Canada taxes residents on worldwide income and non-residents on Canada-source income only. Canada operates a genuine self-assessment system, one of the first in the world (adopted in the 1910s per IMF research, alongside the United States): taxpayers calculate their own liability and file a return, though the Canada Revenue Agency does issue a formal Notice of Assessment confirming or adjusting the taxpayer's own calculation after processing. This page states federal rates only. Provincial and territorial income tax layers on top of the federal rate and varies by province, with combined federal-provincial top marginal personal rates ranging from roughly the mid-40s to over 54% depending on province, and provincial corporate rates adding several further percentage points to the federal corporate rate; confirm the specific province's rate separately.
The Canadian tax year is the calendar year for individuals. The general individual filing deadline is 30 April of the following year (15 June for self-employed individuals and their spouses, though any balance owing is still due 30 April to avoid interest). Corporate filing deadlines generally run 6 months after the corporation's own fiscal year-end.
Canada's headline corporate income tax (CIT) rate is Federal 15%; provincial/territorial 8-15% additional.
The headline personal income tax (PIT) rate is Federal top 33%; provincial 11.5-21.8% additional.
The standard VAT/GST (or equivalent consumption tax) rate is combined federal/provincial 5-15%.
Canada uses a facts-and-circumstances "significant residential ties" test rather than a simple day count: a dwelling available in Canada, a spouse or common-law partner in Canada, or dependants in Canada each strongly indicate factual residency, weighed alongside secondary ties. Separately, anyone who sojourns (is temporarily present) in Canada for 183 days or more in a calendar year is deemed a resident for the entire year under paragraph 250(1)(a) of the Income Tax Act, even without any residential ties. Residents are taxed on worldwide income; non-residents only on Canadian-source income, subject to applicable treaty relief.
A non-Canadian entity has a Canadian permanent establishment through a fixed place of business or a dependent agent habitually concluding contracts in Canada on the entity's behalf, following the OECD Model Treaty definition as applied under Canadian domestic law and any applicable tax treaty.
Canada's anti-deferral regime taxes Foreign Accrual Property Income (FAPI) - passive income such as interest, rents, royalties, and certain capital gains - earned by a Controlled Foreign Affiliate (CFA). A foreign affiliate becomes a CFA where a Canadian resident (generally) owns more than 50% of its shares, whether by de jure voting control or aggregated ownership among a non-arm's-length group of Canadian shareholders. FAPI is included in the Canadian shareholder's income as earned, regardless of distribution, though a de minimis exemption applies where a CFA's FAPI is $5,000 or less; active business income is generally excluded from FAPI.
Canada layers two separate interest-restriction regimes. The traditional thin capitalization rule denies interest deductions on debt owed to specified non-resident shareholders once it exceeds a 1.5:1 debt-to-equity ratio. Separately, the newer Excessive Interest and Financing Expense Limitation (EIFEL) rules - implementing OECD BEPS Action 4, effective for tax years beginning on or after October 1, 2023 - cap net interest and financing expense deductions at 30% of tax-EBITDA (40% during a transition window through end-2023) for corporations and trusts generally, regardless of whether the lender is related or a resident. Excluded entities include Canadian-controlled private corporations (with associated group taxable capital under CAD 50 million) and groups with net interest/financing expense under CAD 1 million.
Canada does not use an elective check-the-box classification system; entity classification generally follows the entity's actual legal characteristics compared against recognized Canadian entity forms (a body of case law and CRA guidance has developed specifically around the classification of US LLCs used by Canadian residents, given the mismatch between US disregarded-entity/pass-through treatment and Canada's default corporate classification of an LLC). Canada has implemented OECD BEPS Action 2-aligned anti-hybrid rules denying deductions for payments producing a hybrid mismatch outcome.
A Canadian resident individual, corporation, trust, or partnership holding "specified foreign property" - which includes foreign bank accounts, foreign shares, and other foreign financial assets, but generally excludes property used exclusively in an active business - with a total cost amount exceeding CAD 100,000 at any point in the year must file Form T1135, Foreign Income Verification Statement, with their annual tax return. Penalties for failing to file start at CAD 25 per day (minimum CAD 100, maximum CAD 2,500) and increase substantially for gross negligence or extended non-compliance. This is Canada's own domestic foreign-asset reporting regime, distinct from Canada's separate participation in CRS automatic exchange described under Treaty Network below.
Canada does not provide a general participation exemption in the European sense; foreign dividends received by a Canadian corporation are generally taxable, with relief from double taxation provided primarily through the foreign tax credit system (see Foreign Tax Credit below) and, for dividends from certain foreign affiliates with active business income, a deduction mechanism under the foreign affiliate rules that can achieve a broadly similar exempt-surplus outcome for qualifying active business income repatriated from a treaty-country affiliate.
Canada has a real foreign tax credit regime available to both individuals and corporations who have paid or accrued foreign income tax on foreign-source income, functioning as an ordinary credit capped at the Canadian tax otherwise payable on that income. Individuals claim the federal credit on Form T2209 (with Form T2036 for the separate provincial/territorial foreign tax credit); corporations claim the equivalent corporate credit on their T2 return.
Canada maintains approximately 95 bilateral income tax treaties in force, per TaxAtlas and the Department of Finance Canada's own treaty list, with major partners including the US, UK, France, Germany, Japan, Australia, China, India, South Korea, the Netherlands, Switzerland, and Mexico. Canada ratified the OECD's Multilateral Instrument (MLI) in 2019, which amends most of these treaties with anti-abuse measures - the Canada-US treaty being the principal exception. Canada has also formally suspended its tax treaty with Russia, effective November 18, 2024, for both withholding taxes and other taxes.