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Business and Tax.com
Canadian businesses are subject to
Canadian corporate income taxes on their worldwide income. Depending
on the type and location of products or services being offered, federal
and/or provincial business taxes may apply to a corporation.
In the February 2000 Federal Budget, the
government committed to reduce the federal corporate tax rate from 28% to
27% effective January 1, 2001, with future reductions down to 21% over a
five year period. The mini-budget on October 18, 2000 announced a
specific timetable for these future reductions, with a reduction of 2% for
each of the following three years.
* Rates shown are after provincial tax abatement and before surtax.
In order to encourage
small businesses, Canadian
controlled private corporations (CCPC) enjoy a lower corporate tax rate.
The current rate on the first $200,000 of CCPC's active business
income (ABI) is 12% , and 28% on CCPC's ABI between $200,000 and $300,000
(reduced to 21% from January 1, 2001).
In Ontario, the current general corporate income tax rate is 14.5%. On January 1, 2001, the rate is scheduled to drop to 14%. For small Canadian-controlled private corporations, the 2000 Ontario Budget sets out a timetable to reduce the small business tax rate for small Canadian-controlled private corporations from its current 7% to 4% by 2005.
The combined Federal/Ontario Corporate Tax Rates are:
When calculating income, any reasonable expenses incurred to earn that
If you file annually, you may have to pay four instalments each
year. These quarterly instalments are based on an estimate of your net tax for the current year or the amount of net tax for the
previous year, whichever amount is less. The GST return you complete at the end of the year will reconcile your instalments with
the amount of net tax you owe. If you base your instalments on an estimate of the current year's
net tax, and you underpay your instalments, you will be subject to penalty and interest charges. If you base your instalments on the
net tax remitted the previous year, you will not be charged penalty and interest on the year-end adjustment if the balance is paid by
the due date.
PST rate in Ontario is 8% on most purchases of goods and on labour charges to install, repair and
maintain taxable goods and equipment. Most goods and equipment used in a business such as office
furniture, computers, printers, etc., other than certain categories of
production machinery and materials used in manufacturing, are taxable.
Tax is also payable at 8% on all prepared food products purchased from an
eating establishment, where the total charge is more than $4.00.
Certain purchases such as food products children's
educational books and magazines
are exempt from the tax.
in places such as hotels, motels, hostels, and camps for a period of less
than one month is taxable at 5%. Admissions
to a place of amusement costing more than $4.00 are taxable at 10%.
Liquor, beer and wine that is sold in restaurants and taverns are taxable at
10%. If these items are purchased from a retail outlet, a tax at 12%
that sell taxable goods, provide a taxable service or charge an admission to
a place of amusement must obtain a Vendors Permit through the Ontario
Ministry of Finance and are responsible for collecting tax and remitting the
collected tax on a regular basis.
that sell taxable goods or provide a taxable service qualify for an
exemption on the sales tax when they buy their supplies from a wholesaler. You
should obtain a Purchase Exemption Certificate so that you can buy items
like inventory and supplies without having to pay the 8% sales tax on them;
since your customers will be paying the tax when they buy your product or
federal law, employers are responsible for deducting personal income tax, Canada Pension Plan
(CPP) or Quebec Pension Plan (QPP) contributions, and Employment Insurance (EI) premiums from your employees'
paycheques. You are also responsible for remitting this money to CCRA at regular intervals, usually on
or before the 15th day of the month following the month in which you deducted it.
Remittances for EI and CPP are shared by the employer and employee. Employers
have to contribute the same amount of EI and CPP deducted from employees'
deductions made on behalf of employees must be placed in a trust account.
employer, you have to make sure you ask each employee to complete Form TD1
within seven days of any changes to a situation that will affect their T1
returns. TD1 outlines the credits that employees can claim when filing their
income tax returns. If
employees certify on Form TD1 that their total income for the year will be
less than the total tax credits they claim, do not deduct any tax.
employer, you also have to file your T4 and T4F information returns by the
last day of February following the calendar year to which the information
returns apply (e.g., you have to file your 2001 T4 and T4F information
returns by the last day of February 2002).