Guide to Preparing, Filing and Paying Corporate Tax in Canada
Corporate tax is the provincial and federal income tax for corporations that are doing business in Canada. Federal income tax is generally filed as a T2 corporate return. However, each province has its own way of tackling the provincial income tax.
Do you badly seek help with preparing and filing corporate taxes in Canada? Look no further because this blog has got you covered! Just keep scrolling down since here, some of your relevant confusions will be solved. So, here we go!
Who will file a corporate tax return?
All corporations operating in Canada need to file a T2 return along with non-profits, inactive corporations, and tax-exempt corporations. Therefore, taxes must be filed as long as that corporation exists even if that corporation has no income for the year.
Who will pay corporate tax?
A corporate income tax needs to be paid by most corporations in Canada. Even if your corporation isn’t in Canada, you may still have to pay corporate income tax in Canada in certain cases as follows:
- Continued business in Canada
- Disposed of taxable Canadian property
- Had a taxable capital gain
Which corporations need not pay corporate income tax?
Corporations such as Hutterite colonies, Tax-exempt Crown corporations and registered charities need not file, or pay corporate income tax. However, each entails its own unique filing liabilities with the government.
How much corporate tax should be paid?
The rate of your corporate tax will vary as per the size of your business, and the province you’re in. The baseline tax rate for all corporations is 38% of taxable income. And this is referred to as Part 1 tax.
However, income within Canada is entitled to a federal tax reduction. This drops Part 1 corporate tax to 28%. Also, there are other deductions while tax credits are available too. Check out if you qualify for any of them.
Now, here is good news for small businesses. Canadian-owned and controlled small businesses can be eligible for the small business deduction. In this case, the tax rate can be down to 10.5%.
How to file
For filing your corporate income taxes, you are advised to use the CRA’s My Business Account which is meant for business owners or Represent Client portals for employees and representatives. You can also print the T2 Barcode Return for sending in with your return for filing a paper copy of your corporate taxes. For corporations with annual gross revenue over $1 million, it is mandatory to opt for electronic filing.
How to pay your corporate income tax
Once you know how much to pay, and when to file, check out how you actually get money to the CRA.
Payment Schedule
Corporations in Canada pay their taxes in instalments. That is why the payments are done across the year, on a monthly or quarterly basis. However, for new corporations, or corporations owing under $3,000 in taxes for the year, instalment payments may not be required.
The payment methods you can employ are online banking, credit card, debit, pre-authorized debit, wire transfer, a service provider, cash, or at your Canadian financial institution. You will have to pay in Canadian dollars and basically, everything will do except Bitcoin. Hope some of your queries are solved. For other relevant info, keep in touch!