Manuel Garrido Wondering how to pay your taxes? Canada has a progressive tax system, meaning the more money you make, the higher the tax percentage you pay. Taxpayers pay both federal and provincial taxes in Canada.
Canada’s tax system can be more complex than those of some other countries, as tax rates vary significantly by province, and federal income tax rates change across income brackets. But we can help. This guide offers a closer look at the Canadian tax system so you can plan every expense.
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About Taxes in Canada
Taxes in Canada are mandatory payments made by individuals, businesses, and organizations to the government. Canada uses a progressive income tax system with higher tax rates based on the individual’s income.
Canada has a relatively high tax burden compared to many other countries. However, these mandatory payments help fund public services such as universal healthcare coverage, social programs, infrastructure, and education. Tax rates vary based on the province or territory of residence.
Who pays tax in Canada?
Taxes must be paid by individuals and businesses that earn income in Canada. The following groups are required to file taxes:
- Canadian residents: Permanent residents in Canada earning income from a job, business, or investment must file a yearly individual income tax return. This includes full-time and part-time workers, self-employed individuals, students, and retirees.
- Non-residents: Non-resident individuals who don’t live in Canada full-time must still pay taxes. Non-residents are required to pay if they do business in Canada or earn income from a Canadian source (like rental property, pension plans, or dividend income).
- Consumers: Everyone pays sales tax when they buy goods and services, such as groceries, clothes, or concert tickets. The sales tax rates vary by province.
- Companies: Entrepreneurs invest in Canada to tap into the global market. Corporations and small businesses pay corporate income tax rates. Corporate taxes are based on their business income.
- Property owners: Individuals who own immovable or real property must pay property tax. Some examples of taxable Canadian property include homes, business properties, cottages, land, and shares of a private Canadian corporation.
Taxes in Canada: The Progressive Tax System
Canada maintains a progressive income tax system with increasing tax rates based on the individual’s income. Taxes in Canada are divided into separate categories, such as federal and provincial taxes, personal income taxes, corporate taxes, sales taxes, property taxes, and capital gains. Here is a look at each of these categories.
Federal Income Tax Rates in Canada
Federal income tax is a mandatory federal tax that individuals and businesses pay to the federal government of Canada. The federal income tax rates are based on taxable income. The taxable income is the income derived after applying tax credits, tax deductions, and exemptions.
Individuals pay federal taxable income on their salaries, investments, and self-employment income. At the same time, corporations pay federal income tax rates on their business profits. Rates and income tax brackets vary based on where you live.
The main federal income tax purposes are to fund public services like healthcare, employment insurance premiums, infrastructure, and financial support for low-income families and seniors.
| Federal income tax rates for 2025 (in Canadian dollars) | |
| Tax rate | Taxable income range |
| 15 percent | For taxable income, that is $57,375 below or over. |
| 20.5 percent | For taxable income, that is between $57,375 and $114,750 or over. |
| 26 percent | For taxable income, that is between $114,750 and $177,882 or over. |
| 29 percent | For taxable income, that is between $177,882 and $253,414 or over. |
| 33 percent | For taxable income, that is over $253,414. |
Provincial Income Taxes in Canada
Provincial taxes in Canada are a form of direct consumption taxation of each province or territory. These taxes are based on the individual’s income according to their province. The tax laws for provincial income taxes are the same for non-residents and permanent residents.
Every province has different provincial and territorial taxes. The territorial income tax will vary based on where you live. For example, British Columbia, Ontario, and Québec have separate provincial income taxes that apply to the individual’s income.
