Low-Cost Intercorporate Dividend Planning for Canadian Businesses

Most tax saving comes from a short list of levers: contributing to an RRSP or a spousal RRSP, holding investments inside a TFSA, FHSA or RESP so growth is sheltered, claiming every deduction and credit you actually qualify for, and splitting income where the rules allow, such as pension income splitting. Business owners add expense timing and salary versus dividend planning. Order matters, so decide before year end rather than at filing time.

Yes. A personal T1 can be prepared and filed by the taxpayer through CRA-certified software, and a straightforward year of employment slips and a few credits is manageable. Corporate filing is harder: a T2 has to reconcile to financial statements, and for tax years beginning after 2023 electronic filing is mandatory for essentially every corporation regardless of gross revenue. Self-employment, rental property, investments sold during the year, a move between provinces and foreign income are where self-filed returns most often go wrong.

Claim every genuine business expense and keep the paperwork, then use the structural levers rather than guesswork. A corporation pays the federal small business rate of 9% on the first $500,000 of active business income for 2026 instead of personal rates, so leaving profit inside the company defers tax until you draw it. Time purchases and income around the year end, pay a reasonable salary to create RRSP room, and split income only where the rules truly allow it.

The simplest route is your bank’s online bill payment, choosing the CRA payee that matches the tax type and year. The CRA’s My Payment service takes Interac Online and Visa Debit, and you can set up a pre-authorized debit inside My Account. Third-party card processors work but charge a fee. Select the correct account and period so the money is not applied elsewhere, and pay by the deadline, since interest runs from the day after.

Child care you paid so you could work, run a business or study is a deduction rather than a credit, and it normally must be claimed by the lower-income spouse. Daycare, nursery school, day camps and a caregiver can all qualify. The claim is capped per child according to the child's age and status, and limited by earned income. Check the CRA's child care expenses guidance for current caps, and keep receipts naming the provider, with a social insurance number for an individual caregiver.

Register in Represent a Client from the CRA sign-in page; the RepID is issued straight away once your identity is confirmed. A RepID identifies you personally, a group identifier covers a team, and a business number is used where a firm acts. The identifier alone opens nothing: each client must then authorise you online from their own CRA account, or sign an AUT-01 for the CRA to process, before you can see their information.

Usually your pay for the period is low enough that the credits claimed on the personal tax credits form you gave your employer cancel the tax out, or more was claimed on that form than should have been. Other causes: you were set up as a contractor rather than an employee, the payment was a non-taxable reimbursement, or payroll is simply misconfigured. Nothing withheld does not mean nothing owed, so raise it with payroll early.

Company tax is corporate income tax, reported on a T2 return for each fiscal year. A Canadian-controlled private corporation pays the federal small business rate of 9% on the first $500,000 of active business income for 2026 and the federal general net rate of 15% above that, with each province adding its own rate. Ontario's small business rate is 3.2%, falling to 2.2% on 1 July 2026, and its combined general rate is 26.5%. The T2 is due six months after year end.

No. GST is 5% in 2025 and 2026 and applies to most goods and services, but basic groceries, prescription drugs and most medical devices are zero-rated, while residential rent, most health and dental care, tuition and many financial services are exempt. Provinces add HST or their own sales tax, so the rate on a purchase also depends on where you buy it. Registered businesses recover the tax on inputs through input tax credits.

HST in Newfoundland and Labrador is 15% in 2026: the 5% federal GST plus a 10% provincial component. It increased from 13% to 15% on 1 July 2016 and has stayed there. Sellers charge it on most goods and services supplied into the province, including businesses based outside it. Basic groceries are zero-rated and long-term residential rent is exempt, so neither carries the 15%.

About two weeks for a return filed online, measured from the day the CRA processes it. Direct deposit arrives sooner than a cheque. A non-resident return can take up to 16 weeks. Anything pulled for review runs longer: slips that do not match, a first return, a credit the CRA wants receipts for, or a debt to another government program that offsets the amount. Watch progress in CRA My Account rather than guessing.

Set aside enough to cover income tax at your combined federal and provincial marginal rate on net business income, plus CPP: for 2026 you pay both halves yourself, 5.95% each on earnings between the $3,500 basic exemption and the maximum pensionable earnings of $74,600, and a further 4% each on earnings in the second band from $74,600 to $85,000. Keep any GST/HST you collect in a separate account, because it was never your money. Moving a fixed percentage of every deposit aside, then truing it up each quarter, works well.