Canadian Bookkeeping and Tax Rates

This is "The Rates" page. It has compliance tax rates that would be of interest to Canadian small business owners and bookkeepers who work from home.

You can scroll down to find which rate you are looking for or click on one of the QUICK LINKS to go right to the spot.

You may also be interested in "The Deadlines" page which discusses tax compliance filing deadlines by tax type.

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Quick Links to Tax Rates On This Site

Interest Rates

• CRA Prescribed Interest Rates

Canadian Sales Tax

• Federal GST/HST Rates (current and historical sales tax rates including Simplified Method)
• Quick Method GST/HST Rates (current and historical)
• Out of Province GST/HST/PST Rates
• Summary of Canadian Sales Tax Rates as of July 1, 2010

Payroll Taxes

• Payroll Tax Deduction Rates
• 2010 CPP and EI Rates
• Employee Taxable Benefits Rules

Canadian Travel / Vehicle Mileage Rates

• Simplified Meal and Vehicle Travel Rates
• Employee Automobile Allowance Rates
• Company Vehicle Rates

Income Tax

• Common Business CCA Rates ... and What You Should Know About CCA
• CCPC Tax (corporate income tax)
• Personal Income Tax
• 2010/2011 Tax Deadlines

Notice to Site Visitor

I developed this tax rates page as a handy reference for myself. While I do my best to ensure it is accurate and complete, I make it available for your use with the understanding that I cannot be held liable for errors and/or omissions. Tax information is subject to frequent change so professional advice should be sought prior to acting on any of this information. Please make yourself familiar with my site policies prior to relying on any of the information on this site.

Taxable Benefits refers to interest-free and low-interest loans for shareholders and employees.

Overdue and ovepaid taxes includes income taxes, CPP contributions, EI premiums, GST/HST, Excise tax / duties ... basically any kind of federal tax.

While looking for something else, I came across a KN&V CAs (www.knv.com) rate sheet ... and learned something new. Did you know that the overpaid taxes rate (amounts owing from the federal government) is always 2% point more than the taxable benefits rate? ... and that overdue taxes rates (basically the rate for all other purposes) is 4% points more than the taxable benefits rate? I just never noticed before ... scary how unobservant I am at times!

Canadian GST/HST Rates
Current and Historical Sales Tax Rates

Looking for Tax Compliance Filing Deadlines and Due Dates?

HST is the harmonized sales tax in effect in Newfoundland, Labrador, New Brunswick and Nova Scotia. You should be aware that Nova Scotia is increasing its HST rate on July 1, 2010 by 2%. See the GST HST rates table by province.

The Ontario March 2009 budget brought in HST as well, with the RST being eliminated by July 1, 2010.

In July, 2009, the Campbell government announced that BC would switch to HST effective July 1, 2010 too.

HST transitional rules for BC and Ontario were released by CRA, BC Ministry of Finance and the Ontario Ministry of Revenue. The HST transitional rules were effective May 1, 2010 to June 30, 2010.

If you are registered for GST, then you are automatically registered for HST.

To calculate the provincial part of the HST, subtract the federal part % where the federal part = the GST rate for that period. For example, as of July 1, 2010 the BC HST is 12% - 5% federal part = 7% provincial part.

You can find a CRA rate table by province on their website at Businesses > GST/HST > GST/HST rates.

*The simplified GST/HST rate for purchases is calculated as follows:

• (the current GST/HST rate / (100 + the current GST/HST rate)).
• For GST @ 5%, the simplified tax rate would be 5/105 times total purchase amount including GST = GST paid (ITC).
  For example - 5/105 times $2456.89 including GST = $116.99 GST paid
• For HST @ 13%, the simplified tax rate would be 13/113 times total purchase amount including HST = HST paid (ITC).
  For example - 13/113 times $2456.89 including HST = $282.65 GST paid

It is my understanding that if you use the simplified method, you should have been self assessing HST between October 14, 2009 and April 30, 2010 ... holding and remitting after the June 30, 2010 reporting period.

When does it become mandatory to register for GST/HST?

If you own a business in Canada, you must register for GST and collect it if your annual sales is greater than $30,000.

Registration under $30,000 in sales is optional. If you are starting up your business and your sales will be less than $30,000, you should still register. It allows you to recover your input tax credits (ITCs) on start-up costs and normal purchases.

The question often arises, especially with online internet sales; what are the rules pertaining to GST / HST tax rates on out of province sales? Here's my understanding.

