Taxes are an important consideration for those earning an income in Canada. As a country with a developed welfare infrastructure, and socially accessible public programs, taxes play a crucial role in Canadian society—and further in the welfare of those in Canada.
Still, due to the fact that they can incur extra costs, or deduct from income of individuals, the question of low tax rates is often a popular one.
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The province or territory that has the lowest income tax rates in Canada is Nunavut; however, the question is more complex than it may appear at first glance.
The kinds of taxes in Canada:
Canada features several different taxes; the two most common are:
- Income tax (which breaks down into Provincial and Federal income taxes); and
- Consumption tax (which can break down into Generalised and Provincial Sales Taxes).
Note, however, that there are several other kinds of taxes that may be relevant to your situation. To learn more about the different kinds of taxes in Canada, visit the dedicated government page here.
Income Taxes
Income taxes are two-fold in Canada. There is the federal income tax rate which applies to all residents in Canada, across all provinces and territories—and the provincial income tax rate which varies from province-to-province. Individuals in Canada will have to pay a combination of both these income taxes.
Canada’s tax rates are organized into brackets. Current federal tax and provincial tax rates can be found here. To learn more about filing your federal income tax, visit our dedicated webpage here.
A common misconception of income tax in Canada is that as one’s income goes up (and individuals move up through tax brackets), so too does the flat rate by which one’s total income is taxed. However, this is not the case; instead, income is taxed in a tiered system across these brackets. For example:
The 2023 tax rates cite 15% tax on income that is $53,359 CAD or less, and 20.5% tax on income between $53,359 and $106,717 CAD.
If your yearly income in Canada is $90,000 CAD, instead of simply jumping to the relevant federal tax rate for your bracket (20.5%), you would instead pay the applicable tax on the amount that corresponds to the lower bracket (15% on the first $53,359 CAD), before paying the corresponding tax rate (20.5%) on amounts over the bracket limit. This means instead of paying $18,950 of income tax (20.5% flat rate) you instead pay $15,515 in annual income tax.
Therefore, to determine which province really has the lowest tax rate, we need to use an example salary, to better judge what the relevant taxes may be. According to Statistics Canada, the average national employment income of a Canadian worker (aged 16 and over) in 2021 (the last available Canadian Income Survey) was $51,600 CAD—which we can use as pre-tax income.
The federal tax rate in 2023 for this salary is 15%. Below is a list of how much an individual making this salary would pay in taxes, in each province:
- British Columbia: $7,515 CAD;
- Alberta: $8,399 CAD;
- Saskatchewan: $8,296 CAD;
- Manitoba: $9,564 CAD;
- Ontario: $7,449 CAD;
- Quebec: $9,331 CAD;
- New Brunswick: $9173 CAD;
- Nova Scotia: $7,515 CAD;
- Prince Edward Island: $9,909 CAD;
- Newfoundland and Labrador: $9,487 CAD;
- Northwest Territories: $7,502 CAD;
- Nunavut: $6,727 CAD; and
- Yukon: $7,704 CAD.
We can see that the tax payable is the lowest in Nunavut; however, this may not be constant, and can vary greatly on one’s income and expenses. To get the best idea of what taxes you might pay in each province, you can visit the government’s 2023 provincial tax rates page here.
Consumption Taxes
Consumption taxes break down similarly to income taxes. While the federal government imposes a national consumption tax known as a General Sales Tax (GST), each province also has their own Provincial Sales Tax (PST). Canadian residents are required to pay both kinds of taxes on goods and/or services purchased within Canada. Note that some goods and services are exempt from these taxes.
Some provinces combine the GST with their local PST, creating what is called a Harmonised Sales Tax (HST). While HST functions exactly like charging GST and PST separately, it is more convenient for book-keeping as a single tax rate.
The national GST in Canada (in 2023) is 5%.
Among provinces that charge both consumption tax rates, the following are the 2023 PST rates:
- British Columbia: 7%;
- Manitoba: 7%;
- Quebec: 9.975%; and
- Saskatchewan: 6%.
Among provinces that combine consumptions taxes, the 2023 HST rates are:
- Ontario: 13%;
- New Brunswick: 15%;
- Newfoundland and Labrador: 15%;
- Nova Scotia: 15%; and
- Prince Edward Island: 15%.
In addition, the following provinces and territories do not charge a PST, and only charge GST on goods and services:
- Alberta;
- Northwest Territories;
- Nunavut; and
- Yukon.
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