Business & Corporate Tax Archives

I was fully reimbursed by my client for meals I purchased while providing services to my client. Are my meals expenses 100% deductible in this case?

Yes. You will be able to fully deduct your meals expense against the reimbursement (which is treated as income). Therefore, the net effect on your income would be $0. The amount will be 50% deductible for your client.t be charged on shareholder loans to avoid a taxable benefit.

How far back can the CRA audit an individual or business?

The CRA reserves the right to audit your prior year tax filings going back six years. Hence, you should keep receipts and documentation supporting your claims up to six years.

If I operate my corporation in multiple provinces, is there a special way my taxable income gets allocated to the provinces?

The taxable income in the multiple provinces gets allocated based on a formula. The taxable income is prorated and allocated based on the salaries paid and the gross revenue earned in those provinces.

Is there a quarterly remittance requirement for GST/HST similar to Income Tax?

Yes. Similar to income tax, if the net GST/HST payable exceeds $3,000 on a GST/HST return, your business will be required to pay quarterly instalments of GST/HST. The CRA often does not inform the business of the GST/HST remittance requirement and as such, this is an area that most businesses overlook.

I purchased a corporate bond during the year. The purchase price included accrued interest to the seller of the bond. Is there a way for me to avoid being taxed twice on accrued interest?

Yes, to avoid double tax you are entitled to deduct accrued interest you paid when you bought the bond from the interest income for the year. Accrued interest will be deducted in Schedule 4 under carrying charges and interest expenses.

I am a sole proprietor and am selling my business. Can I use the lifetime capital gains exemption of $800,000?

As a sole proprietor you are not eligible for the lifetime capital gains exemption (CGE). The CGE is only available on the sale of the shares of a Canadian Controlled Private Corporation (CCPC). The CGE, as the name suggests, exempts up to $800,000 of profit (i.e. capital gain) on the sale of shares of a … Continue reading

I often take clients to a sports or entertainment event and provide gifts to maintain client relationships. Will these costs be considered fully deductible or 50% deductible?

The expenses mentioned above will be considered entertainment expenses, so that only half of the amount spent can be deducted. This includes gift cards for food and drinks, restaurants and entertainment venues. Gifts that are food (e.g. box of chocolates) or drinks (e.g. wine) are also considered to be “meals”.

How do I determine which GST/HST rate to charge when I sell to multiple provinces in Canada?

Generally speaking, the rate of GST/HST to charge depends on the place of supply for the good that is being provided. The place of supply is generally where the legal place of delivery takes place. So, if goods are being delivered to a ‘participating province’ HST of 13% will be charged. If, for example, the … Continue reading

I didn’t register for WSIB even though it was compulsory. What should I do?

You can make a voluntary disclosure on the WSIB website. By registering voluntarily, you will only have to make payment for WSIB premiums for the current year and the prior year. Interest and penalties will not be levied. If you get caught for non-registration, then you could end up paying huge amounts in penalties, interest, … Continue reading

What are the tax implications of my corporation paying critical illness premiums for me? What if I pay them personally?

Critical illness (CI) does not have specific mention in the Income Tax Act. It depends on the exact circumstances whether a CI policy resembles more to a life insurance or a sickness/accident insurance. CI premiums paid by the corporation are not deductible. When the policy value is paid to the corporation on diagnosis of a … Continue reading

What is the benefit of registering for GST/HST voluntarily?

The main benefit is that you can claim input tax credits (ITC) for the amount of GST/HST you paid on business expenses. For example, if you purchase materials from a vendor in the course of business, the government will provide you with credit for the amount of GST/HST you paid on the purchase. Therefore, any … Continue reading

What is the role of an Ontario agent appointed by a Foreign corporation?

If you are a foreign corporation (i.e US LLC or US C-Corp.) carrying on business in Ontario, then you’ll need to appoint an agent in Ontario of your foreign corporation. This will allow you to apply for the extra provincial license required to carry on business in Ontario. The main role of the agent is … Continue reading

Can I deduct research expenses relating to starting a new business?

Where a taxpayer is carrying on a business and incurs expenditures on research to determine whether to expand his/her business, to determine the desirability of developing a new product or line of products, to develop a more efficient manufacturing process, to improve administrative procedures These expenses would be considered current operating expenditures and are deductible … Continue reading

Can I add a shareholder to my corporation at any point in time?

A common mistake many business owners make is that they add shareholders (often family members) to their company for no money at all or very little money (e.g. $100). Now you wouldn’t add me to your corporation for nothing! The CRA takes a similar view. Fair market value must be paid by all individuals that … Continue reading

Can my company declare a bonus to reduce taxes?

If your corporation has surplus profits for the year, then consider accruing a bonus payable to you or your family members. The bonus does not have to be paid at the end of the year, but simply recorded as a liability. Your corporation will receive a tax deduction for the amount of the bonus accrued. … Continue reading

Category: Business & Corporate Tax