Place of supply rules come into play ... and there are four categories ... each with separate rules and specific differences for certain groups - (1) goods, (2) real property (3) services, (4) intangible personal property.

If you reside in an HST province (called participating province), and make a sale to a GST province (called a non-participating province), you would reduce the tax charged from the HST to the GST rate.

However, if the out-of-province customer picked up the goods in your province, then you must charge the full HST rate. Either way it is tax neutral to you as you get to claim all relevant ITCs.

And it's the opposite if you are a non-participating province (GST) and sell to a participating province (HST). You must charge the HST rate to out-of-province sales unless the customer physically picks up the goods in your province.

New place of supply rules for intangible personal property and services, are effective May 1, 2010. Old rules relied on the supplier's location. New rules place greater reliance on where the consumer is located. This means you will now need your customer / client's address.

May 1, 2010 was an important HST transitional date. October 14, 2009 was also an important date for those who had to self-assess. Are you tax compliant?

You can find more information in CRA's Technical Information Bulletins B-103 Place of Supply Rules under the HST which includes proposed HST place of supply rules for intangible personal property and services effective July 1, 2010, B-079 Self-Assessment of the HST on Supplies Brought Into a Participating Province, and B-080R Rebates of HST on Supplies Made From the Participating Provinces.

GST/HST pertaining to virtual or electronic commerce (online internet sales, web hosting and web design) is discussed here, including non-resident tax rates.

Summary of Canadian Sales Tax Rates by Province

You used to be able to find the following list at the Canada Business website. The rates were located in the Canada-Saskatchewan GST/HST service section ... about mid-way down the page. The site has since been revised and I can no longer locate the table.

I have updated the table for the GST and HST rates by province at July 1, 2010.What I really like about the table is that it includes the effective combined rates for PEI and Quebec as they charge PST on GST.

* In Quebec and Prince Edward Island only, the GST is included in the provincial sales base. You are also charged PST on GST, therefore the higher than expected combined rate.




Here is a copy of the original table as it was presented on the Canada Business website in 2009 ... to give you an idea of where things stood before BC and Ontario implemented HST.

Quick Method GST/HST Rates

With the introduction of different HST rates in BC and Nova Scotia on July 1, 2010, this simplified method of accounting will require a bit more paperwork than before.

You now need to track your sales by the four groups ... non-participating provinces, participating provinces by rate - BC, Nova Scotia, all the other participating provinces ... and by non-eligible sales and personal use "sales".

As this topic is a bit more complex now, the GST HST Quick Method rates are now are their own page.

Let's Chat About ...

CCA (capital cost allowance) is the expensing of your capital expenditures over time for tax purposes. The accounting treatment (known as amortization or depreciation) is slightly different

The allowable CCA tax rates are found in the Income Tax Act Regulations 1100 Schedule II . It has classified different types of assets into classes. Each class of asset has a different CCA tax rate. So take care when you classify your assets. CRA does watch for this because if you pick the wrong classification and depreciate your assets too quickly, you would be deferring taxes.

Join the discussion in the community bookkeeping forum by posting your comments ... or asking a bookkeeping question on something you don't understand.

As a small business owner, the most common CCA classes, along with their tax rates, that you would probably be interested in are:

• CCA Class 8 office furniture, office equipment, small tools over $500 and equipment not listed in another class at 20%
• CCA class 10 and 10.1 vehicles at 30%
• CCA Class 10 computer hardware and systems software acquired before March 23, 2004 at 30% - see also class 45
• CCA class 12 computer software other than your operating system and small tools under $500 at 100%
• prior to May 1, 2006 the threshold amount was $200
• do not include systems software here
• CCA class 45 computer equipment and systems software acquired after March 22, 2004 at 45% - see also class 50
• CCA class 46 network equipment and associated systems software (that would have been included in class 8) acquired after March 22, 2004 at 30%
• CCA Class 50 computer equipment and systems software acquired after March 18, 2007, that is not used principally as electronic process control, communications control, or monitor equipment, and the systems software related to such equipment, and data handling equipment that is not ancillary to general purpose computer equipment at 55%
• CCA class 52 computers acquired between January 28, 2009 and January 31, 2011 at 100%

You can find more business CCA classes along with their tax rates in the CRA publication T4002 Business and Professional Income. Look in chapter 4 under CCA classes.

