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5 Canadian tax & accounting terms starting with W

Plain-language definitions, each with the CRA rule it comes from and the filings it affects.

Withholding Tax

Withholding tax is tax deducted at source from certain payments, notably payments to non-residents, and remitted to the CRA by the payer rather than the recipient.

In practice: A Canadian company pays a $10,000 royalty to a US resident. Absent treaty relief it withholds 25% ($2,500) and remits it to the CRA, paying the non-resident $7,500. A treaty may lower the 25% rate.

Work in Progress (WIP)

Work in progress is the value of partially completed work or unbilled services a business has performed but not yet invoiced, recorded as an asset.

In practice: An engineering firm has performed $40,000 of work on a project but not yet invoiced it at month-end. That $40,000 is recorded as work in progress, an asset, so the month's results reflect the value created.

Workers' Compensation (WSIB)

Workers' compensation is a provincial insurance program, such as Ontario's WSIB, funded by employer premiums that covers workers injured or made ill on the job.

In practice: An Ontario construction company registers with the WSIB and pays premiums based on its payroll and a construction-industry rate. When a worker is injured on site, WSIB covers their lost wages and medical costs.

Working Capital

Working capital is current assets minus current liabilities, measuring the short-term liquidity a business has to meet its obligations over the next year.

In practice: A company has $120,000 in current assets and $80,000 in current liabilities, giving $40,000 of working capital, a cushion to fund operations and absorb timing gaps between paying suppliers and collecting from customers.

Write-Off

A write-off is the removal of an asset's value or the deduction of an expense against income, reducing taxable profit, commonly used for bad debts, obsolete inventory or business costs.

In practice: You hold $5,000 of inventory that has become unsellable. You write it off, removing it from assets and recording a $5,000 expense, which reduces your taxable income by $5,000 and your tax by your marginal rate on that amount.

Related terms from other letters

Terms the entries above rely on, defined the same way.

Foreign Tax Credit

A foreign tax credit reduces your Canadian tax by the amount of income tax you already paid to another country on the same income, preventing double taxation.

In practice: You earn $10,000 of foreign investment income and pay $1,500 of foreign withholding tax on it. Canada taxes the $10,000 too, but a foreign tax credit for the $1,500 already paid reduces your Canadian tax so the income is not taxed twice.

Sources. CRA — Businesses · Income Tax Act (Justice Laws Website)