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  • Writer's pictureNassima Choualhi

Corporate - Tax return guide

Updated: Sep 26, 2022

The corporate company must file tax (T2) separately from the owners because it is a separate entity. The corporate tax rate is lower than the personal tax rate, which is a good option to incorporate when a sole proprietorship/self-employed business starts to reach a high sale. On the other hand, the costs are more important such as the production of the fiscal year end which can reach 2000-3000$+tx or more depending on the workload and the business sector (small-medium size businesses). This price includes the financial statements in the form of a compilation assignment, as well as the tax return.

What to prepare for the year-end ?

In order to reduce the accounting bill, it is essential to keep updating your accounting with an accounting software. There are several accounting software on the market (Quickbooks, SAGE, Acomba, etc). You must find the one that is best adapted to your business sector. Moreover, some software allows you to connect other software such as Lightspeed in order to automate your transactions.

For example, a small service company with simple accounting could use Quickbooks because this software is adapted to small businesses with simple transactions. However, a manufacturing plant that needs to keep track of costs and inventory of many types of products should use a more complex software.

By the end of the fiscal year, your CPA will first have to produce your financial statements (Income Statement and Balance Sheet) before filing your tax return. Here’s what you need to prepare for financial statements in the form of a compilation engagement:

  • Income Statements and Balance Sheet for your fiscal period.

  • Report of cash transactions (bank statements) for your tax period.

  • Sales, purchases, revenues and expenses report for your fiscal period.

  • GST/QST tax report (if applicable) for your fiscal period.

  • Other necessary information (investments, loans, etc.) for your fiscal period.

What are the eligible expenses?

The expenses you can deduct are those incurred during the year and related to your business activities. Here are some examples:

  • Office supplies

  • Cost of goods sold (raw materials, labour, transportation, etc.)

  • Business taxes and permits;

  • Premium paid for professional liability insurance to maintain professional status;

  • Cost of hired labour and materials used in the maintenance and repair of property used to earn business income;

  • Meals and entertainment expenses;

  • Motor vehicle expenses (travel expenses, interest on a loan to purchase a vehicle, depreciation, lease fees, etc.);

  • Major asset categories and their depreciation rates;

  • Home use expenses.

To learn more, you can also contact us by making an appointment for a consultation with one of our Chartered Professional Accountants (CPA).

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