Like any other country in the world, taxes are a part of everyday life in Canada. Wanted or not, there is a requirement for certain taxes to be filed, depending on whether you are an individual or a business, and depending upon where you reside. If you are new to the tax system then it can be a bit of a minefield, knowing what has to be paid and when.
So, what are the different taxes in Canada? There are 3 main types of taxes – Federal, which must be declared and paid through the Canada Revenue Agency (CRA); Provincial or territorial, which must be declared and paid through the relevant Revenue department, and Municipal taxes which go through the local government for your area.
Below is an introduction to the types of taxes you can expect to face if you are running a business in Canada:-
- GST/HST – Goods and Sales tax/Harmonised Sales Tax. This is similar to the VAT system used in other countries. You must register for this system if you provide taxable goods and services within Canada and are a large supplier. If your only activity is the sale of real estate, except as a business then you do not need to register, however, you may still be liable to collect and pay taxes on your transactions. It is up to you, as the business owner to collect, declare and remit the tax payments to the CRA.
- Payroll tax. It is your responsibility as an employer to make the correct deductions from your employees’ salaries. These include deductions for the CPP (Canada Pension Plan), EI (Employees Insurance) and employee income tax. You must make the deductions and then declare and pay the tax due to the CRA.
- Corporate income tax. This must be declared and paid either monthly or quarterly, depending on the type and size of business you are running. If the tax payable amount is less than $3,000.00 you do not have to pay it in instalments. There are also certain deductions that can be made, again depending on the type of business.
If you are running your business from your home then there are certain tax deductions that can be made, depending on how much of the home is used and whether that portion of the home is solely for business use or shared. You must ensure that you follow the rules for tax deductions carefully as mistakes can often be costly.
These are the main 3 different types of taxation you can expect to face if you are running a business in Canada. Obviously they are a little more complex than described above but your financial advisor or accounting service can give you more in depth details on what you can and can’t declare, claim and pay for. There are different guidelines for Corporations, Sole Proprietors and Partnerships and for businesses below and above a certain size. Ensuring that you follow the correct tax rules is essential to avoid penalties and interest.
If upon reading this post on “what are the different taxes in Canada?”, you feel that you need some help or guidance to stay on top of the accounting needed to run your business, please contact us today!
Redwood Meadows, Calgary, AB T3Z 1A3