Eileen Reppenhagen, CGA cautions bookkeepers to be aware that software is classified as operating software(class 12) and systems software. As each type has a different CCA class, I think it's advantageous to track the two types separately in your books.

To get a more thorough understanding of the complicated subject of CCA and how to apply the tax rates, visit CRA's website page at

Businesses>Sole proprietorships and partnerships>Reporting>Capital Cost Allowance (CCA).

One of the articles discusses "Things You Should Know About CCA". This publication is a must read. The CRA publication covers:

• the 50% rule
• available for use rule (it's important to understand this rule)
• land and living things
• possible recapture of CCA
• terminal loss
• depletion allowance
• T5013 and T5013A slips and your CCA claim
• First fiscal period is less than a year

Here is another one of the things you should know about CCA. That is ...

You don't have to make a full CCA claim on your tax return every year. If you are losing money, then it is better NOT to claim CCA in a particular year. Save the tax deduction for a future year. You can also take a partial deduction to bring your net business income to zero.

A general rule when deferring your CCA claim, defer your quickest depreciating assets first.

Canadian Travel and Vehicle Mileage Rates

Simplified Meal and Vehicle Travel Mileage Rates - Cents per Kilometre

The simplified method can be used for trips relating to your selected 12 month period of medical expenses, moving expenses or northern residents deductions.

With the simplified method, you do not need to keep receipts.

The simplified meal rate is a flat rate - $17 per meal or $51 per day.

To claim the simplified travel mileage, you must track the mileage of your trips and prorate it.

Small businesses are not allowed to use the simplified method for their vehicle expenses at this time ... but I keep hoping soon. It would reduce paperwork!

As a small business owner, you report your vehicle expenses on Form T2125 using the detailed method. This means you do have to keep all your receipts.

That being said, if you live more than 40 kilometers away from medical facilities, keep a travel log ... as you can claim dentist, optometrist, and doctor trips under medical expenses on your personal tax return.

Mileage rates for the 2010 tax year are not released until 2011. Here are the 2009 mileage rates that were released early in 2010.

Employee Auto Allowance Tax Rates - Cents per Kilometre

If your employees use their personal vehicle for business purposes, these are the published tax rate deduction limits for the tax-exempt portion of allowances that CRA considers reasonable. Any amount paid over these rates is considered a taxable benefit that must be reported on the employee's T4 slip.

Reimbursement of toll or ferry charges or supplementary business insurance is acceptable provided you did not calculate your allowance to include these reimbursements.

The allowance should only be paid on the business kilometers and the employee should NOT be reimbursed for expenses related to operating the vehicle as this allowance is meant to cover those costs.

It is recommended you have employees keep an auto log as proof of the number of kilometres driven for business use.

As a Canadian sole proprietor, you are NOT eligible for a per kilometre allowance. You must use the detailed method. This allowance is for employees only.

The rules are different for a U.S. sole proprietor.

If you are incorporated and work in your business, you are an employee and eligible to use these rates ... but you also have another option.

These tax rates are reviewed annually and announced each year-end ... and include GST and HST.

For example, that means if you are in a GST province, divide the rate by 1.05 to get the mileage rate excluding GST. The GST on mileage would be mileage allowance times 5 divided by 105.

If you live in an HST province, divide the rate by 1.13 where 13 equals the HST rate to get the mileage rate excluding HST. The HST on mileage would be mileage allowance times 13 divided by 113 where 13 equals the HST rate.

Flat allowances paid that are not based on kilometres driven are fully taxable. If the auto expenses exceed the allowance, the difference may be deductible ... check with your accountant.

CRA's publication T4130 Employers' Guide - Taxable Benefits and Allowances has a benefits chart which shows that you cannot include GST/HST on this allowance.

Company Vehicle Tax Rates

These tax rates are for the "passenger vehicle category" and used on Form T2125 Page 5 in Charts B and C. They are reviewed and revised annually each December.

• Maximum annual interest $3,650 on money borrowed to buy vehicle
• Maximum monthly lease payments $800 plus taxes
• Maximum Class 10.1 capital cost $30,000 plus taxes
• Maximum GST ITC claimable 5% of $30,000 = $1,500

Need more information, read more here ...

