Canada or Spain: Where is it better to pay taxes?

One of the best ways to assess profitability when moving to Canada or Spain is by comparing taxes. This helps you decide better, whether as a worker or entrepreneur.

This guide helps you understand how both tax systems work and which one suits your profile better. Throughout the article, you will see each tax explained. At the end of each section, tables summarise the information. Let’s get started!

Taxes for companies or legal entities in Canada and Spain

We start with how Canadian and Spanish companies are taxed. Both countries differ significantly. This is mainly due to incentives for start-ups and their deduction systems. Below, we break down the details.

1. Corporate income tax in Canada vs Spain

Corporate income tax is the core business tax in both countries. It applies to net profits earned during the fiscal year.

In Canada, it is called Corporate Income Tax. It has two levels: a 15% federal rate and a provincial rate ranging from 8% to 16%. Spain applies a flat 25% rate.

However, Spain encourages entrepreneurship. It applies a reduced 15% rate for new companies during their first two profitable years.

For small businesses, Canada offers an advantage. The federal rate drops to 9% through its small business deduction.

2. Consumption taxes: GST/HST in Canada vs VAT in Spain

Consumption tax applies to goods and services. Although consumers pay it, companies collect and remit it.

In Spain, VAT has three levels: 21% standard, 10% reduced, and 4% super-reduced, the latter applying to essential goods.

In Canada, the system varies by location. The federal government applies a 5% GST nationwide.

However, provinces differ. Some add a separate PST, while others use HST, combining taxes between 13% and 15%.

3. Capital Gains Tax in Canada and Spain

Under the Spanish tax system, corporate capital gains are not taxed separately but are included in the general tax base for the purposes of calculating corporation tax; in other words, they are taxed at the standard rate of 25%.

For example, if a company sells a property for more than it paid for it, that profit will be taxed at 25%. However, there is an important mechanism at play here: the double taxation relief, designed to prevent the same income from being taxed twice.

Under this scheme, companies are eligible for a 95% tax exemption on profits or dividends, provided they hold at least a 5% stake in the subsidiary for a minimum period of one year. In practice, this means that only 5% of that profit is subject to tax.

In Canada, not all capital gains realised by a company are taxed. There is an inclusion rate of 66.7%, which means that only that portion of the profit is included in the company’s ordinary income and taxed at the applicable corporate tax rate, which varies between 23% and 31% depending on the province in which the company is located.

The remaining 33.3% is tax-exempt, resulting in a lower effective tax rate on the total return on investment.

4. Payroll taxes (social security contributions)

In Spain, employers pay most social security costs. These range from 29.9% to 31% of gross salary. These contributions are used to cover general contingencies, as well as unemployment and vocational training.

Canada uses a co-payment model between employer and employee based on fixed annual caps. Employers make two main contributions: the Pension Scheme (CPP) and Unemployment Insurance (EI), under which the employer pays 1.4 times the amount contributed by the employee.

Once an employee’s salary reaches the maximum limit set by the government, which for 2026 is in the range of $70,000 to 80,000 CA ($51,161 US, €43,699) per year, both the employer and the employee cease to pay these contributions for the remainder of the calendar year.

5. Local and activity taxes (Property Tax / IAE)

Canadian property tax is the main local cost for companies that own or rent commercial premises. This tax applies primarily to buildings and is set by local authorities based on the market value of the premises or office, with the tax being levied on that value.

The tax rate is divided into two parts: a municipal rate and an education rate, which together amount to between 0.25% and 2.5% of the property’s assessed value. Meanwhile, the Spanish model leaves it up to each local council to set the tax rate, with rates ranging from 0.4% to 1.1% of the cadastral value.

This usually results in a lower property tax burden for companies in Spain compared to those in Canada, mainly because the cadastral value in Spain is not updated every two years, which ensures greater cost stability over time.

Taxes for individuals in Canada and Spain

Spain applies a progressive tax system for individuals. Both the State and Autonomous Communities manage it. This differs from Canada’s dual system. Canada also offers more generous tax-free thresholds for taxpayers.

Next, we analyse VAT and income tax. This helps determine which country leaves more net income.

