Taxation Info-Guide

The Info-Guide is a document designed to help you navigate through different government programs, services and regulations and identify those of interest. Although many questions will be answered in an Info-Guide, the list is, by no means, exhaustive. The selected items provide a helpful overview of the programs, services and regulations in a related area. This blended product of both federal and provincial information is developed to answer a growing demand for strategic information by business people. Municipal and other non-government information could be included, depending on the content and region.

TABLE OF CONTENTS

Taxation Introduction
Financial Assistance
Information Services                
Management Services
Regulations        

TAXATION INTRODUCTION
The three levels of government in Canada (federal, provincial, and municipal) have distinct responsibilities and taxing authority.

Income Taxes
Taxes on Sole Proprietorships and Partnerships
Sole proprietorships and partnerships can deduct the same expenses from taxable income as corporations can. These expenses must relate to the generation of business income. However, your business income, or share of the business income, in a partnership, is taxed personally. You may have to pay your income tax by instalments. You may also need to make instalment payments for Canada Pension Plan contributions on your own income. Remember to budget for these payments. For more information, to obtain tax guides, or to open an installment account, contact the Canada Revenue Agency.

Corporate Taxes
Corporate income tax rates vary depending on the type of business and its net income. As of April 2004, the combined federal / provincial corporate income tax rate is 33.62% for general businesses and 16.12% for small businesses. The small business threshold (the amount of income eligible for the small business tax rate) increased from $350,000 to $400,000 as of April 1, 2003. Alberta does not have any provincial capital or payroll taxes, which are common in many other provinces and U.S. states.

Different forms of income, such as interest, royalties, income from foreign subsidiaries, capital gains and dividends, are treated differently, making corporate business taxes complicated and constantly changing. The following are a few tax tips to remember:

1. Depending on when you start operations, your corporation may have a taxation year other than the calendar year.
2. Corporate taxes must be paid by monthly instalments, based on either a tax payable estimate for the year or the tax paid the previous year.
3. You should open a corporate tax instalment account with Canada Revenue Agency as soon as your business operations begin.
4. Corporate residents in Alberta must submit income tax returns separately to the federal and provincial governments.
5. Corporate assets such as buildings, vehicles and equipment are not deducted from income in the same way as other expenses.

For an overview and comparison of tax rates visit the Alberta Economic Development Web site at http://www.alberta-canada.com/economy/positiveBusinessClimate/competitiveCorporateTaxes.cfm

More information including Alberta corporate tax rates, small business deduction rates, fuel tax, tobacco tax and hotel room tax rates, and other services, publications and forms can be obtained by visiting the Alberta Finance web site located at: http://www.finance.gov.ab.ca/publications/tax_rebates/index.html

Municipal Taxes
Business owners pay property taxes at the municipal level. Some municipalities also collect a local business tax. For more information, contact the local municipal authority or council in the area your business is located.

FINANCIAL ASSISTANCE

Scientific Research and Experimental Development (SR&ED) Program - Canada Revenue Agency
The federal government provides income tax incentives to Canadian taxpayers that conduct scientific research and experimental development (SR&ED) in Canada. The program encourages industry, including small business and start-up firms, to develop technologically advanced products and processes in Canada.

Claimants can apply for SR&ED investment tax credits for expenditures such as wages, materials, machinery, equipment, some overhead, and SR&ED contracts.

For further information, please call 1-800-959-5525, see the document Scientific Research and Experimental Development (SR&ED;) Program or visit the Web site at http://www.cra-arc.gc.ca/taxcredit/sred/menu-e.html

INFORMATION SERVICES

Finance and Taxation Information for Enterprises - Statistics Canada
Statistics Canada maintains financial and taxation information on incorporated enterprises operating in Canada.

