Canada's three levels of government — federal, provincial and territorial, and municipal — provide their citizens with a wealth of services and programs. Governments collect your tax dollars and return them in the form of education, free health care, roads and highways, and numerous other social benefits.  In 2013-14, for example, the federal government alone spent $251.2 billion on government-sponsored programs. And about 30% of federal government revenues come from personal incomes taxes.

Both federal and provincial/territorial governments levy income taxes which, as the name implies, is a tax on your income. They also levy consumption taxes or sales taxes. In Canada, you will encounter the Goods and Services Tax (GST), provincial sales taxes and, in some provinces, the Harmonized Sales Tax (HST).

Goods and Services Tax (GST) and the Harmonized Sales Tax (HST)

Consumption tax, more commonly known as a sales tax, is a tax on your purchases — whether you are shopping for new clothes, dining in a restaurant or buying a mutual fund. When you purchase goods and services in Canada, you add this tax to the cost of your purchase to get the total owing; the tax is generally not included in the price displayed on the sales tag.
Some items are exempt from sales taxes: basic groceries, for example, prescription drugs, child care, health and dental services, rent. Some items are "zero-rated," such as most livestock and agricultural and fishery products. They are subject to sales tax but at a rate of 0%. Everything else is taxable.
The federal government levies a 5% GST. Some provinces also levy a provincial sales tax (PST); the amount varies by province ranging from 7% to 10%. Some provinces have chosen to combine the two taxes into a single tax — the Harmonized Sales Tax or HST — which includes both the provincial and federal portion.

In Ontario, for example, the HST is 13% with 5% going to the federal government and 8% to the province. If you are shopping in British Columbia, however, your sales receipt will show GST and PST separately, at 5% and 7% respectively. Only Alberta has no PST; in Alberta you pay only the 5% GST.

Income Taxes

Who is required to pay income taxes in Canada?

Every resident of Canada is required to file a Canadian income tax return annually. Before filing your tax return, you must determine whether you are a resident, a "deemed" resident or a non-resident of Canada for tax purposes. According to the Canada Revenue Agency (CRA), you are considered a Canadian resident when you have established significant ties in Canada, such as having your permanent residence in Canada or a spouse and/or dependents in Canada. Having significant ties can also include holding Canadian documentation — for example, a social insurance number (SIN) or a provincial health card and/or a driver's license showing a Canadian address. The CRA may deem you a resident if you spend 183 or more days in Canada in a year; if you maintain significant ties to another country or your country of origin, you may be considered non-resident. 

In Canada, each member of the household — who has income — is responsible for filing his or her own income taxes. You and your spouse, for example, will each file a return. If you have teenaged children who earned income on a part-time job, the child will file a return. And you must file a return, even if you have been in Canada only part of the year; you will file your worldwide income for that part of the year.

To prevent you from paying taxes twice — in Canada and in your country of origin — on the same amount of money, Canada has tax treaties or conventions with more than 90 countries. To find out more, see the Foreign Pensions and Tax Treatiessection.

Paying income taxes in Canada

Canada's tax system is unique in many respects and will probably be different from what you are used to in your country of origin. As a resident of Canada, it is your responsibility to pay taxes on the worldwide income you earned during the year and to file your tax return with the government. Income can take many forms:  employment income, investment income, commission income, retirement income. You will pay taxes on your income at both the federal level and the provincial/territorial level.

In Canada, the tax system is progressive or graduated, meaning the more money you make, the more income taxes you pay. The amount of your income that you pay in taxes is expressed as a percentage and goes up in steps, or "brackets."

For example, in 2017, if you had a taxable income less than $45,916, you are in the lowest bracket of federal income tax and pay 15% of taxable income. If you made more than $45,916 but less than $91,831, you still pay 15% on the first $45,916, and 20.5% on the next $45,916. And it goes up according to income.

On top of that, you will pay provincial/territorial income taxes. Your province of residence is determined by where you were living on December 31 of that tax year. Even if you lived in Manitoba until September, when you moved to Ontario, you will file Ontario income taxes. Provincial/territorial income rates, likewise, step up in brackets and vary according to the jurisdiction. For the federal and provincial/territorial income tax brackets, go to Canadian income tax rates for Individuals - current and previous years. 

So, every year by April 30, you must file your income tax return, the T1 general tax return, for the previous year ended December. 31, and the accompanying provincial forms and "schedules." The forms you need will be determined by your situation.