With all the different types of taxes, it’s no wonder people will regularly consult a tax planning attorney to help them strategize how to minimize their tax liability. In Canada, taxes, rates, and duties are collected by various levels of government to fund their programs and services. Three levels of taxation including Federal, Provincial/Territory and City. Understanding the differences and the types that apply to you as a regular working citizen or as a business owner is very important. This is where the management and preparation of tax strategies becomes very helpful in terms of facilitating and complying with the provisions of the tax law and related regulations.
The most common type of tax is an income tax that is derived from a person’s salary or from certain business income. Most of us are familiar with this type and in many cases, a company will withhold employee income taxes to ensure they are filed regularly.
The other types are consumer taxes and excise taxes which are aimed at the production, sale or consumption of goods and services. This is a form of indirect tax. Excise taxes are levied by the manufacturer or retailer and not paid directly by the consumer, and therefore often remain “hidden” in the price of a product or service, rather than being listed separately.
Property taxes are imposed on the sale and transfer of ownership of various types of property or assets. In general, property is classified under land, improvements to land (fixed assets such as buildings), personal property (movable assets such as vehicles), and intangible properties. Many provinces levy property taxes on real estate based on the current use and value of the land. It is the main source of income for most municipal governments. While property tax rates vary between municipalities within a province, there is usually a general property valuation or valuation criteria set out in provincial law.
Another common type of tax is an import/export tax. Import duties and taxes are payable when importing goods into the country by both individuals and commercial entities. Apart from import duties, imports may be subject to other taxes such as GST (General Sales Tax), PST (Provincial Sales Tax), or a combination of the two known as HST (Harmonized Sales Tax) depending on the type of importer and province. The amount of import duties and taxes payable depends on the place of residence of the importer and not on the location of the entry of the goods into the country.
These are just some of the basic types of taxes that people in Canada usually pay. It can be confusing and even overwhelming when you start calculating and even detailing all the different taxes a person has to pay. This is why it is advisable to consult a tax professional and seek their help in managing and strategizing how to pay and minimize your taxes. This in no way avoids your taxes. You’re just making sure that you don’t have to pay anything over and above what you have to pay. This is where a tax planning attorney can be of great help.