Provincial tax is a form of direct consumption taxation legally required by several Canadian provinces. Provincial or territorial income tax rates are required in addition to federal income tax rates.
Key points:
- Provincial tax is a direct tax collected by Canadian provinces and territories alongside federal tax.
- Tax rates differ by province and depend on income brackets.
- Quebec has the highest provincial income tax; Alberta has one of the lowest.
- Non-residents may owe provincial tax if they have a permanent establishment.
- Provincial taxes fund services like healthcare, education, and infrastructure.
Each province and territory sets its own tax credits, tax rates, and tax deductions. As with federal tax rates, provincial tax rates are applied based on the person’s income bracket. For instance, someone who lives in British Columbia and makes an income of $70,000 will pay a different amount than someone who makes the same amount and lives in Alberta.
For example, in 2024, someone in Alberta earning $85,000 would fall into the 13% tax bracket, while someone in Nova Scotia earning the same amount would hit the 14.95% bracket. The difference could result in several hundred dollars more in provincial tax annually.
Who pays provincial tax in Canada?
In addition to federal income tax, an individual who lives in or has earned income in any Canadian province or territory must pay provincial or territorial income tax. One exception is Quebec, where provincial and territorial taxes are calculated on the federal return and collected by the federal government.
What is the difference between federal and provincial tax in Canada?
The federal income tax is the same for everyone in Canada, while the provincial rate depends on the province where the individual resides. In addition to federal and provincial income taxes, Canadians must pay the following taxes:
- Municipal
- Income
- Sales
- Property
- Corporate tax
Do non-residents need to pay provincial tax in Canada?
If someone earned income from a business with a permanent establishment in Canada, they are required to pay provincial/territorial tax. The tax rules for non-residents are the same as those of non-residents in Canada.
Which province has the highest income tax in Canada?
Quebec has the highest income tax rate out of all of Canada’s provinces and territories. Quebec is Canada’s second most populated province.
Alberta vs. Ontario income tax
Alberta has some of the lowest tax rates in Canada. Alberta’s corporate income tax is set at 8% for businesses, compared to Ontario’s 11.5%. Additionally, Alberta’s higher basic personal amount means residents can earn more before the total income tax is factored in, making Alberta pay more beneficial to residents.
Here’s a breakdown of Canada’s income tax by province
Alberta has some of the lowest tax rates in Canada. Alberta’s corporate income tax is set at 8% for businesses, compared to Ontario’s 11.5%. Additionally, Alberta’s higher basic personal amount means residents can earn more before the total income tax is factored in, making Alberta pay more beneficial to residents.
Here’s a breakdown of Canada’s income tax by province:
| Province | Tax rate | 2024 tax bracket rates for Income Tax |
|---|---|---|
| Alberta | 10% 12% 13% 14% 15% | On the first $148,269 of taxable income, plus On $148,269.01 up to $177,922, plus On $177,922.01 up to $237,230, plus On $237,230.01 up to $355,845, plus On the amount over $355,845 |
| British Columbia | 5.06% 7.7% 10.5% 12.29% 14.7% 16.8% 20.5% | On the first $47,937 of taxable income, plus On $47,937.01 up to $95,875, plus On $95,875.01 up to $110,076, plus On $110,076.01 up to $133,664, plus On $133,064.01 up to $181,232, plus On $181,232.01 up to $252,752, plus On the amount over $252,752 |
| Manitoba | 10.8% 12.75% 17.4% | On the first $47,000 of taxable income, plus On $47,000.01 up to $100,000, plus On the amount over $100,000 |
| New Brunswick | 9.4% 14% 16% 19.5% | On the first $49,958 of taxable income, plus On $49,958.01 up to $99,916, plus On $99,916.01 up to $185,064, plus On the amount over $185,064 |
| Newfoundland, Labrador | 8.7% 14.5% 15.8% 17.8% 19.8% 20.8% 21.3% 21.8% | On the first $43,198 of taxable income, plus On $43,198.01 up to $86,395, plus On the next $86,395.01 up to $154,244, plus On $154,244.01 up to $215,943, plus On $215,943.01 up to $275,870, plus On $275,870.01 up to $551,739, plus On $551,739.01 up to $1,103,478, plus On any amount over $1,103,478 |