| British Columbia income tax rates for 2025 (in Canadian dollars) | |
| Tax rate | Taxable income range |
| 5.06 percent | For taxable income, that is $49,279 below or over. |
| 7.7 percent | For taxable income, that is between $49,279 and $98,560 or over. |
| 10.5 percent | For taxable income, that is between $98,560 and $113,158 or over. |
| 12.29 percent | For taxable income, that is between $113,158 and $137,407 or over. |
| 14.7 percent | For taxable income, that is between $137,407 and $186,306 or over. |
| 16.8 percent | For taxable income, that is between $186,306 and $259,829 or over. |
| 20.5 percent | For taxable income that is over $259,829. |
| Québec income tax rates for 2025 (in Canadian dollars) | |
| Tax rate | Taxable income range |
| 14 percent | For taxable income, that is $53,255 or below. |
| 19 percent | For taxable income, that is between $53,255 and $106,495. |
| 24 percent | For taxable income, that is between $106,495 and $129,590. |
| 25.75 percent | For taxable income, that is $129,590 or over. |
Personal Income Tax in Canada
Personal income tax in Canada is the tax you pay on the money you earn. This includes income from employment, self-employment, investments, pension plans, and other sources. It is “personal” because it is based on the individual’s income or personal earnings.
Both the federal and provincial governments collect individual income tax. Non-residents and permanent residents earning an income in Canada pay a personal income tax.
Corporate Taxes in Canada
Canadian resident corporations must pay Canadian corporate income tax (CIT) on all their income. A non-resident corporation only has to pay CIT on income made from doing business in Canada or on capital gains from selling taxable Canadian property.
Canadian CIT and withholding tax (WHT) can be lowered or removed if Canada has a tax treaty with the country from which the non-resident is from.
| Corporate taxes in Canada for 2025 | |
| Basic rate | 38 percent of taxable income |
| After federal tax abatement | 28 percent of taxable income |
| After general tax reduction | 15 percent of the net tax rate |
Sales Taxes in Canada
Canada charges sales taxes on goods and services when you buy them.
There are three types of sales taxes:
- Goods and Services Tax (GST) – GST is a federal sales tax that applies across the country. But, it varies based on the province. For example, GST is five percent in provinces like British Columbia, Alberta, the Northwest Territories, and for Québec residents.
- Provincial Sales Tax (PST) – PST is a provincial sales tax charged by an individual province. Some provinces charge PST separately from GST. For example, British Columbia and Manitoba have a seven percent PST.
- Harmonized Sales Tax (HST) – HST is a sales tax in Canada that combines GST and PST into one tax. For example, HST is five percent in Northwest Territories, 14 percent in Nova Scotia, and 15 percent in Prince Edward Island.
The Canada Border Services Agency (CBSA) collects taxes and duties on imported goods.
Property Taxes in Canada
Property taxes in Canada often vary between 0.5 percent and 2.5 percent. The amount you pay in property tax is based on how much your home is worth and the tax rate set by your local government.
The Canadian government determines a property’s assessed value regularly, but how often this happens varies by province. For example, British Columbia and the Northwest territories send a yearly property assessment notice. However, Ontario has assessments every four years. In Canada, permanent residents, Canadian citizens, and non-residents all pay property taxes on any real property they own. But a non-resident often pays higher taxes than a Canadian citizen.
Capital Gains Tax in Canada
Capital gains in Canada are taxes you pay on the profit you make from selling specific assets, like real estate, bonds, stocks, or other investments. In Canada, only 50 percent of capital gains are taxable.
There are certain exemptions to this type of tax. For example, certain sales of assets are not subject to capital gains tax. This includes your principal residence and money in special investment accounts like Registered Retirement Savings Plan (RRSP), Tax-Free Savings Account (TFSA), Registered Education Savings Plan (RESP), and First-Home Savings Account (FHSA).
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What to expect when filing taxes in Canada?
To file your taxes, you’ll need to complete the necessary tax forms. A Canadian resident must pay an income tax on worldwide income. But, to avoid double taxation, Canada has tax treaties, foreign tax credits, and tax deductions. Here is how each factor affects your tax rates:
- Tax treaties: Tax treaty countries are nations that have agreements with Canada to avoid getting taxed twice on the same income. Canada has treaties with many countries, including the U.S., UK, Germany, and Australia.
- Foreign tax credits: When you file taxes, you can claim a credit for the amount of tax you paid to the foreign government. For many Canadian taxpayers, non-refundable tax credits are the key to reducing their overall tax burden for an entire calendar year. To be eligible for these credits, you must be a permanent resident, a Canadian citizen, or a Canadian-based company.
