Taxes 101: What to Know
In this module we will go over some of the basics of Canadian taxes that will be useful to know, however given the complications with tax, speaking with a professional accountant will be important.
In Canada, the Canada Revenue Agency is the government body that administers Federal and most provincial tax filings. Let’s go over some of the filings you may have to deal with as a startup in Canada:
Year End Taxes:
Corporate Tax Return:
As a Canadian corporation, you are required to file a corporate year end tax return, also known as a T2. The T2 must be filed six months after your corporation’s year end.
Importantly, if there are any taxes owing, this must be paid three months (or two for Canadian-Controlled Private Corporations) after year-end or there would be penalties or interest charges.
Companies that are profitable and have owed tax in previous years are expected to make monthly tax instalments to the CRA - which are calculated by CRA based on previous year’s income.
What is a Canadian-Controlled Private Corporation (CCPC)?
There are various benefits to being a CCPC. To be CCPC you must check off the following:
Must not be controlled by non–residents of Canada Must not be controlled by public corporations
Benefits include but not limited to the following:
Small business deduction for taxes Taxes due three months after year end vs two Potential for lifetime capital gains exemption - applicable when you’re selling your company Eligible for high rate SR&ED credits Beneficial treatment for employee stock option
Government Incentives:technology-driving
There are various government incentives that may apply to your company. Typical ones applicable for startups include:
Scientific Research and Experimental Development Tax Credit (SR&ED): Provided to companies conducting research and development 35% federal and 10% provincial refundable credit for eligible expenditures for CCPCs BC Interactive Digital Media Tax Credit (BC IDMTC) Provided for developing interactive digital media products 17.5% of eligible salaries Industrial Research Assistance Program (IRAP) Provided for having the objective to develop innovative, technology-driving, products, services or processes or hiring under IRAP’s youth programs Customized funding amounts
Sales Taxes
All Canadian-based companies must collect sales taxes on most goods and services provided. This is either Goods and Services Tax (GST) at 5%, or, if Ontario based, Harmonized Sales Tax (HST) at 13%. When filing your GST/HST return, you will be reporting the total sales taxes you’ve collected.
An exception to collecting sales taxes applies to companies that generate less than $30,000 in taxable sales in a year.
As part of your sales tax return, you will also report the amount of GST/HST the company has paid from purchases of supplies and services. This portion will be deducted against the GST/HST the company has charged for its own goods and services and will result in the net sales taxes owed to remit to the CRA.
GST filings are typically done annually three months after year end for taxable sales up to $1.5 million, however it varies depending on where your company is at. Speaking with a tax accountant will give you the right information needed for filing.
In certain provinces, a company must collect provincial sales taxes on most goods and some services. The relevant provinces are:
PST: 7% in BC, 6% in SK RST: 7% in MB QST: 9.975% in QC
These taxes are remitted to the provincial tax authority. Unlike GST, these PST/RST paid on purchases cannot be recovered.
Filing frequency for provincial sales tax is based on the amount collectible per year:
Annual for 3,000 to 6,000 to 12,000
Payroll Taxes:
Companies that have employees are required to make payroll withholdings and filings. Typical withholdings required on salary paid employees include:
Employment Insurance (EI) Canada Pension Plan (CPP) Income Tax
Payroll taxes and filings are highly dependent on company specific circumstances. If you expect to have employees, it will be important to register your company with the CRA for payroll and then speak with an accountant on what is required.
Annual filings for payroll, known as the T4 in Canada, are based on the calendar year and must be filed by February 28 of the subsequent year.
Employees vs Contractors:
One major factor to keep in mind is if someone in your company is considered an employee or a contractor as the implications are different.
Typically, having an employee results in withholdings and taxes such as EI, CPP, and general cost of administration. As such, if the CRA determines that a potential contractor is technically an employee under their definition, the company could be liable for these costs that would otherwise have not been paid.
The CRA gives guidelines on how they determine this relationship:?
