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Taxation Info-Guide

Last Verified: 2007-10-03

The following Info-Guide provides a helpful overview of taxation issues relevant to business owners in Newfoundland and Labrador. Federal, provincial and municipal information is included. This is not necessarily an exhaustive list - you should consult with your accountant and/or lawyer regarding your specific taxation issues.

For details on any programs, services, or regulations referenced in this guide, please contact the listed organizations directly.

The Canada/Newfoundland and Labrador Business Service Centre is your BEST source for FREE business information! For information on any of our services, contact our Centre, or visit one of our Network Sites .

Canada/Newfoundland and Labrador Business Service Centre
90 O'Leary Avenue
P.O. Box 8687
St. John's, Newfoundland and Labrador  A1B 3T1
Telephone: 709-772-6022
Fax: 709-772-6090
Toll-free (information): 1-800-668-1010 (in the Atlantic region only)
TTY Toll-free (hearing impaired): 1-800-457-8466
E-mail: info@cbsc.ic.gc.ca
Web site: http://www.cbsc.org/nl
Hours of operation: 8:30 am to 5:00 pm Monday to Friday

TABLE OF CONTENTS

INTRODUCTION
     - Keeping Records
     - Five Reasons Why Keeping Records Can Benefit You
FEDERAL
Canada Revenue Agency
    - Guides 
    - New Employer Visits
    - Tax Incentive Programs
Canada Border Services Agency (CBSA)
    - Guides
PROVINCIAL
Department of Finance
    - Tax Incentive Programs
MUNICIPAL
    - City/Town Council


INTRODUCTION

Keeping Records

You are required to maintain adequate records if you are carrying on a business or engaged in a commercial activity in Canada. Records are accounting and other financial documents that are kept in an organized way. Your records must provide sufficient details to determine your tax obligations and entitlements. They have to be supported by source documents to verify the information in the records.

Five reasons why keeping records can benefit you:
1. Good records can help you identify the sources of your income.
You may receive cash or property from many different places. If you don't have records showing your income sources, you may not be able to prove that some sources are non-business or non-taxable.

2. Well-kept records can mean tax savings.
Good records serve as a reminder of deductible expenses and input tax credits. If you don't record your transactions, you may forget some of your expenses or input tax credits when you prepare your income tax or GST/HST returns.

3. Well-kept records can prevent most of the problems you might encounter if we audit your income tax or GST/HST returns.
If your records are so incomplete that auditors cannot determine your income from them, the auditors will have to use other methods to establish your income. This will cost you time. If your records do not support your claims, they could be disallowed.

4. Your records will keep you better informed about the financial position of your business.
You need good records to establish your profit or loss, and the value of your business. Information from good records can also tell you what is happening in your business and why. The successful use of records can show you trends in your business, let you compare performance in different years, and help you prepare budgets and forecasts.

5. Proper records may help you get loans from banks and other creditors.
Creditors need accurate information about your current financial position before they give you a loan. You can't give them this information if you don't keep organized records. Also, good records show potential creditors that you know what's going on with your business. 1

[Note: Copies of official tax returns are often requested by bank staff to verify income when processing loan applications.]

For more information, see CRA's guide  Keeping Records .

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FEDERAL

Canada Revenue Agency (CRA)

The  Canada Revenue Agency is the federal government agency responsible for administering tax laws for the Government of Canada and for most provinces and territories. CRA has a number of useful guides to help business owners understand how they are taxed.  Some of these guides are described below.

Guide for Canadian Small Businesses
This document will introduce you to the Canada Revenue Agency (CRA) programs you need to know about, and give an overview of your obligations and entitlements under the laws that we administer. Some of the topics are covered in this guide are:

  • Setting Up Your Business (sole proprietorship; partnership; corporation; Business Number; etc.)
  • The Goods and Services Tax (GST) and Harmonized Sales Tax (HST)
  • Excise Taxes and Excise Duties 
  • Payroll Deductions and Remittances 
  • Income Tax 
  • Audits
  • Objections and Appeals.

Business and Professional Income
Use this guide if you are a self-employed businessperson or a professional. It will help you calculate the business or professional income you will report on your income tax return. Self-employed commission sales persons should also use this guide to determine the income to report in 2005.

You are considered to be self-employed if you have a business relationship with a payer and you also have the right to determine where, when, and how your work is done. For more information, see CRA's pamphlet  Employee or Self-employed .

