An Overview of Taxation in Canada: Income Tax Payments and Returns - PricewaterhouseCoopers LLP
The requirements for the payment of Canadian income tax and the necessary tax returns and other filings vary depending on whether the taxpayer is a corporation or individual, or a flow-through entity such as a partnership or trust.
Corporations generally are required to pay monthly instalments toward their current year's income tax liability based on the previous year's actual taxes payable. The balance of the tax liability is due two months after the corporation's year-end (three months in the case of certain corporations eligible for the small business tax credit).
Canada imposes no restriction on what date a new corporation may choose for its year-end, but a change in that date requires permission from the taxation authorities. Corporate income tax returns must be completed and filed within six months of each year-end. This is also the filing deadline for any special tax elections and reporting on transactions with related non-residents.
Each corporation in a related group must file a separate federal income tax return (Quebec, Ontario and Alberta also require provincial returns) as there are no provisions for consolidated tax returns.
For individuals, salaries and wages are subject to federal and provincial tax deductions at source. Quarterly tax instalments may also be required. The requirement to make quarterly instalments will depend on an individual's net tax owing for the year, as well as preceding tax years. Net tax owing is the difference between tax payable and tax withheld at source. If an individual's net tax owing exceeds $2,000 in the year or in either of the two preceding tax years, quarterly instalments will be required. Any balance of tax owing is due no later than April 30 of the following year.
The tax year for individuals is the calendar year. However, a different fiscal period is possible for an unincorporated business carried on by an individual. Most individual returns must be filed by April 30 of the next year with an automatic extension to June 15 where the individual carries on an unincorporated business.
Trust returns are due within 90 days after the end of the taxation year. The filing due date for partnership information returns is:
March 31 of the following year if all partners are individuals;
five months after the end of the partnership's fiscal period if all partners are corporations; and
the earlier of the above dates in most other cases.
Non-resident withholding tax must be remitted by the 15th day of the month following the month during which the related amount was paid or credited to the non-resident.
Annual reporting forms for salary, wages and benefits, interest, dividends, royalties, pensions, etc., must be filed by the last day of February each year.
Non-deductible interest and penalties can be applied where tax payments are insufficient or returns are late-filed.
The information provided herein is for general guidance on matters of interest only. The application and impact of laws, regulations and administrative practices can vary widely, based on the specific facts involved. In addition, laws, regulations and administrative practices are continually being revised. Accordingly, this information is not intended to constitute legal, accounting, tax, investment or other professional advice or service.
While every effort has been made to ensure the information provided herein is accurate and timely, no decision should be made or action taken on the basis of this information without first consulting a PricewaterhouseCoopers LLP professional. Should you have any questions concerning the information provided herein or require specific advice, please contact your PricewaterhouseCoopers LLP advisor, or:
David W. Steele
145 King Street West
Toronto, Ontario M5H 1V8
Over the past year, we have watched the Canadian dollar drop relative to its U.S. counterpoint impacting Canadian businesses. U.S. goods and services are now more expensive, U.S. sales make a premium and errors when recording foreign exchange transactions can cost you more money.
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