1. Consumption tax (VAT vs GST/HST)

Spain uses a unified VAT system with three brackets:

• 21% standard rate that applies to most purchases made by individuals, such as clothing, technology or telephone services.
• 10% reduced rate for essential services such as the hospitality sector and the purchase of new homes.
• 4% super-reduced rate applied to essential goods such as basic foodstuffs, medicines, books and newspapers.

Canada uses a hybrid system depending on the province. On the one hand, there is the HST (Harmonised Sales Tax), which combines the federal and provincial components into a single rate, ranging from 13% to 15% in total.

On the other hand, there are provinces such as British Columbia and Quebec that maintain their own separate taxes. In such cases, some provinces pay 5% federal tax (GST) plus an additional provincial tax (PST or QST) of between 7% and 9.975%, bringing the total to between 12% and 15%.

In some regions such as Alberta, companies are only liable for the 5% federal tax, as there is no provincial sales tax.

2. Personal income tax in Canada vs Spain

There are significant differences in areas such as administration, tax-free allowances and the tax burden, depending on the income levels of Canadian and Spanish citizens.

However, both countries have a progressive tax system that imposes a higher rate as income rises, with the main difference lying in the structure of tax brackets and tax reliefs.

In Spain, tax brackets start at 19% and go up to 47% for middle and high incomes, that is, those exceeding €300,000 ($327,000), which, over time, works to the advantage of high earners.

Spain also protects households with a tax-free allowance of around €5,550 ($6,050) or more if taxpayers have children or dependants with disabilities.

Under Canada’s dual tax system, taxpayers pay tax to both the federal government and the provincial government in most provinces across the country. The tax brackets are defied as follows:

Federal and provincial tax brackets: the federal rate starts at 15% for incomes of up to approximately $58,000 CA ($42,920 US, €39,440). In addition to this, there is the provincial section, which varies depending on the region.

For example, in Ontario, the basic rate is 5.05%, one of the lowest in the country, bringing the total to 20.05%. By contrast, in Quebec the initial provincial tax rate is higher, at around 14%, which brings the total combined tax rate to almost 29% from the very first dollar earned in that bracket.

The government has therefore established five progressive levels:

• 14%: On the first $58,523 CA ($43,310 US, €39,800) of taxable income.
• 20.5%: In the range between $58,523 CA ($43,310 US, €39,800) and $117,045 CA ($86,620 US, €79,600).
• 26%: In the range between $117,045 CA ($86,620 US, €79,600) and $181,440 CA ($134,270 US, €123,300)
• 29%: In the range between $181,440 CA ($134,270 US, €123,300) and $258,482 CA ($191,280 US, €175,800).
• 33%: On any income exceeding $258,482 CA ($191,280 US, €175,800).

3. Wealth tax comparison in Canada and Spain

Canada has an advantage here, as it does not apply a wealth tax. Unlike in Spain, where individuals are taxed on their assets and rights, with their net worth being calculated over a specific tax year.

Although it is a tax administered by the central government, each autonomous community sets the rate to be paid. On a general overview, the first €700,000 ($761,300) of assets are exempt. An additional €300,000 ($327,000) applies for main residence.

In Madrid and Andalusia, the tax is virtually 100% exempt, meaning that no actual payment is made, except for large estates worth more than 3 million euros.

In contrast, in Catalonia and Valencia, progressive rates ranging from 0.2% to 3.5% per year are applied to the value exceeding the statutory thresholds

4. Capital Gains Tax: Which country offers greater tax relief, Canada or Spain?

Both countries treat capital gains differently based on asset type and profit size. Both Canada and Spain use different methods to calculate the tax.

Canada taxes a portion of income, applying an inclusion rate of just 50% of an individual’s earnings, with the remainder automatically being tax-free.

If gains exceed $250,000 CA ($185,000 US, €170,000) in a year, the inclusion rate rises to 66.7%. Canada does not tax the sale of your property, which is similar to the exemption offered by Spain in this regard, although with the caveat that in Spain you must reinvest the proceeds in order to qualify for the benefit.

Spain taxes 100% of net gains, but applies a sliding scale of fixed rates, as set out below:

• Up to €6,000 ($6,540): 19%
• €6,000–50,000 ($6,540–54,500): 21%
• €50,000–200,000 ($54,500–218,000):23%
• More than €300,000 ($327,000): 28 %.

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