There are a multitude of government taxes that small-mid sized businesses need to be aware of to avoid the wrath of the “tax man”. There are both federal and provincial taxes that need to be properly accounted for and paid in a timely manner,
Canada’s tax system is mostly self-reporting and if the required filings and payments are made within the due dates, your business will be in compliance.
However, there are stiff penalties plus interest for late filing and/or payment. Noncompliance could even trigger an audit.
Tax law and other regulations are varied and complex. This checklist is a summary but don’t hesitate to contact us if you have questions or need help.
This checklist is primarily applicable for small and midsized businesses.
- Compliance – fulfill or comply with a legal obligation.
- Corporation – A corporation is a legal entity that is separate from its shareholders (owners). Corporations typically have the rights and responsibilities that an individual possesses such as the ability to enter into contracts, borrow money, sue and be sued (separate from the shareholders), hire employees, own assets and pay corporate taxes (separate from personal taxes).
- CRA – Canada Revenue Agency – the Canadian federal agency that administers tax collections for the Government of Canada and for most of the provinces.
- eFile – Electronic filing
- Filing – An official document that is submitted to a government agency,
- Tax year – For business income tax purposes a 12-month period which is often January 1 to December 31 of each year.
CRA – Get a Business Number (BN) to Apply for Government Programs
Complete the application form to obtain a BN and to register for selected program accounts such as payroll and GST.
You can use Business Registration Online to get a business number. You can also register for one or more of the most common Canada Revenue Agency (CRA) program accounts:
- GST/HST program account (RT)
- Payroll deductions program account (RP)
- Corporation income tax program account (RC)
You can register online, by mail, by fax or by phone.
Get a Business License
Complete the application form to obtain a business license for the location of your business. E.g. if your business is in Nanaimo, you will need a business license from the City of Nanaimo.
Canada Revenue Agency (CRA): Payroll
- When a new employee is hired, have the employee complete a TD1 form within seven days of being hired. It is used to determine the amount of the payroll deductions for income tax, etc. There is also a TD1BC for BC businesses. Create federal and provincial Forms TD1, following the instructions at Electronic Form TD1, and have your employees send them to you online
- Payroll source deductions (deductions from employees pay) for income tax, CPP (Canada Pension Plan) and UI (Unemployment Insurance) on each payroll. Remit the source deductions by the 15th of the month after you pay employees. The employer also pays additional CPP and UI. E.g. the source deductions would be paid by April 15th for the March payroll.
- Annual payroll reporting – each employee gets a T4 information slip by the last day of February following the year. A T4 Summary is filed with the CRA. E.g. the 2020 payroll is due by end of February 2021. All information returns should be filed electronically to avoid the delays in processing paper returns.
Canada Revenue Agency (CRA): Self Employed Individuals
- Individual are required to file their annual income tax returns by April 30th of the following year. E.g. 2021 tax return is due by April 30, 2022 and is likely to require to eFile. Even if all the taxes due can’t be paid, file the return on time to avoid late filing fees, then negotiate a payment plan for the balance.
- If you are self-employed (individuals), the due date to file is June 15th. Note that the CRA charges interest on any outstanding tax owing starting on April 30th.
Canada Revenue Agency (CRA): Corporate Tax Return
- Corporate Income Tax Return (i.e. the company’s annual tax return) due within 6 months of the end of each tax year. The tax year of a corporation is its fiscal period.
Canada Revenue Agency (CRA): GST
- GST is a sales tax on all sales – but only sales in Canada. E.g. a sale to a USA business would not collect GST. There are different rates depending on the province as some provinces (not BC) combine the federal tax (GST) with provincial sales tax (called HST). E.g. a sale to a client in Ontario would be different than the current 5% for BC sales. The GST/HST return will show the due date at the top of the form.
- It is important to record payment of GST for expenses such as office supplies as that is deducted from the sales tax owing.
BC Provincial Sales Tax (PST)
Whether an individual, partnership or corporation, you are required to register with the BC Ministry of Finance if you sell or lease taxable goods or services or have more than 4 units of accommodation.
WorkSafe BC: Workers’ Compensation
- This is typically annual reporting for a small business of the total annual payroll and paying of premiums.
- The payroll for this return includes employee payroll, shareholders (owner) payroll for corporations and contractors (who are not self-insured) located in BC. Exclude contractors who have their own coverage or vendors outside BC.
Annual Report Filing for Corporations: Province of BC
- As an incorporated business in BC, the corporation is required to file an annual report within two months of the company’s anniversary date.
- Also, a filing would be done for a change of address or a change of directors.
Reporting and payment on time is very important as there are penalties for late filing and for late payment.
Don’t hesitate to contact us if you have any questions.
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