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Legal Guide

If a foreign enterprise finds it necessary to transfer an individual to Canada, the individual’s Canadian tax consequences will depend upon whether or not he/she becomes resident in Canada for tax purposes.

Canadian residents are taxable on their income from all sources earned anywhere in the world. Income includes one-half of realized capital gains net of realized capital losses, subject to an exemption for a capital gain realized on the sale of a principal residence. Employment income includes the value of most employee benefits, including housing, automobiles, low-interest or interest-free loans, stock options, profit sharing plans and insurance benefits. If an individual becomes or ceases to be resident in Canada part way through a year, he or she will only be taxed in Canada on worldwide income earned while resident in Canada in that year. Upon ceasing to be a resident in Canada, the individual may also be taxed on unrealized capital gains arising from an increase in values of certain capital property while the individual was a resident.

A non-resident of Canada, on the other hand, is taxed only if the non-resident was employed in Canada, carried on business in Canada, or disposed of “taxable Canadian property” (in general terms, real estate, resource properties, or in some cases shares of corporation that primarily derive their value from such).If an individual is subject to Canadian tax, he or she will pay income tax at rates which increase with the amount of taxable income. Basic federal income tax rates range from 15 percent to 29 percent. In addition to federal income tax, each province levies its own income tax.Combined federal and provincial income tax rates vary from 39 percent to 50 percent of taxable income, depending on the province. Provincial income taxes are not deductible in computing taxable income for federal purposes.

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