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Disclaimer: The content/information provided on these FAQs are intended to provide general information only, which are up-to-date as of the date of publish, and which may not reflect a reader’s specific situation and the latest position/state of the relevant laws/standards/facts/opinions. As such the readers are advised to take an expert opinion or consult related laws before taking any actions in this respect. In case there is any confusion, readers are advised to consult relevant rules and regulations published by the respective government authorities or consult with an appropriate competent professional. MAQ CPA Professional Corporation cannot be held liable for reliance on or usage of the general information provided on this page/blog/article, under any situations whatsoever. 

Corporate & Business Tax

 

1.    Who has to file a corporate tax return?

All corporations – including non-profit organizations, tax-exempt corporations, and inactive corporations – have to file a T2 return for every tax year, even if there is no tax payable. The only exception to this rule is a corporation that was tax-exempt Crown corporations, Hutterite colonies and registered charity throughout the year.A non-resident corporation requires filing a T2 return if, at any time in the year, one of the following situations applies:

it carried on business in Canada;
it had a taxable capital gain; or ;
it disposed of taxable Canadian property, unless a disposition that takes place after 2008 that meets all the related criteria
This requirement applies even if any profits or gain(s) realized are claimed by the corporation to be exempt from Canadian income tax due to the provisions of a tax treaty. A corporation requires filing income tax return within six months of the end of each tax year. The tax year of a corporation is its fiscal period. When the corporation’s tax year ends on the last day of a month, file the return by the last day of the sixth month after the end of the tax year. When the last day of the tax year is not the last day of a month, file the return by the same day of the sixth month after the end of the tax year. A corporation requires paying income tax in monthly or quarterly instalments when the total of Part I, Part VI, Part VI.1, and Part XIII.1 taxes payable for either the previous year or the current year is more than $3,000. The balance of tax the corporation owes for a tax year is due within either two or three month of the end of that tax year, depending on the circumstances of the corporation. If you file your corporate tax return late, a penalty applies. The penalty is 5% of the unpaid tax that is due on the filing deadline, plus 1% of this unpaid tax for each complete month that the return is late, up to a maximum of 12 months.

1.     Do I have to file corporation tax return even if my corporation is inactive?

Yes, you have to file your corporation tax returns even if your corporation is inactive.

2.     Do I have to file corporation income tax returns even if there is no tax payable?

Yes, you have to file your corporation income tax returns even if there is no tax payable.

3.     I don’t have a tax preparer or an accountant, how can I file corporate tax returns by myself?

Yes, you can file your corporate income tax returns either electronically or paper return. It is mandatory to file electronically if your annual gross revenues exceed $1 million, otherwise there is a penalty of $1000 for non-compliance. There are two different forms of T2 return, namely, (a) T2 corporation income tax return and (b) T2 short return. However, you have to be eligible to file T2 short returns, which you can check in the CRA guide T4012, T2 corporation income tax guide.

4.     I have a new corporation, how do I determine my corporation tax year?

You can choose your corporate tax year (also known as fiscal year) starting from the date of incorporation to the date of year-end within maximum 53 weeks (or 371 days). For example, you incorporated on July 26th 2017 you can choose July 31st 2018 as the year-end. For subsequent years, the tax year would be August 1st to July 31st.

5.     How can I change my corporate tax year?

In order to change the corporate tax year you can write a letter, by showing the reasons, to your tax service office asking for their approval. It is mandatory for all bankrupt corporations. However, such approval is not required in few situations such as winding up, merger and acquisition, becoming or ceasing to be exempt from tax and emigration in which they will file the final tax returns.

6.     When to file corporation income tax returns?

Timeline for filing corporate income tax returns is six months from the date of tax year-end. If your corporation’s year ends on the last day of a month the filing deadline would be last date of 6 months after the tax year end. For example, corporation’s year ends on June 30th the filing deadline is December 31st. However, if it is on August 31st then deadline is February 28th. If the year ends on any other dates then filing deadline is on the same date of 6 months after the tax year end. For example, corporation’s year ends on June 10th the filing deadline is December 10th.

7.     I am late in filing my corporation tax returns for last five years and I expect refund in all years, am I entitled to get tax refunds for all five years?

