“You must pay taxes. But there’s no law that says you gotta leave a tip.”– Morgan Stanley
Staying current with income tax as a small business owner won’t guarantee your success, but it can help you avoid failure. As the owner of a corporation, you are required to remit various types of tax, but with the complexities involved in filing the different returns on the rise, staying up to date with changing tax rules can be challenging.
Mistakes are costly in terms of fines and interest charges; they can also negatively impact your tax compliance standing, adding additional costs and reporting requirements.
RECORD TYPE: Income Tax
Corporations pay two types of income tax in Canada, Federal Tax which is administered by the Canada Revenue Agency (CRA) and Provincial or Territorial Tax, which is legislated by each province or territory and, except for Alberta and Quebec, administered by the CRA.
A Canadian Controlled Private Corporation (CCPC) pays a significantly reduced tax rate on active business income by using the Small Business Deduction (SBD). There are several factors that are used to determine if a corporation is eligible for the SBD, including the amount of passive income earned by the corporation in the reporting period. Protecting the SBD can reduce total tax payable and increase after-tax profits that can be used to secure the business owner’s financial future.
Suggested Action: Upload a copy of all Income Tax returns, supporting documents and any correspondence you may receive from the (CRA).
RECORD TYPE: Payroll Tax
There are four types of payroll taxes in Canada, Federal income tax, Provincial or Territorial income tax, Canada Pension Plan (CPP) contributions and Employment Insurance (EI) premiums.
All employers are required to withhold payroll deductions from their employee’s income. All amounts withheld must be remitted to the Canada Revenue Agency (CRA) in addition to the employer’s portion of CPP and EI. Payroll deductions are the property of the CRA and must not at any time be included in the operating capital of the company.
Suggested Action: Upload a copy of all Payroll Tax reporting documents and any correspondence you may receive from the CRA.
RECORD TYPE: Sales Tax
There are three types of sales tax in Canada, Goods and Service Tax (GST), Harmonized Sales Tax (HST), and Provincial/Quebec Sales Tax (PST/QST). All corporations must register for GST/HST unless considered a small suppler.
GST is charged on the supply of most goods and services purchased in Canada. All corporations, except for small suppliers, must charge and collect GST in each province except for zero-rated goods and services.
HST is a consumption tax levied at point-of-sale that combines both PST and GST in most provinces and territories. The HST was introduced in 1997 with the intent to become the standard across Canada to improve the efficiency of sales tax collection.
PST (QST in Quebec) is a Provincial sales tax that is collected by provinces that do not participate in the HST program. Corporations that do business in one of these provinces must collect and remit both GST and PST separately. The only provinces not participating in the HST program are Alberta*, Manitoba, Saskatchewan, British Columbia and Quebec. (*Alberta does not charge PST)
Suggested Action: Upload a copy of all Sales Tax reporting documents and any correspondence you may receive from the CRA of Provincial tax authority.
RECORD TYPE: Assessments
A Notice of Assessments is provided by the Canada Revenue Agency (CRA) when a tax return is filed by a corporation. It includes an account summary, tax assessment summary, and explanation of changes and other important information.
Suggested Action: Upload a copy of all Notice of Assessments received from the CRA.
RECORD TYPE: Tax-Saving Transactions
Many of the strategies your advisors will recommend are structured to reduce or defer corporate income tax, this could include tax efficient investing and corporate estate planning strategies. Maintaining records of the transactions you make will help you confirm the results achieved are in-line with your expectations.
Suggested Action: Upload a copy of all corporate Tax-Saving Transactions and expected results.
- Download Resources
Click the Resources link to download and print the various worksheets and templates applicable to your needs. Set aside some time over the next few days to complete each one. Remember to involve your partner/spouse should you have one.
- Gather Documents
Complete each worksheet or template and gather other statements and documents for each type of Record to be uploaded to this Tile.
- Upload Documents
Using a scanner or the Sidedrawer Mobile App, upload all statements and documents to the appropriate Record for secure storage and collaboration with your family and trusted advisors.
- Add Collaborators
From the Sidedrawer home screen, click on the Collaborator icon to add someone you wish to give access to one or more of your Records. Enter their email, name and relationship to you, then select the Record and permissions to be granted.
Click here to print the Corporate Taxation Document Checklist.