Some of the topics covered in this guide are:

  • Business income (how to report; business records; etc.)
  • Income
  • Expenses
  • Capital cost allowance (CCA)
  • Eligible capital expenditures

Employers’ Guide to Payroll Deductions and Remittances
You are responsible for deducting, remitting, and reporting payroll deductions. You also have responsibilities in situations such as hiring an employee, when an employee leaves or if the business ceases its operations.

  • Canada Pension Plan contributions
  • Employment Insurance premiums
  • Pensionable and Insurable Earnings Review (PIER)
  • Deducting income tax
  • Special payments (bonuses; overtime pay; vacation pay; etc.)
  • Special situations (taxi drivers; baby-sitters; fishers; seasonal agricultural workers; etc.)
  • Remitting payroll deductions

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Income Tax Guide to the  Non-Profit Organization  (NPO) Information Return
This guide is for you if you represent an organization that is:

  • a non-profit organization (NPO); or
  • an agricultural organization, a board of trade or a chamber of commerce.

Information for Status Indians
If you are an Aboriginal entrepreneur, your business income is generally exempt from tax if the actual income-earning activities of the business take place on a reserve. If your business is operated entirely on a reserve, your business income is connected to a reserve and is exempt under section 87 of the Indian Act.  If your business activities are mostly carried on off a reserve, your business income is taxable because the exemption under section 87 does not apply.  If some of your revenue-generating activities take place on a reserve and the rest off a reserve, the tax exemption may be prorated (i.e. part of your income will therefore be taxable, and part will be exempt from tax.)

Employer Visits Program
CRA offers free on-site personalized visits employers to provide help with payroll deductions. If you would like information about this service, call 1-800-959-5525.

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Tax Incentive Programs (Federal)

Scientific Research and Experimental Development (SR&ED;) Program
The SR&ED program is a federal tax incentive program to encourage Canadian businesses of all sizes and in all sectors to conduct research and development (R&D) in Canada that will lead to new, improved, or technologically advanced products or processes. Claimants can apply for SR&ED investment tax credits (35%) for expenditures such as wages, materials, machinery, equipment, some overhead, and SR&ED contracts. It should be noted that the CRA is responsible for administering the SR&ED program, while the Department of Finance is responsible for the legislation that governs it. [Note: there is also a 15% provincial SR&ED investment tax credit - see below.]

St. John's Tax Centre
Canada Revenue Agency
290 Empire Avenue
St. John's, Newfoundland and Labrador  A1B 3Z1
Fax: 709-754-3416
Toll-free (information): 1-800-959-5525 T.I.P.S. Automated Services 1-800-267-6999
Toll-free (publications): 1-800-959-2221 (Forms and Publications)
TTY Toll-free (hearing impaired): 1-800-665-0354
Web site: http://www.cra.gc.ca/menu-e.html

Newfoundland & Labrador Tax Services Office
Canada Revenue Agency
Sir Humphrey Gilbert Building
165 Duckworth Street
P.O. Box 12075
St. John's, Newfoundland and Labrador  A1B 4R5
Fax: 709-754-5928
Toll-free (information): 1-800-959-5525 (Business Enquiries and Registrations)
Toll-free (publications): 1-800-959-2221 (Forms and Publications)
Web site: http://www.cra.gc.ca/menu-e.html

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Canada Border Services Agency (CBSA)

The  Canada Border Services Agency  (CBSA) ensures the security and prosperity of Canada by managing the access of people and goods to and from Canada. The CBSA has guides for importers and exporters as listed below.

Step-by-Step Guide to Importing
This guide has been created to help small and medium-sized enterprises that import goods into Canada. It provides an overview of the commercial importing process and is intended to complement, not replace existing regulations, acts and references. The guide provides information on:

  • tariff classification
  • applicable tariff treatment
  • rates of duty
  • tax payable when importing goods. 

Exporting Goods from Canada : A Handy Guide for Exporters
This publication outlines the requirements that you, as an exporter, must fulfill to meet your obligations to report exports under the Customs Act and the Reporting of Exported Goods Regulations (revised 2005). It explains:

  • why you have to report your goods
  • who is an exporter
  • what goods you have to report
  • how, where, and when you report
  • the basics of the Administrative Monetary Penalty system (AMPS).

