Corporate Tax Returns in Richmond
Corporate Tax Returns Service in Richmond
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Corporate Tax Returns Filing in Richmond
A company’s fiscal year, which is usually the fiscal period adopted for accounting purposes, cannot exceed 53 weeks. The fiscal year does not necessarily have to be a calendar year. After selection, the tax year cannot be changed without the consent of the tax authorities.
Tax Refund
Both the federal and the provincial/territorial corporate tax systems operate primarily on a self-determination basis. All companies must file federal tax returns. Alberta and Quebec tax returns must also be filed by companies that have PE in those provinces, regardless of whether taxes are paid. Companies with PEs in other provinces that collect capital tax must also file a tax return on capital. The tax return must be filed within six months of the end of the company’s tax year. There are no extensions available.
Some companies with gross annual revenue greater than CAD 1 million are required to electronically (electronically) submit their federal CIT filings over the Internet. Information statement filers who submit more than 50 information statements per year must also submit electronically over the Internet. The penalties are assessed for non-compliance with the electronic submission.
Payment of taxes
Corporate tax installments are generally due on the last day of each month (although some CCPCs may make quarterly installments if certain conditions are met). Any balance due is generally due on the last day of the second month following the end of the fiscal year.
Functional currency
The amount of income, taxable income, and taxes payable by the taxpayer is determined in Canadian dollars. However, some Canadian-based companies may choose to determine Canadian tax amounts in the company’s “functional currency”.
Tax verification process
The tax authorities are obliged to issue a notice of payment within a reasonable time after filing the tax return. These initial assessments are usually based on a possible limited review of the company’s tax return. The assessment notice will in any case indicate any changes made (e.g. correction of discrepancies in any balances transferred). Although tax authorities are required to review the first return with proper presentation, it is not necessary to accept modified returns, although administratively they are generally allowed but have no priority. In general, the CRA focuses its resources on high-risk taxpayers while spending minimal resources on low-risk taxpayers.
Traditionally, all companies with gross sales in excess of CAD 250 million and their affiliates are assigned a large team of practices and undergo an annual risk assessment. Companies classified as high risk are generally audited annually. Medium-sized companies (gross revenues between CAD 20 million and CAD 250 million) are typically selected based on a screening process and identified risks. Smaller companies, which are typically CCPCs with gross sales of less than CAD 20 million, have undergone compliance audits or limited audits selected based on statistical data and a screening process. CCPC audits are generally limited to the current and previous fiscal year.
The bill changes the scope of powers of CRA officials to confirm that they can require individuals to answer questions in whatever form they decide and to provide reasonable assistance for any purpose related to the administration or enforcement of relevant law.
How is the T2 business tax return presented?
Hire an accountant
The easiest way to file our corporate tax return in Canada is to do business with an accountant for tax preparation. Will ask for the aforementioned documents and information requested. Then, once the job is done, they will have you sign the T183 CORP clearance. The T183 CORP form is a corporate return to electronic transmission. After reviewing your tax return and signing the T183 CORP, your accountant will be able to electronically file the T2 tax return with the Canada Revenue Agency.
Using a software solution
You can archive your T2 corporation tax return using the T2 software and submit it online or in hard copy. If you are determined, you can still fill out the declaration using the PDF Z card. However, we do not recommend submitting directly on the government site, as there is too much risk of miscalculation or omission of important times. Keep in mind that if your company has a gross income over $ 1 million, it cannot file a paper tax return. Below is a link for more information on the subject: Online filing obligation for corporate tax returns. The Canadian Revenue Agency imposes a $ 1,000 fine on companies that fail to submit their returns online.
What are the deadlines for submitting the T2 business tax return?
Every business in Canada must file a T2 business tax return within 6 months of the end of each fiscal year.
The limitation period
A revaluation of the tax payable by a non-CCPC company can be made within four years from the date of dispatch of the original notice of assessment, usually after a detailed field check of the declaration and supporting information. The statute of limitations for the CCPC is three years. The three and four-year limits are in some cases extended by another three years (e.g. transactions with non-residents who are not in normal conditions). The CRA may also revalue the capital gains tax on the disposal of real estate or immovable property after the expiration of the normal revaluation period if the taxpayer does not initially notify the sale. Revaluation is generally not allowed above these limits unless there has been misrepresentation or fraud. Different deadlines may be provided for provincial revaluations.
