Canadian Corporate Taxes

How to Maximize Your Return

It’s that time of year again –the dreaded tax season.  For business owners with incorporated corporations whose fiscal year has ended, this means having to file two separate returns – personal and corporate. It’s a daunting task to say the least, which is why many businesses chose to hand over their paperwork and receipts to a trusted accountant. But for those of you who are do-it-yourself types, here’s a guide to help you maximize your corporate tax return.

Type of Corporations

There are various types of corporations in Canada, all of which are subject to tax rates dependent upon corporate status. The corporations that have the lowest tax rate are Canadian-controlled private corporations (CCPCs).  These are entirely private corporations controlled and operated within Canada. CCPCs are eligible for the Small Business Deduction which, at this time, stands at 11%, the lowest tax rate available to corporations. All other corporations that do not fall under this category, whether private or public, are taxed at a higher rate. It is worth investigating at the outset the potential of having your business structure set up as a CCPC in order to benefit from the deduction.

Corporate Tax Credits

Research and Development Tax Credits: To qualify for an R&D tax credit (or the SR&ED Program) your company must be involved in experimental development, applied research, basic research and support work which would lead to advancement or address uncertainty in technological and scientific areas. This can encompass a wide range of R&D and is particularly useful for tech and environmental start-ups that are developing new products or improving upon existing products in the marketplace.

Tax Credits for Small Businesses: In addition to R&D tax credits, Canadian businesses can benefit from a range of tax credits for small business. Some credits are dependent on jurisdiction or depend upon industry, while others are Canada-wide and not industry-specific. Tax credits include areas such as apprenticeship job creation, designated activities on qualified property, child care spaces and pre-production mining.

Corporate Income Tax Deductions

If your corporation doesn’t qualify for any tax credits, take a look at potential corporate income tax deductions, you may be surprised what can be included! Below are some examples:

·         Gifts to employees
·         Automobile expenses
·         Insurance
·         Office expenses
·         Mortgage interest & security
·         Business meals/entertainment
·         Conventions
·         Canadian advertising expenses
·         Accounting/legal services
·         Home-based business expenses

Taking the time to research all the available tax credit and deductions for your small business can definitely help you save money in the long run. Take advantage of the incentives the Canadian government provides small business – that’s what they are there for! Good luck and happy filing.