Corporate Tax Filing and Planning in Burnaby, Richmond and Coquitlam
The corporate return is a report on decisions already made. Almost every dollar that could have been saved was decided months earlier.
What this covers
Business income tax work covers the corporate return and the decisions that determine what goes on it: protecting the small business deduction, choosing between salary and dividends, managing passive investment income inside the corporation, and getting cash out to shareholders at the lowest total cost. Compliance is the deadline; planning is where the money is. We prepare and file corporate returns for clients in Burnaby, Richmond, Coquitlam and across Metro Vancouver.
Who this is for
- Canadian-controlled private corporations with active business income
- Owner-managers deciding how to pay themselves each year
- Companies accumulating investment income alongside an operating business
- Groups of associated or related corporations sharing one small business limit
What you end up with
The point of the exercise
The small business rate protected
Passive income and associated corporation limits monitored so the low rate is not lost by accident.
A defensible remuneration plan
A salary and dividend mix calculated for the year, with the split income analysis documented.
Deadlines met without a scramble
Returns, slips, elections, and instalments on a schedule you can see.
Business Income Taxes in detail
The small business deduction, and what erodes it
Up to $500,000 of active business income a year is taxed at the small business rate, well below the general corporate rate. Two rules take it away: taxable capital above $10 million, and passive investment income above $50,000 across the associated group, which removes the limit entirely at $150,000. Associated companies share one limit and must file an allocation.
Salary, dividends, or both
Integration makes the theoretical difference small; the practical difference is not. Salary builds RRSP room and CPP and is deductible to the company; dividends do neither and are taxed according to the pool they come from. Enough salary to earn maximum RRSP room usually comes first. The right mix is a calculation for the year, not a policy.
The three accounts that price a distribution
The general rate income pool, refundable dividend tax on hand and the capital dividend account decide what the same cash costs on its way out, depending only on the order things are done in. A capital dividend paid above the account balance attracts a penalty tax, so the balance is confirmed and the election filed before the dividend is declared.
Shareholder loans and the twelve-month trap
A withdrawal that is neither salary nor a dividend is a loan, and if it is not repaid by the end of the corporation's following taxation year the whole amount is included in your income. Repaying it later does not undo that. It is the most avoidable assessment we see; tracking the shareholder account through the year prevents it entirely.
How it runs
What working together looks like
Review the current year before it closes
Projected income, the shareholder loan account, and the small business limit are looked at while there is still time to act on them.
Set the remuneration mix
A salary and dividend calculation for the year, tested against RRSP room, CPP, the split income rules, and the corporation's dividend pools.
Check the limit and the pools
Associated corporation allocations, adjusted aggregate investment income, and the balances in the general rate income pool, refundable pools, and capital dividend account.
File, and file consistently
Return, slips, elections, and instalments prepared so the numbers agree with each other and with the corporate records.
Report back in plain terms
A short year-end summary of what was decided, what it saved, and what should be looked at before the next year-end.
Questions
Business Income Taxes, answered
General information about how the rules work, current at the time of writing — not advice about your situation. Speak to Ray Loucks before acting on any of it.
When is my corporate tax return due?
Six months after the end of the corporation's fiscal year. The balance of tax is due earlier — two months after year-end for most corporations, or three months for a Canadian-controlled private corporation that claims the small business deduction and meets the associated conditions. Because the payment deadline arrives before the filing deadline, the tax has to be estimated and paid before the return is finished.
What is the small business deduction worth?
It reduces the corporate tax rate on up to $500,000 of active business income each year. In British Columbia the combined small business rate is well below the combined general rate, so the annual saving on a fully used limit is substantial — which is why the erosion rules matter so much. Both the taxable capital test and the passive income test can reduce or eliminate the limit without any change in the operating business.
Should I pay myself salary or dividends?
Usually some of both, and the split changes year to year. Salary generates RRSP contribution room and CPP pensionable earnings and is deductible to the corporation; dividends do neither but avoid payroll deductions and can be paid from the more favourable dividend pools. Because Canada's system is designed for rough integration, the raw tax difference is small — the decision is really about RRSP room, CPP, cash flow timing, the split income rules, and which corporate pools are available.
Does investment income inside my corporation cost me the small business rate?
It can. Where adjusted aggregate investment income across the associated group exceeds $50,000 in a year, the $500,000 business limit is reduced; at $150,000 it is eliminated. That is often the trigger for moving the investment portfolio into a separate holding company, though the restructuring has to be done with the association rules and subsection 55(2) in mind rather than as a simple transfer.
I took money out of my company during the year. Is that a problem?
It depends on how it is characterised and when it is repaid. Under subsection 15(2), a shareholder loan that is still outstanding at the end of the corporation's next taxation year is included in the shareholder's income in the year it was made — and later repayment does not reverse that inclusion. Deciding while the year is open whether the withdrawal should be salary, a dividend, or a repayable loan, and documenting it, avoids the issue.
Often needed together