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Mergers and Acquisitions in Canada

In addition to income taxes and capital taxes, both goods and services are taxed in Canada. For the most part, a consumption tax is levied at both the federal and provincial levels, although some provinces levy this tax through a harmonized structure. The federal sales tax is presently 5% and is called the goods and services tax (the “GST”). Ontario’s and British Columbia’s sales taxes, 8% and 7% respectively, are “harmonized” with the GST (the “HST”). Quebec levies a sales tax of 8.5% (the “QST”) which is very similar to the GST. It should be noted that the GST, the Ontario and British Columbia HST, and the QST, are “value added taxes” and are generally refunded to most commercial operations. In addition, most goods exported from Canada are not subject to the GST, HST or QST.

Commercial entities that are involved in making taxable supplies in Canada, including non-residents of Canada who are making supplies in the course of a business carried on in Canada, are required to register for and charge, collect, and remit GST, HST and QST, where applicable, on such supplies.

Currently, the provinces of Saskatchewan and Manitoba impose a provincial sales tax (the “PST”) which is a single incidence sales tax imposed on end-users of tangible personal property as well as certain services in the province. The PST varies from five percent in Saskatchewan, seven percent in British Columbia and eight percent in Manitoba. The province of Alberta does not impose a separate sales tax.

Most provinces also levy a tax when land is transferred. In addition there are several payroll taxes imposed by the federal and provincial governments including employment insurance, Canada Pension Plan (which in Quebec is replaced by the Quebec Pension Plan) and provincial health taxes.

Accordingly, in connection with any transaction, income, commodity and payroll tax advice should be obtained.

Additional posts from the blog



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by Sandra Walker

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