The BOMCAS provides corporate tax preparation in Calgary. Your professional tax accountant Calgary will discuss the administration of corporate income tax (CIT), GAAR (generally accepted accounting principles), and GAAR for CCPCs. While most corporations pay their taxes in Canadian dollars, certain corporations have the option to determine their Canadian tax amounts in their functional currency.
BOMCAS provides corporate tax preparation in Calgary
BOMCAS provides corporate tax preparation in Calgary surrounding areas. The company offers innovative tax planning for corporations, including the nil return process for inactive and dormant corporations. BOMCAS Calgary corporate tax accountants also make sure that a corporation’s losses are carried forward and back if applicable.
CRA administers corporate income tax
The CRA is the government agency responsible for administering corporate income tax in Canada. Among other duties, the CRA is responsible for overseeing family and child benefits. These benefits include the Canada Child Benefit, a tax-free monthly payment for eligible Canadian children. Other programs administered by the CRA include the Canadian child disability benefit and related provincial and territorial programs.
The CRA has made some changes to the way that it administers corporate income tax in Canada. The changes are meant to be temporary and to help affected businesses meet their obligations. For example, if you were to lose all of your records to a natural disaster, the CRA can provide you with additional time to replace them. The CRA will also work with you to comply with these new obligations if you cannot meet them for operational reasons.
The CRA recently released updated versions of its T2200S and T777S forms for the 2021 tax year. The new forms are similar to those released last year, but the CRA has also highlighted the criteria for automatic electronic submission of these forms. As a result, there may be an additional delay in processing your capital dividend claim.
The CRA also administers research and development tax credits. The CRA has provided a summary of these credits for the provinces in Canada. These credits can be credited to shareholders’ loan accounts.
Corporations are audited annually
Every year, corporations are audited to ensure they are complying with the tax laws and are reporting accurately. The audit process consists of two steps: a risk assessment and a compliance audit. The risk assessment is a process that identifies high-risk corporations and identifies areas for improvement. The compliance audit is usually a one-time process for a corporation that has no significant issues or isn’t considered a high-risk corporation.
While a single loss in a business will not result in an audit, multiple losses over several years or losses used as a way to offset other income may raise red flags. Corporations with a lot of cash-intensive businesses are more likely to be audited than others.
Financial statements are required to be provided to Corporations Canada by corporations every year. These financial statements must be prepared in accordance with NFP Act requirements and generally accepted accounting principles. The CPA Canada Handbook – Accounting specifies the standards that must be met. In addition, corporations are required to send a copy of their annual financial statements to their members.
CRA has a number of tools that help them in the audit process. One of these is a detailed audit of the tax return. This process is performed by CRA to ensure that a corporation is compliant with the law.
CCPCs are subject to GAAR
CCPCs are taxable entities, and the government uses the GAAR to penalize them for deferring tax payments. This tax is imposed on the investment income of a CCPC generates. In order to discourage CCPCs from deferring taxes, the tax rate is 50%. However, this rate includes the amount paid to a notional account called Refundable Dividend Tax on Hand (RDTOH). This amount is refunded if the corporation pays taxable dividends to its shareholders.
The courts have largely followed the Canadian Trustco case in applying the GAAR to CCPCs. Although the court considered the economic substance to be a relevant element of GAAR, it found that this test is not regularly applied in Canadian tax cases. The Supreme Court reasoned that the economic substance is only relevant when the relevant legislation expressly says so.
GAAR is designed to prevent abusive tax avoidance. The government is interested in the other issues that may result from the application of the GAAR. If you have a foreign affiliate, it is crucial to comply with GAAR rules. Otherwise, you may face substantial penalties. In Canada, it is important to ensure that your foreign affiliates are in compliance with GAAR requirements to avoid being penalized.
The GAAR rate is not high, but it is high enough to prevent CCPCs from deferring tax on investment income. However, CCPCs may benefit from the small business deduction, a reduced corporate income tax rate. The maximum deduction is $500,000 of qualifying active business income. A CCPC can claim this deduction with its associated corporations as long as the combined “adjusted aggregate investment income” of the associated corporations is between $50,000 and $150,000.
Small business deduction limit
The Small Business Deduction is a deduction that a corporation can make in order to reduce its corporate tax liability. The deduction is available to privately owned corporations that have taxable capital between $10 million and $15 million in Canada. Large private corporations cannot claim the deduction, which applies only to Canadian corporations.
There are certain conditions that must be met in order to qualify for the deduction. For example, a corporation that owns more than 25 per cent of another corporation cannot claim more than one deduction. Another condition is that the corporation is related to the one that lends it money or property. The loan or transfer must be for a reasonable reason, such as to reduce investment income.
The Small Business Deduction (SBD) is a great benefit for small businesses because it allows them to defer more taxes than they would pay otherwise. The deferred taxes can be used for investments or for additional income. The longer the period of deferral, the higher the value of the tax deferral advantage. Furthermore, the SBD also enables the business to pay less tax than it would otherwise, if it was operated by an individual.
John operates a successful real estate business in Toronto. But after a pandemic forced him to leave his job, he started a small business from his home. His business earns $200,000 annually. At a 28% tax rate, his tax bill would be $56,000 per year. John applies the SBD to reduce his tax bill.
Offshore audits
The CRA’s offshore compliance programs are a key aspect of the CRA’s overall tax enforcement strategy. They are focused on preventing and detecting offshore tax non-compliance, and they share the information they collect with domestic and international partners. The CRA uses these data to identify companies and individuals that are prone to non-compliance, and it takes action based on the risk level. This includes examinations, penalties, and referrals to criminal investigations.
In Canada, citizens must report income from foreign investments, but some people hide their income in order to avoid paying taxes. Some estimates estimate that Canada is losing as much as $0.8 billion in federal tax revenue annually from hidden offshore investment income. This raises important issues of fairness. Offshore audits can be used to identify tax evasion and fraud.
Depending on the size and type of corporation, the audit process can be lengthy and complex. A high-risk corporation will undergo a comprehensive audit once a year, and small companies will be audited on a yearly basis. Large corporations also undergo an annual risk assessment.
CRA is committed to transparency and openness. In fact, the CRA has published four reports that provide detailed information on its efforts to combat non-compliance. It also presents its estimates of the Canadian tax gap and explains its methodology. These reports also serve as an important tool for the public to gain a clear understanding of the state of the tax system.
