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| Subject: Canadian tax general information |
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I think I have to talk thru general Canadian taxation system to you guys if possible. Welcome any sharing and adding experience. Also as matter of fact, it??s tax season, for those future Canadian, I think it??s better to know this. I want to get rid off some misunderstood too.
I feel surprise somebody actually mention as long as I keep other citizenship, I don??t need pay tax?? This is absolutely untrue. Depend on which province do you live and the income level, all personnel who physically shows up in Canadian soil has the equal responsible towards taxation.
1.The most frequently tax we met is something like sales tax. GST/HST and PST.
Goods and Services Tax (GST) is a tax rate of 7% applied to the supply of most goods and services in Alberta, British Columbia, Manitoba, Ontario, Prince Edward Island, Quebec, Saskatchewan, North West Territories, Nunavut and the Yukon.
Harmonized Sales Tax (HST) is a tax of 15% that is applied to the same goods and services as the GST in, New Brunswick, Newfoundland and Labrador and Nova Scotia. HST is composed of 7% federal part and 8% provincial part.
Examples of goods and services taxable at 0% (zero-rated) include:
?? basic groceries such as milk, bread, and vegetables;
?? agricultural products such as grain, raw wool, and dried tobacco leaves;
?? most farm livestock;
?? most fishery products such as fish for human consumption;
?? prescription drugs and drug-dispensing fees;
?? medical devices such as hearing aids and artificial teeth;
?? exports (most goods and services taxable at 7% or 15% in Canada are taxable at 0% when exported);
?? many transportation services where the origin or destination is outside Canada; and
?? any supply of property or a service that is for the use of the Governor General.
PST depends on different province, B.C 7%, Saskatchewan, 7.%, Ontario, 8%.
Alberta because of rich petrol reserve, they charge 0% PST.
Those above are day-to-day sale tax. No matter who they are, same rate.
You can claim GST return, details I am not going to talk about, and otherwise I can be a tax consulter rather than immigrant consulter
2. Income tax.
This is kind of complicated topic, I can talk it about 2 hours if possible. Well just write it simple. You have to pay federal and provincial income tax, and CPP (Canadian pension plan) and EI (Employment Insurance) from each bio-week pay-check. It will automatically deduct from your pay-check.
I will only use one example, you guys can check out the rest online if you still interest on that.
16% of taxable income less than or equal to $35,595
22% greater than $35595 and less than $71,190
26% greater than 71,190 less than 115,739
29% greater than 115,739.
Base on my own example, because I went to college in 2004, tuition fee is tax deductible, and RRSP (registered retired saving plan), union duties, all of them add up, I don??t pay any income tax this year, furthermore, I still get my GST return last year, because of my tuition fee. I always think RRSP is such a generous tax-shelter, it??s like a super-charged non-taxable income, if you play some RRSP eligible mutual fund. You can actually let your retire funds grow without taxation. Maximum RRSP this year is 15,000 something, as long as you put no more than this number, no income tax asked.
If for those people, you think you pay too much tax. I hope when I finish my tax calculation; I will you the real number for reference purpose. I think Canadian taxation system is so fair and reasonable. We are not living in some corruption country; I trust how they use our money.
Welcome sharing, or if I put some mistake information, please let me know.
Those information are available online or thru your local revenue Canada office. They have free publication that is the best and free Canadian knowledge textbook.
[08-03-2005,14:50]
[**.66.78.235]
Yijie |
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(in reply to: Canadian tax general information)
The Canadian tax system is fair, but we pay way too much taxes and have way too little deductions than in US. This year, they had 9 billion surplus in the budget, why they didn´t use at least some of the money to reduce taxes?
(They say they did, but that´s a joke: $400 more PER YEAR for a middle class Canadians within 5 years).
Now, why do you think the government wants you to put money to RRSP? The answer is simple: so they can control it and pay you less pension when you reach an old age.
Here is the alternative to RRSP that our government doesn?t want you to know.
Assumptions:
1.You contribute every year $14,500 (maximum limit in 2003) to RRSP;
2.You have 11% average annual growth (which is close to the historic returns of the stock market not including dividends).
After 20 years, you will have $931,000. But this is still not your money ? when you withdraw it, you?ll pay tax 30-43% (depending on your marginal tax). So after tax, you have 530-650 thousands.
Now the alternative way.
1.Take $200,000 loan for 20 years at 5% and invest it.
2.Every year, pay only the interest ? $10,000.
3.Contribute an additional $4,500 to RRSP.
Now, assuming same 11% growth, your $200,000 after 20 years grow to $1,612,000 and you have an additional $289,000 in RRSP. After returning $200,000 loan, you have $1,412,000 which are taxed as capital gains (only 50%), so you have 919,000 to $1,129,000 after tax, (depending on your marginal tax) plus 289,000 in RRSP before tax. This compared to $530,000-$650,000 in the first case. And you have more flexibility on when to withdraw the money.
Bottom line: you spend the same $14,500 every year and get the same tax return (you deduct the $10,000 interest because the money is used to invest), but your bottom line after 20 years is about twice bigger.
And you can have the maximum pension from the government because theoretically, your income is close to zero (you have taxable income only when you realize capital gain).
[08-03-2005,15:24]
[**.10.219.38]
prg |
(in reply to: Canadian tax general information)
PRG, thanks a lot, I will research your review a little bid before I have any further comment, great to know that. as a matter of fact, I am not a financial advisor. I have little knowledege on financial planning. I am just a college boy according to my age,:-). sorry for my naive comment if I made.
[08-03-2005,15:38]
[**.66.78.235]
Yijie |
(in reply to: Canadian tax general information)
Yijie...you asked about PST.
http://www.taxtips.ca/BCpst.htm
[09-03-2005,22:52]
[***.81.114.40]
sharon |
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