Canadian money terms for newcomers

Frequently asked questions

Does Canada have 13th month pay?

No. There is no law requiring a 13th month or a year-end bonus. Some employers pay a bonus, and when they do it is taxed as ordinary income, usually with more tax withheld on the bonus cheque than the final tax turns out to be. Vacation pay, at least 4% of wages, is the one extra that every employer must pay.

Is CPP the same as EPF or PF?

No. CPP is a government pension. You and your employer pay in, you cannot withdraw the money, and it pays you a monthly amount from age 60 to 70 for life. The closest thing to an EPF or PF account is the RRSP: an account you own, where contributions reduce your tax now and withdrawals are taxed later. A PF balance from home cannot be transferred into an RRSP.

Is a GIC the same as a fixed deposit?

A plain fixed-rate GIC works like an FD: a set rate for a set term, guaranteed. Two differences. Some GICs are market-linked, and those can pay much less than the advertised maximum. And interest is fully taxable unless the GIC is inside a TFSA or RRSP, so the account you hold it in matters as much as the rate.

Is Canada's GST the same as India's GST?

Same name, different tax. Canada's GST is a flat 5% federal tax. Some provinces add their own sales tax on top, and others merge the two into an HST of 13% to 15%. There are no rate slabs by product category the way India has.

Does Canada tax long-term capital gains at a lower rate?

No. Canada does not distinguish long-term from short-term gains. Half of any capital gain is added to your income and taxed at your marginal rate, whether you held the asset for a month or a decade. Gains inside a TFSA are not taxed at all.

Is my UK ISA still tax-free in Canada?

No. Once you are a Canadian resident, an ISA is an ordinary investment account to the CRA. Its interest, dividends and gains are taxable in Canada every year. The Canadian equivalent is the TFSA, and your room starts building the year you arrive.

What is a mortgage renewal? My country does not have this.

A Canadian mortgage is usually paid off over 25 years, but the interest rate is fixed for a shorter term, most often 5 years. When the term ends you renew: the lender offers a new rate for the next term, and you can accept it or move to another lender. The renewal calculator shows what a new rate does to your payment.

Why is my take-home pay lower than the calculator at home would show?

Canada deducts income tax, CPP and EI from every paycheque, and the income tax has a federal part and a provincial part. On a $75,000 salary the total is roughly 20% to 25% depending on the province. Many other countries either tax less at that income or collect it later. The take-home pay calculator shows every deduction for your province.