For further information, please call 1-800-263-1136, see the document Finance and Taxation Information for Enterprises or visit the Web site at http://www.statcan.ca

Forms and Publications -- Internet Ordering Service - Canada Revenue Agency
If you would like to order a paper copy of one of Canada Revenue Agency's forms or publications, please complete their on-line Order form.

For further information, please call 1-800-959-2221, visit the Web site at http://www.cra-arc.gc.ca/formspubs/menu-e.html

Guide for Canadian Small Businesses - Canada Revenue Agency
The Guide for Canadian Small Businesses provides useful information on a broad range of issues, such as how to set up a business, the GST / HST, excise taxes and duties, importing / exporting, payroll deductions, and income tax. The guide is targeted primarily at new and prospective small businesses. It provides a comprehensive overview of tax and customs related information that established small businesses may also find useful.

For a copy of the guide, please call 1-800-272-9675, see the document Guide for Canadian Small Businesses or visit the Web site at http://www.cra-arc.gc.ca/E/pub/tg/rc4070/README.html

Selecting Professional Services - Canada Business service centres
The use of professional services is essential to the success of a small business. They can provide knowledge and expertise in the areas in which you may have little. They may also round out your management team to ensure your business is operating efficiently. As an entrepreneur, there are four main areas of professional services with which you may consult: accountant, lawyer, banker and insurance broker.

For further information, see the document Selecting Professional Services

Services of the Income Tax Rulings Directorate  - Canada Revenue Agency
The Income Tax Rulings Directorate is the centre of income tax expertise within the Canada Revenue Agency (CRA), issuing advance income tax rulings and technical interpretations on which clients can rely.

For further information, see the document Services of the Income Tax Rulings Directorate.

Tables on Diskette - TOD -- Payroll Deductions - Canada Revenue Agency
Tables on Diskette (TOD) is an electronic version of the payroll deductions tables. TOD calculates the amount of income tax, Canada Pension Plan (CPP) contributions and Employment Insurance (EI) premiums that the Canada Revenue Agency (CRA) requires an employer to withhold from an employee's income.

For further information, please call 1-800-959-5525, see the document  Tables on Diskette - Payroll Deductions  or visit the Web site at http://www.cra-arc.gc.ca/tax/business/tod/menu-e.html

MANAGEMENT SERVICES

Business Window - Canada Revenue Agency
Businesses can get one-stop service at Business Windows in most Canada Revenue Agency offices. Service is offered at the counter, or by telephone or fax for the four Business Number (BN) accounts (i.e. corporate income tax, import/export, payroll deductions and GST). Business Window staff can also put business clients in touch with the right contact for other Canada Revenue Agency business programs.

For further information, please call 1-800-959-5525, see the document Business Window - Supplement or visit the Web site at http://www.cra-arc.gc.ca/contact/prov/ab-e.html

New Employer Visits - Canada Revenue Agency
Personalized visits to new employers help them to understand withholding procedures and to solve any source deduction problems they may have.

For further information, please call 1-800-959-5525 or see the document New Employer Visits.

Social Insurance Number (SIN) - Human Resources Skills Development Canada - HRSDC
The Social Insurance Number (SIN) is a unique nine digit number used in the administration of various Canadian government programs. Every person who works in Canada is required to have a Social Insurance Number.

For further information, please contact your local Human Resource Centre of Canada - HRCC, for a complete list of local HRCC offices visit HRSDC's Web site at: http://www.hrsdc.gc.ca/en/gateways/where_you_live/regions/offices/ab-nwt-nu.shtml  or check the government listings in your telephone directory or see the document Social Insurance Number - SIN.

REGULATIONS

Business Number (BN) - Canada Revenue Agency
The Business Number (BN) replaces the many numbers businesses need to deal with government, thus helping reduce costs and increase competitiveness. At the Canada Revenue Agency (CRA), they use the BN for four major business accounts:

• corporate income tax
• import / export
• payroll deductions
• goods and services tax / harmonized sales tax (GST / HST)

The BN increases government efficiency and helps it deliver one-stop service at Business Windows. This program contains information about which accounts a business may need and how to complete a request for a Business Number.

