Canadian tax legislation is complex and requires proper planning and a broad understanding of income tax rules and regulations to minimize possible negative tax implications to both employee and employer.
The Canada Revenue Agency (CRA) and other regulatory agencies, such as the Canada Border Services Agency (CBSA), are actively in the process of identifying taxpayers and employers who are non-compliant with Canadian taxation and payroll remitting, reporting, and filing requirements. The CRA is also working closely with other foreign tax authorities and regulatory agencies thus increasing the complexities associated with an international global workforce entering Canada.
These initiatives have significantly increased the compliance activity and the scrutiny of the CRA and as such, Doane Grant Thornton Canada’s Global Mobility Services (GMS) practice can assist expatriates and their employers navigate through Canadian tax and employment related matters including advising on tax planning opportunities, management of assignment policies and the provision of Canadian tax filing services.
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From an employer perspective, Canada has a very intricate and comprehensive payroll legislation with time sensitive deadlines and requirements. Non-compliance can result in many negative implications such as the application of significant penalties and interest charges. It is best to obtain a thorough understanding of the Canadian payroll system and the possible options and relief that may be available.
For international employees performing services in Canada, be it temporary in nature or more long-term, proper planning is required to ensure that the employee’s exposure to Canadian taxation is either minimized or eliminated.
Work visas are required to undertake duties in Canada and serious penalties can apply for breach of visa conditions. There are several types of visas, and the process in Canada is subject to frequent changes. As a result, we recommend consultation with an immigration lawyer before the finalization of any assignment. Information on visas can be found at www.canada.ca/en/immigration-refugees-citizenship
The Canadian taxation year runs from January 1 to December 31.
The filing date for an individual’s tax return is generally April 30 following the year-end. For self-employed individuals (or married to self-employed individuals), the tax filing deadline is June 15 although any balance due is still payable by April 30.
There is no ability to request an extension of the due date to file a Canadian tax return.
There are potentially several foreign asset reporting disclosure forms that may need to be filed by the individual. The filing deadline of these forms varies. Late filing or non-compliance may result in significant penalties and interest.
Other than the province of Quebec, all the other provincial taxes are incorporated with their Canadian federal personal income tax return and filed with the CRA.
Individuals are taxed at progressive rates according to total taxable income. Rates for the 2025 income tax year are:
Resident Federal tax rates
Taxable Income (C$) Marginal rate
$0 to $57,375 15%
$57,376 - $114,750 20.5%
$114,751 - $177,882 26%
$177,883 - $253,414 29%
$253,415 and over 33%
Federal tax
Base salary 80,000
Bonus 20,000
Cost of living allowance 15,000
Bank interest 5,000
Total income 120,000
RRSP1 (22,000)
Taxable income 98,000
Federal income tax 16,934
Less: Non-refundable tax credits (NRTC):
Personal2 16,129
Spousal3 16,129
CPP4 4,034
CPP 25 396
EI 1,077
Canada employment amount 1,471
Total NRTC 39,236 x 15% (5,885)
Federal income tax 11,049
Provincial tax
The following table outlines the combined federal and provincial tax by province for an individual with $98,000 taxable income (assuming the same fact situation noted above – i.e., married employee, spouse has no income). Provincial tax includes all applicable surtaxes. Ontario tax includes the Ontario health premium tax.
British Columbia $15,801
Alberta $16,704
Saskatchewan $18,309
Manitoba $18,896
Ontario $17,168
Quebec $19,722
New Brunswick $19,377
Prince Edward Island $20,904
Nova Scotia $22,068
Newfoundland and Labrador $20,222
Northwest Territories $15,035
Yukon $16,105
Nunavut $13,352
Canadian tax residents are subject to Canadian taxation on their worldwide income, while non-residents are generally only subject to Canadian tax on Canadian source income.
These general rules may be modified by certain domestic concessions and tax treaty provisions depending on individual circumstances.
Based on Canadian domestic tax law, an individual’s Canadian tax residency is based on their ties to Canada. Generally, establishing a primary tie to Canada is a strong indicator that an individual would be considered a Canadian tax resident. Primary ties consist of:
Secondary ties to Canada must also be considered especially when an individual is departing Canada or a non-resident. Generally, secondary ties to Canada are not strong indicators of an individual’s tax residency. Secondary ties to Canada may consist of the following:
It is also possible for an individual to be considered a tax resident of Canada if they are present in Canada for more than 183 days during a calendar year. However, it is possible to be deemed a non-resident of Canada despite the 183 days in Canada should the individual be resident in a country which has a tax treaty with Canada.
Taxable income from employment includes salaries, wages, bonuses, lump sum payments, allowances and benefits arising under employment-related share purchase/stock option programs.
Canada has very broad sourcing rules which need to be considered carefully in some cases. However, it is generally true that employment income is deemed to be sourced in the country in which the employment services are physically performed.
Certain benefits may be exempt from Canadian taxation. To qualify to exclude the benefits from taxation, timely forms/waivers may need to be filed with the CRA. Certain taxable benefits that may be exempt include:
Specific advice should be sought in advance to ensure planning opportunities are maximized and qualification criteria are met.
Canadian tax residents are eligible to claim a credit for foreign tax paid on foreign-source income (which may include foreign sourced employment, investment, and rental income). In general terms the foreign tax credit will be limited to the lesser of the foreign tax paid or the Canadian tax applicable to the foreign income.
For Canadian purposes, deductions can be claimed to reduce an individual’s taxable income when such deductions were incurred to earn taxable income. Common deductions may include union or professional dues and investment fees incurred to generate investment income.
The most common deduction for Canadian purposes is the registered retirement savings plan (RRSP) deduction. The RRSP is an individual funded personal retirement plan. The individual’s contribution to the RRSP (subject to annual limitations) would be claimed against the individual’s income.