The deadline for the re-measurement of the taxpayer is extended by:
- three years for income deriving from a person connected abroad of the taxpayer
- the stop-the-clock rule that applies when a request for information or a performance order is challenged in court; the reconsideration period is extended for the period during which the application or order for enforcement is contested, and
- Three years to the extent that the revaluation relates to a previously declared loss carried forward when the loss is revalued following a transaction involving the taxpayer and a non-resident who is not market independently for the tax years in which the carryover of the loss is claimed.
The definition of “transaction” used in the transfer pricing rules will apply for the purposes of the extended reconsideration period in relation to transactions between the taxpayer and non-residents that are not under ordinary conditions.
Appeal
The taxpayer who does not agree with the assessment or assessment of the tax can appeal. The first step is to file a formal warning within 90 days from the date of sending the notice of assessment or revaluation, indicating the reasons for the opposition and other relevant information. Different deadlines may be provided for provincial revaluations. Companies that qualify as “large companies” must provide a more detailed notice of objection. The CRA will review the Notice of Objection and cancel (cancel), amend, or confirm. A taxpayer who does not yet agree has 90 days to appeal the CRA’s decision to the Tax Court of Canada and, if necessary, the Federal Court of Appeals and the Supreme Court of Canada. However, the Supreme Court hears very few income tax appeals.
Topics of interest to Canadian tax authorities include:
- Transfer prices (inbound and outbound), including quantity and deductibility:
- royalties paid by Canadian companies
- goods and services
- corporate restructuring costs incurred by a group of companies based in more than one country
- Interest rates and interest paid on loans, if the funds obtained from the loans are used abroad
- warranty fees paid by Canadian companies
- management fees and general and administrative expenses a
- “Hybrid mismatch” financial instruments (CRA challenged the Canadian deduction of interest by re-qualifying the debt as principal when the recipient of the interest is not subject to taxation in its country of origin); for more information, see Hybrid Mismatch in Group Taxation.
- If non-residents have a PE in Canada.
Shopping for a treaty to reduce Canada’s WHT and capital gains tax.
Manipulation of fiscal attributes, including:
- removing the surplus to reduce the Canadian WHT by increasing the paid-up capital of the Canadian company and then distributing the surplus as a return on capital
- agreements that manipulate the adjusted cost base of capital assets, e
- Acquisition of tax losses realized by independent subjects.
- Obligation to withhold tax on certain payments made to non-residents relating to fees, commissions, or other amounts in connection with services provided in Canada.
- Transaction costs, including professional fees, related to the restructuring of the company.
- Deductibility of reserves (contingent or unfounded amounts).
- Exchange gains and losses (current or capital).
Money Sharing Agreements
The Canadian Revenue Agency also continues to focus its audit work on employers who do not withhold tax or seek a contractual exemption from withholding tax under Regulation 102 for Commuters and Business Travelers. (For more details, see Withholding Tax for Non-Resident Employees in Other Taxes). The CRA also conducts “employer compliance audits” which focus on two main issues:
- Who is the main beneficiary of the employee benefit?
- What is the value of employee benefits?
If the employer is the primary beneficiary of the benefit, no taxable benefit is due to the employee. The value of the benefit is generally the fair market value of the benefit, not the cost to the employer.
- Who is the main beneficiary of the employee benefit?
- What is the value of employee benefits?
If the employer is the primary beneficiary of the benefit, no taxable benefit is due to the employee. The value of the benefit is generally the fair market value of the benefit, not the cost to the employer.
General Anti-Circumvention Rule (GAAR)
GAAR was first introduced in 1988 and was designed to dispute transactions or series of transactions that would directly or indirectly give a tax advantage when:
- the taxpayer relies on a particular provision of the Income Tax Act to achieve the result that those provisions seek to prevent
- the transaction violates the fundamental principles of the aforementioned provisions, or
- The agreement circumvents the application of certain provisions, such as special anti-circumvention rules, so as to defeat or frustrate the object, spirit, or purpose of those provisions.
If GAAR is applied, the CRA may disallow any deductions, exemptions, or exclusions in the calculation of taxable income, or the nature of any payment or other amount may be redeveloped to deny the tax benefits that would result from tax avoidance.