Historical Tax Rates - Maximum Class 10.1 Capital Cost Restrictions

Jan 1, 2001 to present -- $30,000 plus taxes
Jan 1, 2000 to Jan 1, 2001 -- $27,000 plus taxes
Jan 1, 1998 to Jan 1, 2000 -- $26,000 plus taxes
Jan 1, 1997 to Jan 1, 1998 -- $25,000 plus taxes
Jan 1, 1991 to Jan 1, 1997 -- $24,000 plus taxes
Sep 1, 1989 to Jan 1, 1991 -- $24,000
Jun 17, 1987 to Sep 1, 1989 -- $20,000

Source of Historical Rates: CCH publication 'Preparing Your Income Tax Returns' 810a

The Bookkeeper's Reference to Canadian Personal Tax

Looking for personal tax information? Personal taxes is outside the theme of this website (except for pieces and parts that relate to your home based business) as its niche is bookkeeping for the work from home business owner. But ...

... personal tax planning is an important aspect of your overall financial plan that should not be ignored. Soooo ... I am introducing you to my favorite tax site. I found this site a few years back and I drop in on a regular basis.

TaxTips.ca is an all Canadian reference site for easy to understand tax, financial and investing information. It also has terrific calculators. The one I like is the Canadian income tax calculator . You input a few key pieces of information and it estimates your taxes - all for free. Now that's easy tax planning! After every federal or provincial budget, the information is updated to reflect the changes.

TaxTips.ca is owned by a small private company located in Cedar, B.C. The web content is prepared by a husband and wife team who are retired from owning and operating a small business, with one being a retired professional accountant.

I just love this site ... and I hope you do too! Make tax planning part of your overall financial plan because you don't want to forget that ... Freedom is the Goal, Right?

Let's Chat About ...

In Canada we have a progressive tax system based on individual incomes not family incomes. A low rate is imposed on lower incomes and a high rate is imposed on higher incomes. Currently there are four different federal tax brackets.

The federal government has their tax schedule and each province / territory has one as well. So it's tough to know what your combined marginal tax rate is, which is the highest rate at which your last dollar of income is taxed.

If you are in the lowest tax bracket, your income is taxed just on one rate. If you are in the second to fourth tax bracket, you pay tax at different rates.

Capital gains and dividend income attract different marginal tax rates than other income because of special tax rules. Only 50% of capital gains are included in taxable income while dividends are included in taxable income at 125% or 145% with an offsetting deduction from taxes payable.

Have you ever wanted to calculate your marginal tax rate but don't know how? Well here's how to do it.

Get your latest tax return filed with the CRA. Find the Schedule 1 Federal Tax and Your Provincial Tax Schedule in your tax return package. In BC, it's form BC428 British Columbia Tax. Each province has their own tax schedule. The form will start with two letters for your province / territory followed by 428.

On page 2 of both schedules, you will see the four different tax rates imposed on various levels of incomes. Federally, they are 15%, 22%, 26%, and 29%. Provinces set their own rates.

Take your taxable income reported on line 260 of your T1 return and pick the highest tax rate you paid tax on. If you are looking at your filed return, it should be easy to spot as you will see a completed calculation in one of the four columns.

Add the federal rate from your Schedule 1 and the provincial rate from your provincial tax schedule to get your marginal tax rate.

So if you had taxable income of $40,000 in the province of BC, your marginal tax rate would be 22% plus 7.7% = 29.7%. That means on your last dollar earned, you paid 30 cents in tax. Your marginal rate is the highest rate your income is taxed.

But here's the thing. Your marginal tax rate is not your actual tax liability.

To calculate that, you want your average tax rate. Your average tax rate will be lower than your marginal tax rate.

The easiest way to calculate your average tax rate ... take your tax payable from line 435 of your T1 (page 4). Divide it by your taxable income on line 260 of your T1 (page 3).

My favorite tax site has an average tax rate table for every province or territory at varying levels of employment income, showing average tax rates for each. You can also find marginal tax rates by following the links to your province or Canada.

So why do you want to know these rates?

Well, you can calculate what if scenarios (instead of letting the computer software do it for you). Suppose you couldn't decide whether to purchase a $1000 RRSP or donate $1000 to a charity.

With the above information, we can figure out which gives you the most tax savings. Using the $40,000 taxable income again, here's how:

(1) RRSP contribution of $1000 x marginal tax rate of 22% = tax savings of $220 plus future interest/dividends are sheltered.

(2) Charitable contribution of $1000 ... 200 x 15% = $30 + ($1000-$200) x 29% = $232 = tax savings of $262

That's just one example of what you can do when you know your marginal tax rate.

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