For further information, please call 1-800-959-5525, see the document Business Number - BN or visit the Web site at http://www.cra-arc.gc.ca/bn

Excise Taxes and Excise Duties - Canada Revenue Agency
When certain goods are manufactured in Canada, excise tax is payable at the time the goods are delivered to the purchaser. When certain goods are imported, excise tax is payable by the importer, at the time the goods are imported.

Excise duties are charged on spirits, beer, and tobacco products manufactured in Canada. The Excise Act sets out the rates of duty for these goods.  

For further information, please call 1-800-959-8287, see the document Excise Taxes and Excise Duties or visit the Web site at http://www.cra-arc.gc.ca/tax/technical/excise-e.html

Goods and Services Tax and Harmonized Sales Tax - GST / HST - Canada Revenue Agency
The goods and services tax (GST) is a multi-stage tax that applies to most transactions throughout the production and marketing process. A quick method of accounting for the GST is available for small businesses with annual worldwide GST included sales of $200,000 or less including sales of associated businesses. You have to apply to the Canada Revenue Agency to use this method. If you do use this method, you have to continue using it for at least a year. Certain businesses cannot use this method, for example you cannot use this method if you are a lawyer, accountant or bookkeeper. There are other exceptions as well. For more information on the quick method, see the CCRA guide RC4058, Quick Method of Accounting for GST/HST http://www.cra-arc.gc.ca/E/pub/gp/rc4058/README.html

For further GST information, please call 1-800-959-5525, see the document Goods and Services Tax and Harmonized Sales Tax - GST/HST or visit the Web site at http://www.cra-arc.gc.ca/tax/business/gsthst/menu-e.html

GST and the Indian Act - Canada Revenue Agency
Under Section 87 of the Indian Act, the personal property of an Indian or Indian band situated on a reserve and their interests in reserve lands are not subject to tax. The application of the GST/HST is consistent with the provisions of that Act.

For further information, please call 1-800-959-5525, or see GST/HST and Indians.

Information for Aboriginal People

• For information about tax and customs benefits and requirements under the Canadian Indian Act , see Information for Status Indians.
• For examples of how the Indian Act exemption applies to employment income and other related income, see the Indian Act Exemption for Employment Income Guidelines.

For further information contact Canada Revenue Agency at 1-800-959-5525 or on the Web at http://www.cra-arc.gc.ca

Income Tax - Payroll Deductions
Under the Income Tax Act, an employer is required to withhold any amounts relating to income tax  from an employee's paycheque. As an employer, you are holding these deductions in trust for your employees; therefore, you are expected to keep these funds separate from the operating funds of your business.

For further information, please call, 1-800-959-5525, see the document Income Tax - Payroll Deductions or visit the Web site at http://www.cra.gc.ca/payroll

Trust Accounts Division - Canada Revenue Agency
The Trust Accounts Division works to ensure that employers and workers meet the withholding, remitting and reporting requirements of the Income Tax Act,the Canada Pension Plan, the Employment Insurance Act and the Excise Tax Act. It also ensures they meet the requirements for provincial tax withheld at source, for all provinces except Quebec.

For further information, please call 1-800-959-5525, see the document  Trust Accounts Division  or visit the Web site at http://www.cra-arc.gc.ca/tax/business/topics/payroll/menu-e.html

Income Tax Returns: T1 General - Canada Revenue Agency
All individuals use the T1 General return to report income and determine their income tax obligations under the laws of Canada and of all provinces and territories, except Quebec (Quebec residents must use a separate provincial return for their provincial income taxes.)

Non-incorporated self-employed individuals, sole proprietors and partners can also use the T1, along with supplementary guides, to determine their personal income tax obligations.

