A corporation that has an establishment in Québec or that sells certain property in Québec is subject to income tax. The income earned by the corporation belongs to the corporation; shareholders cannot allocate the corporation's income to themselves. The corporation's losses are not deductible from the income of individual shareholders, but may influence the value of their shares.
Consequently, a person who works for a business, as an employee, cannot set up a corporation in order to report his or her income as corporate income.
In calculating the corporation's income, the main items you should take into account are
You must report the corporation's sales, as well as any fees received or receivable for services rendered by the corporation.
As a rule, the corporation's income must be calculated according to the accrual basis of accounting, unless the corporation is a farming corporation or a fishing corporation.