There’s a big fight over corporate taxes in Ontario. The main political parties are proposing different rates. Doug Ford’s Progressive Conservatives promise to lower corporate taxes, while Andrea Horwath’s New Democrats want to raise corporate taxes. Meanwhile, Kathleen Wynne’s Liberals are proposing no change. This debate is particularly interesting because Ontario’s economy is flourishing, with business profits reaching record highs.
Unincorporated businesses are not liable for Ontario corporate tax
If you want to operate a business without the need for a formal entity, you can go unincorporated. This way, you can run your business out of your home or even from your briefcase. While you do not need permission to operate an unincorporated business, there are some requirements. You must have interest in the products and services you offer, have proper records, and a game plan.
An unincorporated business does not have to pay Ontario corporate tax. Its profits can be reinvested or invested, and it can also defer personal taxes on withdrawals. By contrast, an incorporated business is required to pay Ontario corporate tax. Its owners should consult a tax lawyer before doing so.
Incorporating a business requires annual filings to the Canada Revenue Agency. An unincorporated business is not liable for Ontario corporate tax, but owners must pay personal income tax on their own. An unincorporated business can be a sole proprietorship or run by an individual as a partnership.
If you’re running a nonprofit organization, you should consider incorporating your organization. It will offer many benefits and responsibilities to its members. It’s a good idea to consult a business lawyer who specializes in corporate matters before deciding to incorporate. However, you should also keep in mind that a nonprofit organization does not have to incorporate if it’s a non-profit. In fact, hundreds of unincorporated organizations operate in Ontario and don’t have a separate legal existence.
Incorporating your business can also reduce your personal tax rate. The tax rates for corporations are lower than those for individuals. Incorporating a business also allows you to leave your money in the business and withdraw it at a later date. For example, an individual who earns $300,000 annually would pay $78,296 in personal taxes, resulting in a marginal tax rate of 29.6%.
Corporations are required to file a separate tax return
The annual tax return of a corporation must be filed on or before the 15th day of the month following the end of the tax year. For calendar-year corporations, this means the due date is April 15. For fiscal-year corporations, the due date is June 30. If the fiscal year ends on a Sunday or legal holiday, the return must be filed on the next business day. Alternatively, a corporation can file on the 15th of the third month after the year-end.
When preparing a corporate tax return, the first step is to determine what deductions the company can claim. Generally, this includes any current business expenses, including employee salaries, certain investments, real estate purchases, insurance payments, and some taxes. The CRA provides details of the allowable expenses.
Corporations must file all required returns, including income tax returns and employment tax returns. They also need to file information returns and excise tax returns. If they have more than 10 required returns, they must file them electronically. They should also file a hardship waiver if they cannot file electronically.
If the corporation fails to pay the tax due, it will be penalized. If the tax due is not paid on time, interest will be applied. The interest is calculated using Form CT-1120I. Underpayment penalties are not waived, but the IRS has the right to extend the due date by up to six months. If they do not pay, the penalty may be as high as ten percent of the unpaid amount.
While some states do not tax S-Corporations, the state of Delaware does. This state recognizes the S-Corp election. S-Corporations must file a separate tax return and pay a state withholding tax. They should file Form 1100S as well.
Rate
The Rate of Ontario corporate tax is a controversial issue that has divided the province. Doug Ford’s Progressive Conservatives promise to cut it, while Andrea Horwath’s New Democrats want to raise it. The Liberals, meanwhile, propose no change. Despite the polarizing debate, business profits in Ontario are increasing, and the province’s economy is booming.
This tax is charged on earnings from public and private corporations, and is different from federal taxation. In some cases, the rate is lower than the federal rate. The rates are applicable for the twelve-month tax year ending 31 December 2022. Some income is exempt from the rate, such as dividends.
The Rate of Ontario corporate tax is calculated based on the income a corporation earns. A corporation’s revenue, location, and services provided are all factors that determine the corporate tax rate. There are also different rates for capital gains, dividends, and investment income. The rate of Ontario corporate tax applies to all types of businesses in Ontario, except for tax-exempt Crown corporations, Hutterite colonies, and registered charities.
After 1973, companies in manufacturing and processing activities enjoyed preferential tax treatment. However, in 2004, the percentage reduction became the same for all companies, making the general rate the same as the manufacturing and processing rate. The general rate is currently 13.0%. There is also a reduced rate for small businesses. For example, companies with only a single employee have a lower rate than larger companies.
In addition to the general rate, Canadian companies may be subject to a special corporate tax called corporate minimum tax. This tax applies to businesses with CAD 50 million in total assets.
Limits
If your corporation is subject to the Ontario corporate tax, you may be eligible to pay a corporate minimum tax. This tax is based on adjusted book income and is only paid to the extent it exceeds your regular Ontario corporate income tax liability. Currently, the corporate minimum tax rate is 2.7% of the total assets and annual gross revenue of your corporation.
This tax applies to Canadian-controlled private corporations with active business income below a certain threshold. The current limit is $500 000. However, the amount may change depending on the amount of the company’s revenue and number of days it operates each year. This tax relief is meant to help smaller businesses meet their tax obligations and offers some benefits for larger companies as well.
The Small Business Deduction allows you to take advantage of this tax relief for Canadian-controlled private corporations. However, to qualify, you must have a taxable capital employed in Canada of between $10 million and $15 million in the prior year. Additionally, you must generate income from a specified investment business, including property rents, royalties, and royalties. Moreover, your company must have more than five full-time employees.
In addition to reducing the corporate tax rate, you can also take advantage of the federal small business deduction. It reduces your tax burden by up to $5 million if your company is Canadian-controlled. However, this deduction is only applicable for the first $500,000 of active business income. For all other income, you will pay a higher rate.
Filing deadline
If you are a Canadian taxpayer, you are likely aware of the May 2, 2022 filing deadline for Ontario corporate taxes. However, if you are self-employed, your filing deadline will be June 15, 2022. Moreover, there are penalties and interest to pay if you fail to file your taxes on time. If you are a business owner, you need to make sure that you meet the deadline to avoid incurring any additional costs.
You should file your Ontario corporate tax return on time if you own a business in the province. There are a few ways to get your corporate tax returns done on time. One way is to file through the business registry. The new registry will require you to register with your business name, address, and official email address. You should then receive your corporate access key in the mail. Alternatively, you can engage a registered intermediary, such as BOMCAS Canada, who will file your taxes on your behalf.
Ontario corporate tax filing is required by businesses that hold share capital. To avoid any penalties, corporations should file their annual information returns with the Canada Revenue Agency within six months of the end of their tax year. This means that if your company’s year-end is June 30th, 2020, you should file your return by December 31, 2020. If you miss the deadline, you may incur late filing fees and face the cancellation of your company’s taxes.
For domestic corporations, the filing deadline for their annual income tax return is the fifteenth day of the sixth month after the end of their tax year. If you have a calendar year, you need to file your return by June 15. In addition, you must pay your taxes by April 30.
