Overview of the Northwest Territories Tax System
The Northwest Territories (NWT) has a territorial tax system that operates in conjunction with the federal tax system. Residents of NWT are required to pay both federal income tax and territorial income tax, which is administered by the Canada Revenue Agency (CRA). Unlike provinces that levy their own sales taxes, NWT does not have a territorial sales tax; instead, it follows the federal Goods and Services Tax (GST) system.
Territorial Personal Income Tax Rates
The Northwest Territories has a progressive income tax system, meaning individuals pay different tax rates depending on their income level. For 2024, the territorial tax rates are:
- 5.90% on the first $50,593 of taxable income
- 8.60% on the portion over $50,593 up to $101,198
- 12.20% on the portion over $101,198 up to $164,867
- 14.05% on the portion over $164,867
These rates apply only to the territorial portion of income tax, with federal income tax rates applying separately.
Tax Credits and Deductions
NWT residents are eligible for various tax credits and deductions to reduce their tax burden. These include the Basic Personal Amount (BPA), which allows individuals to earn a certain amount before paying income tax. Other credits include:
- Northern Residents Deduction: Provides tax relief to compensate for the high cost of living in remote areas.
- NWT Cost of Living Tax Credit: A refundable credit to help lower-income residents manage higher expenses.
- Charitable Donation Tax Credit: Provides tax relief on donations to registered charities.
Carbon Tax and Other Levies
The Northwest Territories Carbon Tax was introduced as part of Canada's federal climate strategy. It applies to fossil fuels and is designed to encourage energy efficiency and reduce greenhouse gas emissions. Residents may be eligible for carbon tax rebates to offset the increased costs.
No Provincial/Territorial Sales Tax (PST)
One key advantage of living in the Northwest Territories is the absence of a provincial/territorial sales tax (PST). Residents only pay 5% federal GST on goods and services, which lowers the overall tax burden compared to provinces with their own sales taxes (e.g., Quebec or British Columbia). However, the high cost of goods and services due to transportation costs and remoteness offsets this advantage.
Filing Taxes and Additional Considerations
Residents of NWT file their taxes with the CRA using the same tax return as other Canadians. However, they must ensure they claim territorial tax credits and deductions where applicable. The territorial tax system supports economic growth while addressing the challenges of living in remote regions. Despite relatively low tax rates, the higher cost of living in NWT means that many residents rely on targeted tax relief programs to maintain affordability.
No Territorial Payroll Tax
- Unlike some provinces, such as Quebec (which has a provincial payroll tax) or Ontario (which has the Employer Health Tax), the Northwest Territories does not impose an additional payroll tax on employers or employees.
- This means businesses in NWT do not have to pay a separate tax based on employee wages to the territorial government.
Federal Payroll Deductions Still Apply
Even though there’s no territorial payroll tax, employers in NWT must still deduct and remit standard payroll taxes for their employees, including:
- Canada Pension Plan (CPP) contributions
- Employment Insurance (EI) premiums
- Income tax withholding
These deductions are mandatory and must be submitted to the Canada Revenue Agency (CRA).
Workers' Compensation Premiums Still Apply
- Employers in the NWT must also pay premiums to the Workers' Safety and Compensation Commission (WSCC) to provide coverage for workplace injuries.
- These premiums vary by industry and are separate from payroll taxes.
No Health Premiums in NWT
- Some provinces charge health premiums or have a healthcare payroll tax (e.g., British Columbia’s Employer Health Tax), but the Northwest Territories does not have such a tax.
- Instead, healthcare in NWT is funded through general revenues, meaning there are no direct payroll-based deductions for healthcare.
Conclusion
While payroll deductions (CPP, EI, and income tax) still apply, the NWT government does not impose any additional payroll tax on employers or employees. This can be seen as a business-friendly policy, reducing employment costs compared to provinces with extra payroll-based levies.
Northwest Territories Income Tax Brackets
The territorial income thresholds, basic personal amounts, and tax reduction amounts in Northwest Territories are adjusted based on changes in the consumer price index (CPI). This is called the indexation factor, which was 2.7% for 2025, down from 4.7% for 2024.
Northwest Territories Income Tax Brackets
| 2023 | 2024 | 2025 | Rate |
|---|---|---|---|
| Less than $48,326 | Less than $50,597 | Less than $51,964 | 5.90% |
| Over $48,326 to $96,655 | Over $50,597 to $101,198 | Over $51,964 to $103,930 | 8.60% |
| Over $96,655 to $157,139 | Over $101,198 to $164,525 | Over $103,930 to $168,967 | 12.20% |
| More than $157,139 | More than $164,525 | More than $168,967 | 14.05% |
The Northwest Territories Basic Personal Amount in 2023 was $16,593. For 2024, the basic personal amount increased to $17,373. It becomes $17,842 for 2025 If you make less than $17,842, you won’t have to pay any territorial income tax.
Northwest Territories Income Tax Credits
As a resident of Northwest Territories, you may be eligible for several income tax benefits and credits, such as:
- Age amount
- Disability amount
- Child benefit
- Political contributions tax credit