Collection of income tax by the concerned tax department is a common practice in almost all the countries and it is a way of generating revenue for the Government to carry out various infrastructure projects, developing rural places of the country and improving the country’s economy. In order to generate this revenue, every country will collect taxes from the citizens residing and working in a country depending on their profits and incomes. Income tax is a type of tax that you need to pay to the Government if you earn a good income through the services that you render a local or an international company in your country.

Income Tax In Canada

If you are a resident in Canada and are working in Canada, then you are required to pay income tax to the Government of Canada in order to support the economy of the country. Moreover, it is seen that the income earned by the Government through personal income taxes is higher than what they earn from corporate income tax. The Canadian tax on income is levied based on the provisions made in the Income Tax Act of Canada and the Canadian Revenue Agency has the responsibility of collecting the income tax from its citizens. Like most countries, the income tax system is based on self assessment. The Canada Revenue Agency will verify the returns filed by the personal income people and will make corrections if they come across any errors in the returns filed.

Collection Of Income Tax

The Canadian residen individuals will have to make use of the T1 Tax and benefit return to file personal income tax returns for both salaried and self employed individuals. The amount of tax that each individual will have to pay the Government will be dependent on their their taxable income. The taxable income is calculated by a simple process wherein the allowed expenses of an individual are deducted from the gross income of that individual.

Some of the different ways of collecting tax in Canada are:

• Deduction of the tax right from the source.

• Taxpayers can pay their income tax in small installments spread over the year instead of paying it in bulk at the end of the year.

• Tax can be paid when you file the tax return.

• You can also pay the tax after filing the tax returns and this is known as arrears payment.

Expert Service To File Income Tax

There are quite a lot of small complex adjustments that you need to make while filing income tax returns in order to save some money on your income tax. If you seek the help of an experienced and highly qualified Toronto tax accountant, then you need not worry about filing your income tax returns.

Canada is a country where there is no estate tax and this may sound great from the outside, but then what many don’t realize is that there is a deemed disposition tax in Canada which is very similar to estate tax. This is a tax that is applied by the Canada Revenue Agency after you die and is a liability that will have to be dealt with. This can be a problem for many, but then there are ways to get this sorted out by estate planning and to ensure that the assets reach the beneficiaries it is intended for without much hassles. We will be discussing about ways you can reduce the exposure of your assets to the deemed disposition tax and on how you can use planning to safeguard the interests of your assets.

Taxation Issues With Assets

The term deemed disposition tax is used because as per the government your investments are deemed to be sold when you die. Whenever assets are sold, there will probably be capital gains and the capital gains that one gets after the assets are sold after the death will be included in the final income tax return that will have to be filed in the year of the death. This final tax return will also include the income that is received from stocks, life insurance proceeds gained due to death, value of retirement accounts and real estate investments from the beginning of the death year till the date of death. The federal tax rate in Canada is up to 29% and this will mean that a substantial amount will have to be paid as tax even after death of a person. Provincial taxes will also apply. But there are ways to do some estate planning and defer the tax and it can be done by transferring the assets to a trust or to a surviving spouse using a will. But then if the spouse sells the property, the tax will again be applicable.

Options of Using Trusts

Using trust will often be the best option for estate planning and there a few types of trusts that you can opt for. They are

• Living Trust – This is a trust that is formed when the person is alive. This is a common trust that is formed by people who have a family business and is a popular choice.

• Testamentary Trust – These are personal trusts that are created on the day a person dies and the terms of the trust is usually determined by the will or a court order.

As in many other countries, non-residents in Canada are also subjected to taxation and they will have to pay taxes for the income that they generate from sources that are within Canada. The Canadian non-resident taxation policies can be a bit confusing for people as there are a lot of different rules in the taxation laws and if you are not aware of the terms that are used typically in taxation, then you may find it even more difficult to understand. Some of the non-residents are exempted from tax as per the tax treaties that are signed between the respective countries and some of the income have to be taxed like it is done for Canadian residents.

What You Should Know about Canadian Non-Resident Taxation

There are a few important points that one has to know about Canadian non-resident taxation and they are discussed below.

• Identifying your residency status in Canada is the first step that one has to do. There are different types of residency status like residents, non-residents, deemed residents and deemed non-residents in Canada and the taxation for each of the residency status will vary.

• Identifying your tax obligations to Canada is the next thing that you will have to assess. Most of the types of income that is generated from Canada is taxed and therefore find out the tax bracket that your income will fall under.

• Identifying the Canadian non-resident taxation package that you will have to use is very important and it is decided by the type of income that you generate.

• Knowing the filing due date and filing your IT returns along with the necessary forms before the deadline.

• Pay any tax that is due to the Canadian Revenue Agency before the deadline so that you avoid penalties or other consequences.

Corporate Tax and Non-Residents

Non-resident corporations who have business interests in Canada and generate revenue from a business that is located in Canada will have to pay corporate tax to the Canadian Government. The clauses that govern the corporate tax in Canada are a bit complicated and the complications will only increase if you are a non-resident. If you are ‘carrying on business’ in Canada either directly or indirectly then the profit that is earned out of the business will be subject to taxation. Like in income tax, the residency status of the corporation will have to be determined and the corporate tax that is levied will be based on the residency status of the corporation.

