In Canada, income tax is payable on the worldwide income of every person who resided in Canada at any time during the year. For provincial tax purposes, taxpayers report their income and pay their income taxes in the province in which they were resident on December 31. In general, individuals are considered resident of the province where they have substantial residential ties, i.e., where their residence or home is situated and where their spouse and children live, if any. The facts of each case have to be analyzed individually and a number of other criteria may also be taken into consideration.

Taxable income includes various types of income (employment, business, investment, taxable capital gains, and other) against which certain deductions can be claimed according to tax legislation. Income taxes are calculated at progressive rates depending on the level of income. Taxes are reduced by refundable or non-refundable tax credits. Taxpayers who have an unused refundable tax credit balance are entitled to a refund. In certain cases, additional tax may be payable during the year as AMT (refer to Section VII).

Full indexation applies to a large number of tax measures including the personal income thresholds for calculating income taxes as well as amounts used to determine certain credits.

The indexation and taxation rates and non-refundable credits amounts can be found in your province’s Individuals Taxation tables.

Quebec

Unlike the other provinces, Quebec taxpayers have to file a separate provincial income tax return.

Beneficiary of a Trust
A Quebec resident who is a beneficiary of a trust resident in Canada but outside Quebec must generally file a tax return and complete a declaration as to his/her status as a beneficiary. Failure to do so could result in penalties for the beneficiary.

Ontario

Ontario’s income tax system is based on taxable income for federal purposes and no provincial return has to be filed.

Lower income taxpayers may reduce or eliminate their Ontario income tax by claiming the Ontario tax reduction of a basic amount of $274 in 2023 plus an additional $506 for each dependent child or disabled person. This measure is based on the individual’s taxable income and the number of eligible dependents.

New Brunswick

Like Ontario, New Brunswick’s income tax is based on taxable income for federal purposes, and taxpayers do not have to file a provincial income tax return.

Low-income taxpayers are entitled to a tax reduction such that they have to pay no provincial income tax if their income in 2023 does not exceed $20,385 for a single tax filer. This reduction is gradually withdrawn at the rate of 3% of income in excess of this threshold.