Tax payments are headaches and at the same time mandatory. Be it road construction, all the government services that we get, expenditures in defense of a country etc, finance for all these things comes from the taxes. Taxes for different things are different and fall with different rules and regulations. These are followed and collected according to international tax rules and Canadian taxation system is also not left untouched of them.
Here comes the hard core requirement for a Tax specialist. A tax specialist takes care of all the taxes associated with your firm and your personal accounts, their terms, their different percentages. He doesn’t only make sure that all your taxes are paid in time but also helps you in saving taxes where possible with his vast knowledge and expertise in tax industry.
The general tax the government collects from everyone is income tax which is levied on based on your salary and is required to be paid to the government time to time on a fixed percentage depending on how much your annual salary is amounting. Any big businessmen would never like income tax police to rush in to his territory because of tax payment issues. Tax are not only collected for salary but there are many taxes to be paid in an year like house tax, water tax, taxes for real estate, corporate taxes a businessman must take very good care of, taxes on residents and non-residents and much more which a normal person is less aware of. If you own a home and use water, you are supposed to pay home taxes and water taxes. If you are a resident of Canada, the tax rules and regulations for you will be different from the ones who are non residents. A tax expert can put you out through all this math work and help you manage your tax, pay them well in time and save wherever possible.
Canadian Tax laws are implemented by both federal as well as provincial governments.According to the 1930 ruling of the Canadian Supreme Court:
- It is imposed by the tax rules of the country
- Implemented by the public body
- Revenue generated to be used for public utility
- Direct Taxation
- Indirect Taxation
Direct Taxation is levied on people, property or transactions within the country or for people outside the province conducting transactions within the country. The Canadian Revenue Agency is responsible for the collection of taxes in the country for both the federal and the provincial governments. The Canadian people evaluate the tax liability and then file their returns according to the tax norms. They themselves calculate the deductions, tax credits etc. and submit their returns to the local public agency authorized by the CRA. If anyone who does not pay the taxes in the stipulated time will be penalized and beyond that the legal action might be taken against the defaulter.
CRA is responsible for collecting taxes in the manner mentioned below:
- Income tax is collected in the provinces through a unified system
- Corporate taxes for all the provinces
- The Harmonized Sales tax (HST) which is excess of GST in the provinces, is also collected by the CRA
Personal income taxes are one of the largest sources of revenues in Canada accounting for almost 40% of the total tax collected. Federal government imposes the maximum percentage of the personal taxes and the provincial agencies charges comparatively lower percentage of taxes. The higher income groups pay higher percentages compared to the low income groups. It is a progressive method of tax system. Only 50% of the income gained from capital investments by the individuals is charged. Income generated through dispute settlements and lawsuits are not taxed. Tax saving schemes and retirement policies provide opportunities to the individuals to save their personal income tax. Companies and organizations are taxed on the profits generated through investment in the capitals. However this is however this is a very small percentage compared to the personal income tax.
The countries, with which Canada has tax treaties, help in protecting the Canadians from double taxation. A citizen who is a non-resident may apply to CRA to avail such benefits under the International tax schemes. CRA also takes into account that no tax is diverted and hence a financial loss is not caused to the country.
Income taxes are among the biggest expenses you have to pay during your life. Canadian citizens may very well pay as much as almost half of their annual income back to the government every year. Luckily, there are many tools you can use for managing your finances in a way that you'll end up with significant savings and cut your taxes dramatically.
A large part of tax savings strategies deal with spreading your earnings through your inner family network and thus getting the benefits of lower tax brackets.
- Family Loans & Accounts Structuring
- Own & Spousal RRSP Contributions
- Claiming Home Office & Deducting Home Expenses
- RESP Contributions
- Medical Contributions
- Employing family members
- Donations to Charity
From 2009, there's also a new tool in effect called Tax-Free Savings Account (TFSA). Life insurance products also offer significant advantages and can be useful tools for lowering your taxes and paving the way for maximizing wealth.
In the event of your death, they don't have to pay any additional probate fees and there's no tax liability. You don't pay any taxes on the proceeds. Depending on your insurance package, your savings grow sheltered from taxes and you can also use accumulation funds to offset your future premiums with pre-tax dollars rather than after tax dollars.
Cash values inside policies can be accessed at any time within certain limits through a policy loan or partial surrender. Often, these financial tools can create the equivalent of a tax-free income stream. However, be sure to understand that straight cash withdrawals are subject to taxation. Donations and charitable giving in the form of life insurance policies are tax-deductible.