The Federal Budget 2022 proposes to overturn the 2018 decision of the Federal Court of Appeals (Wild v. Canada 2018 FCA 114) by amending the Income Tax Act so that the GAAR can apply to transactions that affect tax attributes that are not yet become relevant for the calculation of the tax for transactions carried out after April 6, 2022 (and for transactions prior to April 7, 2022, on the basis of notices of determination issued after April 6, 2022, in relation to the transactions).
The federal government also plans to publish a consultation paper on GAAR modernization, with legislative proposals expected by the end of 2022.
Foreign reporting
Reporting requirements apply to taxpayers with offshore investments. The rules place a significant compliance burden on taxpayers with foreign affiliates. Failure to comply can result in heavy penalties. For fiscal years starting after 2020, the deadline for filing T1134 information returns for foreign affiliates is 10 months after the end of the year.
Exchange of tax information on the sellers of the platform for the digital economy
The 2022 federal budget proposes to implement the model rules developed by the OECD for the reporting of digital platform operators versus platform vendors. The proposed rules would require operators of reporting platforms that provide support to reportable sellers for applicable activities to determine the jurisdiction of residence of their reporters and to report certain information about those sellers to the credit rating agency by 31 January of the year following the calendar year of reporting.
The measure would generally apply to platform operators resident in Canada for tax purposes, as well as platform operators who are not domiciled in Canada or a partner jurisdiction and who facilitate the relevant business to sellers domiciled in Canada or with respect to the letting of real estate. Based in Canada. A partner jurisdiction is a jurisdiction that has imposed similar reporting obligations on platform operators and that has agreed to exchange information with the CRA about the platform providers that are subject to reporting.
Certain exemptions would apply, including one for platform operators who facilitate the provision of relevant assets for which the total compensation in the previous year is less than € 1 million and who choose to be excluded from reporting. The rules would apply to calendar years starting after 2023. This would allow for the first communication and exchange of information in early 2025 relative to the calendar year 2024.
Tax evasion and aggressive tax avoidance
In recent years, the federal government has invested significantly in strengthening the CRA’s ability to untangle complex tax systems and increase cooperation with international partners. Current initiatives include:
- hire additional auditors to investigate high-risk multinational companies
- increasing the number of annual CRA inspections of high-risk wealthy taxpayers
- a twelve-fold increase in the number of transactions investigated by the CRA
- creation of a special CRA program to stop “organizations creating and supporting tax regimes for the rich”
- hire auditors and additional specialists focusing on the shadow economy
- the development of robust business intelligence infrastructures and risk assessment systems to address high-risk international tax avoidance and abuse cases, and
- Three-year extension of the revaluation period for income deriving from foreign affiliation.
Tax measures previously introduced to assist the CRA in the fight against international tax evasion and aggressive tax avoidance are as follows:
Some financial intermediaries are required to report international electronic fund transfers of CAD 10,000 or more to the CRA.
The “Offshore Tax Whistleblower Program” rewards certain individuals who provide information that leads to the assessment or revaluation of more than CAD 100,000 in federal taxes (Quebec has a similar program, the “General Rule of Transaction Whistleblower Reward Program anti-avoidance with tax compliance and false transactions “).
If you do not submit Form T1135 (Foreign Income Verification Statement) on time or do not report all the foreign assets listed on it, the normal review period for this form will be extended by three years.
The deadline for submitting Form T1134 (Return of Information on Controlled and Uncontrolled Foreign Affiliates) has been reduced from 15 months to 10 months after the end of the year (see Foreign Reporting above).
There are now more than 1,100 offshore audits and more than 50 criminal investigations with links to offshore transactions. The government also aggressively prosecutes those who support tax avoidance regimes and imposes sanctions on these third parties.
The federal government has invested in improving the CRA’s information systems, including replacing legacy systems so that the infrastructure used to combat tax evasion and aggressive tax avoidance continues to evolve.
Recent federal investments (proposed in the 2021 federal budget) have included:
- CAD 2.1 million to help implement a publicly accessible registry of beneficial owners by 2025. The registry will be used by law enforcement, tax, and other authorities to access accurate and up-to-date information about the persons who own and control corporations and capture those who attempt to launder money, avoid paying taxes or commit other financial crimes.
- CAD 304.1 million to further combat tax evasion and aggressive tax avoidance, enabling the CRA to fund new initiatives and expand existing programs, including:
- Increase in GST / HST audits of large companies with the greatest risk of non-compliance.
