Three Things about the Canadian Income Tax System You Absolutely Need To Know

When you are employed in Canada, you know that some of your income will go to the government, as designated in the Canadian Income Tax system. The United State—among other countries, too—also has a similar income tax system. In Canada, though, income tax is actually the Federal and Provincial government’s most significant source of revenue. Indeed, income tax accounts for approximately half of all Canadian tax revenue.

Yes, this system in Canada is very similar to the system in the United States, but with a few differences.


Perhaps the biggest difference between the American and Canadian income tax systems is that in Canada you are not required by law to report your income tax, annually.  If you own or run a company then you will need to report your corporate payable taxes and capital gains.  As a single worker, though, you get to choose just how much tax you report. Now, any time you opt to skip your tax filing for the year, you will not be able to take advantage of various tax-related federal and provincial benefits.


Effectively, then, the Canadian tax system is a social program, a responsibility that is shared by everyone.  With that, though, the government will not—and cannot—interfere with your freedom of choice and responsibility. You can choose to file—or not file—as you please.  However, the government will intervene if you try to participate in any of the aforementioned tax-related benefits but are not necessarily adhering to your required tax-payer responsibilities.  But, there are some situations when the Canadian government can exercise strict power to enforce tax responsibility; for example, if multiple parties are involved with the earning of this income.


The Canadian Income Tax Act says that any person who resides in Canada is considered a legal resident/citizen, if they have earned an income for more than 182 days in any single tax year (or if said person is connected with the Canadian government in some way but earns their income overseas, like a Canadian Forces soldier).  Similarly, though, the Canadian government can deem that you are a resident of Canada if you have certain ties to a real Canadian address, even if you did not live there for 182 days in a single working year.