Hiring Tax Experts for Taxation Issues

If you are a non-resident then it will be a wise decision to avail the services of tax experts to help you in filing your taxes. As the Canadian non-resident taxation policy is complicated paying personal income tax or corporate tax can be rather confusing for nonresidents. A good tax expert will be aware of the various exemptions that you can avail and will also know about what forms are necessary while filing your Tax Return. You may have to spend a small sum of money as hiring charges but then it will save a lot of your time and will ensure that you do not miss out anything while filing your return which can then result in penalties.

In Canada, corporation have to pay tax on their income generated. Canadian Corporate tax only makes for a small portion of the entire taxes that are collected and the major share of the revenue is from personal income tax. Canadian Corporate tax has to be paid by the corporation before dividends are distributed among the individual shareholders. For the people who receive dividends from Canadian corporations, some credit is given for underlying tax. All resident corporations in Canada have to pay corporate taxes and have to file a corporation tax return (T2) every year. Even if there is no tax payable to the CRA, corporations have to file the T2 return.

Who Have to File T2 Returns And When

All resident corporations have to pay Canadian corporate tax and file the T2 return except charities that are registered, Crown corporations and Hutterite colonies. T2 return has to be filed by the corporation even if they have no corporation tax to pay and non-profit organizations, inactive corporations and tax-exempt corporations should file the returns mandatorily. Non-resident corporations are also required to file T2 return if any of the following situations can be applied to them:

• The corporation has carried on business in the country

• The corporation has disposed of taxable Canadian properties

Any disposition that has been done after 2008 will have a few additional criteria that it will have to consider and there have been other amendments to the definition of taxable Canadian property . T2 return forms have to be submitted to the CRA no later than 6 months from the end of the year. The date of filing will change according to the when the tax year ends and one has to ensure that it is not beyond six months of the end of the year or else they may have to pay a penalty.

How to Determine the Tax Year of The Corporation

If you want to pay your corporation tax promptly and file the T2 return on time, you need to know the tax year end of your corporation. The fiscal period of a corporation or the corporation’s tax year has to be less than 53 weeks. New corporation can choose the tax year end while filing the first T2 return and the subsequent tax year can be calculated according. If the professional corporation is a partnership firm, then the tax year will end on December 31. The tax year end cannot be changed by the corporation unless approved by the CRA and they have to pay their corporation tax and file the T2 returns before the deadline until they get a notification of change of tax year end.

Filing A T2 Return Form

IF the annual gross revenue of the corporation exceeds $1 million, then the corporation will have to file the T2 return online. Some companies are exempted from this rule and they are

• Nonresident corporations

• Insurance corporations

• Corporations that are exempted from paying tax under section 149 of the Canadian Income Tax Act

• Corporations that are reported in functional currency

Corporations that have less than $1 million revenue can send their T2 return forms to their respective tax centers and the nonresident corporations can send their forms to the International Tax Services Office.

If you are working in Canada and are not a resident of Canada, then you too need to pay income tax in Canada. Income that nonresident people living in Canada earn by working in Canada will also be taxed like the taxes that are levied on resident Canadians. The tax structure of course would be different for the two groups.

Living And Working In Canada

If you are living and working in Canada and you are not a Canadian resident, Canadian non-resident taxation rules apply to you. It is ideal that you should be aware of such taxation rules if you are living or working in Canada as a nonresident. You will be able to gather a lot of information about the taxation laws in Canada on nonresidents through the internet and online discussion forums. You can as well contact some of the experienced and reputed tax accounants in the area you live in Canada in order to get full information on the nonresident taxation laws. He or she will help you in computing the tax figures that you need to pay a tax to the Government of Canada.

Accessing Your Canadian Residency Status

A lot of factors are considered when it comes to determining the residence status of a person living in Canada. The important factor that is taken into consideration is the residential ties that the nonresident has in Canada. Some of the common residential ties in Canada are:

• Owning personal property in Canada like car, furniture and so on.

• Having a home in Canada.

• Owning a Canadian driving license or Canadian credit cards or Canadian bank account.

• Having good social or economical ties in the country.

• Have a spouse or dependents in Canada.

• Having a common law partner in Canada.

• Health insurance with Canadian provinces or territories.

If you are not able to find out your residency status then you have the option to fill Form NR74 or NR73 and send it to International Tax Services Offices to get more information and clarity on the status of your residence in Canada.

Forms to File Tax Returns

It is important for you to obtain forms like Canadian T4 form from your Canadian employer in order to file your papers for non-resident tax in Canada. This form will have details of your earnings and deductions that are made by your employer. This form is normally mailed to the address that you give to the Canadian employer. These forms are also quite important for Canada-US tax filing and hence it is important for you to make sure that you give the correct address to your employer so that you receive the form properly. Normally, the T4 forms will be sent by your employer between January and March which will give you ample time to file your nonresident tax return by the end of April.