Because Canada is a federation, taxation in Canada is a shared responsibility between the federal government and the various provincial and territorial governments. Canadian provinces and territories have the facility to levy taxes on income, consumption and wealth, as does the federal government.

Federal taxes are collected by the Canada Revenue Agency (CRA). Under tax collection agreements, the CRA collects and remits to the provinces:

• provincial personal income taxes on behalf of all provinces except Quebec, through a system of unified tax returns;
• corporate taxes on behalf of all provinces except Quebec and Alberta; and
• that portion of the Harmonized Sales Tax (HST) that is in excess of the federal Goods and Services Tax (GST) rate, with respect to the provinces that have implemented it.

The Agence du Revenu du Québec collects the GST in Quebec on behalf of the federal government, and remits it to the federal government.

Canada Tax Advantages

Tax benefits, however, are not usually included on this list. They should be.

To begin with, the following principles of taxation apply:

• Canada taxes individuals on the basis of their residence and not their citizenship. A Canadian permanent resident may apply for Canadian citizenship and a Canadian passport after three years (soon to be four years).
• Canada taxes its residents on their worldwide income, but allows offshore trusts for new permanent residents.
• Canadian citizens who are non-residents of Canada do not pay Canadian tax on their worldwide income. Non-residents pay Canadian tax only on certain Canadian-sourced income and capital gain.
• There are no estate duties or succession duties in Canada.

New Canadian permanent residents can significantly reduce, or even eliminate, Canadian taxes with proper planning in advance of their arrival. They are permitted to establish a properly structured offshore trust to shelter non-Canadian sourced income and capital gain for up to five years after their arrival in Canada. During this five-year tax holiday the individual can acquire Canadian citizenship and choose to become a non-resident for Canadian tax purposes. In this manner the income and capital gain generated by the trust never falls into the Canadian tax net.

Taken all together, Canada is the right choice — even from a taxation point of view.