Disclaimer: The information provided in this article is for informational purposes only, may not be up to date, and should not be construed as financial, tax, or legal advice. It is always recommended to consult with a qualified financial advisor or tax professional before making any financial decisions.
Every country has its own taxation system based on a range of factors such as economic considerations, social and equity concerns, politics, and international agreements. In some countries, such as Canada with 13 provinces and territories, taxation is a little more complex with each province and territory adding their own taxes on top of the federal taxes.
Understanding how you will be taxed is crucial when considering a new location. If you are moving to a different province or territory, you may be looking at a higher salary, but you could also be looking at a higher tax bracket. Not doing your homework on taxes could leave you worse off if you move to a province or territory with higher taxes.
In this article, we look at the current federal taxes in Canada as well as the tax brackets in all the provinces and territories. We also look at other taxes that Canadians have to pay and how Canada ranks for taxes compared to other countries.
Taxation Statistics for Canadians
- Taxation Statistics for Canadians
- The federal income tax in 2023 is between 15% and 33%.
- The lowest provincial/ territorial tax percent varies from 4% in Nunavut to 15% in Quebec.
- Quebec has the highest top tax percentage with anything above $119,910 taxed at 25.75%.
- The average tax percentage in Canada is 25.1%.
- The sales tax in Canada ranges from 5% to 15% depending on the province/ territory.
- Based on the highest federal tax bracket, Canada ranks 25th highest for personal income tax in the world.
- The Ivory Coast has the highest personal income tax in the world at 60%.
- Guatemala’s income tax, at 7%, is the lowest in the world when you exclude countries with 0% income tax.
- Ten countries have no personal income tax.
Taxation in Canada
Because Canada has both federal and provincial/ territorial taxes, you need to deduct both from your wages to know how much you will get at the end of the week or a month. Below, you will find details of the federal income tax followed by the income tax brackets for the Canadian provinces and territories.
Federal Income Tax Brackets
The federal income tax rates apply to anyone living in Canada regardless of the province or territory they live in. There are different tax brackets and how much federal tax you pay depends on your income.
- Up to $53,359: 15%
- $53,359 – $106,716: 20.5%
- $106,717 – $165,430: 26%
- $165,431 – $235,675: 29%
- Above $235,675: 33%
How to Calculate Federal Tax
When you calculate your federal taxes, you do not deduct the same percentage of your whole earnings unless you earn less than $53,359. If your income is below that, you deduct 15% of your income.
If you make more than $53,359, for example, if your income is $75,000, you will be taxed at 15% up to $53,359 and then 20.5% on the remaining income. If your income is, for example, $120,000, you would pay 15% on the first $53,359, then 20.5% up to $106,716, and then 26% on the remaining income.
Provincial and Territorial Income Tax Brackets
As mentioned above, Canadians pay provincial or territorial taxes on top of the federal income taxes. The income tax thresholds and the number of tax brackets variest between the provinces and territories. Here are the income brackets for provinces and territories in 2023.
- up to $142,292: 10%
- between $142,292 and $170,751: 12%
- between $170,751 and $227,668: 13%
- between $227,668 and $341,502: 14%
- above $341,502: 15%
- up to $45,654: 5.06%
- between $45,654 and $91,310: 7.7%
- between $91,310 and $104,835: 10.5%
- between $104,835 and $127,299: 12.29%
- between $127,299 and $172,602: 14.7%
- between $172,602 and $240,716: 16.8%
- above $240,716: 20.5%
- up to $36,842: 10.8%
- between $36,842 and $79,625 12.75%
- above $79,625: 17.4%
- up to $47,715: 9.4%
- between $47,715 and $95,431: 14%
- between $95,431 and $176,756: 16%
- above $176,756: 19.5%
Newfoundland and Labrador
- up to $41,457: 8.7%
- between $41,457 and $82,913: 14.5%
- between $82,913 and $148,02: 15.8%
- between $148,027 and $207,239: 17.8%
- between $207,239 and $264,750: 19.8%
- between $264,750 and $529,500: 20.8%
- between $529,500 and $1,059,000: 21.3%
- above $1,059,000: 21.8%
- up to $48,326: 5.9%
- between $48,326 and $96,655: 8.6%
- between $96,655 and $157,139: 12.2%
- above $157,139: 14.05%
- up to $29,590: 8.79%
- between $29,590 and $59,180: 14.95%
- between $59,180 and $93,000: 16.67%
- between $93,000 and $150,000: 17.5%
- above $150,000: 21%
- up to $50,877: 4%
- between $50,877 and $101,754: 7%
- between $101,754 and $165,429: 9%
- above $165,429: 11.5%
- up to $49,231: 5.05%
- between $49,231 and $98,463: 9.15%
- between $98,463 and $150,000: 11.16%
- between $150,000 and $220,000: 12.16%
- above $220,000: 13.16%
Prince Edward Island
- up to $31,984: 9.8%
- between $31,984 and $63,969: 13.8%
- above $63,969: 16.7%
- up to $49,275: 15%
- between $49,275 and $98,540: 20%
- between $98,540 and $119,910: 24%
- above $119,910: 25.75%
- up to $49,720: 10.5%
- between $49,720 and $142,058: 12.5%
- above $142,058: 14.5%
- up to $53,359: 6.4%
- between $53,359 and $106,717: 9%
- between $106,717 and $165,430: 10.9%
- between $165,430 and $500,000: 12.8%
- above $500,000: 15%
How Much Taxes Do Canadians Pay on Average?
