How to Maximize Your Return
It’s that time of year again –the dreaded tax season. For business owners
with incorporated corporations whose fiscal year has ended, this means having
to file two separate returns – personal and corporate. It’s a daunting task to
say the least, which is why many businesses chose to hand over their paperwork
and receipts to a trusted accountant. But for those of you who are
do-it-yourself types, here’s a guide to help you maximize your corporate tax
return.
Type of Corporations
There are various types of corporations in Canada, all of
which are subject to tax rates dependent upon corporate status. The
corporations that have the lowest tax rate are Canadian-controlled private corporations
(CCPCs). These are entirely private
corporations controlled and operated within Canada. CCPCs are eligible for the
Small Business Deduction which, at this time, stands at 11%, the lowest tax
rate available to corporations. All other corporations that do not fall under
this category, whether private or public, are taxed at a higher rate. It is
worth investigating at the outset the potential of having your business
structure set up as a CCPC in order to benefit from the deduction.
Corporate Tax Credits
Research and
Development Tax Credits: To qualify for an R&D tax credit (or the
SR&ED Program) your company must be involved in experimental development,
applied research, basic research and support work which would lead to
advancement or address uncertainty in technological and scientific areas. This
can encompass a wide range of R&D and is particularly useful for tech and
environmental start-ups that are developing new products or improving upon
existing products in the marketplace.
Tax Credits for Small
Businesses: In addition to R&D tax credits, Canadian businesses can
benefit from a range of tax credits for small business. Some credits are
dependent on jurisdiction or depend upon industry, while others are Canada-wide
and not industry-specific. Tax
credits include areas such as apprenticeship job creation, designated
activities on qualified property, child care spaces and pre-production mining.
Corporate Income Tax
Deductions
If your corporation doesn’t qualify for any tax credits,
take a look at potential corporate income tax deductions, you may be surprised
what can be included! Below are some examples:
· Gifts to employees
· Automobile expenses
· Insurance
· Office expenses
· Mortgage interest & security
· Business meals/entertainment
· Conventions
· Canadian advertising expenses
· Accounting/legal services
· Home-based business expenses
Taking the
time to research all the available tax credit and deductions for your small
business can definitely help you save money in the long run. Take advantage of
the incentives the Canadian government provides small business – that’s what
they are there for! Good luck and happy filing.
