The Canadian government levies a 5 percent goods and services tax (GST) similar to the value-added taxes of many countries. Some provinces levy a blended federal/provincial harmonized sales tax, while others maintain a separate retail sales tax. Certain other taxes and charges are levied by provincial and local governments, such as payroll and health fund taxes.
For more information on Canada's indirect taxes, see KPMG's Indirect Tax Services page.
As more goods and services flow between countries, transfer pricing continues to be a critical tax issue facing multi-national corporations. Like many other countries, the Canadian tax authorities have imposed complex transfer pricing regulations with penalties for non-compliance.
See KPMG International's A Meeting of the Minds – Resolving Transfer Pricing Controversies, which focuses on transfer pricing controversy issues and resolution alternatives, and describes several approaches that have helped to add real value by resolving controversies and debates.
Duties are imposed on a wide range of goods imported into Canada, and Canadian tariff schedules parallel the schedules of most major exporting countries. However, importers may obtain relief from duty from drawbacks and remissions, while the North American Free Trade Agreement has reduced or eliminated customs tariffs on some goods originating in the United States and Mexico.
To avoid costly delays, hassles, or worse consequences at the border, keeping up on the latest rules and procedures can be critical. Subscribe to KPMG's Trade Matters newsletter, which discusses the most recent developments in trade and customs that may affect your investment in Canada.
Extended business travellers to Canada — employees working abroad for more than 30 days, but less than 180 days per year — are likely to be taxed on employment income relating to their Canadian work days, and will have an obligation to file a Canadian income tax return. In addition, employers have a payroll reporting and tax withholding obligation, even if the employee's income is exempt from tax under a tax treaty.
You can find further information in Canada: Taxation of International Executives [PDF 452Kb] and Canada: Planning Your International Transfer.
To see how these rates compare to other countries, see KPMG International's Thinking Beyond Borders publications, which address several key tax issues, including income tax compliance obligations, social security obligations, permanent establishment implications, work permit requirements, and indirect taxes.
Canada's federal government delivers more than $3 billion in tax incentives annually to companies doing research and development (R&D) in Canada. The Organization for Economic Co-Operation and Development (OECD) has found that Canada's strong federal and provincial tax incentives for research and development (R&D) activities makes the after-tax cost of R&D in Canada lower than almost everywhere else in the world.
For more details on Canada's Scientific Research and Experimental Development (SR&ED) program, see R&D incentives in Canada.