Category: Business & Corporate Tax

Can I purchase a company that has a history of losses to offset the profits of my company?

Question: I am thinking of acquiring a loss-generating business and planning on using its loss to offset the profits that my company is generating, can I do this? Answer: In certain cases, you can. However, you need to be aware of the “acquisition of control rules”. This prevents a profitable corporation from acquiring a corporation … Continue reading Can I purchase a company that has a history of losses to offset the profits of my company?

What amount can I charge to my company in terms of per diem travel expenses?

The CRA looks at what is deemed reasonable in terms of travel expenses. If the travel allowance is reasonable, then you don’t have to include it in your personal income. If it is not reasonable, then it is an income inclusion and you will need to pay tax on it. In terms of what is … Continue reading What amount can I charge to my company in terms of per diem travel expenses?

Do I have to pay tax on a merger between two Canadian companies?

Question: I would like to merge my business with a Canadian company that operates in the same field as me. Is there any way to avoid paying tax on the merger? Answer: The Income Tax Act allows for a tax free merger if the following conditions are met: Both corporations are Canadian Controlled Private Corporations … Continue reading Do I have to pay tax on a merger between two Canadian companies?

What are the tax consequences of changing from a sole proprietorship to a corporation?

Question: I am currently operating as a sole proprietor, but I see the benefits of incorporating my business and wish to do so. However, I have several assets that have appreciated in value (including goodwill) since I began. Is there any way I can transfer these assets tax-free to my corporation?  Answer: When you transfer … Continue reading What are the tax consequences of changing from a sole proprietorship to a corporation?

If I am sending Canadian employees to work in the United States, do I need to withhold social security taxes from their pay in both Canada and the USA?

If you own a Canadian corporation that is sending Canadians to work on its behalf in the USA, the USA-Canada tax treaty gives you the option of not withholding social security taxes from your employees’ pay-cheques. To be eligible for this provision, you must apply for a certificate of coverage.  

What are non-capital losses and do they expire?

The tax term for business losses is non-capital losses.  Non capital losses can be used to reduce taxable income from a prior year or a subsequent year.  If they are not used within a certain time period, then the non-capital losses expire.  The time period for utilizing non-capital losses depends on the taxation year in … Continue reading What are non-capital losses and do they expire?

How do I report income earned from an online business such as Google adSense?

Question: I recently moved to Canada but I have web hosting that was created outside of Canada that is generating Google adSense earnings for me. How do I report this income on my Canadian tax return? Answer: You would report it as ‘business income’ on your Canadian income tax return. As you are reporting the … Continue reading How do I report income earned from an online business such as Google adSense?

I have a corporation and would like to pay out premiums for critical illness insurance, what are the tax implications?

When a corporation pays premiums for critical illness insurance it’s a non-deductible expense and is classified as a taxable benefit to the employee/shareholder. However, if a qualifying health and welfare trust is in place, then its deductible to the corporation and is not a taxable benefit to the employee/shareholder.

Can I apply my business losses to my capital gains?

Losses carried forward from business income cannot be applied to capital gains as business losses are classified as non-capital losses. Capital losses are classified as net-capital losses and can only be applied to capital gains.

Should I donate from my small business corporation or personally?

Ideally its beneficial to donate from your corporation as it reduces your taxable income by the full amount donated saving you 15.5% income tax at the corporate tax rate. If you donate personally you’ll receive a tax credit for 15% on the first $200 dollars of donation and 29% above that. Therefore, if your personal … Continue reading Should I donate from my small business corporation or personally?

What are capital dividends and the capital dividend account (CDA) in my small business corporation?

The capital dividend account maintains fair integration between an individual and corporation. When an individual incurs a capital gain only 50% is taxable and the remaining 50% is tax free. When a corporation incurs a capital gain the same concept applies. The non-taxable portion of a capital gain realized by a corporation is added to … Continue reading What are capital dividends and the capital dividend account (CDA) in my small business corporation?

Why are dividends grossed up when received from my small business corporation?

Dividends are paid out of a corporation’s retained earnings, which is technically the net income after taxes each year. Only shareholders are entitled to receive dividends, not employees. Since the corporation has already paid tax on its profits at a rate of 15.5%, a dividend tax credit is provided so taxpayers are not double taxed … Continue reading Why are dividends grossed up when received from my small business corporation?

Is a payment made by a corporation to a sports and recreation club deductible for taxation purposes? Will the deduction result in a taxable shareholder or employee benefit?

In order for the corporation to be eligible for the deduction, it must be transparent (corporation must be ready to prove) that the primary beneficiary of the sports and recreation club was the corporation. This in turn, will ensure that there will be no shareholder or employee taxable benefit. If, there is an inquiry or … Continue reading Is a payment made by a corporation to a sports and recreation club deductible for taxation purposes? Will the deduction result in a taxable shareholder or employee benefit?

A US corporation is considering doing business in Canada. What are some of the formalities that must be fulfilled?

You must obtain a Business Number, Sales Tax Number (i.e. GST #) and a Payroll Number, if there are employees. If the corporation does not have a physical presence in Canada, then a Treaty-based corporate tax return must be filed every year in order to avoid paying income tax. Otherwise, absence of filing will result in the corporation … Continue reading A US corporation is considering doing business in Canada. What are some of the formalities that must be fulfilled?

I am considering moving my business and business-owned property offshore. What are the consequences?

When moving your business from a Canadian corporation to another corporation in a tax-free country, you are deemed to have disposed of that business assets’ at their Fair Market Value. This triggers capital gain tax, which must be paid to the CRA  Proper tax planning is required to minimize capital gains tax, and to ensure … Continue reading I am considering moving my business and business-owned property offshore. What are the consequences?
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