- Deductions: Common tax deductions related to investments, employment, or businesses may lower your overall tax burden. In most cases, Canadian citizens can claim tax deductions based on the nature of their expenses.
When are taxes due in Canada?
Canadians pay taxes at different times of the year. For example, if you need to file an income tax return for the 2024 tax year, you start filing in February 2025. The deadline to file the income tax is 30 April 2025. Filing the taxes after the deadline could lead to higher interest paid and penalties. However, the deadline for filing taxes is different if you or your common-law partner are self-employed. You are expected to file the income tax by 15 June 2025.
How much are taxes in Canada?
Based on reports from the Canada Revenue Agency (CRA), the federal tax rate for tax year 2025 is:
- 15 percent on the first $57,375 of taxable income
- 5 percent on the taxable income from $57,375 to $114,750, or over
- 26 percent on the taxable income from $114,750 to $177,882, or over
- 29 percent on the taxable income from $177,882 to $253,414, or over
- 33 percent on the taxable income over $253,414
Income tax rates vary between the provinces you live in. For example, if you moved from the Northwest Territories to Nova Scotia in 2024, your provincial tax rate would be based on Nova Scotia’s tax rates in the 2025 tax year.
Are taxes higher in Canada or USA?
Canada uses a progressive tax system based on income level. The more money you earn, the higher tax rates you have to pay. The income tax rates are often higher than in the USA for high-income earners but very similar for medium—to low-income earners. Both the United States and Canada have progressive taxes. However, in Canada, there are fewer ways to reduce taxes through deductions at the federal level.
When it comes to the value-added tax, there is the cost of health. Canadian taxes fund universal healthcare coverage, which makes many services free. The Canadian government covers about 70 percent of the healthcare costs. In the U.S., American citizens must pay for insurance with significant out-of-pocket expenses.
The Canadian and U.S. systems have similar tax advantages for seniors, allowing them to set some money aside for retirement. However, the Canada pension plan enables retirees to enjoy lower poverty rates than in the U.S. That’s why many Americans choose to retire in Canada.
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Frequently Asked Questions About Taxes in Canada
Do you pay taxes in Canada?
Yes, you must pay taxes if you live in Canada or earn money from Canadian sources. Residents and non-residents pay an income tax or an additional cost for sales and property taxes. High rent and property values can make living in certain urban centers more expensive.
Does Canada tax worldwide income?
Yes, but only if you are a Canadian tax resident. You must report all your income, whether from a job in another country, rental property abroad, foreign investments, or pensions. You can also claim a credit for foreign taxes paid in another country to avoid being taxed twice on the same income.
How are taxes in Canada vs US?
Overall, many employees in Canada, especially those who earn more, pay a higher combined rate of taxes on their employment income compared to similar earners in the USA, especially when provincial taxes are included.
Do you pay tax in Canada on salary?
Yes, both the federal government and the provinces charge income tax to people who live in Canada. However, only Québec collects its own income tax separately, so Quebec residents must file two tax returns—one for the federal government and one for Québec. Passive income is taxed at about 50 percent.
What are Canada personal income tax brackets?
Canada has a tiered system for paying taxes. The bigger your personal income, the higher the tax percentage. The government creates tax brackets to tax personal income at different rates. For example, federal income tax rates vary from 15 percent to 33 percent according to the portion of your income.
How much tax do you pay on investment income in Canada?
The tax rates vary based on the type of income you have. In 2025, the Canada Revenue Agency (CRA) taxes about 50 percent of capital gains. In other words, you pay tax on half of the profit you make from selling an asset.
Can married couples file taxes separately in Canada?
Even after couples marry, each person must submit their tax return. In Canada, you must file your tax returns separately. Of course, you can prepare them together, but you must file two individual returns.
What happens to the Canadian withholding tax?
Withholding taxes is a tax Canada takes before the money leaves the country, usually when non-residents earn income from Canadian sources. The payer (like a bank or company) withholds the tax and sends it directly to the Canadian government. The standard rate is 25 percent but there can be lower taxes if non-residents are from tax treaty countries.