Canada Border Services Agency
165 Duckworth Street
6th floor
St. John's, Newfoundland and Labrador  A1C 1G4
Toll-free (information): 1-800-461-9999
Web site: http://www.cbsa.gc.ca/menu-eng.html

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PROVINCIAL

Department of Finance

The Department of Finance is responsible for the implementation and administration of most provincial taxes. In terms of business taxes, these include:

  • Corporate Income Tax
  • Health and Post Secondary Education Tax (Payroll Tax)
  • Financial Corporations Capital Tax
  • Insurance Companies Tax
  • Mining and Mineral Rights Tax
  • Sales Tax on Insurance Premiums 
  • Utilities and Cable Television Tax
  • Gasoline Tax.

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Tax Incentive Programs (Provincial)

The Government of Newfoundland and Labrador offers a number of tax credits, incentives and benefits programs to businesses. The following are administered by the  Department of Finance :
 
Direct Equity Tax Credit - designed to encourage private investment in new or expanding small businesses as a means of creating new jobs and diversifying the economy. An investment credit, in the form of a provincial income tax credit, is available to individuals and arm’s length corporations who invest as shareholders in eligible small business activities.

Manufacturing and Processing Tax Credit  - applies to corporations that carry out manufacturing and processing from a permanent establishment located in Newfoundland and Labrador. The credit allows a deduction from the corporate income tax (CIT) rate which results in an effective CIT rate of 5%.

Small Business Tax Credit - small businesses are taxed at a rate of 5% versus the general corporate income tax rate of 14%. [Note: this credit is administered by on behalf of the province by the Canada Revenue Agency - CRA.]

Small Business Tax Credit - provides a provincial corporate income tax exemption to eligible businesses incorporated between April 1, 2003 and March 31, 2006. For businesses located on the Northeast Avalon, the tax holiday will be provided for the new company’s first three fiscal years. For those located outside the Northeast Avalon, the tax holiday will apply for five years. Eligible businesses must operate in designated growth sectors of the economy: technology; aquaculture; manufacturing; export; tourism; research and development; forestry and agrifoods; processing; import replacement; cultural.

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Scientific Research and Experimental Development Tax Credit - a refundable credit of 15% of eligible expenditures made with respect to scientific research and experimental development activities carried out in this province. [Note: this credit is administered by on behalf of the province by the Canada Revenue Agency - CRA).]

Film and Video Tax Credit - a refundable provincial Corporate Income Tax credit is provided for eligible local film projects at a rate of 40% of eligible local labour costs, but may not exceed 25% of production costs.

Political Contributions Tax Credit - a non-refundable credit equal to the lessor of $500 or the sum of 75% of the first $100 of contributions, 50% of the next $450 of contributions and 33.3% of the next $600 of contributions. Contributions can be made to a registered candidate or political party.

Economic Diversification and Growth Enterprise (EDGE) Program - a 10 year tax holiday to qualifying companies from provincial corporate income tax and payroll tax, followed by a five year phase-in of these taxes. The program also offers the lease of unserviced crown land for a nominal fee and the services of a dedicated government facilitator to new or expanding businesses. Effective January 1, 2002, companies receiving EDGE status may be eligible for an enhanced tax holiday:

  • enhanced benefits for rural areas by increasing the tax holiday period for businesses that establish or expand outside the North East Avalon area from 10 years to 15 years
  • a 50% rebate on federal corporate income tax for EDGE designated companies ("double-edge"). 

Labour-Sponsored Venture Capital Tax Credit - a 15% provincial tax credit for an individual who invests in a labour-sponsored venture capital corporation (LSVCC) fund. An LSVCC fund is required to invest in emerging Canadian growth companies with less than $50 million in assets and 500 employees and at least 75% of salaries and wages paid to residents in the province. A minimum of 75% of the funds raised in Newfoundland and Labrador have to be reinvested in this province within three years after the year in which capital is raised.

Taxation and Fiscal Policy Branch
Department of Finance
P.O. Box 8700
St. John's, Newfoundland and Labrador  A1B 4J6
Telephone: 709-729-3166 / 709-729-2983
Fax: 709-729-2070
E-mail: taxpolicy@mail.gov.nl.ca
Web site: http://www.fin.gov.nl.ca/fin/taxcredits.html

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MUNICIPAL

Check with your local city or town council office regarding:

  • the business tax rate for your area
  • other applicable taxes (commercial property tax; water and sewer tax; etc.)
  • any tax credits or incentives offered by your municipal government (in addition to the Small Business Corporate Income Tax Holiday, the EDGE Program, and others mentioned above.)

If your municipal government has a web site, this information may be available online. For example:

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1. From Guide for Canadian Small Businesses by Canada Revenue Agency (CRA)

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.



Last Modified: 2007-11-20

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