This is information about taxes that affects businesses operating in our community. Included are municipal property taxes, plus federal and provincial taxes.
The Canadian Government levies an income tax on corporations residing in Canada, based on income from all sources inside and outside Canada. These taxes are payable quarterly to the Department of National Revenue in Ottawa. The Canadian Government does allow for certain deductions and incentives to small businesses of which an accountant or lawyer should be aware. Detailed tax information is available from Revenue Canada. It is strongly recommended that such matters be discussed with an accountant or tax lawyer.
Subsidiaries of Foreign Companies & Branch Operations
When a non-resident firm is conducting business through a resident subsidiary operation, the total income of the subsidiary, whether earned in Canada or elsewhere, is subject to tax. However, the subsidiary may claim credit for taxes paid in a foreign country and rarely ends up duplicating taxes in both Canada and another country. A withholding tax of 10 – 15% is levied on dividends, royalties and similar payments remitted to a foreign country by a Canadian subsidiary which in turn is deductible for tax purposes by recipients in most countries. Taxes are computed similarly to those for resident corporations except that small business incentives are not available for foreign owned corporations. A non-resident firm carrying on business through a branch operation (without local incorporation) is liable to income tax on income from that branch’s activities in Canada. A foreign firm operating in Canada should enlist the assistance of a Canadian Accountant or Lawyer.
Provincial Corporation Income Tax
Provincial taxes are calculated on the same basis as the federal tax. Corporations which qualify for federal small business deductions are also entitled to a provincial small business tax credit. For more information contact the government of Ontario, Ministry of Finance.
Federal & Provincial Personal Income Tax
Both levels of government levy tax on income from all sources inside or outside of Canada for residents of Ontario. Non-residents are liable to both governments on income earned during the year in the province. Taxes are payable annually. For More information contact the Canada Customs and Revenue Agency.
Harmonized Sales Tax (HST)
On July 1, 2010 the Harmonized Sales Tax (HST) took effect in Ontario and is applied to most purchases and transactions. The 13 per cent HST replaces the federal goods and services tax (GST) and the provincial sales tax (PST).