Federal and provincial governments, in Canada, impose income taxes on individuals earning money throughout the year. This is the most significant source of revenue for these two levels of government—accounting for nearly 50 percent of tax revenue.
As such, it is important to know your tax rights as MyLawyer.ca citizens.
- Canadian taxes are a shared responsibility
That is to say that the government does not tell you what you in taxes every year. You are obliged to report what you have personally assessed that you owe. This self-assessment and self-reporting system fundamentally shapes all aspects of Canadian taxation governance. This means, though, that while you do not necessarily have to report your income every year, the government does have some pretty darn intrusive power to enforce tax representation when multiple parties are involved; which also means you need to hold on to your tax/income statements for quite some time.
- You are not required to report your taxes
Speaking of “not necessarily having to report your income every year,” the Canadian tax system does not require individuals to report income every year. Of course, corporations who have tax payable or taxable capital gains or who have shed capital property for that tax year must file, but individuals can choose when they file. At the same time, there are benefits to filing (like an income tax refund, etc.) but the government leaves this decision up to the individual.
- Canadian “residents” are taxes on their Worldwide income
The Canadian Income Tax Act considers you to be a resident if you have earned some kind of income while Canada for more than 182 days within a single tax year or if you have garnered certain connections to the Canadian Government (like joining the Canadian Forces). The Canadian government can find you a “resident” of Canada even if you have not spent 182 days in the country (over a series of visits) if you have certain ties that imply you to be more a resident than a visitor (like a family resident you report to often over the course of the year).
- The Canadian Income Tax Act General Anti-Avoidance Rule empowers the Canada Revenue Agency to deny tax benefits
But only when there is not a bona fide purpose behind a transaction other than to obtain a tax benefit. Basically, this law attempts to prevent entities (typically business-related, but not exclusively) from abusing the Income Tax Act in order to gain tax advantages to which they would otherwise not be entitled.