- Modernize the CRA risk assessment process to prevent unauthorized and fraudulent GST / HST refunds and rebate requests and improve the ability to issue refunds to qualifying companies as quickly as possible.
- Strengthen the ability to identify fiduciary tax evasion and provide better services to executors and trustees.
- CAD 230 million to improve the CRA’s ability to collect outstanding tax debts in a timely manner.
- CAD 330.6 million for new IT technologies, tools, and infrastructure to meet the growing sophistication of cyber threats and improve the way benefits and services are delivered to Canadians.
The federal budget for 2022 proposes to invest:
- CAD 17.7 million over five years to initiate and conduct a financial sector legislative review aimed at digitizing money and maintaining the stability and security of the financial sector, with the first phase focusing on digital currencies and
CAD 1.2 billion over five years, starting 2022-23, for the CRA to extend audits of larger, non-resident entities involved in aggressive tax planning.
Mandatory Disclosure Rules
To make it easier for the CRA to receive timely information on measures involving aggressive tax planning, the 2021 Federal Budget proposes to strengthen Canada’s mandatory disclosure rules:
- by modifying the current regulations on the reporting of operations of the law on income tax
- the introduction of obligations to report “transactions subject to notification” and specific companies to report uncertain tax treatment
- extension of the reconsideration period in certain circumstances
- To introduce penalties for non-compliance that will apply to both taxpayers and registrants or advisors.
Notifiable Transactions
The current rules of the Income Tax Act require a transaction to be reported to the CRA if it is considered a “circumvention transaction” as that term is defined for the purposes of the General Anti-Tax Avoidance Rule (GAAR) and meets at least two of the three defining characteristics. Currently, this results in limited reporting by taxpayers.
To improve the effectiveness of the rules on reportable transactions and align them with international best practices, draft legislative proposals require that only one of the hallmarks of a reportable transaction be present. They also propose that the definition of “transaction avoidance” be amended for this purpose so that the rules apply if it can reasonably be concluded that one of the main purposes of executing the transaction is to obtain a tax advantage. Further adjustments will be made to promoters or advisors promoting these transactions and requiring them to disclose such transactions as well.
The draft legislative proposals introduce a category of specific transactions called “notifiable transactions”. The Minister of Revenue, with the approval of the Minister of Finance, would have the power to designate a transaction as a reportable transaction. Similarly to the United States, the transactions subject to reporting would include both transactions deemed abusive by the CRA and transactions identified as attractive transactions. A description of a reportable transaction would indicate in sufficient detail the patterns or factual results that constitute that transaction to enable taxpayers to comply with the disclosure rule. As part of the legislative proposals, the Ministry of Finance has issued a document containing a list of sample transactions (or series of transactions) that have been designated by the Ministry of Revenue as “transactions subject to notification”. The example transactions are grouped into categories such as:
- creation of loss transactions through partnerships,
- manipulation of the bankruptcy state to reduce the forgiven amount related to the commercial liability, reliance on purpose tests in section 256.1 of the Income Tax Act (restriction on the negotiation of tax attributes) to prevent an alleged acquisition of control and
- Using back-to-back arrangements to circumvent the reduced capitalization and withholding tax rules of Part XIII.
Annual returns against tax returns: they are not the same thing!
Filing an annual return (RZ) is often confused with filing a tax return. 2 are fundamentally different.
An annual declaration is a document that you must submit to Corporations Canada each year for your federal corporation to remain active and compliant with the Corporations Act.
It also allows us to keep our online database of federal companies up to date and accurate. Learn more about the integrity and reliability of joint stock company information. A tax return is a document that you must file with the Canada Revenue Agency (CRA) on behalf of your business each year. It is completely separate from any filing obligations you may have with Corporations Canada.
Why do you have to submit an annual declaration?
Your company may be dissolved if it does not submit its AR as we assume it is not operational. When your company is dissolved, you cannot continue doing business. For example, if your business is liquidated (in other words, legally closed) and you have applied for a loan from a bank, it may be turned down.
When do you have to file an annual declaration?
Each year, each company must submit an annual report to Corporations Canada within 60 days of the anniversary date.
How do you know when the annuity is due?
Corporations Canada will send a personalized notice indicating when your AR is due. If you do not submit your request in time, we will send a default notice approximately 90 days after your anniversary date.
