By: jnawali
Accounting Services
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Filing and paying corporate tax in Toronto can be intimidating and stressful. One always wants to avoid errors; therefore, to better understand the process, let’s take a look at the ultimate guide that will give you all you need to know.
What is Corporate Tax?
The first question that comes up often is what exactly is corporate tax. If you are new in business, corporate may sound utterly alien to you. Corporate tax is categorized as provincial and federal income tax paid by corporations that operate and do business in Canada. There are two different classifications, one is the Federal income tax filed as a T2 corporate return, and another is provincial income tax which varies from province to province.
Who Needs To Pay Corporate Tax?
If you are a corporation in Canada, you are eligible to pay a corporate income tax. If your business is carried on in Canada, has a taxable capital gain and is disposed of Canadian taxable property, you will need to pay corporate income tax even if it is not technically in Canada.
Which Corporation Do Not Need To Pay Corporate Income Tax
Not all corporations are the same; some corporations are not required to pay corporate income tax. The list includes Hutterite colonies, registered charities, and Tax-exempt Crown corporations who do not need to file or pay corporate income taxes. However, it is to be noted that these corporations do have their separate filing requirement with the government.
What is your Corporate Income Tax Rate?
The rate of corporate income taxes is subject to change depending on the two factors.
- The size of your business
- The province you are based in
Although there is a chance of federal tax abatement for income earned within Canada, this reduces corporate tax Part 1 to 28%. Your corporation can be eligible for multiple other deductions and tax credits. Check the CRA page to know more about this and learn if you qualify.
Does this Benefit Small Businesses?
If you are a small business in Canada, there is some good news. If you are a Canadian-owned small business, you can be eligible for a small business tax deduction, which significantly lowers the tax rate to almost 10.5%. Your small business is eligible for this tax deduction only if the corporate income is $500,000. To estimate your corporate taxes, there are several worksheets provided by the CRA, but it’s best to get a professional assessment from CPAs or accounting firms.
Learn All About Corporate Income Tax
The first thing that you always need to keep in mind is the deadline for your corporate income tax return. You need to file your corporate income tax within six months of the end of the tax year. Always check when and which day your tax year-end as your taxes will be due six months later on the same date of that month. Let’s take an example. If your tax year ends on December 18th,2021, your deadline for filing corporate taxes will be June 18th, 2022. If you encounter a weekend or a public holiday, you can still file it on the next business day after the deadline.
There is also an app created by CRA to assist in getting tax reminders so that you never miss your deadlines.
Now that your deadlines are in check, you need to learn how to file your taxes.
To time them, business owners need to utilize CRA’S My Business Account or Represent a Client portal. If you are working offline, you have to print the T2 Return and send it with your return. But if a corporation crosses over $1 million in annual revenue, you have to opt for online filling.
Penalties
If you are filing and paying your taxes late, it is obvious that you will incur some penalties or late fees, but there are numerous types of penalties. Learn what the penalties are and be on the lookout for them.
Late Filing Penalty
If you do not file your T2 taxes within the stipulated time, you will incur penalties. The penalty will amount to 5% of the amount owed in your taxes. The penalties increase by 1% for each month that the tax wasn’t paid. The penalty may also skyrocket to 10% if there is a demand to file from CRA or a failure in filing in the past three tax years.
It is safest to set a reminder and file your taxes on time to avoid unnecessary hassle.
The lesson here is basically to file your taxes on time; your future self will thank you for it.
Late Payment Penalty
Beware of late/ insufficient payments as interest on them is compounded daily. Do not let your corporation’s late payment interest crossover $1000, as this can lead to an added installment payment.
Avoid false statements, omitting information, not reporting income, or aiding someone in a false claim. You can find all about the penalties when visiting the CRA’s website.
In case of natural calamities or death in your immediate family, penalties can be waived. Apart from that; any reasons have to be extraordinary to avoid penalties.
Why Choose Apex Accounting
Let us not beat around the bush; corporate tax filing services are a necessity as taxes can be challenging to do on your own; that is why we help businesses file their corporate income tax returns to the Canadian Government. We at Apex Accounting, provide one of the best corporate tax filing services in Toronto and offer a wide range of corporate tax services that benefit your business. Our services reach beyond filing a corporate tax return with the Canada Revenue Agency on an annual basis. Our experienced group of tax professionals helps you and your business through the various corners of the Canadian tax system.