In Canada, Corporate tax is not anything you want to just dabble into without prior information. Corporate Taxes are levied yearly, and each corporation has the mandate to complete and file a T2 Corporate tax form each year. This rule cuts across for every corporation that operates in Canada. This is regardless of how active or inactive the corporation was, during the year. Charity corporations are the only ones that are excluded from the binding rule.
Modalities of the Corporate Tax system in Canada
The due date for payment
It is important that taxes are not owed, and are paid as and when due. But in the case where there is a spillover and tax debt has to be carried over into another financial year, the tax balance has to be paid within the first two months in the new financial year. (Note that in Canada, the financial year of a corporation has to match the tax year.) Meanwhile, in the case where the company involved is a Canadian-controlled-private corporation, then it’ll have an extension of one month to settle its Corporate Tax balance. This means that Canadian-controlled-private corporations have the grace of three months, to pay their income tax balance while other corporations have two.
The Canadian-Controlled-private Corporation (CCPC)
When talking tax, CCPC is the best type of small business. There are lots of benefits that accrue to it by virtue of being CCPC. Examples are the small business tax deduction, investment tax credits, capital gains exemptions for shareholders on the sale of shares, and research and development tax credits for qualifying activities.
Methods of making payment for the tax balance.
In the event that a corporation owes tax at the end of a tax year and wants to pay the next year, the following are the methods of payment that such a corporation can choose from.
- Payment through Business Accounts
Now, this is a CRA online service. With it, business owners can pay over the net to their Canada Revenue Agency accounts.
- My Payment Service
This is another online method where corporations can pay from their company bank account through their My Payment service
- Sending Cheque
This method is the oldest of all methods and it is more stressful and time-consuming. Although some people still prefer sticking with this old-fashioned way of making payment.
T2 Corporation Income Tax return, or T2 Short Return
Now the above are two methods of filing for a tax return.
To be able to file for a T2 Short Return, you must satisfy the following criteria, meanwhile if not, the T2 corporation Tax return is your best bet.
- The corporation has to be a Canadian-controlled private corporation (CCPC) throughout the tax year
- If in the financial year, it had no profit, or even incurred loss.
- It has the status of a permanent establishment in only one province or territory within the country.
- If all of its requests are for the refund of the installments that was earlier paid
- If its financial records are in Canadian currency
- If the company operates devoid of transitional tax debt in Ontario
- If it is a tax-exempt corporation that is permanently established in only one province of the state. (This is a self-sufficient condition)