Corporate Tax Types and Rates
A corporation in Canada is primarily subject to three types of taxes during its operations:
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GST/HST (Sales Tax): Generally, the federal sales tax rate is 5%, and each province has its own sales tax rate. For example, in Ontario, the HST rate is 13%, which includes the federal 5% and the provincial 8%. In British Columbia, the sales tax rate is 12%, including the federal 5% and the provincial 7%.
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Corporate Income Tax: Companies are classified as CCPC (Canadian-Controlled Private Corporation) or Non-CCPC. A CCPC can benefit from a lower tax rate of 12.2% (in Ontario) on the first $500,000 of taxable income, while Non-CCPCs face a corporate tax rate of 26.5% (in Ontario).
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Payroll Deductions for CPP/EI and Personal Income Tax: When a corporation hires employees and pays salaries, it is generally required to deduct and remit CPP (Canada Pension Plan), EI (Employment Insurance), and personal income tax on behalf of its employees every month (in some cases, quarterly). CPP and EI represent pension and unemployment insurance, respectively.
Tax Filing and Payment Deadlines
When registering a corporate account with the tax authorities, a company can set its Fiscal Year End (FYE). For example, a company may choose to set its fiscal year from November 1 to October 31 of the following year.
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The key tax filing deadlines for the company (annual filing) are as follows:
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By February 28, the company must issue tax forms such as T4, T4A, and T5 for employees, shareholders, and creditors.
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HST must be filed within 3 months after the end of the company’s fiscal year.
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Corporate income tax must be filed within 6 months after the end of the company’s fiscal year.
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A CCPC (Canadian-Controlled Private Corporation) must pay HST and corporate income tax within 3 months after the end of the fiscal year to avoid penalties and interest. A Non-CCPC must pay corporate income tax within 2 months after the end of the fiscal year. Additionally, if the tax amount exceeds $3,000, the company must make prepayments for the next fiscal year.