In order to receive a tax refund you must file a tax return no later than three years after the end of a tax year.

8.     Do you prepare and file corporation income tax returns?

Yes, we do prepare and file corporate tax returns (i.e., T2 returns) based on financial statement.

9.     Where do I have to send my T2 corporation income tax returns?

If you file T2 paper return you have to send corporate tax return to CRA tax services office based on your business location. You may wish to ask CRA tax service offices or any corporate tax service providers if you do not find your tax services office.

10.  My corporation is not making much so I want to file my tax return myself, where can I get a copy of T2 corporation income tax return?

You can search on Google or CRA website using keywords “T2 corporation income tax return” and look for the latest version.

11.  Does my corporation have to pay any provincial taxes in addition to federal taxes?

Yes, your corporation is subject to provincial or territorial income taxes. For most of the provinces and territorials corporation income tax is calculated with federal income taxes and filed along with the federal tax return.

12.  Are corporation tax rates same for all corporations in Canada?

No. Corporate tax rates vary for different types of corporations.

13.  What are the federal tax rates in Canada?

Basic federal tax rate (i.e., Part I tax) is 38% of your taxable income. However, it is 28% after federal tax abatement and net tax rate is 15% (2017 rate) after general tax reduction.

14.  What is the small business tax rate in Canada?

Federal tax rate for small business is 10.5% (2017 rate) who (Canadian-controlled private corporations) claim small business deduction.

15.  What are the provincial or territorial tax rates in Canada?

There are two rates of income tax in provinces and territories, namely (a) a lower rate and (b) a higher rate. These rates vary for each province and territory.

16.  What are the corporation tax rates in Ontario?

In Ontario, lower rate is 4.5% and higher rate is 11.5% for corporations.

17.  Which corporations are entitled to lower rate and higher rate of corporation income taxes?

Corporations eligible for federal small business deduction can apply lower tax rate within the business limit. Some provinces use federal business limit, which is currently $500,000, and some set their own business limits.

18.  Does my corporation have to keep books and records of business activities?

Yes, all persons have to keep its books and records. The person includes individuals, corporations, trusts, and any exempt entities such as registered charities, registered Canadian amateur athletic associations, and non-profit organizations.

19.  What does books and records mean for the corporations in Canada?

Canada Revenue Agency usually does not specify what books and records a person has to keep. However, a “ ‘record’ includes an account, an agreement, a book, a chart or table, a diagram, a form, an image, an invoice, a letter, a map, a memorandum, a plan, a return, a statement, a telegram, a voucher, and any other thing containing information, whether written or in any other form.” It is generally understood and required that you have to substantiate the tax liability with proper supporting source and related documents. A source document includes items such as sales invoices, purchase invoices, cash register receipts, formal contracts, credit card receipts, delivery slips, deposit slips, work orders, dockets, cheques, bank statements, tax returns, and general correspondence whether written or in any other form. You may wish to ask for help of any Tax Accountant Toronto or Corporate Tax Services Toronto.

20.  How long do I have to keep books and records of my business/corporation?

You have to keep all books and records for a minimum of six years after the end of tax year to which they relate. You may wish to learn more about this from any Tax Preparers Toronto or CPA Professionals Toronto.

21.  How does GST/HST work?

If your business deals with taxable supplies you will require collecting GST/HST from your customers, which means you have to add GST/HST at applicable rate(s) on each sales invoices. You can also take input tax credit (ITC) charged on purchases and net amount would either result in a owning or a refund to/from CRA. You have to file a GST/HST return to CRA according to approved reporting period. To learn more in details about this you may wish to consult CRA website or ask any GST/HST service providers Toronto.

22.  How to pay corporate taxes?

Generally corporations have to pay taxes in installments, and any balance due is paid within two or three months of the end of the tax year. However, if your tax payable is lesser than $3,000 you may not have to pay taxes in instalments.

