Tax Tips

Tax Rate in British Columbia:

Personal:

Marginal Rate & Important Dates for filing 2007 Tax Return

Marginal Rate & Important Dates for filing 2006 Tax Return

Marginal Rate & Important Dates for filing 2005 Tax Return

 

Coporate:

Combined Federal British Columbia Corporate Tax Rates

Frequent Asked Questions:

1. Should I incorporate?

2. Do I need to register for a GST account?

3. What are the common filing and remittance deadlines?

4. Employee or Self-Employed?

1. Should I incorporate? (Back to Top)

Each situation is different and here are some of the advantage and disadvantages that may arise as a result of incorporating a business:

Advantages:

• Capital Gains Exemption: Establishing a company may enhance the ability to claim the $750,000 life-time capital gains exemption on sale of the shares of the corporation;
• Estate Planning: Estate planning maybe possible by issuing shares to children or other family members thereby transferring all or a portion of the future growth in the corporation to them;
• Income Splitting:  Income splitting may be available if the company is paying a reasonable salaries or dividends to family members that are employees or shareholders;
• Limited liability;
• Tax deferral:  Tax can be deferred by retaining up to $400,000 of active business income in the corporation so that it will be taxed at the low small business rate; and
• Tax savings: Up to $400,000 of active business income is eligible for the Small Business Deduction (SBD) and enjoys a lower tax rate.  Any income in excess of $400,000 or inactive business income has a much higher tax rate.

 

Disadvantages:

• Addition expenses: incorporation costs and the annual reporting requirements must be weighted against the advantages of incorporation;
• Corporate tax returns must be filed annually and taxes may be levy on corporation;
• Investment Income: Investment income does not qualify for the small business deduction and may be taxed at a high rate;
• Loss utilization:  Business losses may be used to offset other personal income if the sole proprietor carries on business personally while corporation losses may not be deducted until income is earned in future years;
• Separate books and records for the corporation must be maintained.

2. Do I need to register for a GST account? (Back to Top)

Any individual, business, association, partnership, company, corporation or organization that engaged in commercial activity in Canada with annual sales and revenues of GST-taxable goods and services of more than $30,000 are required to register for GST.

3. What are the common filing and remittance deadlines? (Bank to Top)

Personal Tax Returns:  April 30. For individuals with income from unincorporated businesses, the filing deadline is June 15, however, tax payable is still due on April 30.

Corporate Tax Returns: Six months after year-end.  Any taxes, however, are due two months after the fiscal year-end; or for Canadian-controlled private corporations three months after year-end (except Quebec).

Turst Income Tax Returns: Ninety days after year-end.

Registered Charity Information Returns:  Six months after year-end.

T3, T4, T5 Information Slips:  Last day of February. If the business activity is discountinued, the return is due 30 dyas after discontinuance.

NR4 Information Slips: March 31.  If payment to non-resident is discountinued, the return is due 30 days after discountinuance.

4.  Employee or Self-Employed? (Back to Top)

Factors that need to be considered, whether the worker is an employee or a self-employed individual, are: Control, Tools and Equipment, Subcontracing work or hiring assistants, Finanical Risk, Responsibility for investment and management, and Opportunity for Profit.

If a worker or payer is not sure of the worker’s employment status, they can request a ruling to have the status determined.  You can get the form, CPT1, Request for a Ruling as to the Status of a Worker under the Canda Pension Plan and/or the Employment Insurance Act, at www.cra.g.ca/forms or by calling 1-800-959-2221.

The information on this site is general in nature and should not be relied upon to replace the requirement of specific professional advice. Each person’s situation differs and Kevin K Yip, CGA can assist you in using the information on this web site to your best advantage. Please contact Kevin K. Yip, CGA at 604-267-1220 or at info@kyipcga.com prior to acting on the basis of any information on this site.