When starting a company in Canada, here is an overview of the key taxes and related regulations you may need to understand and file:
1. Federal Corporate Income Tax
- General Corporate Tax Rate: The standard federal corporate income tax rate is 15% on taxable income.
- Small Business Deduction (SBD): Canadian-controlled private corporations (CCPCs) are eligible for the SBD, reducing the tax rate to 9% on the first $500,000 of active business income.
2. Provincial and Territorial Corporate Income Tax
Each province or territory has its own corporate income tax rates. Companies must pay taxes at the applicable rate in the province or territory where they operate. Refer to local tax regulations for specific rates.
3. Goods and Services Tax (GST)/Harmonized Sales Tax (HST)
- GST: The federal Goods and Services Tax rate is 5%, applied to most goods and services.
- HST: In some provinces (e.g., Ontario), the provincial sales tax is combined with the federal GST to form the Harmonized Sales Tax (HST), with rates ranging from 13% to 15%.
Registration Requirements:
Businesses or self-employed individuals with annual taxable revenue exceeding $30,000 must register for a GST/HST account and charge GST/HST on taxable goods or services.
Net Tax Calculation:
Net Tax = Collected GST/HST – Input Tax Credits (ITCs)
- Input Tax Credits (ITCs): GST/HST paid on business expenses (e.g., raw material purchases) can be claimed as a credit to offset the tax owed.
4. Provincial Sales Tax (PST)
In provinces not participating in the HST (e.g., British Columbia, Saskatchewan), businesses may need to separately collect and remit Provincial Sales Tax (PST). PST rates vary by province—check the regulations specific to your location.
5. Payroll Tax Deductions
If your company employs workers, you must withhold and remit the following payroll taxes:
- Canada Pension Plan (CPP) Contributions: Shared by both the employer and employees.
- Employment Insurance (EI) Premiums: Shared by both the employer and employees.
- Employee Income Tax Withholding: Withheld based on employees’ income and tax credits.
6. Industry-Specific Taxes
Certain industries (e.g., manufacturing, import/export, retail) may be subject to additional taxes, such as:
- Excise taxes
- Customs duties
- Environmental or recycling fees
Understanding these taxes will help you better plan and meet your company’s tax obligations. If you need further assistance, feel free to ask!
