Canadian province with the lowest tax rate is a crucial thing to know, especially for newcomers earning in Canada.
Given that Canada has a well-developed welfare state and publicly accessible services, taxes are essential to Canadian society and, by extension, to the well-being of its citizens.
Nevertheless, the topic of low tax rates is frequently in question because they can result in additional expenses or take money out of an individual’s income.
Nunavut is Canada’s province or territory with the lowest income tax rates, but the issue is more complicated than it might initially seem.
The Types of Canadian Taxes
Canada comprises numerous types of taxes, out of which the most standard ones are as follows:
- Income Tax – This tax bifurcates into Provincial and Federal Income Taxes.
- Consumption Tax – This type of tax can be divided into Generalized and Provincial Sales Taxes.
However, different types of taxes are appropriate for your situation.
Income Taxes
In Canada, income taxes are levied twice. There are two income tax rates in Canada: the federal income tax rate, which is the same for all citizens living in all provinces and territories, and the provincial income tax rate. This is the one that differs depending on the province. In Canada, individuals will need to pay a mixture of these two income taxes.
The tax rates in Canada are arranged into brackets. A prevalent misunderstanding regarding income taxation in Canada is that the flat rate at which an individual’s entire income is taxed increases in tandem with their income. Also, their movement through the tax brackets.
This isn’t the case; income receives tax according to a tiered structure spanning these levels. As an illustration:
The tax rates for 2023 state that there will be a 15% tax on income under $53,359 CAD and a 20.5% tax on income over $53,359 CAD to $106,717 CAD.
Instead of immediately applying the necessary federal tax rate for your bracket (20.5%) if your annual income in Canada is $90,000 CAD, you would initially pay the relevant tax on the sum that fits into the lower bracket. This implies 15% on the first $53,359 CAD.
Further, you would pay the comparable tax rate (20.5%) on amounts over the bracket limit. Accordingly, you pay $15,515 in annual income tax in contrast to $18,950 in income tax (20.5% flat rate).
Canadian province with the lowest tax rate
Consequently, in order to ascertain which province actually has the lowest tax rate, we must employ an example wage. As a result, we will have a more accurate estimate of the potential taxes. We can utilize this amount as pre-tax income.
Statistics Canada states that the average national job-related salary of a Canadian worker (aged 16 and over) in 2021 was $51,600 CAD. This is according to the most recent Canadian Income Survey.
Tax amounts in provinces
For this wage, the federal tax rate in 2023 is 15%. The tax amounts that a person earning this wage would pay in each province are listed below:
- British Columbia: $7,515 CAD;
- Alberta: $8,399 CAD;
- Saskatchewan: $8,296 CAD;
- Manitoba: $9,564 CAD;
- Ontario: $7,449 CAD;
- Quebec: $9,331 CAD;
- New Brunswick: $9173 CAD;
- Nova Scotia: $7,515 CAD;
- Prince Edward Island: $9,909 CAD;
- Newfoundland and Labrador: $9,487 CAD;
- Northwest Territories: $7,502 CAD;
- Nunavut: $6,727 CAD; and
- Yukon: $7,704 CAD.
It is evident that Nunavut has the lowest tax payable; however, this may not always be the case and can vary significantly depending on an individual’s income and expenses.
Consumption Taxes
Income taxes and consumption taxes work similarly. Every province has its own Provincial Sales Tax (PST) in addition to the General Sales Tax (GST) levied by the federal government as a national consumption tax. Canadian citizens must pay both types of taxes on products and services acquired domestically. Keep in mind that some products and services are not subject to these taxes.
In Canada (as of 2023), the standard GST rate is 5%.
The following are the 2023 PST rates for the following provinces that impose both consumption tax rates:
- British Columbia: 7%;
- Manitoba: 7%;
- Quebec: 9.975%; and
- Saskatchewan: 6%.
The 2023 HST rates for the following provinces that bundle consumption taxes:
- Ontario: 13%;
- New Brunswick: 15%;
- Newfoundland and Labrador: 15%;
- Nova Scotia: 15%; and
- Prince Edward Island: 15%.
Furthermore, the following territories and provinces solely impose a GST on goods and services and do not impose a PST:
- Alberta;
- Northwest Territories;
- Nunavut; and
- Yukon
If you wish to know about the Canada Provincial Nominee Program, connect with our immigration experts at MakeHomeCanada. Our considerable experience in the immigration field can help you. You may write to us [email protected]
