12 January 1993 Income Tax Severed Letter 9232895 - General Canadian Tax Rules for Individuals

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.

[SUBJECT: GENERAL CANADIAN TAX RULES FOR INDIVIDUALS (7146-1)]

• 5- 923289

XXXXXXXXXX G. Middleton
(613)957-2122

January 12, 1993

Dear XXXXXXXXXX

Re: Canadian Laws Governing Taxation

This is in reply to your letter of October 28, 1992 in which you requested information on Canadian laws governing taxation.

We are enclosing the following publications which will provide you with information and explanations on the rules regarding Canadian taxation for individuals.

• • Tax Guide for New Canadians
• • Federal and Provincial General Tax Guide - Ontario
• • Capital Gains Tax Guide
• • Federal and Ontario Individual Income Tax Return
• • Table A and Table B and other forms relating to the tax return

A resident of Canada is taxable in Canada on his world income. Accordingly, if you become a resident of Canada, the income from your investments and Australian superannuation plan plus 3/4 of any capital gains would be subject to tax in Canada and would be included in your "taxable income".

In order to avoid double taxation, Canada will provide a resident of Canada with a foreign tax credit, on a country by country basis, which is generally equal to the lesser of the tax paid to the foreign jurisdiction or the Canadian tax otherwise payable on the specific source of income. The calculation of the foreign tax credit is at lines 507 to 509 on the form entitled "Detailed Tax Calculation - Schedule 1" and that form is included with the "Table A and Table B" publication mentioned above.

The Canada-Australia Income Tax Convention also avoids double taxation and it provides the maximum rate of tax which may be imposed by each of the countries on particular sources of income. We are enclosing a copy of Articles 10, 11, 13, 18, and 23 of this Convention which may be helpful to you.

Federal Tax

• 1. The rates of federal income tax for 1992 are set out at the top of the form entitled "Detailed Tax Calculation - Schedule 1".
• 2. There are various non-refundable tax credits that are also available to certain individuals which reduce the federal tax payable. The explanations for these credits are summarized on pages 29 to 38 of the "Federal and Provincial General Tax Guide - Ontario" and the calculation of these credits is on page 3 at lines 300 to 350 of the "Federal and Ontario Individual Income Tax Return". For example, for 1992 an individual is entitled to a basic personal credit of $1,098 (17% of $6,456) and if he is age 65 or older, he is entitled to an additional credit of $592 (17% of $3,482). The non-refundable tax credits are deducted from the federal tax at line 501 of the form entitled "Detailed Tax Calculation - Schedule 1"
• 3. There is also an additional federal individual surtax which is calculated at the bottom of the form entitled "Detailed Tax Calculation - Schedule 1". Additional comments on this surtax can be found on page 40 at Line 419 of the "Federal and Provincial General Tax Guide - Ontario".

Provincial Tax Rates

• In addition to the federal tax, an individual who resides in any of the provinces of Canada is also subject to provincial income tax. The provincial tax is generally expressed as a percentage of the "Basic federal tax" amount calculated at line 506 of the form entitled "Detailed Tax Calculation - Schedule 1". The provincial tax for individuals is collected for all of the provinces, except Quebec, by the federal government on a joint tax return.
• In 1992, the provincial tax rates ranged from a low of 44% of the "Basic federal tax" amount in the North West Territories to a high of 62% of the "Basic federal tax" amount in Newfoundland. There may also be provincial surtaxes in some provinces. An individual's Ontario income tax payable is calculated on the three pink forms at the back of the "Table A and Table B" publication mentioned above. (See form T1C (ONT.)-1992 entitled "Ontario Tax Credits"; form T1C (ONT.) TC-1992 entitled "Ontario Income Tax"; and form T1C (ONT.) Seniors-1992 entitled "Ontario Property and Sales Tax Credits for Seniors").

We trust our comments will be of assistance to you and if you wish a 1992 Income Tax Return for a particular province, you can write to:

International Tax Office
2540 Lancaster Road
Ottawa, Canada
K1A 1A8

Yours truly,

for Director
Reorganizations and Foreign Division
Rulings Directorate
Legislative and Intergovernmental
Affairs Branch