Accounting and tax

legal considerations for companies in Canada

Tax rates

  1. Corporate tax in Canada is levied at the federal (15%) and provincial (11.5% – 16%) level;
  2. Personal federal tax rates are progressive up to 33% (27.56% for residents of Quebec). Personal provincial tax rates are also progressive upto 25.75%;
  3. Branch offices, however, must pay an additional remittance tax of 25%;
  4. The federal GST rate is 5% and the HST rate is 13% for goods and services supplied in the province of Ontario (ON), and 15% for the provinces of Newfoundland (NL), Nova Scotia (NS), New Brunswick (NB) and Prince Edward Island (PEI). The QST rate is 9.975%. The PST general rates are as follows: British Columbia (BC) 7%; Saskatchewan (SK) 6%; and Manitoba (MB) 8%. Only the 5% GST is levied in Alberta and the territories;
  5. Companies incorporated in Manitoba, Newfoundland, Ontario and Quebec impose a formal employer payroll tax (called by different names), with the top rate ranging from 1.95% to 4.26% of the annual gross wages, salary and other remuneration paid by an employer;
  6. Dividend payments, interest payments and royalty payments are subject to a 25% withholding tax in Canada.

Tax administration and reporting obligations

  1. GST/HST and QST filings can be monthly, quarterly or monthly, depending on the province in which the business is incorporated;
  2. Resident companies must file their tax returns within 6 months after the end of the accounting year. Please note, all companies must file their returns individually as consolidated returns are not permitted;
  3. As per the Canadian Company Act, if the gross annual turnover of the soliciting company exceeds CAD$250,000, it is obliged to conduct an audit for its financial review, whereas for the non-soliciting company the limit is more than CAD$1 million;
  4. Canada has signed DTAs with 93 countries including Australia, China, Singapore, South Africa, United Kingdom and United States to reduce withholding tax on payments abroad.

Accounting considerations

  1. In accordance with Canadian Taxation Act R.S.C., 1985, c. 1 (5th Supp), each entity must register for corporate tax and Goods and Services Tax/ Harmonized Sales Tax (GST/HST) at the Canada Revenue Agency. However, registration for GST/QST is not required for small suppliers (persons who have worldwide taxable sales under CAD 30,000) or non-resident of Canada who do not “carry on business” in Canada (with some exceptions);
  2. There is a capital gain tax in Canada. Only 50% of the amount of capital gains less capital losses is considered taxable in Canada;
  3. Trading and capital losses can both be carried back for 3 years. However, while trading losses can only be carried forward for 20 years, capital losses can be carried forward indefinitely;
  4. Monthly and quarterly Government tax obligations include i) monthly payroll reporting and ii) monthly or quarterly GST and corporation tax return filing.

Assistance to our Clients

  1. Our in-house accountants will be happy to assist you with corporation tax and GST registration for a one-time fee of US$750;
  2. Our tax specialists can complete monthly Government reporting for a monthly fee of US$860. Our monthly support will include i) receive in Dropbox the monthly invoices from our client ii) label monthly bank statement transactions iii) preparation and submission of monthly VAT returns and iv) monitor monthly profit levels to minimize annual tax and v) submission of monthly employee payroll reporting;
  3. Our Compliance Department will assist our Clients with i) documenting and implementing accounting procedures ii) implementing financial accounting software iii) preparation of financial accounting records and iv) preparing forecasts, budgets and sensitivity analysis;
  4. Our fees to submit annual accounting, audit and tax reports (all three combined) is US$4,950;
  5. For an active trading company, the accounting and tax fees are an estimate of our fees to efficiently and effectively discharge your annual company accounting, auditing and tax obligations. Following receipt of a set of draft accounting numbers from your company, Healy Consultants will more accurately advise accounting and tax fees. For a dormant company, our fee is only US$950;
  6. It is important for our Clients’ to be aware of their personal and corporate tax obligations in their country of residence and domicile; to fulfill those obligations annually. Let us know if you need Healy Consultants Group PLC’s assistance to clarify your annual reporting obligations.

Legal and compliance

  1. Every Canadian company must have at least one director and one shareholder. At least one director must be resident in Canada for companies registered under the federal law and those registered with the states of i) Alberta, ii) Ontario, iii) Manitoba, iv) Saskatchewan and v) Labrador;
  2. Canada company incorporation can be done online if the shareholders and directors already have a Canada social security number;
  3. Every Canada company must obtain Corporation Income tax Account immediately after incorporation.

Contact us

For additional information on our accounting and legal services in Canada, please email us at email@healyconsultants.com. Alternatively please contact our in-house country expert, Mr. Petar Chakarov, directly: