Online Guide for Newcomers to Prince Edward Island - Canada
Canadian Tax System
In Canada, like many other countries, there is a taxation system to collect money from individuals and businesses. Here the taxation system is managed by the Canada Revenue Agency (CRA).
The tax money collected pays for government services and programs. Our tax dollars pay for things like paving of roads, health care, public schools, economic stimulus programs, employment programs, cultural activities, etc.
Types of Taxes
In Canada, everyone needs to file an individual income tax return by April 30th each year. For example, the income tax return for the 2009 tax year must be filed by April 30, 2010.
People who own businesses do not have to file income tax until June 30th of each year.
The main form of tax in Canada is the Income Tax. You pay income tax when you:
- Have a job - your employer deducts income tax from your paycheque and submits it on your behalf to CRA.
- Own a business - any money earned in your business and expenses paid on your business need to be reported to CRA every year, and you have to pay taxes on profits earned.
- Earn money - for example, if you earn interest on money you have invested.
When you buy something (products or services) in Canada, you pay sales taxes. In PEI there are two types of sales tax:
- Goods and Services Tax (GST) is a 5% federal tax charged on most things except groceries.
- Provincial Sales Tax (PST) is a 10% provincial tax charged on most things except groceries, clothing, footwear and books.
Sales tax amounts are usually not included the price tag of a product or service, so the final cost you pay at checkout will be higher than the one displayed on a price tag.
In PEI, when you purchase an item where both taxes are charged, the GST is charged first. Then the PST is added, which makes the total tax equal to 15.5% of the purchase price.
Some provinces use the Harmonized Sales Tax (HST). HST is a combined tax amount that includes both the GST and PST. GST is the same everywhere in Canada, but PST or HST amounts change from province to province. In PEI HST is not used.
Filing the Income Tax Return
As a newcomer to Canada, you are considered a 'resident of Canada for income tax purposes' when you establish residential ties in Canada. This usually is on the date you arrive in Canada. [See Related Resources]
Even if you do not have any income, or are receiving financial assistance, you have to file an income tax return with CRA every year. This may help you get some benefits from federal or provincial government programs.
There are two ways to file your income tax return:
- Electronically, by using the NETFILE service on the Internet along with a certified tax preparation software or web application.
- Fill in an income tax form by hand, then mail or deliver it to your local tax centre. You can get the forms at your local post office, online or at the local CRA office.
[See Related Resources]
How to Get Help with Filing Income Tax Return
There are several ways to get help with completing your income tax return:
- Use the CRA online course Learn About Taxes. [See Related Resources]
- Pay a professional to help you, like a bookkeeper, accountant, or a tax preparation service.
- Make an appointment with a Community Volunteer Income Tax Program (CVITP). This program organizes tax preparation 'clinics' for people with low income who cannot fill out the return by themselves and cannot afford to pay to have it done for them. Call the CRA or check out their website to find a Voluntary Tax Preparation Clinic in PEI.