Canadians are taxed on their income from sources inside and outside Canada. There are various ways in which income is taxed, depending on the person or entity earning the income. And depending on who is earning the income and the type of income being earned, tax rates range from approximately 20% to approximately 53%, with federal and provincial rates combined.
Non-residents, although taxed on income earned in Canada, may benefit from lower tax rates as a result of tax treaties that Canada has with their country of residence.
Businesses, including corporations and partnerships not only have a broad range of deductions available to them, but their income is generally taxed at a more favourable rate than most or all individuals – especially if the business qualifies for the small business deduction. Partnership income differs from business income in that it is not taxed at the partnership level – instead partnership act as a “flow through”, meaning that the income is first divided between partners who in turn pay income tax at their own rates.
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