TAX STRUCTURE

Canada's personal income tax system is a self-assessment system built on the Income Tax Act. Every resident individual reports worldwide income on a T1 Income Tax and Benefit Return, calculates the tax owing, and pays any balance. The Canada Revenue Agency (CRA) administers federal tax and, under tax collection agreements, the provincial and territorial income taxes of every jurisdiction except Quebec, which runs its own system through Revenu Québec.

The system has three layers that work together: who is taxable (residency), what is taxable (income, measured in a specific order), and how much tax is owed (graduated rates, reduced by credits). This section explains each layer before the later sections go into slips, deductions, credits and forms in detail.

• Taxpayer: Canada taxes individuals separately. There is no joint return for couples, although many credits and benefits use family net income.

• Tax year: the calendar year, January 1 to December 31, for all individuals.

• Tax base: worldwide income for residents and Canadian-source income only for non-residents.

• Rates: graduated (progressive) rates at two levels of government, federal and provincial or territorial.

• Relief: deductions reduce income, non-refundable credits reduce tax, refundable credits and benefits can produce a payment even when no tax is owing.

• Administration: employers and payers withhold tax at source, the individual reconciles everything on the annual return.

PAGES IN THIS SECTION

• Residency and Who Must File: the starting point; residency decides whether worldwide income is taxed.

• Provincial and Territorial Tax: Ontario rates, surtax and Health Premium, and how the other provinces fit in.

• Types of Income: employment, business, property, capital gains and other income, and how each is treated.

• From Total Income to Tax Payable: the line-by-line path from line 15000 to the balance owing or refund.

• Marginal and Average Tax Rates: why the next dollar is taxed differently from the average dollar.

• Tax Year and Key Dates: the annual calendar of deadlines and payment dates.