What you need to know about business taxes in Canada

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What you need to know about business taxes in Canada

Taxation is an integral part of everyday life and is even more important when you are running a business. Business taxes in Canada apply to all forms of businesses be it sole proprietorships, partnerships or corporations. You will need to be aware of what taxes you must pay and how these are determined as these details will help you plan your business accordingly and make the most out of what is available to get a steady profit, despite the taxes.

Different types of taxes

If you are the sole proprietor of your business then you are responsible for reporting your profits or losses in the self-employment income part of the personal tax returns form. You will also need to file a statement of business activities or statement of professional activities while reporting the gross and net income from your business.

With a partnership the process is similar as both partners must report their share of the profits or losses. They must also file statements of business or professional activity.

Business taxes in Canada are different for corporations. It is very difficult to manage on your own as the process is quite complicated and thus you should take the help of a reputed tax professional when filing reports for profits or losses due to your participation in a corporation.

Calculating net profits or losses

Business taxes in Canada are heavily based on profits and losses and to figure out how much you owe to the government you will need to accurately calculate how much you spent and how much you earned. For this you will need to keep detailed records of all expenses, all assets and all business-related income. Using these records you should subtract the expenses you incurred from the amount of money you earned in the same year. This will enable you to accurately see how much profit or loss you have incurred. Business taxes in Canada are determined based on your calculations of your profits or losses.

What count as expenses?

Expenses can be of two types: current and capital, the former refers to things like telephone bills and supplies while the latter refers to aspects like the computers used, the property that houses the business and so on. Depending on your expenses you may be able to deduct a good amount of money from your taxes. This works only if you can prove that the expenses were unavoidable and necessary for the progress of your business.

Records to keep

Keeping records is the best way to ensure that your business lasts a while. You should keep records for around six years and include receipts, invoices and banking information, among other things. A good accounting software should do all the hard work for you and is thus worth the investment. Remember also that if you employ workers you will have to record the amount of hours they work and follow the correct procedure for deducting and remitting 'source deductions'. Business taxes in Canada are best determined when you have a solid framework of records to use and hence it is crucial that you focus on keeping a track of all business activities.

It is important to note the different forms of business taxes in Canada so that you can accurately file your profits or losses without any hassles. Remember that paying taxes is an essential part of running a business and good planning will ensure that it is a smooth process.

Visit Canada Revenue Agency website to know more about taxes in Canada.

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