You have decided to incorporate. Congratulations!
Here is a short blog on basic tax compliance requirements for a corporation. Our hope is that this overview of the basic filing requirements will prepare you for what’s ahead, and keep your new corporation in compliance with the law, and in control. This overview discusses GST/HST and sales tax returns, payroll, T5s, and corporate tax returns.1
GST/HST AND SALES TAX RETURNS
After incorporating and opening your corporate bank account, your next step might be to send your first invoices to your clients. Does GST/HST or sales tax apply?
Each service offering a business provides will fall in one of three basic categories, HST exempt, HST zero rated, and HST taxable. A business can have all three, in the same business, and should register when its HST taxable sales exceed 30,000.2. Yes we suppose that this is a “free ride” meaning that you don’t need to charge tax on your first 30,000 of taxable sales. Once registered with CRA however, tax must be charged even on the first dollar, and returns will be due monthly quarterly or annually depending on the size of the business. Filing will be paperless and is done online.3
A new corporation will face the decision of whether to pay the shareholder by salary/payroll, or using dividends. In addition, a payroll account will be required when the first employee is hired. If payroll is needed, the business should register a payroll account, and will determine the filing frequency (quarterly, monthly, weekly, biweekly).4
A TD1 form is required for each employee when the payroll commences for an employee, or when circumstances change – seven days after the change.5
When taxes are withheld, small businesses can use an online calculator6 to calculate deductions. Larger businesses use electronic payroll processors Ceridian or ADP to calculate both payroll deductions and T4s. Any withheld amounts are paid to the government in accordance with the company’s filing frequency.
T4’s Are Due Annually On The Last Day of February. T4s can be done electronically on the “CRA My business Account Login” site. Small businesses can also complete fillable forms7 and mail the slips. For more than 50 employees, electronic filing is mandatory.
A new corporation will face the decision of whether to pay the shareholder by salary/payroll, or using dividends. When the business pays using dividends, the business paying the dividend prepares a T5 information return each year on the last day of February. T5 slips are due the last day of March.8
CORPORATE INCOME TAX RETURNS
Corporate tax returns are due 180 days following year-end, however don’t wait until then to pay your tax bill. The final tax payment for each year is due 2 months after year-end. Deadlines have been extended due to COVID.
Most corporations can file their return electronically. While it’s possible to file manually for corporations with revenue under $1 million, many chose to file electronically due to the ease and relatively low cost of doing so.9
Congratulations on your decision to incorporate! While no two circumstances will ever be identical, we hope that this overview of some of the basic filing requirements has prepared you for what’s ahead, and that you’re able to keep your new corporation in compliance, and in control. We hope that this blog will set you on your way to doing much of the work yourself. As always however, we stand ready to assist you to meet your filing deadlines.