All governments in Canada impose a tax on income, and Nunavut is no exception.
Nunavut boasts the lowest tax rates in the country, with the exception of the rate on the highest income bracket, which is slightly more than Alberta’s 10%. Overall, the Nunavut Income Tax system is progressive, fair, and economically competitive with all other jurisdictions within Canada, including the other 2 territories.
Calculation of Tax
Income tax is calculated on the total taxable income of an individual or a corporation.
Rates of Tax
Income tax rates are set annually. Please refer to the Nunavut Tax Rate Sheet for this year’s income tax rates.
Administration of Income Tax
The administration of the Income Tax System is controlled by 2 Income Tax Acts, one at the federal level and one at the territorial level.
Nunavut has also signed a Tax Collection Agreement empowering the Canada Revenue Agency (CRA) to collect our taxes for us, administer our income tax system on our behalf, and provide additional services for us at a minimal cost. Nunavut agrees to keep our tax system similar to the federal system for efficiencies in administration and enforcement.
The Income Tax Act (Nunavut) is our own legislation governing our income tax system, and builds on the federal system by identifying territory–specific provisions such as special tax credits that apply only in Nunavut.
Collection of Tax
Income tax is collected by the Canada Revenue Agency (CRA) on behalf of Nunavut. The Department of Finance (Canada) prepares an estimate of what is expected to be collected by CRA, and that estimate is paid to the Government of Nunavut on a weekly schedule. As it often takes 18 to 24 months for a taxation year to be finalized, there are often adjustments of what was finally collected in taxes by CRA and what was actually paid to us be the Department of Finance (Canada).
Penalties and Fines
Every person who contravenes or fails to comply with this Act or the regulations is guilty of an offence.
Offenses are extensively outlined in the Income Tax Act (Canada) and include such things as:
- failure to file a return,
- making false statements, being involved with tax evasion or conspiring to commit an offence under the act,
- Any person who violates the confidentiality of tax information is liable to summary conviction
Territory-specific tax measures
There are several personal income tax measures included in the Income Tax Act (Nunavut) that do not have a federal counterpart. These measures affect the amount of territorial income tax collected, and they do not affect the amount of federal income tax collected. There measures are as follows:
Cost of living tax credit
Residents can claim a refundable tax credit of up to $1,200
Cost of living supplement for single parents
Single parents with more than $60,000 in adjusted net income can claim a refundable tax credit of up to $255.12.
Volunteer Firefighters Tax Credit
All full-time and part-time volunteer firefighters who complete at least 200 hours of community service, including training, will be eligible to claim a $500 non-refundable tax credit. This credit will be effective for the 2008 taxation year, and will be indexed to inflation annually starting in 2009.