Canadian Corporate Tax Requirements

With an increasing number of new companies incorporated in Canada every year (only accelerated by the pandemic), it is important for new business owners to be aware of their tax filing obligations.

Now that you’ve completed all the paperwork to set up your new company, what’s next?

Goods and Services Tax (GST) / Harmonized Sales Tax (HST)

The federal government, and certain provincial governments, levy GST / HST. The GST / HST is a value-added tax that operates on an input / output system.

Where your corporation sells goods or services, it will need to collect GST / HST and remit to the appropriate government. But where your corporation purchases goods or services from suppliers where GST / HST is charged, you can deduct such GST / HST paid from the amount you owe to the government (commonly referred to as Input Tax Credits).

Do you need to register for GST / HST on day 1? Not necessarily. If you are not anticipating an annual global revenue of more than CAD $30,000, you may not need to register. 

Many companies may still opt to register as that will allow them to claim the GST / HST that they paid on supplies as Input Tax Credit (cash refundable).

Provincial Sales Tax (PST)

Some provinces, including British Columbia, Manitoba, Quebec and Saskatchewan, levy PST. Similar to GST / HST, corporation operating in those provinces may need to collect and remit PST. However, unlike the GST / PST, there is no recoverable ITC for provincial sales tax paid.

Most provinces have a minimum revenue threshold for registration. Please consult with your tax advisors on what those thresholds are as they vary from province to province.  

Payroll Tax

If you are thinking of hiring an employee, or even paying yourself a salary, you will need to register for payroll tax. As an employer, you are responsible for withholding the appropriate amount of taxes, CPP (Canada Pension Plan) and EI (Employment Insurance), and remitting them to the Canada Revenue Agency. 

Corporate Income Tax 

Corporate income tax returns are generally due 6 months after fiscal year end so this is probably not something you need to worry about on day 1. But please make sure that to have your bookkeeping and records kept up to date throughout the year. If not done properly, you may need to spend more time, resource, and money to clean up and unwind transactions.