FAQ (Please read the disclaimer below)
How long do I need to keep my records?
Generally, a taxpayer must keep all of the records and supporting documents that are used in the calculation of taxes owing for a period of six years from the end of the last tax year to which they relate. So for a tax year ended December 31, 2017, the records will have to be retained till December 31, 2023.
What do I need to bring in for you to prepare my tax return?
2023 Personal Tax Checklist
Company’s tax check list
Should I set up a corporation?
A business can be carried on primarily under two arrangements – a) as a Sole proprietor or b) as an incorporated business. Both options have varying tax implications:
a) Sole-proprietor, whereby all the business operations are reported under your personal tax based on a calendar year.
– The net income will be subject to tax at the personal tax rate and could be as high as 48% in Alberta.
– If there are losses, then the losses can be used to off-set your other income and thus you get the tax benefit
b) Incorporated business (Corporation), whereby the Company reports all the business activities, based on the Company’s year-end and then the Company can pay a salary or a dividend.
– The Company, in most cases, will be able to use tax incentives and the tax rates on the net income could be as low as 11% in Alberta.
– The Company and the shareholder are seen as two different entities, and any losses in the company cannot be used to reduce your other taxable personal income.
How can I set up a Company?
The company will first have to be legally setup and the process involves:
a) Determining the following information
– Who will be the shareholder(s)? – They own the company
– Director(s) – They will be accountable for the operation of the Company
– Name of the corporation – If you want a particular name, then the company will have to do a name search to ensure that there are no pre-existing businesses with identical or similar names. Otherwise, the Company can be assigned a random number like 123456 Alberta Ltd.
– Rights of each class of shares. These are outlined in the Articles of Incorporation that has to be submitted during the incorporation process.
We can discuss the best set-up with you during our initial meeting. Any deficiencies in these documents can impose severe restrictions on many of the tax planning opportunities.
b) Federal or Provincial Incorporation
Once the above information is determined, the Company can be incorporated provincially under the Alberta Business Corporations Act or federally under the Canada Business Corporations Act. Most corporations will choose the provincial incorporation, if their business operations will be restricted to that province. Some companies may, however, prefer the federal incorporation and then registration with each province in which they operate.
c) Federal Business number registration
The Company will then need to register for a business number with Canada Revenue Agency. This account number will be used for tax reporting purposes which include corporate income tax, GST and payroll.
When do I have to pay the taxes for my company?
A Company can select any year-end that is within 53 weeks from the date of incorporation. It is critical to select a year-end following which the business operations will not be as busy and when you will have time to work on the taxes. A company would then generally have 3 months from its year-end to pay any taxes owing.
When do I have to file the Company’s tax return?
A company will generally have six months from its year-end to file the tax return. In Alberta, a company is required to file both a federal as well as a provincial income tax return.
Do I have to register for GST?
There are certain businesses for which the GST may not apply including health care professionals. A Corporation is also not necessarily required to register for GST if the revenue is below $30,000 although some may voluntarily register for GST to claim the GST that is paid on its purchases. If, however, the income exceeds the threshold of $30,000, then the corporation must register for GST and start charging GST on its revenue.
When do I have to file my GST return?
The GST reporting period depends on revenue as well as frequency that you select. If the Company’s annual taxable sales is $1,500,000 or less, it may select an annual, quarterly or monthly GST reporting period. So if a company expects a GST refund in most cases, then a more frequent filing period allows an earlier GST refund.
When do I have to pay my GST owing?
If your reporting period is monthly or quarterly, you have to file your GST return and pay the amount you owe no later than one month after the end of your reporting period.
Do I have to make GST Installments?
If you have an annual GST reporting period and your GST owing is more than $3,000 (without the installment) on the last return that was filed, then you would be required to make quarterly installment payments for the next year.
What is this “Annual Return” form from Service Alberta?
An annual return is the report that has to be filed with Service Alberta every year confirming the voting shareholders & any changes in the directors. This filing is separate from the income tax returns and can be filed directly with any Registry. A corporation that fails to file this annual return for consecutive years may be “struck off”. The corporation will then need to revive the entity to continue to operate and file its tax returns.
Disclaimer: The above information is only of a general nature and presented solely as educational information and does not constitute advice or opinions of any kind. No accountant-client, advisory, fiduciary or other relationship is created between Horizon Group (Horizon) or any person accessing or otherwise using any of the information unless an engagement letter is signed. Horizon and its affiliates (and any of its respective directors, officers, agents, contractors, interns, suppliers and employees) will not be liable for any damages, losses or causes of action of any nature arising from any use of any of the information presented on this website. The information presented herein is based on assumptions that may not apply in your particular situation. They also contain tax rates that are subject to change. We would therefore highly recommend that you contact us, as it may need review of your particular situation.