All individuals, corporations, and trust residents in Canada have liabilities to report tax.
Non-residents – Report tax from Canadian-sources income if:
- Employed in Canada
- Carried on a business in Canada
- Disposed of taxable Canadian property
Partnerships are not directly liable for the tax on income, and it should be reported by the partner.
Taxation year of individuals – Calendar year (Jan 01 to Dec 31)
Taxation year of corporation – Fiscal year（select own fiscal year as long as it is not longer than 53 weeks)
Income Tax Filing Deadlines
- Due on or before April 30 of the next year
- June 15 if individual or spouse carried on a unincorporated business-if owing tax, tax owing due on or before April 30
Usual filing deadline. Exception: If an individual dies after October in the year and before the filing date (i.e. April 30/June 15), the return must be filed by the later of six months after the date of death; and usual filing date following the particular year.
Corporations-within six months after the end of the taxation year
- Late-filed tax return: Balance of tax owing *5%+1% for each complete month late: Maximum=17%
- Late-filed tax return (repeat offender): Balance of tax owing *10%+2% for each complete month late: Maximum=50%
- Failure to report income (repeat offender): Income not reported * 10%
- Under-reporting income (knowingly or gross negligence): Minimum=$100; Maximum=increased tax liability *50%
- Late or deficient instalments: [Interest charged-greater of (a) $1,000 and (b) 25% of interest that would have been charged if no instalments were made] *50%
Payments and Interest
- Individuals- April 30
- Corporations- 2 months after year-end
- CCPC claiming Small Business Deduction with taxable income under the business limit in the previous year- 3 months after year-end
- Trusts- Due date for trust return
Liability of directors-Corporate directors may be held liable for unremitting withholding.
Liability for GST/HST
Under the Excise Tax Act (ETA), a person who is engaged in a commercial activity in Canada is required to register for GST/HST purposes, which include an individual, partnership, corporation, trust or estate, or a body that is society, union, club, association, commission, or other organizations of any kind. GST/HST is a tax on consumption or value added, and not on income.
Exclusions from commercial activity
Activities involve the making of exempt supplies do not constitute commercial activities. Therefore, you cannot register for the GST/HST if you provide only exempt goods and services. This means that you do not charge the GST/HST on your supplies of your goods and services, and you do not claim input tax credits.
Exempt goods and services include:
- used residential complexes.
- long-term residential accommodation (of one month or more), and residential condominium fees.
- some sales of vacant land or farmland.
- most health, medical, and dental services performed by licensed physicians or dentists for medical reasons.
- child care services (daycare services for less than 24 hours a day) for children 14 years old and younger.
- bridge, road, and ferry tolls (ferry tolls are taxed at 0% if the ferry service is to or from a place outside Canada).
- legal aid services.
- most educational services such as:
- courses from a vocational school that lead to a certificate or a diploma to practise a trade or a vocation; or
- tutoring services for an individual who takes a course approved for credit by a school authority or the education service follows a curriculum designated by a school authority.
- music lessons.
- most food or beverages sold in an elementary or secondary school cafeteria primarily to students of the school and most meal plans provided in a university or public college.
- most services provided by financial institutions such as arrangements for a loan or mortgage.
- arranging for and issuing insurance policies by insurance companies, agents, and brokers.
- most goods and services provided by charities.
- certain goods and services provided by non-profit organizations, governments, and other public service bodies, such as municipal transit services and standard residential services such as water distribution.
One client who provides the educational services and charged HST to their customers. When we find out their mistakes, we help them to correct the mistakes and doing the properly adjustments in adjusted trial balance, and helped them to file adjusted GST/HST return to avoid CRA penalty.
One client received CRA audit from the previous year and come to our firm to response the CRA audit issues. When we analysis their previous year’s financial statements, we find out the mistakes from previous allocated and charged GST/HST for rental income of residential condominium. We help them to correct it and adjust for GST/HST return and income tax return which relative it. We help the client to get couple thousands of refund of GST/HST.
Case 3: New house GST/HST rebate
One client who purchased new condominium. When the house was closed, she disclosed to lawyer about the new house for principal residence purpose. One year later, CRA audited it and find out the condominium was rent out and charged $27,000 penalty and interest for the GST/HST rebate claimed. We helped the client to correct the GST/HST New Residential Rental Property Rebate Application and solved the problem.