When must a company pay its taxes in Canada?

Tax regulations exist in every country in the world. To a greater or lesser extent, but they must always be respected.

Canada Revenue Agency sign outside its head office

When we create a company, we must respect the corporate tax deadline to avoid problems with the tax authorities of the country and possible monetary penalties.

If you are about to form a company in Canada or you are selling a product and/or service, knowing when a company must pay its taxes is essential. Read on.

What is corporate income tax in Canada?

It is a tax rate that companies must pay both at the federal level (to the National Government) and at the provincial level in Canada.

When it comes to meeting the corporate tax deadline it is important to keep in mind that each province in Canada has a different tax rate. 

Who has to pay and file a corporate income tax return in Canada?

Very few people without fiscal studies know that all companies in Canada are required to file their corporate income tax return (otherwise known as a T2).

Whether you are a not-for-profit, tax-exempt company or not in business, you must do the same as an active company with positive net income.

Therefore, as long as the company legally exists, the corporate tax return needs to be filed with the CRA.

Who must pay corporate income tax?

Now, who must pay corporate income tax in Canada? The following:

  • Your company conducts business in the country.
  • You own a profit from your initial capital (Example: Investments in the stock market).
  • You sold a property in Canada.

How much percentage of profits do I have to pay as corporate income tax?

The percentage of corporate tax deadline will depend on many factors of your company such as, for example:

  • Province where you do business.
  • Size of the company (small, medium or multinational).

The average corporate tax rate is around 38% but there are some ways to reduce it.

If the income earned was within Canada, i.e., you have not sold internationally, the Federal Government grants a reduction to 28% of the corporate tax rate.

On the other hand, the National Government offers other facilities to the companies through the Canada Revenue Agency (CRA) on tax credits or deductions for operating expenses of the company.

You can find out about corporate income tax deductions on the Canada Revenue Agency website by going on their webpage. There you will be able to see if your company can apply for these corporate tax discounts.

In case of being a small company recently launched to the productive market, there is a corporate tax deduction of 10.50%. The only requirement of the CRA for these companies is to have net income less than $500,000 to qualify for this tax benefit.

What is the deadline for corporate income tax in Canada?

The corporate income tax deadline, according to the CRA (Canada Revenue Agency), is up to 6 months after the tax year ends.

For example: If your company has a tax year that starts on January 1 and ends on December 31 of the current year, you will have until June 30 of the following year to file your tax return.

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