Important Aspects Of Canadian Corporate Tax

By Author: Ken Donaldson
Total Articles: 48
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Companies and corporations pay tax on profit income and on capital. Canadian corporate tax makes up a relatively small portion of total tax revenue. Tax is paid on corporate income at the corporate level before it is distributed to individual shareholders as dividends. A tax credit is provided to individuals who receive dividend to reflect the tax paid at the corporate level. This credit does not eliminate double taxation of this income completely, however, resulting in a higher level of tax on dividend income than other types of income. (Where income is earned in the form of a capital gain, only half of the gain is included in income for tax purposes; the other half is not taxed.) Corporations may deduct the cost of capital following capital cost allowance regulations. All resident corporations in Canada have to pay corporate tax and have to file a corporation tax return (T2) every year. Even if there is no tax payable to the CRA, corporations have to file the T2 return.

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 residents and corporations pay income taxes based on their world-wide income. Canadians are protected against double taxation receiving income from certain countries which gave agreements with Canada through the foreign tax credit, which allows taxpayers to deduct from their Canadian income tax otherwise payable from the income tax paid in other countries. A citizen who is currently not a resident of Canada may petition the CRA to change her or his status so that income from outside Canada is not taxed.

Corporate tax in Canada is collected by the CRA for all provinces and territories except Quebec and Alberta. Provinces and territories subject to a tax collection agreement must use the federal definition of “taxable income”, i.e., they are not allowed to provide deductions in calculating taxable income. These provinces and territories may provide tax credits to companies; often in order to provide incentives for certain activities such as mining exploration, film production, and job creation.

You need to know the tax year end of your corporation if you want to pay your corporation tax promptly and file the T2 return on time. The fiscal period of a corporation or the corporation's tax year has to be less than 53 weeks. While filing the first T2 return, new corporation can choose the tax year end and the subsequent tax year can be calculated according.

About Author:-
Ken Donaldson is a chartered accountant who practices as an independent tax consultant. He also author of Corporate Tax, in this article he provides Canadian corporate tax tips. For more information you can visit Taxca.com.