runs from 1 January to 31 December. Your employer will withhold tax from your wages or salary. You must supply them with your unique social insurance number (SIN) Taxpayer ID number. To apply for an SIN you will have to take proof of identity to the nearest Service Canada office; if you are living more than 10km from the nearest office, the application can be done by mail. There is more information on this here. You should also provide your employer with a TD 1 form which proves you are entitled to the basic allowance. After the end of each calendar year your employer must provide you with a T4 slip, which shows full details of income earned and tax deducted. You can use your T4 slip in filing your tax return at the end of the year, and should provide details of any other income you have earned.

Income tax rates in Canada follow the tax band method used in many countries, where all income in a band is taxed at the same rate. Both residents and non-residents have the same personal allowance (personal amount) of C$11,138 which can be offset against federal tax. The allowance is indexed to inflation and comes as a non-refundable tax credit; which means it can only be used against tax payable. There are also allowances for such things as children and education expenses. There is more information on allowances here.

Each province has provincial taxes which follow the band method. Each province also has a personal allowance against provincial taxes. These allowances differ from province to province. There is more information and links to the rates payable in different territories here.

Non-residents are subject to an additional federal tax on any income which is considered to have been earned in Canada but not earned in a province. This is equal to 48% of the basic federal tax in each of the bands in the table below. If the non-residents’ income is deemed to have been earned in a province, it is subject to normal provincial taxes instead.

In addition to income tax, your employer will also deduct federal payroll tax. This is composed of a contribution to the Canada Pension Plan of 4.95% of income up to C$51,100, and employment insurance of 1.88% up to a maximum total annual payment of C$891.12.   

The following table shows the federal income tax rates for residents for 2014:

Income C$Rate
Up to 43,95315%
43,954 - 87,90722%
87,908 - 136,27026%
Over 136,27029%

 

You will usually be required to submit an annual tax return complete with a payment of any tax due. This must be sent to the relevant tax service office by 30 April of the following financial year. You can locate your nearest office here. For the self-employed, the deadline for filing is extended to 15 June, however payment must still be made by 30 April.  Married residents must file separately. In Quebec, an additional return must also be sent to the Quebec Ministry of Revenue.

Contac information for non-residents is:

International Taxation Services Office
2204 Walkley Road
Ottawa
Ontario K1A 1A8

www.cra-arc.gc.ca

Tel:
In Canada: 1 800 267 5177 (toll free)
Outside Canada: +1 613 952 3741

 

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