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A Business Owner’s Guide to Canada Taxes

Did you know that there are more than one million small businesses in Canada? Canada is a great place to start and operate a business. However, you need to make sure that you understand how Canada taxes work so that your company can be prepared when tax day finally comes.

In this article, we’ll go over everything you need to know about Canadian business taxes. So keep on reading to learn more!

What Taxes Do Small Businesses Need to Pay?

As the owner of a small business, you’ll have to pay income taxes on the profits that your company makes. In Canada, you need to pay income tax at the provincial and federal levels.

Depending on what kind of business you run, you might also need to collect a Harmonized Sales Tax (HST) or Goods and Services Tax (GST) from your customers.

You won’t be required to register for HST/GST if your revenue over the course of one year is lower than $30,000 CAD. With that said, if you make taxable leases or sales in Canada then you’ll be able to voluntarily register for HS/GST.

When you are a small business owner, you’ll need to start paying taxes in quarterly installments after your first year.

How Business Structure Affects Tax Returns

Your business structure will determine which taxes you pay. Many small businesses start off as partnerships or sole proprietorships. These structures aren’t incorporated. You need to report your business income on the T2125 form.

If you’re a freelancer or independent contractor, then your tax rates will be the same as your personal income tax brackets.

If your business is incorporated then you’ll need to pay a Corporation Tax. Incorporating your business can come with a big tax advantage. Before you structure your business, you should understand all of the pros and cons of incorporation.

The basic federal tax rate for a corporation is 36 percent of taxable income. However, a Canadian-controlled small business can get a small business deduction on income. This can reduce the federal tax rate to only nine percent.

Territories and provinces usually have a higher and lower income tax rate for corporations. The lower tax rate applies to companies eligible for small business deductions.

Because it can be difficult to navigate the world of corporate taxes in Canada, it is very important that you utilize high-quality tax preparation services.

Use this Business Owner’s Guide to Canada Taxes Today

Nobody likes to pay taxes. But by using our business owner’s guide to Canada taxes, you can make sure that you’re prepared to run your company and pay the right amount in taxes. And you can now see if you are eligible for special deductions.

Just make sure that you hire a qualified accountant to guarantee that all of your books are above board.

Are you looking for other helpful business articles like this one? If so, then check out the rest of our blog today for more!


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