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Know About Canadian Corporate Tax
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In Canada, when it comes to taxes, big corporations don't pay their full share. Instead of other countries, the central government helps out big businesses in order to keep the money circulating through Canada. Without supporting such services through income tax, it is seen as inappropriate and unfair that corporations with profitable operations benefit from government services. Also, current levels of taxation were cited as a major problem for Canadians. Since Canadian corporations pay a lower income and corporate tax, if the government was to raise the tax who would pay it at the end. Another clear example which supports such argument is seen when it comes to high payroll tax. Since businesses claim that high payroll tax will force them to fire employees, this gives them another advantage in not paying their expected share. Businesses pay less then what is expected of them to pay.
Canadian corporate tax includes taxes on corporate income in Canada and other taxes and levies paid by corporations to the various levels of government in Canada. These include capital and insurance premium taxes; payroll levies (e.g., employment insurance, Canada Pension Plan, Quebec Pension Plan and Workers' Compensation); property taxes; and indirect taxes, such as goods and services tax (GST), and sales and excise taxes, levied on business inputs.
Canadian corporate tax is levied both at the federal and provincial level. The current federal corporate tax rate for 2013 is 15% on general active business income and the combined federal and provincial corporate income tax rates in 2013 range from 25% to 31%, depending on the province in which the permanent establishment is located.
Nonresident corporations who have business interests in Canada and generate revenue from a business that is located in Canada will have to pay corporate income tax to the Canadian Government. The clauses that govern the corporate income tax in Canada are a bit complicated and the complications will only increase if you are a nonresident. If you are ‘carrying on business' in Canada either directly or indirectly then the profit that is earned out of the business will be subject to taxation. Like in income tax, the residency status of the corporation will have to be determined and the corporate tax that is levied will be based on the residency status of the corporation.
Canada’s complex and continually changing legislative environment poses a significant tax-compliance burden on every company doing business in Canada. That’s why it’s more important than ever for businesses to understand the key tax regulations that affect their particular business. To minimize your risks, it’s important to work with professionals who can help you manage your tax issues and anticipate the potential impact they will have.
Josep Guardiola is a chartered accountant who practices as an independent corporate tax consultant. He also author of Offshore Tax, in this article he provides nonresident tips. For more information you can visit Taxca.com.
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