Wednesday, November 1, 2017

Taxes in Canada and Ontario

Ontario is the largest province in Canada with a population of 10.5 million and 4.2 million properties.

Federal tax rates for 2017

  • 15% on the first $45,916 of taxable income, +
  • 20.5% on the next $45,915 of taxable income (on the portion of taxable income over $45,916 up to $91,831), +
  • 26% on the next $50,522 of taxable income (on the portion of taxable income over $91,831 up to $142,353), +
  • 29% on the next $60,447 of taxable income (on the portion of taxable income over $142,353 up to $202,800), +
  • 33% of taxable income over $202,800.

Provincial/territorial tax rates for 2017

5.05% on the first $42,201 of taxable income, +
9.15% on the next $42,203, +
11.16% on the next $65,596, +
12.16% on the next $70,000, +
13.16 % on the amount over $220,000
Under the Constitution, municipalities are creatures of the provincial government. The Provinces can create or destroy municipalities, determine what they can make expenditures on, and what sources of revenue are available to them. In terms of the property tax, the provincial governments set the rules for how the tax base and tax rates are determined. Municipalities in all provinces levy property taxes to finance municipal services. In some provinces, the provincial government also levies a property tax to finance some of the costs of elementary and secondary education. 

Municipal Taxes 

The municipal level of government is funded largely by property taxes on residential, industrial and commercial properties. These account for about ten percent of total taxation in Canada. There are two types. The first is an annual tax levied on the value of the property (land plus buildings). The second is a land transfer tax levied on the sale price of properties.

Land transfer taxes are levied at the time of sale of a property and are calculated as a percentage of the value of the property transferred. The tax, which must be paid before the transfer will be registered, is like a sales tax payable by the purchaser and calculated as a percentage of the purchase price. The tax rate sometimes increases with the value of the property; in some cases, taxes are higher on non-residents. In Ontario, for example, the rate is 
  • 0.5 percent of the first $55,000 of purchase price; 
  • 1 percent on the amount from $55,000 to $250,000; 
  • 1.5 percent on the amount from $250,000 to $400,000; and 
  • 2 percent on the amount over $400,000. 

International taxation

If you are a non-resident of Canada and you have taxable earnings in Canada (e.g. rental income and property disposition income) you will be required to pay Canadian income tax on these amounts. Rents paid to non-residents are subject to a 25% withholding tax on the “gross rents”, which is required to be withheld and remitted to Canada Revenue Agency (“CRA”) by the payer (i.e. the Canadian agent of the non-resident, or if there is no agent, the renter of the property) each time rental receipts are paid or credited to the account of the non-resident by the payer. If the payer does not remit the required withholding taxes by the 15th day following the month of payment to the non-resident, the payer will be subject to penalties and interest on the unpaid amounts.

Sales taxes

Current sales tax rates Ontarion 13% (HST) Harmonized Sale Tax

Excise taxes

Both the federal and provincial governments impose excise taxes on inelastic goods such as cigarettesgasolinealcohol, and for vehicle air conditioners. Canada has some of the highest rates of taxes on cigarettes and alcohol in the world, constituting a substantial share of the retail total price of cigarettes and alcohol paid by consumers. These are sometimes referred to as sin taxes.

Gift tax

Gift tax was first imposed by the Parliament of Canada in 1935 as part of the Income War Tax Act. It was repealed at the end of 1971, but rules governing the tax on capital gains that then came into effect include gifts as deemed dispositions made at fair market value, that come within their scope.

Licensing fees and regulatory charges

Provincial legislatures may charge a fee that is of an indirect nature, where it is supportable as ancillary or adhesive to a valid regulatory scheme under a provincial head of power.


The property tax accounted for over 53 percent of local government revenues on average across Canada in 2000.

In all provinces, the base for the property tax is “real property,” defined as land and improvements to the land. There is different treatment of machinery and equipment in different provinces; in some cases, machinery and equipment “affixed” to real property is included and in others it is not. There is also different treatment of minerals, mines, oil and gas wells, pipelines, railways, and public-utility distribution systems in different jurisdictions. 

 All provinces assess properties at some percentage of market value (sometimes referred to as actual, real, fair, or current value). In most provinces, farm properties are favoured in the assessment system. Generally, alternative uses of the land are excluded in considering its assessed value. In Ontario, properties are assessed at their “current value"

In Ontario, properties are assessed at their “current value” which is defined as the amount of money the fee simple, if unencumbered, would realize if sold at arm's length by a willing seller to a willing buyer. For farms, conservation lands, and managed forests, value in current use (not highest and best use) is used. Railway and hydro rights-of-way are taxed on a rate per acre for nine geographic regions across the province. The rates are set by provincial statute. 

Exemptions include churches, cemeteries, Indian lands, public hospitals, charitable institutions, and educational institutions. Land or property belonging to the federal, provincial or local governments is not liable for taxation. Instead of paying property taxes, governments make payments in lieu of property taxes to municipalities. The payments are viewed as property taxes 3 since the municipality would have collected property taxes on these properties if they were privately owned. They are generally less than the property taxes would be, however. 

Farmland is assessed at its value in current use and the tax rate is legislated to be 25 percent of the residential rate.

Variable tax rates permit municipalities to shift tax burdens among property classes within provincially-determined ranges of fairness. Transition ratios were calculated for each property class to reflect the relative distribution of burden by tax class prior to reform (the “starting point”). 

Municipalities can set their tax ratios so as to maintain the transition ratios, move towards the range of fairness, or vary tax ratios within ranges of fairness.

Development Charges

Development charges Development charges (also known as exactions and lot levies) are levied by local governments on developers to cover the growth-related capital costs associated with new development.The municipality, in some cases, agrees to recover part of the costs on behalf of the developer from future benefiting owners.


Canada and Ontario are one of the most taxed provinces in the world.


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