For further information, please call 1-800-959-5525, see the document  Income Tax Returns - T1 General Income Tax and Benefit Return or visit the Web site at
http://www.cra-arc.gc.ca/formspubs/t1general/allyears-e.html

Income Tax Returns: the T2 Corporate Income Tax Return and the T2 Short Return - Canada Revenue Agency
The T2 Corporation Income Tax Return is an eight-page return that serves as a federal and provincial/ territorial corporation income tax return. Exceptions: corporations located in Quebec, Ontario or Alberta. If the corporation is located in one of these provinces, it has to file a separate provincial corporate return.

The T2 Short is a two-page return designed for small, non-taxable corporations with a gross annual income of $500 000 or less. Two categories of corporations are eligible to use the T2 Short.

For further information, please call 1-800-959-5525, see the document  Income Tax Returns - the T2 Corporate Income Tax Return and the T2 Short Return  or visit the Web site at http://www.cra-arc.gc.ca/t2return

Corporation Internet Filing - Canada Revenue Agency
Corporation Internet Filing is the newest electronic tax-filing option; it streamlines the tax-filing process, provides the filer with an immediate confirmation of receipt and results in faster refunds.

For more information, please call 1-800-959-5525, see the document Corporation Internet Filing or visit the Web site at http://www.cra-arc.gc.ca/eservices/tax/business/corpnet/about-e.html

Objections and Appeals - Income Tax Act / Excise Tax Act - Canada Revenue Agency
The Income Tax Act provides for a formal objection process for taxpayers who disagree with an income tax assessment. The Excise Tax Act provides a similar process for persons who disagree with a GST/HST or excise tax assessment.

If you do not understand or agree with an assessment or reassessment notice, you should first call or visit the Client Services Section of your tax services office or write to the tax centre that processed your return. The Canada Revenue Agency (CRA) resolves many problems with assessments in this way.

For further information, please call 1-800-959-5525, or see the document Objections and Appeals - Income Tax Act/Excise Tax Act.

Tax and Revenue Administration - Alberta Finance
Tax and Revenue Administration is responsible for the administration of the Alberta Corporate Tax Act, Fuel Tax Act, Tobacco Tax Act,  Tourism Levy Act, as well as the Health Cost Recovery programs. The Alberta Corporate Tax Act contains provisions for determining the Alberta income tax of corporations, the Alberta Royalty Tax Credit for corporations, the Alberta Royalty Credit for individuals and trusts and the Insurance Corporations Tax. Fuel tax, tobacco tax and tourism levy provisions are contained in the respective acts.

For further information, please call Edmonton 780-427-3044 , (call 310-0000 then enter 780-427-3044 for Alberta toll-free) orCalgary 403-297-5200 , (call 310-0000 then enter 403-297-5200 for Alberta toll-free), see the document Tax and Revenue Administration (TRA) or visit the Web site at http://www.finance.gov.ab.ca/business/tax_rebates/index.html

Municipal Taxes
In addition to a property tax levy, a municipality may impose a business tax, a special tax, or a local improvement tax. As well, the Municipal Government Act (MGA) provides for taxes within a business revitalization zone (BRZ) and for a tax on well drilling equipment.

For further information contact your local municipal office. If you want to read the MGA visit the Alberta Queen's Printer Web site at http://www.qp.gov.ab.ca/catalogue

• New Employer Visits
• Business Window
• Small Business Information Seminar
• Guest Advisor Program Service
• Goods and Services Tax and Harmonized Sales Tax - GST/HST
• GST/HST and Indians
• Tax and Revenue Administration (TRA)
• Guide for Canadian Small Businesses
• Are You an Employee or Self-Employed?

DISCLAIMER
Information contained in this document is of a general nature only and is not intended to constitute advice for any specific fact situation. Users concerned about the reliability of the information should consult directly with the source, or seek legal counsel.

Links Policy
Some of the hypertext links lead to non-federal government sites which are not subject to the Official Languages Act and the material is available in one language only.