As a business owner, staying on top of your yearly obligations is key to remaining compliant with Canadian laws and regulations. While the obligations may seem daunting at first, when broken down and understood, they can become more manageable. In this blog post, we'll discuss the five (5) main areas of yearly obligations: corporate tax returns, T5 Information Return for Dividends, T4 Summary, GST/HST Return, and your Annual Return.
Filing corporate taxes is a yearly obligation in Canada. This requires the filing of a T2 Corporate Income Tax Return which must be filed within six months of the end of the business' fiscal year. The return must include a summary of the business' income, expenses, capital gains, and losses for the year.
If your business has a net income greater than $500,000, then your business is not eligible for the small business deduction. This means that you must make a corporate tax payment within two (2) months of the end of the business’ fiscal year. Your corporate tax return is still due six (6) months after your fiscal year end.
If your business has declared any dividends for the most recent fiscal year, then there is a return that must be filed for each shareholder that received dividends. This is the T5 Information Return.
This return declares to the Canada Revenue Agency (CRA) that your business paid out dividends to certain shareholders.
A general rule of thumb is that you can only pay out dividends from after-tax profits (not losses) or if you have retained earnings in your business.
If you have employees in your business and you’ve paid them payroll, then throughout the year you should have been remitting source deductions to the CRA. This includes,
By February 28th each year, you need to submit to the CRA your T4 Summary and individual employee T4’s (to employees, too). This tells CRA that what you paid to them matches what you’re reporting.
If you don’t submit these each year then you will face penalties and interest.
Goods and services tax (GST) and Harmonized Sales Tax (HST) is a consumption tax on most goods and services in Canada. Businesses that are registered for GST/HST are required to file a GST/HST return and remit the applicable taxes to the CRA on a monthly, quarterly, or annual basis.
Generally, when you first incorporate your business and register a GST/HST account, you will be set up to remit annually. You can elect to remit monthly or quarterly, too.
The year following your GST/HST filing where you paid more than $3,000 of GST/HST to the CRA, you will receive a notice from the CRA telling you that you are now an annual filer but quarterly remitter. This means that you’ll need to remit a payment to CRA each quarter based on an estimate. At the end of your fiscal year you will file your GST/HST return and subtract the payments you made to determine if you owe more, paid the right amount, or will receive a refund for overpayment.
We like to recommend that when you must remit payment quarterly as an annual filer that you should change your filing frequency to quarterly to align your payment with filing. This can also be beneficial because if in certain quarters your actual filing is less than your estimated filing then you are saving on cash flow. The opposite can be true, however, if your actual filing is more than your estimated filing then you will owe more money.
The due date of your GST/HST return filing depends on your frequency:
This type of return is most typically confused with your Corporate Income Tax Return. These are completely different filings.
The Annual Return is used to tell Corporations Canada that your business is still… well… in business.
Each year on the date of your incorporation you’ll receive an email or letter in the mail that your Annual Return is due within two (2) months from that date. For example, if you incorporated on July 1 then your Annual Return will be due by August 31 each year. You can certainly file before that filing date.
We recommend you do this immediately when you receive your notification. It’s a simple yes/no question to answer, plus paying $12.
Staying on top of your business' yearly obligations is essential in order to remain in compliance with Canadian laws and regulations. The five (5) main obligations include filing a T2 Corporate Income Tax Return, a T5 Information Return for Dividends, a T4 Summary for employment income, a GST/HST Return, and your Annual Return. Understanding these obligations and completing them in a timely manner will help your business remain compliant.
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