Intention - The CRA looks to see if the two parties intended to enter into contract of service (employee relationship) or contract for services (business relationship) Relationship Level of control - does the company have the ability to exercise control over a worker in which work is done? Provision of tools and equipment - contractors typically would bring in their own equipment. Ability to subcontract or hire assistants - contractors typically have full autonomy on being allowed to use subcontractors or assistants. Degree of financial risk - typically a contractor pays for their own costs and expenses to get the job done. Degree of capital investment and management - contractors have their own capital investment and manage their own staff. Opportunity for profit - contractors have the chance of profit or risk loss in their jobs.
Stock Options:,
As a startup, a common scenario seen is issuing stock options as part of a compensation package. Stock options have tax implications to note:
Stock options issued to an employee: Generally no immediate income inclusion for the employee upon receipt Taxation of stock option benefit is deferred, the benefit is taxed when shares are disposed Stock options issued to a contractor: FMV of the options reported as business income upon receipt
Generally, stock options are not deductible to the corporation, and payroll withholdings could apply. When dealing with stock options, talk with your accountant to ensure proper reporting and filing.
Suggested Prompts
How can a startup effectively leverage government incentives like SR&ED or IRAP to maximize their research and development funding?
What are the key differences in tax treatment and reporting requirements between employees and contractors that startups should be aware of?
In what ways can understanding provincial sales tax filing thresholds and schedules help a startup optimize its cash flow and compliance?
Module Comments 0 Analytics Settings
Introduction & Onboarding (Pre-Program)
MODULE
Welcome to Maple
MODULE
What is Launch?
MODULE
The Launch Team
MODULE
Important: Book Your Onboarding and Expectations Calls
Maple - Resources
MODULE
What to Expect
RESOURCE
Join Launch’s Slack Community
RESOURCE
Disco
RESOURCE
LaunchHub
RESOURCE
LaunchPad Calendar
MODULE
Topical Modules
MODULE
Payment Support
RESOURCE
Main Start-up Visa Program Website
RESOURCE
Get Connected to Our Network
Maple - Timeline & Catch Up Calls
MODULE
Bespoke Timeline
MODULE
Office Hours
MODULE
Book Your Milestones Planning Session
MODULE
Immigration Module Progress Updates
MODULE
Company Catchup and Resources
Welcome to Maple
MODULE
Reminder: Book Your Onboarding Call
MODULE
Summary
The Startup Visa Immigration Process
MODULE
Immigration - Workshop & Office Hour
MODULE
Immigration Webinar Slides
MODULE
Hire an Immigration Lawyer
Incorporation Process
MODULE
Incorporation - Workshop & Office Hour
MODULE
Incorporation Webinar Slides
MODULE
Hire an Incorporation Lawyer
Maple - Deliverables
MODULE
Immigration Module Progress Update
MODULE
Maple Deliverables
MODULE
Important: Monthly Company Update
Deliverables: Company & Incorporation
DELIVERABLE
Company Deliverable: Company Description
DELIVERABLE
Immigration Deliverable: Choice of Immigration Path
DELIVERABLE
Immigration Medical Exam
DELIVERABLE
Immigration Language Test
DELIVERABLE
Company Deliverable: Lean Canvas
DELIVERABLE
Incorporation Deliverable: Incorporation Certificate
DELIVERABLE
Company Deliverable: Member Chart
DELIVERABLE
Company Deliverable: Capitalization Table
DELIVERABLE
Company Deliverable: Pitch Deck
DELIVERABLE
Immigration Deliverable: Proof of Funds
MODULE
Company Deliverable: Due Diligence
DELIVERABLE
Immigration Deliverable: IMM Form 5475
MODULE
Thanks for Submitting Your Deliverables!