If you own a company in Canada, you must file a T2 tax return every year. Depending on your industry, structure, and income, your T2 will look very different from any other company.
What if your income this year is nil? Do you still need to file a nil or nil declaration with the CRA?
Some companies, such as start-ups and new SMEs, can operate for years before becoming profitable. Other companies are legally incorporated but start doing business years later. It is more common than you think for a company in Canada to have nil income.
Yet the Canada Revenue Agency (CRA) still expects a nil-income company to file a tax return. This does not have to be a full T2 tax return and there is a short T2 CRA form for companies wishing to submit a nil return.
Here you will find everything you need to know about the nil tax return.
What is a nil return?
A nil tax return, also known as a nil tax return, refers to a corporate tax return that does not report any income during a particular tax year. This is usually due to the business being inactive or losing money for a variety of reasons.
A nil tax return for a company can be completed using an abbreviated form T2.
Who has to file the tax return to a nil company?
A Canadian company must file a corporate income tax every year. If your business has no income or loss, it must file a nil tax return for each year that it has that loss or no income.
This applies to resident companies. Non-resident companies must submit a nil tax return if:
- or did business in Canada
- or had a taxable capital gain
- or disposed of Canadian taxable assets
If any of these situations arise, if the non-resident company has nil loss or income, it must file a nil tax return.
How to submit a nil return
The best way to file a nil tax return in Canada is to work with a corporate tax accountant. They can ensure that you’re T2 nil declaration is properly filed with all relevant information and on time.
In many situations, a company that needs to file a nil T2 declaration can do so using the abbreviated form T2. This is a short two-page tax return created by the CRA for nil-income companies that can be used to file.
Both T2 and T2 corporation income tax return abbreviations can be found on the CRA website, completed, printed, and attached to the appropriate program for your company. When filing a nil return, it is imperative that all of your information is accurate and you confirm that you had nil income or were making a loss.
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Are you eligible to use the abbreviated form CRA T2?
The short form CRA T2 corporation income tax return was created to simplify the filing of corporate tax returns for eligible businesses that do not need to provide a great deal of financial detail to the CRA. Not all companies can use the abbreviated form T2 corporation tax return even if they do not have tax returns in Canada.
To use the short form, a corporation must be A Canadian Controlled Private Corporation (CCPC) for the full fiscal year and with nil net income or loss for income tax purposes that year. A tax-exempt company within the meaning of § 149 (for example, a non-profit organization).
Additionally, a company must meet all of the following conditions in order to use the T2 corporation tax return abbreviation:
- has a permanent establishment in a single province or territory
- does not claim any refundable tax credit (except for the reimbursement of the installments paid by him)
- has not received or paid taxable dividends or is reported in Canadian currency
- Ontario does not have a pass-through tax charge
If your business meets these criteria, you can use the T2 corporation income tax return abbreviation to file a nil-tax return.
What is the deadline for submitting a nil return to the CRA?
The deadline for submitting your company’s nil declaration to the CRA is within six months of the end of each fiscal year. Your company’s fiscal year is its fiscal period.
If the company’s tax period expires on the last day of the month, the return is due by the last day of the sixth month following the end of the tax year.
If the company’s tax year does not end on the last day of the month, submit the return by the same day of the sixth month following the end of the tax year.
The fiscal year ending March 31 will have a filing deadline of September 30. The fiscal year ending September 15 will have a filing deadline of March 15.
Uncertain tax treatment
The bill requires specific corporate taxpayers to report specific uncertain tax treatment (similar to the reporting regime in the United States) to the CRA if the following conditions are met:
- the company is required to file a Canadian tax return
- the company has assets of at least CAD 50 million at the end of the financial year which coincides with the fiscal year
- the company or an associate has audited financial statements prepared in accordance with IFRS or other country-specific GAAP that are relevant to national public companies, and
- There is an uncertain tax position relating to Canadian corporate income tax which is reflected in the audited financial statements.
The obligation to report certain uncertain tax regimes would also apply to a private company that meets the equity threshold if that company or its associate has audited financial statements prepared in accordance with IFRS. For each uncertain tax treatment of a reportable company, it is proposed that the company be required to provide the required information, such as the amount of the tax in question, a brief description of the relevant facts, the tax treatment applied, and whether uncertainty relates to a permanent or temporary tax difference.
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