Living Costs and Taxes in Canada for new PR applicants
If you are thinking of applying for the Canada PR, read this article to know more about how you can plan your finances in Canada. This guide will give you comprehensive information on living costs and Canadian taxes and help you understand Canadian income tax returns.
Estimated Living Costs For Your New Start in Canada
Cost of living is highly subjective and depends on how you choose to spend your money. For example, you could decide to use a car or use public transport. Likewise, you could live in an with high rentals or not. All in all, your personal expenses, be it for transportation, accommodation, food etc. are all based on your personal choices.
Living costs and taxes in Canada varies across provinces. That said, the average minimum monthly cost for a single person would be approximately 500 CAD (25,000 INR).
The biggest monthly living cost comes in the form of house rent. For Canadians, the second biggest monthly expense is transportation. For transportation, there a lots of options like buses, trains, trams, metros, taxis and private vehicles. Taxi fares in Canada differ from city to city, with minimum taxi fares in the range of 3-6 CAD (150 INR-300 INR). If you travel by bus frequently, a better option would be to get a monthly pass which costs about 150 CAD (7,500 INR).
In terms of food, if you choose to cook, then groceries would cost around 200 CAD (10,000 INR) per month per person. Alternatively, if you choose to have all your meals at a restaurant then your daily food cost can be anywhere between 20 CAD (1000 INR) and 30 CAD (1500 INR).
If you own a car in Canada, then the average cost of the vehicle will vary depending on factors like the type of car, your driving record etc. A rough estimate of yearly ownership cost, if a compact car is 11,000 CAD (5,50,000 INR).
To know about how the Canada PR works, click here to read our article on the basics of Canada PR.
Taxes in Canada
The level at which your taxes are assessed depend on your income level as well as the province you live in. The Federal Government and the various provincial legislatures share taxes in Canada. Listed below are various taxes applicable to Canadian residents:
The CRA (Canada Revenue Agency) collects income tax in Canada. People who are Canadian residents for tax purposes complete an income tax return every year. The Canadian Government considers Canadian citizens and permanent residents, refugees, temporary residents, such as foreign students and workers as residents for tax purposes. You file a tax return if you want to get a refund or if you owe taxes to the government.
You become a taxpayer in Canada when you establish significant residential ties there when you arrive in the country.
Residential ties include:
- A home in Canada
- Personal property in Canada
- Any sort of ID proof that belongs to Canada
If you maintain residential ties in Canada and are living abroad you may still be considered a Canadian resident for tax purposes. In this scenario, the income tax that you pay is calculated based on your worldwide income. According to Canadian tax laws on foreign incomes, foreign business incomes is treated the same as earning money from Canadian sources.
How much income tax do I have to pay?
The income tax you pay depends upon the amount of money you’ve made in the past year minus deductions and credits. A combination of federal and provincial tax rates influence your income tax rate.
Federal tax rates for 2019:
— 15% on the first 47,630 CAD of taxable income, plus
— 20.5% on the next 47,629 CAD of taxable income (on the portion of taxable income over 47,630 CAD up to 95,259 CAD), plus
— 26% on the next 52,408 of taxable income (on the portion of taxable income over 95,259 CAD up to 147,667 CAD), plus
— 29% on the next 62,704 of taxable income (on the portion of taxable income over 147,667 CAD up to 210,371 CAD), plus
— 33% of taxable income over 210,371 CAD
Corporate Income Tax
If you hold a business/corporation in Canada then you are subject to Canadian Corporate Income Tax (CIT) on worldwide income (except for Quebec and Alberta). If a corporation with a permanent establishment in Ontario, it is subject to both federal and Ontario income taxes.
Sales tax in Canada is nothing but the Harmonized Sales Tax (HST), which is a consumption tax in Canada. It combines Goods and Service Tax (GST) and Provincial Sales Tax (PST).
The Goods and Service Tax applies to most goods and services made in Canada, with some exceptions. The Provincial Sales Tax is a retail sales tax payable when a taxable good or service is acquired for personal or business use, with certain exemptions.
The HST is in effect in five of ten Canadian provinces. These include New Brunswick, Newfoundland and Labrador, Nova Scotia, Ontario, and Prince Edward Island.
The CRA collects HST in Canada. After collecting tax, CRA remits the appropriate amount to the respective provinces. The HST rates differs between provinces mentioned above, as each province has its own PST rates within the HST. If the province does not collect HST then the CRA will only collect 5% GST.
8% of the Harmonized Sales Tax goes to the provincial government and 5% goes to the federal government. In Ontario, there is an HST of 13%, which is the highest among all other provinces. Individuals and families with low incomes living in Ontario may be eligible for an HST credit.
Canadian Sales Tax Table
Wondering if Canada has Inheritance taxes?
In Canada, there is no inheritance tax. If you are the beneficiary of money or asset through an estate, the estate pays the tax before you inherit.
What about Estate Tax?
The Canadian government charges tax on your income and not on your assets. In Canada, CRA does not tax the assets of an estate but they do require that you pay all of the tax owing on income up to the date of death.
Capital Gains Tax
With stocks, the Capital Gains Tax is applied when the stock is sold at a time of its increased value. For example, if an investor purchases stock for 1,000 CAD and then sells that stock for 2,000 CAD, then they will have a 1,000 CAD capital gains.
Investors pay Canadian capital gains tax on 50% of the capital gain amount. This means that if you earn 1,000 CAD in capital gains, and you are in the highest tax bracket in, say, Ontario (53.53% – Capital Gains Tax ). Hence, you will pay 267.60 CAD in capital gains tax on the 1,000 CAD.