| Northwest Territories | 5.9% 8.6% 12.2% 14.05% | On the first $50,597 of taxable income, plus On $50,597.01 up to $101,198, plus On $101,198.01 up to $164,525, plus On the amount over $164,525 |
| Nova Scotia | 8.79% 14.95% 16.67% 17.5% 21% | On the first $29,590 of taxable income, plus On $29,590.01 up to $59,180, plus On $59,180.01 up to $93,000, plus On $93,000.01 up to $150,000, plus On the amount over $150,000 |
| Nunavut | 4% 7% 9% 11.5% | On the first $53,268 of taxable income, plus On $53,268.01 up to $106,537, plus On $106,537.01 up to $173,205, plus On the amount over $173,205 |
| Ontario | 5.05% 9.15% 11.16% 12.16% 13.16% | On the first $51,446 of taxable income, plus On $51,446.01 up to $102,894, plus On $102,894.01 up to $150,000, plus On $150,000.01 up to $220,000, plus On the amount over $220,000 |
| Prince Edward Island | 9.65% 13.63% 16.65% 18.00% 18.75% | On the first $32,656 of taxable income, plus On $32,656.01 up to $64,313, plus On $64,313.01 up to $105,000, plus On $105,000.01 up to $140,000, plus On the amount over $140,000 |
| Quebec | 14% 19% 24% 25.75% | On the first $51,780 of taxable income, plus On $51,780.01 up to $103,545, plus On $103,545.01 up to $126,000, plus On the amount over $126,000 |
| Saskatchewan | 10.5% 12.5% 14.5% | On the first $52,057 of taxable income, plus On $52,057.01 up to $148,734, plus On the amount over $148,734 |
| Yukon | 6.4% 9% 10.9% 12.8% 15% | On the first $55,867 of taxable income, plus On $55,867.01 up to $111,733, plus On $111,733.01 up to $173,205, plus On $173,205.01 up to $500,000, plus On the amount over $500,000 |
Source: CRA – Provincial and Territorial Tax Rates
What are Canada’s popular credits and deductions?
Canada offers several deductions, expenses, and credits to reduce the amount of tax businesses and individuals need to pay.
Basic personal amount: The basic personal amount (BPA) is a non-refundable tax credit that ensures citizens can earn a minimum amount of income before paying federal income tax.
Canada Carbon Rebate: The Canada Carbon Rebate (CCR) is a tax-free amount to help individuals and families cope with the costs of the federal carbon pollution pricing. The CCR is a basic and supplemental amount for residents of small and rural communities.
Education and tuition credits: Canada has several credits towards claiming an amount for the interest paid on student loans (under certain conditions) and tuition and enrollment fees
Provincial child benefits: If eligible, Canadians can claim certain child care expenses as a deduction on personal income tax returns as well as deductions for supporting spouses or common-law partners, dependents, caregivers, adoptive parents, and medical expenses.
GST/HST Credit: The GST/HST Credit is a refundable tax credit for low income Canadians that offsets taxes they pay on consumer goods and services.
Ontario Trillium Benefit (OTB): Ontarian’s may be eligible for the Ontario Trillium Benefit (OTB), a refundable tax credit that assists low-income residents when paying for energy costs, sales tax, and property taxes.
Home Buyers’ Amount (HBA): The Home Buyer’s Amount (HBA) is a non-refundable tax credit applied when purchasing a qualifying home in Canada.
Residents, citizens, and businesses can use a provincial tax calculator to determine which credits they’re eligible for.
FAQs
Q: Do I pay provincial tax if I move provinces during the year?
A: You pay tax based on your province of residence as of December 31st of that tax year, regardless of where you lived earlier in the year.
Q: Is provincial tax calculated separately from federal tax?
A: Yes. In most provinces, the two taxes are calculated independently and added together for total liability. In Quebec, the process is handled differently, with separate provincial filing.
Q: How do I reduce my provincial tax burden?
A: You can apply provincial credits such as child benefits, education credits, and basic personal amounts. Each province has unique eligibility rules.
Q: Are provincial tax rates progressive?
A: Yes. Similar to federal rates, most provinces use a tiered bracket system where higher income is taxed at progressively higher rates.
Q: Does having a remote job affect provincial taxes?
A: Potentially. If you live in one province but your employer is located in another, you still pay provincial tax where you reside, not where the company is based.
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