The basics of taxation and how a tax planning attorney can help

With all the different types of taxes, it’s no wonder people regularly consult with a tax planning attorney to help them devise strategies to minimize their tax liability. In Canada, taxes, duties, and fees are collected by different levels of government to fund their programs and services. The three levels of taxation include federal, provincial/territorial, and municipal. It is very important to understand the differences and what rates apply to you as a regular working citizen or as a business owner. This is where tax management and strategizing becomes really useful in terms of making things easier and complying with the provisions of the tax laws and related regulations.

The most common type of tax is income tax that is derived from a person’s salary or income from a specific business. Most of us are familiar with this type, and in most cases, a corporation will withhold an employee’s income tax to ensure regular filing.

Another type is the excise and consumption tax, which is for the production, sale or consumption of goods and services. This is a form of indirect tax. Excise duties are collected by the producer or retailer and are not paid directly by the consumer, and as such are often “hidden” in the price of a product or service, rather than listed separately.

Property taxes are collected on the sale and transfer of ownership of different types of property or assets. Property is generally classified as land, land improvements (fixed assets such as buildings), personal property (movable property such as vehicles), and intangible property. Many provinces impose property taxes on real estate based on the current use and value of the land. This is the main source of revenue for most municipal governments. Although the levels of property taxes vary between the municipalities of a province, there are generally common criteria for the evaluation or valuation of property established in the provincial legislation.

Another common type of tax is the import/export tax. Import duties and taxes are due when importing goods into the country, whether by a private individual or a business entity. In addition to the tariff, imports may be subject to other taxes such as GST (General Sales Tax), PST (Provincial Sales Tax) or a combination of both known as HST (Harmonized Sales Tax) depending on the type of importer and the province. The amount of duties and taxes owed depends on the importer’s place of residence and not where the goods enter the country.

These are just some of the basic types of taxes that people normally pay in Canada. It can get confusing and even overwhelming when you start calculating and even itemizing all the different taxes a person has to pay. That is why it is advisable to consult with a tax professional and seek their help both in the management and in the strategy of how to pay and minimize your taxes. This is in no way avoiding your taxes. You’re just making sure you don’t have to pay anything above what you’re supposed to pay. This is where a tax planning attorney can be of great help.

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