Low-Cost Inventory Accounting for Canadian Businesses

A Canadian business can face corporate income tax federally and provincially, GST/HST or provincial sales tax on what it sells, payroll withholding with employer CPP and EI, property tax on premises it owns, and payroll or health levies in some provinces. An unincorporated business reports its profit on a T2125 with the owner's T1 instead of paying corporate tax. Which ones apply depends on structure, where you operate, and whether you have employees.

Canada does not use tax classes or tax codes the way some other countries do. Your income tax comes from graduated brackets, with federal rates for 2026 running from 14% up to 33% and separate provincial brackets on top, and from the credits you claim on the personal tax credits return you give your employer. In a business setting, tax class usually means a capital cost allowance class, which sets the rate at which you depreciate an asset.

Both happen, and the tax result differs. Canada Pension Plan and Old Age Security are paid monthly and taxed as received. A defined-benefit pension usually pays monthly, though some plans offer a commuted value instead; a lump sum paid to you is taxable in that year unless part of it transfers directly into a registered plan. Money in an RRSP can be withdrawn as a lump sum or converted to periodic retirement income.

Tax law is the body of statutes, regulations and court decisions that set who pays tax, on what, and when. In Canada the main pieces are the federal Income Tax Act and the Excise Tax Act, which covers GST/HST, plus each province's own tax statutes. The CRA administers these rules and publishes guides, folios and interpretations explaining its view, while the Tax Court and higher courts settle disputes over what the wording means.

Federal excise duty on cigarettes is charged per thousand cigarettes on tobacco packaged for the Canadian duty-paid market, which is why packages carry an excise stamp. The rate is adjusted each year, and most provinces levy their own tobacco tax on top, so the shelf price carries both. Manufacturers and importers remit the duty, not retail buyers. Check the CRA's excise duty rates page for the current amount before pricing or costing stock.

Your business number appears on every CRA notice, statement of account and remittance voucher, on GST/HST and payroll correspondence, and in My Business Account once you sign in. It is also on the confirmation issued when the account was opened, and on incorporation paperwork if the number came with registration. If nothing is to hand, the CRA business enquiries line can confirm it once it verifies that you are authorised to ask.

Unreported income costs far more than the tax alone. The CRA adds interest, and where you omit income in one year and also omitted income in any of the three preceding years, a repeated-failure penalty applies to the unreported amount. If the omission looks deliberate, a gross negligence penalty is much heavier, and evasion can be prosecuted. Fixing it yourself with a T1-ADJ or the Voluntary Disclosures Program is cheaper.

No GST or HST is charged on long-term residential rent: a lease of a home for a month or more is exempt, which is why your rent has no tax line. Short-term accommodation is different, since stays under a month can be taxable, and a landlord over the $30,000 small-supplier threshold must charge GST/HST on them. Some municipalities also add their own accommodation tax. Provincial sales tax does not apply to residential rent.

Yes. CRA My Account holds your notices of assessment and reassessment, lets you view returns for a number of prior years, and lists the slips the CRA received, such as T4, T4A and T5. Keep in mind these are the CRA's records of what was assessed, not the file your software produced, so figures can differ if the return was adjusted. Records supporting a return should be kept six years from the end of the last tax year they relate to.

There is no single percentage. Canada applies graduated federal rates plus a provincial or territorial rate, and each bracket taxes only the income falling inside it, so the marginal rate on your last dollar is higher than the average rate you actually pay. Credits such as the basic personal amount cut the result further. Check the federal and provincial brackets for the year you are filing on the CRA site, since they are indexed annually.

Yes. Salary is employment income and fully taxable, and it appears on your T4 with the tax, CPP and EI already withheld. Taxable salary also captures most benefits an employer provides, so a company vehicle, group life insurance premiums or a taxable allowance are added to the slip. A few payroll amounts work the other way and reduce the income you are taxed on, notably registered pension plan contributions and union dues.

Balance owing is what you still have to pay after your return is assessed: tax for the year less the tax already withheld, instalments paid and refundable credits. A positive balance means money is due. A credit balance, usually shown with a minus sign, means you overpaid and a refund or transfer is coming. Your notice of assessment shows the balance as assessed, and My Account shows it updated for interest and payments received.