Based on the amount of tax paid in 2021, the average tax percentage in Canada is 25.1% of gross annual income. This is the average tax when the federal and provincial/ territorial taxes are combined. On average, Canadians take home 74.9% of their gross income.
However, for most people, the combined taxes are higher or lower than the average, depending on how much they earn and which province or territory they pay taxes in.
What Other Taxes Are There in Canada?
In addition to your income, you may be liable to pay other taxes in Canada. Each province and territory applies these taxes differently.
The Goods and Services Tax, GST for short, is a 5% levy, which is added by the federal government to most goods and services. This tax applies in all provinces and territories. Some provinces and territories will also have additional sales taxes, while others use GST only.
The PST stands for Provincial Sales Tax and is used in some provinces and territories in addition to GST. The rate of the PST depends on the territory or province you are in.
HST is short for the Harmonized Sales Tax. This tax combines GST and PST and is used by some provinces and territories instead of the two separate sales taxes. In most provinces/ territories where HST is in use, the percentage is 15% except in Ontario where it is 13%.
QST or the Quebec Sales Tax is only used in Quebec. This provincial sales tax is set at 9.975%.
Below you will find a summary of sales taxes used in each province/ territory in Canada.
- Alberta: GST 5%
- British Columbia: GST 5% and PST 7%
- Manitoba: GST 5% and PST 7%
- New Brunswick: HST 15%
- Newfoundland and Labrador: HST 15%
- Northwest Territories: GST 5%
- Nova Scotia: HST 15%’
- Nunavut: GST 5%
- Ontario: HST 13%
- Prince Edward Island: HST 15%
- Quebec: QST 9.975%
- Saskatchewan: GST 5% and PST 6%
- Yukon: GST5%
The Lowest and Highest Taxes in Canada
It can be quite confusing trying to work out which province/ territory has the lowest and highest taxes because of the varying thresholds and rates. However, for overall taxation, Alberta is the cheapest, while Quebec has the highest taxes. This is because the government of Quebec finances things that are not financed in other provinces/ territories.
How Do Canada’s Tax Rates Compare Internationally?
Canada is seen as a country with high tax rates and ranks 25th out of 172 countries for the highest income taxes based on the highest federal income bracket. However, if countries were compared based on the average taxes paid by the residents, Canada would rank lower.
Countries with the Highest Income Taxes
According to the World Population Review, the country with the highest tax rate is the Ivory Coast, which has one of the strongest economies in West Africa and a tax rate of 60%. The sales tax is 18% and corporate income tax for businesses is 25%. The 60% income tax rate applies to everyone regardless of their income.
Following the Ivory Coast are Finland and Japan. Finland has a tax rate of 56% although most people do not pay anywhere near that. The sales tax is 24% and the corporate tax is 20%. In Japan, the rates are 55%, 10%, and 30% respectively. Austria and Denmark also have a personal income tax rate of 55%.
Countries with the Lowest Income Taxes
If we exclude countries with no personal income tax, the country with the lowest personal income tax rate is Guatemala with just 7%. The sales tax in Guatemala is 12% and the corporate tax is 25%. Montenegro has the second lowest income tax at 9%, while the sales tax is 21% and the corporate tax is 9%. Several countries have an income tax of 10%, including Bulgaria, Mongolia, Serbia, and Romania.
Countries with 0% personal income tax
There are some countries in the world where individual income is not taxed at all. These countries are the United Arab Emirates, Saudi Arabia, Qatar, Oman, Kuwait, the Cayman Islands, Brunei, Bermuda, Bahrain, and the Bahamas.
Canada has a more complex taxation system than many other countries because there is no single system that applies across the whole country. Canadians are taxed the federation tax rate as well as the provincial/ territorial tax rate. Each province and territory has its own tax brackets and tax rates. When working out your total income tax, you need to include both federal and provincial/territorial taxes.
Frequently Asked Questions
Canada is considered a country with high personal income taxes. It ranks 25th out of 172 countries when countries are ranked according to their highest tax bracket. Of course, the vast majority of people in Canada are not in the highest tax bracket and pay a lower tax percentage. The Ivory Coast has the highest personal income tax in the world at 60%.
Alberta has the lowest personal income tax system in Canada overall. However,if you are working out how far your income will go in a certain part of Canada, you also need to consider other costs, such as accommodation and food as provinces/ territories with lower taxes may have higher living costs and vice versa.
Canada has a taxation system where you pay federal tax, which is the same rate across the country. You also have to pay the taxes set by your province or territory. These tax rates are different depending on where you live.