Common tax credits include donations, tuition and medical.
Based on domestic Canadian tax law, employees resident in Canada or performing services in Canada are subject to Canadian payroll withholding, reporting, and filing requirements. The employer withholds the source deductions from salary and wages and remits this amount to the CRA.
Please note that other than the province of Quebec, any provincial withholdings are remitted directly to the CRA along with the federal withholding. Quebec provincial withholdings are remitted to Revenu Quebec.
The frequency of remittance of withholdings to the CRA is dependent on several factors which include whether the employer is a new employer in Canada, the average monthly remittances due to the CRA and the corporate structure of the employer (i.e. associated or related companies that also remit to the CRA).
An annual wage reporting form for each employee, Form T4, “Statement of Remuneration Paid” and a Form T4 Summary “Summary of Remuneration Paid” which reports the employees’ and employer’s compensation and withholdings for the taxation year are to be filed with the CRA by February 28 of the following taxation year.
Based on current legislation, 50% of the realized capital gain is subject to Canadian taxation at marginal tax rates.
Realized capital losses may either be carried forward or back (up to three years) and be claimed to offset previous or future capital gains.
In recent years, Canadian federal, provincial and municipal jurisdictions have implemented a series of rules and prohibitions aimed at regulating home ownership and use, particularly by non-residents or non-Canadian citizens. These measures are primarily designed to address concerns about housing affordability and availability for Canadian residents. The federal government, along with several provincial and municipal authorities, has introduced legislation to curb the influence of foreign investment in the residential real estate market.
One of the most notable federal measures is the Prohibition on the Purchase of Residential Property by Non-Canadians Act, which came into effect on January 1, 2023. This act imposes a two-year ban on non-residents purchasing residential property in Canada, which has since been extended to January 1, 2027.
Another key federal measure, introduced in 2022, is the Federal Underused Housing Tax (UHT) - an annual tax based on 1% of the value of residential properties in Canada that are considered to be underused or vacant. The tax was first implemented for the 2022 calendar year, with the first filing due on April 30th, 2023. Residential property for UHT purposes is limited to a property that has three or less dwelling units. Many resident taxpayers have found they are exempt from having to pay any tax payable under this tax but have also found that there is an onerous filing requirement that typically involves the need for professional advice. Other sub-national jurisdictions such as the Province of British Columbia and the City of Toronto have introduced other forms of Vacant Housing Taxes to encourage high occupancy rates in existing homes.
A third measure, aimed at curbing speculative property flipping, modifies the tax treatment of a gain realized on properties held less than one year, unless certain criteria apply. Such gains are treated as ordinary income rather than capital gains, and are not eligible for a principal residence exemption.
Several Canadian jurisdictions have also implemented regulations to manage short-term rentals. These measures aim to balance the benefits of short-term rentals with the need to maintain a sufficient supply of long-term housing options for residents.
Given the regulatory landscape in this area is constantly changing, please seek professional advice to understand what rules may apply.
Should an individual sever their Canadian tax residency and no longer be considered a Canadian tax resident, the individual may be subject to deemed disposition/departure tax.
The CRA deems that an individual to have sold their assets (exceptions listed below) on the date they terminate their Canadian tax residency. This deemed disposition requires the individual to report any unrealized gains on their departure tax return. Any unrealized gains included as part of the deemed disposition will be subject to Canadian taxation which may result in a departure tax. Based on current Canadian tax rates, half of the unrealized gains will be subject to Canadian taxation at the individual’s marginal tax rates.
Departure tax is not applicable to the following assets:
Please note that it may be possible to defer the resulting departure tax resulting from deemed dispositions. To defer the departure tax, an election must be timely filed with the CRA, and security may be required to be provided with the CRA.
Several provinces in Canada assess an additional payroll tax for the purposes of funding the provincial run health care systems, employee training programs and/or educational system.
Each of the provinces have different health tax/levy legislation.
Currently, the following provinces assess the employer health tax/levy and/or payroll tax:
The Canada Pension Plan (CPP) is Canada’s national social insurance plan that provides Canadians with funds during their retirement.
CPP is funded by both the employee and employer with matching contributions. For the 2025 taxation year, the maximum employee and employer CPP contribution is equal to $4,034.10
All residents of Canada (except residents of Quebec) who earned pensionable earnings and are between the age of 18 and 70 are required to contribute into CPP. Certain high-income earners contribute an additional $396.00 towards a temporary fund, CPP2 to improve financial security in retirement for working individuals facing rising cost of living and longer life expectancies.
For expatriates working in Canada on a temporary assignment, may opt out of paying into CPP and if a Totalization Agreement has been entered into by the home country and Canada and if a Certificate of Coverage has been applied/approved.
For a list of countries that Canada has entered into a Totalization Agreement with, please refer to What is the purpose of international social security agreements? - Canada.ca
The Employment Insurance (EI) is Canada’s national special benefits program which aids individuals who are not able to work due to specific life events (pregnancy, illness, etc).
EI is funded by both the employee and employer. For the 2025 taxation year, the maximum employee and employer EI premiums are $1,077.48 and $ 1,508.47 respectively.
All residents of Canada (except residents of Quebec) who earned insurable earnings are generally required to contribute into EI.
For expatriates entering Canada, if the expatriate continues to contribute into their home country’s equivalent of EI while in Canada then the expatriate and employer would be exempt from making EI premiums.
There were significant changes to the taxation of stock options in Canada which is beyond the scope of this summary.
To determine the impact of this new legislation, professional advice should be obtained.
Christine Herrington
T- 416-607-8853
Email: christine.herrington@doane.gt.ca
Sarah McLellan
T – 519-575-7587
Email: sarah.mclellan@doane.gt.ca