Deliverables Reminder: Monthly Company Updates
MODULE
Recurring Deliverable: Monthly Company Update
Deliverables: Immigration - Letter of Support, Permanent Residency and Work Permit
DELIVERABLE
Final Documents Submission
MODULE
Company Immigration Catchup: Permanent Residency Ready
MODULE
Letter of Support Request
DELIVERABLE
Permanent Residency and Work Permit Submission Dates
Resources
MODULE
Catchup, modules and programming
Module: Lifestyle Module
MODULE
Lifestyle Module
MODULE
Workshop: Housing and Real Estate
MODULE
Housing: Choosing Where to Live in Vancouver
MODULE
Housing: Choosing Where to Live Around Vancouver
MODULE
Housing: Accommodation and Rental
MODULE
Bank Account: Opening a Bank Account in Canada
MODULE
Education: Childcare
MODULE
Education: Schooling System in Canada
MODULE
Education: Types of Education Available
MODULE
Transportation: Drivers Licence
MODULE
Transportation: Ride-Sharing
MODULE
Transportation: Public Transportation
MODULE
Government Support: Spouses
MODULE
Government Support: Dependents and Children
MODULE
Health Care: The Health Care System in British Columbia
MODULE
Health Care: BC Services Card
MODULE
Health Care: Medical Services Plan (MSP)
MODULE
Health Care: Pharmacare
MODULE
Employment for Spouses and Dependents: Workshop with Pat Chaisang of Isempower
MODULE
Employment for Spouses and Dependents: Resume and Interviews
MODULE
Employment for Spouses and Dependents: Jobs Portal
MODULE
Employment for Spouses and Dependents: CO-OP
MODULE
Employment for Spouses and Dependents: Transferring Credentials to Canadian Employment
MODULE
Employment for Spouses and Dependents: Registering for SIN Number
MODULE
Lifestyle: Community
MODULE
Vancouver Festivals
MODULE
Lifestyle: Telecommunication and Internet
MODULE
Lifestyle: Groceries and General Store
Module: Non-Dilutive Sources of Funding in Canada
MODULE
Introduction: What is Non Dilutive Funding?
MODULE
Introduction: Resources
MODULE
Loans Available in Canada: Resources
MODULE
Loans Available in Canada: RBCx
MODULE
Loans Available in Canada: TIMIA Capital
MODULE
Loans Available in Canada: Clear.Co
MODULE
Loans Available in Canada: Canada Small Business Financing Program (CSBFP)
MODULE
Loans Available in Canada: WeBC - Loans for Young Women Entrepreneurs in British Columbia
MODULE
Loans Available in Canada: Other Loans (list)
MODULE
BDC: Introduction
MODULE
BDC: Technology Financing
MODULE
BDC: Small Business Loan
MODULE
BDC: Newcomer Entrepreneur
MODULE
BDC: Other Services
MODULE
Tax Credits: Scientific Research and Experimental Development (SR&ED)
MODULE
Tax Credits: Interactive Digital Media Tax Credit (IDMTC)
MODULE
Tax Credits: Other Tax Credits
MODULE
Talent: Innovate BC
MODULE
Talent: MITACs
MODULE
Talent: Student Work Placement Program
MODULE
Grants: NRC IRAP
MODULE
Grants: ISED
MODULE
Grants: Canada Digital Adoption Program
MODULE
Grants: CanExport SMEs
MODULE
Grants: CanExport Innovation
MODULE
Other Sources Available in Canada: Digital Technology Supercluster
MODULE
Other Sources Available in Canada: BC Government Procurement Concierge Program
Module: Fundraising in North America
MODULE
Resources: Fundraising in North America
Module: Hiring in Canada
MODULE
Hiring and HR practices in Canada
MODULE
Employee Benefits and Options
Module: Banking and Accounting in Canada
MODULE
Workshop: Banking in Canada
MODULE
Workshop: Accounting in Canada
MODULE
Startup Finance: Introduction to Clearbooks
Module: Financial Literacy
MODULE
Budget Sheets 101
MODULE
Breaking Down and Creating The Income Statement
MODULE
Understanding the Balance Sheet: A Financial Snapshot
MODULE
The Cash Flow Statement - What Really Matters
MODULE
Taxes 101: What to Know
Additional Resources
Maple - Program Wrap Up
Module: Lifestyle Module for Ontario
Lifestyle Module for Alberta (Calgary)