Tax rates in Canada

Company Tax

Federal Corporate Tax Rate: 15% after the general tax reduction (9% for Canadian-controlled private corporations claiming the small business deduction).

Provincial Tax Rate: Provinces and territories apply two tax rates - a low rate and a high rate. The low rate applies to business income that qualifies for small business deduction (varying between 0% and 3.2%). The high rate applies to all other income (varying between 11.5% and 16%).

For more information, please visit the Canadian government website.

Tax Rate For Foreign Companies

Corporations resident in Canada are subject to taxation on their worldwide income. Foreign non-resident companies are subject to taxation on Canada-sourced income and capital gains arising upon the disposition of taxable Canadian property. On the other hand, they benefit from some exemptions.
A special 25% 'branch tax' is applicable to a non-resident's after-tax profits not invested in qualifying property in Canada. Essentially, this tax serves as a withholding tax on funds repatriated to the foreign head office. However, for corporations residing in treaty countries, the branch tax rate may be reduced to the withholding tax rate on dividends as specified in the relevant tax treaty, typically ranging from 5%, 10%, to 15%.

Capital Gains Taxation

50% of capital gains are included in taxable income for the year in which the gains are realized and is subject to the normal rate of tax. Capital losses are deductible, but generally only against capital gains (in case of excess, the loss can be carried back three years and carried forward indefinitely).

Non-resident corporations are subject to corporate income tax on taxable capital gains arising on the disposition of taxable Canadian property (50% of capital gains less 50% of capital losses).

Main Allowable Deductions and Tax Credits

Companies may amortise their capital property up to a certain percentage every year. General business operating costs are also deductible. Net operating losses may be carried back for three years and forward for 20 years. Interest on borrowed money used for earning business or property income, or interest in respect of an amount payable for property acquired to earn income, is deductible. Deductions for business meals and entertainment expenses are limited to 50% of their cost. Insurance premiums relating to properties of a business are generally deductible, although life insurance premiums are generally not deductible if the company is the named beneficiary. Donations made to registered Canadian charitable organisations are deductible in computing taxable income up to 75% of net income (a 5-year carryforward is available). Tax credits are also available for tax on dividends received from a foreign company as well as income tax paid in another country. Current expenditures on scientific research and experimental development can be deducted in the year incurred, or carried forward indefinitely to minimise tax payable. A reasonable reserve for doubtful accounts may be deducted for tax purposes.

Start-up expenses are not deductible, the same as for federal, provincial, and territorial income taxes and government-imposed fines and penalties. Mining and oil and gas companies are generally allowed a 100% deduction for grassroots exploration costs, whereas other development costs are deductible at the rate of 30% on a declining-balance basis.

Other Corporate Taxes

Taxes on natural resources, namely oil and gas, mineral and timber are applied across Canada. Federal and provincial resource royalties and taxes are collected on resource production on federal and provincial Crown lands respectively. Certain rental payments and management fees are also subject to a 25% withholding tax, unless otherwise agreed upon in a tax treaty.

Property taxes are levied by municipalities on the estimated market value of real property within their boundaries and by provinces and territories on land not in a municipality.

All provinces and territories impose on insurance companies a premium tax on life and non-life insurance, ranging from 2% to 5%. Insurance companies are subject to a tax on capital in Quebec and Ontario. Quebec also levies a compensation tax on insurance premiums at the rate of 0.30%. The federal government levies a Financial Institutions Capital Tax on banks, trust and loan corporations, and life insurance companies when taxable capital employed in Canada exceeds CAD 1 billion, at a rate of 1.25%.

All provinces and territories charge a land transfer tax or registration fee on the purchaser of real property within their boundaries, calculated on the sale price or the assessed value of the property sold at rates varying between 0.02% to 5% (higher rates may apply for non-residents).

A 2% tax is levied on equity repurchases by entities listed for trading on designated stock exchanges. The tax applies to the difference between the fair market value of the redeemed, acquired, or canceled equity and the fair market value of the equity issued in the same year. Certain nonconvertible preferred shares are exempt from this tax.

Employers need to contribute to social security on behalf of their employees, with rates varying according to the territory. The maximum pensionable earnings under the Canada Pension Plan (CPP) for 2024 is CAD 68,500. For 2024, employers are required to pay, for each employee, government pension plan contributions up to CAD 3,867.50 and employment insurance premiums up to CAD 1,468.77.
Payroll taxes are charged at a maximum rate between 1.95% and 4.26%.

Provinces and territories implement carbon taxes in accordance with the Greenhouse Gas Pollution Pricing Act.

Other Domestic Resources

Canada Revenue Agency

Tax Rate

Allowable Deductions and Tax Credits

The main tax exemption is provided for payments into Registered Retirement Savings Plans (RRSPs), limited to 18% of earned income in the preceding year and a maximum contribution of CAD 31,560 for 2024 (whichever is less). Deductible costs and expenses include those related to employment, education, care for a dependent (capped at CAD 8,000 per child under seven years old and CAD 5,000 per child between 7-16 years old), alimony, certain moving expenses, union and professional dues, donations and investment carrying charges. Individual shareholders may also claim a tax credit on dividends. Interest on money borrowed to acquire investment property or to invest in a business is usually deductible. Capital losses are deductible, but generally only against capital gains.
The income tax system offers individuals a lifetime tax exemption for capital gains from qualified small business corporation shares and qualified farm or fishing property. This exemption, known as the Lifetime Capital Gains Exemption (LCGE), is set at CAD 1,016,836 for 2024.
Business deductions for self-employed persons normally include all reasonable expenses incurred to earn business income.
Several tax credits are provided by the law, for further information consult the dedicated page on the website of the Government of Canada. Furthermore, a comprehensive list of deductions for individual taxpayers is available here.

Special Expatriate Tax Regime

To eliminate any conflicts and the double taxation that might otherwise result, Canada's tax treaties often provide special residency "tie-breaker" rules for determining residency. Normally, under Canadian law and the residency provisions of most tax treaties, an individual is considered resident in the jurisdiction to which the individual has closer personal and economic ties, although other factors may influence this conclusion.
Non-resident taxpayers are taxed on Canadian-source income, on gains from the disposal of Canadian property, and on income derived from carrying on a business in Canada.