Canada - Tax Guide for Freelance Contractors

Tax residents in Canada are liable to pay federal and provincial Canadian tax on their worldwide income,

Non tax residents in Canada are liable to pay tax on their Canadian-source income and on gains from the disposition of taxable Canadian property.

Individuals will be regarded as tax residents:

• if they spend at least 183 days in Canada in a calendar year,
• if they reside in Canada or are ordinarily resident in Canada.

Except for Quebec both residency statuses may be overridden by a tax treaty.

Married couples may choose to be taxed jointly.

Taxable income includes:

• employment income (including most employment benefits),
• investment income and profits earned from a business or profession (taxed at the applicable personal tax rate).

Subject to restrictions, certain deductions are permissible for 2010 including:

• payments to registered retirement savings and pension plans,
• certain moving expenses,
• union and professional dues,
• child care expenses,
• medical expenses,
• charitable and political donations and investments carrying charges
• tax credits may be available for spouses and certain dependents.

Income tax rates for 2010:

Federal tax:

• 15.00% on income up to CDN$ 40’970,
• 22.00% from CDN$ 40’971 up to CDN$ 81’941,
• 26.00% from CDN$ 81’942 up to CDN$ 127’021,
• 29.00% over CDN$127’022.

Provincial tax:

The rates are progressive, ranging from 10% (flat rate in Alberta) to a maximum of 24%.

Several provinces impose also an additional surtax when the basic provincial tax exceeds prescribed limits.

Filing date:

An individual has to file a tax return and pay all outstanding tax liabilities by April 30th.
The employer withholds the tax on employment income and remits it to the tax authorities, however a taxpayer may be required to pay instalments as well.