Tax Differences Between Canadian Provinces

I handle a lot of hires that require employees to move between provinces. 

Navigating the Canadian tax landscape can be complex, especially when considering the variations between provinces and territories. Here’s a breakdown of key tax considerations for both employees and employers across Canada.

Here are some things to consider when comparing workers in different provinces:

Provincial/Territorial Income Tax:

• Each province and territory has its own income tax rates and brackets, which are applied in addition to federal income tax.
• Quebec operates its own independent tax system, requiring separate provincial tax filings.

Employer Health Tax (EHT):

• Several provinces impose an EHT on employers, which is a tax on payroll. The rates and exemption thresholds vary.
• This applies in British Columbia, Ontario, Manitoba, Newfoundland and Labrador, and Quebec

Canada Pension Plan (CPP) / Quebec Pension Plan (QPP):

• Employers and employees throughout Canada contribute to either the CPP or the QPP (in Quebec). 

Employment Insurance (EI):

• Both employers and employees contribute to EI, which provides temporary financial assistance to those who lose their jobs. EI rates also vary slightly between Quebec and the rest of Canada.

Provincial/Territorial Tax Credits:

• Each jurisdiction offers various tax credits, which can reduce the amount of tax owed. These credits can include those for:
  • Basic personal amounts
  • Caregiver amounts
  • Education
• All of the Territories and certain other “prescribed zones” offer northern residents deductions giving residents significant relief on their income taxes.

Province of Employment vs. Province of Residence:

• It’s crucial to understand the distinction between where someone works and where they live. Your tax obligations are primarily determined by your province of residence on December 31st. Establishing residency involves demonstrating a settled intention to live in a province, which can include factors like:
  • Owning or renting a home
  • Driver’s license and vehicle registration
  • Health insurance coverage
  • Family ties

The specifics of these taxes, including rates and exemption thresholds, can vary significantly between provinces and are subject to change. Therefore, it’s always best to consult the official provincial government resources or a tax professional for the most up-to-date information.