Affordable Owner-Manager Tax Planning for Canadian Businesses

No. A refund is your own overpaid tax coming back, so it is not reported as income and does not reduce your income-tested benefits. Interest the CRA pays when a refund is late is treated differently: that interest is taxable and belongs on the return for the year you receive it. A corporate refund works the same way, though refund interest is income to the corporation. Keep the notice of assessment with your records.

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.

If you are incorporated, you can take salary, dividends, or a mix of both. Salary is deductible to the corporation, builds RRSP room and CPP entitlement, and requires payroll registration and regular remittances. Dividends need no payroll but come out of after-tax corporate income and create no RRSP room. Sole proprietors and partners simply draw money and pay tax on the business profit. The right mix depends on your cash needs and the corporation's tax position, so model both.

An incorporated small business generally pays the federal small business rate of 9% on its first $500,000 of active business income for 2026 instead of the 15% general rate, plus a reduced provincial rate, in Ontario 3.2% and falling to 2.2% from 1 July 2026. Unincorporated businesses deduct reasonable expenses on a T2125 instead. Both can claim capital cost allowance, home-office and vehicle costs, and targeted incentives exist for research and hiring.

Start with the structure. An unincorporated business reports on form T2125 inside your personal T1, due 15 June 2026 for the 2025 year, with any balance still payable by 30 April 2026. A corporation files a T2, due six months after its fiscal year end. Either way, reconcile your bookkeeping first, separate business from personal spending, keep records for six years, and claim capital purchases through depreciation rather than as an outright expense.

Not automatically. Relief applies where goods are bought on a reserve, or bought off reserve and delivered to the reserve, by a status Indian, a band or a band-empowered entity, and to services performed on a reserve. Purchases used off reserve with no delivery to it normally carry GST/HST at the usual rate. The vendor has to record the buyer's status information to support the relief. The CRA's guidance for Indigenous peoples sets out the conditions and paperwork.

Payroll deductions are calculated as if your current pay rate continued all year, using the credits you claimed on the personal tax credits form you gave your employer. Deductions look low if you started mid-year, work part-time or irregular hours, over-claimed credits, or hold two jobs where each employer applies the basic personal amount and neither sees the other's pay. Income without withholding, such as self-employment or investments, adds to what you owe at filing.

Insurance is treated as an exempt financial service, so the 5% GST (2025 and 2026) and HST are not charged on premiums. Some provinces apply their own retail sales tax to certain premiums, notably group benefits, and provinces also levy a premium tax on insurers that is built into pricing. Separately, employer-paid premiums can be a taxable benefit on your T4: group life generally is, while private health and dental coverage generally is not outside Quebec.

Yes. There is one combined GST/HST return, so HST you paid on business purchases is claimed as an input tax credit on the same return where you report the GST and HST you collected. The rate charged does not matter: GST 5%, Ontario HST 13%, Nova Scotia 14% from 1 April 2025, and 15% in New Brunswick, Newfoundland and Labrador and Prince Edward Island are all recoverable if the purchase relates to commercial activity. Keep invoices showing the tax and the supplier's registration number.

Start with each employee's taxable pay for the period, including taxable benefits, then use the CRA payroll deductions online calculator or the payroll deductions tables to get income tax, CPP or QPP contributions and EI premiums. Add the employer portion of CPP and EI, which is a cost to the business rather than a deduction from pay. Remit the total by your assigned remitting deadline and report the year's totals on T4 slips.

Yes, in three separate layers. Federal excise duty is built into the price before the product reaches the shelf, each province or territory adds its own tobacco tax, and GST/HST then applies to the selling price including those taxes. The duty and the provincial tax are charged by quantity of product rather than as a percentage of price, which is why the shelf price differs so much between provinces.

Most taxable benefits are pensionable, so CPP contributions apply to them alongside regular wages. Whether EI premiums apply depends on the form the benefit takes: a taxable benefit paid in cash, such as an allowance, is generally insurable, while a non-cash benefit such as employer-paid parking or a gift in kind is pensionable but not insurable. Add the value to the employee's earnings for that pay period before running the deduction calculation.