23.  I operate a sole proprietorship business, which tax return do I have to submit to CRA?

Sole proprietorship businesses are unincorporated business and operated in the name of individuals or sole proprietors. You have to use CRA Form T2125 Statement of Business or Professional Activities to report your business income or loss and file this statement with your personal tax return, i.e., General Income and Benefit Return. If you have operate more than one business or both small business and professional services you have to use above form T2125 for each business or professional activities. To learn more about this you may wish to consult CRA website or any Business Tax Services Toronto / Business Tax Returns Toronto providers.

Personal Tax FAQs

1.    Who are required to file an individual tax return?

You must file a return for a tax year usually if:

You have to pay tax.
We sent you a request to file a return.
You and your spouse or common-law partner elected to split pension income for a tax year.
You received working income tax benefit advance payments in a tax year.
You disposed of capital property in a tax year (for example, if you sold real estate, your principal residence, or shares) or you realized a taxable capital gain (for example, if a mutual fund or trust attributed income to you, or you are reporting a capital gains reserve you claimed on your prior year tax return).
You have to repay any of your old age security or employment insurance benefits.
You have not repaid all amounts withdrawn from your registered retirement savings plan (RRSP) under the Home Buyers’ Plan or the Lifelong Learning Plan.
You have to contribute to the Canada Pension Plan (CPP). This can apply if for a tax year the total of your net self-employment income and pensionable employment income is more than $3,500.
You are paying employment insurance premiums on self-employment and other eligible earnings.
Even if none of these requirements apply, you should file a return if:

You want to claim a refund.
You want to claim the working income tax benefit for a tax year.
You want the goods and services tax/harmonized sales tax (GST/HST) credit (including any related provincial credits).
You or your spouse or common-law partner wants to begin or continue receiving Canada child benefit payments, including related provincial or territorial benefit payments.
You have incurred a non-capital loss in a tax year that you want to be able to apply in other years.
You want to carry forward or transfer the unused part of your tuition, education, and textbook amounts.
You want to report income for which you could contribute to an RRSP and/or a pooled registered pension plan (PRPP) to keep your RRSP/PRPP deduction limit for future years current.
You want to carry forward the unused investment tax credit on expenditures you incurred during the current year.
You receive the guaranteed income supplement or allowance benefits under the old age security program. You can usually renew your benefit by filing your return by April 30. If you choose not to file a return, you will have to complete a renewal form. This form is available from Service Canada.

2.     Do I have to file my personal tax return?

Usually taxpayers file their tax returns to receive benefits and credits such as GST/HST tax credit, Canada child benefit and working income tax benefit even if they do not have any taxes payable. However, doing taxes is a part of a taxpayer’s responsibilities. To learn more you may consult CRA website or any Tax Preparation Service Toronto or Tax Return Preparers Toronto.

3.     When is the deadline for filing my individual income tax return?

Usually April 30th is the due date for filing individual tax returns. If April 30th is the holiday then it is due on the next business day. For self-employed individuals, due date of filing their business tax returns is June 15th, however, they have to pay any tax owing by April 30th. You may wish to consult any Tax Services Toronto or Tax Preparations Toronto to have you taxes done.

Bookkeeping & Accounting FAQs

1.     Do you provide bookkeeping services?

Yes, we do provide bookkeeping service to our clients. Our bookkeepers have expertise in providing remote bookkeeping, online bookkeeping, cloud bookkeeping, virtual bookkeeping services accurately and in time.

2.     Do you provide year-end accounting services?

Yes, we do provide year-end accounting service to our clients. Our professional accountants are capable of providing remote accounting, online accounting, cloud accounting, virtual accounting services accurately and in time. Accountants are conversant with year-end services by making necessary year-end adjustments in order to prepare a notice to reader financial statement.

3.     Do you prepare financial statements?

Yes, we do prepare notice to reader financial statements based on your bookkeeping records.

4.     What does notice to reader financial statements mean?

Notice to reader financial statements are a set of unaudited financial statements.

5.     I want to maintain my business books and records by myself, can you suggest me suitable bookkeeping software?

There are many small business accounting software out there such as QuickBooks Online, FreshBooks, Wave, Xero, Sage. Waveapps.com provides free small business bookkeeping software that you may wish to use, however, any of them is suitable for small business bookkeeping. To learn more you may wish to discuss with any Small Business Accountants Toronto or Professional Accountants Toronto.