Entrepreneurship & Small Business

Post your CORPORATE TAX questions here

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[OP]
Member
Mar 13, 2013
317 posts
56 upvotes
Mississauga, Ontario…

Post your CORPORATE TAX questions here

Hello everyone,

I am a CPA-CGA I run my own accounting practice. My firm specializes in tax and consulting.

Ask your questions here, I will try to answer all questions to the best of my ability. Readers are cautioned that the information provided may not be appropriate for their purposes.
Sarb Cheema, CPA, CGA
Cheema & Associate Professional Corporation
383 replies
Member
Jan 30, 2013
353 posts
24 upvotes
RICHMOND HILL
I own my corporation,right now using my home address (all paid up)as the business address.
I want to invest in a condomiun property as (I). office to do paper work and( II) occasionally to rest there before working near the condo for early morning shifts,

(a)Can I write off this investment? as company expenses
(b) when I sell the property let say in 10-20 yr and make a profit of 500,000 $ , can I claim the lifetime(co) Capital gain exemption of under $800000 and not pay any tax

Do I sell the co. owned property at such time or do I have to sell the whole company?

Thanks
[OP]
Member
Mar 13, 2013
317 posts
56 upvotes
Mississauga, Ontario…
goldenball wrote:
Apr 10th, 2013 11:19 am
I own my corporation,right now using my home address (all paid up)as the business address.
I want to invest in a condomiun property as (I). office to do paper work and( II) occasionally to rest there before working near the condo for early morning shifts,

(a)Can I write off this investment? as company expenses
(b) when I sell the property let say in 10-20 yr and make a profit of 500,000 $ , can I claim the lifetime(co) Capital gain exemption of under $800000 and not pay any tax

Do I sell the co. owned property at such time or do I have to sell the whole company?

Thanks
If I understand your question correctly, you want to purchase a condo (own it personally) and claim the expenses associated with it as business expenses? You can only claim percentage of the condo (the amount that is actually used for your business). If you say the whole condo is used for business, than there are very specific conditions that you must meet (usually never fly's with the CRA).

A condo is not considered a 'Active Business' and therefore you can not claim the life time capital gains exemption. To claim the capital gains exemption you would have to sell your share, which is the whole company (not the assets). Real estate would only be considered Active Business Income if you had more than 5 employees and you were in the business to buy and sell condos.
Sarb Cheema, CPA, CGA
Cheema & Associate Professional Corporation
Member
Jan 30, 2013
353 posts
24 upvotes
RICHMOND HILL
SarbCheema wrote:
Apr 10th, 2013 1:21 pm
If I understand your question correctly, you want to purchase a condo (own it personally) and claim the expenses associated with it as business expenses? You can only claim percentage of the condo (the amount that is actually used for your business). If you say the whole condo is used for business, than there are very specific conditions that you must meet (usually never fly's with the CRA).

A condo is not considered a 'Active Business' and therefore you can not claim the life time capital gains exemption. To claim the capital gains exemption you would have to sell your share, which is the whole company (not the assets). Real estate would only be considered Active Business Income if you had more than 5 employees and you were in the business to buy and sell condos.
Would it be any different if the corporation buy the condo as an office (and not me buying the condo personally)?(Bearing in mind that the corporation 's business is not in real estate but the condo is used for morning shifts(to avoid traffic) and storing company documents,paper work etc.
My corporation does not have any other employee except me who's drawing dividends only(mind you that route would be pretty much closed next yr with the Taxation rule changes in 2014 re non-eligible dividends)
Newbie
May 20, 2013
1 posts
I have recently started a corporation to do IT-type work on the side in addition to my day job. I don't have much in the way of corporate expenses, so there's going to be a fair bit of retained earnings in my corporate bank account.

I am wondering what is the most tax-efficient way of accessing that money.

A couple of options I'm aware of:
1) Paying a dividend to my wife - she has a lower personal income than I do, and I have issued preferred shares in her name.
2) Selling an asset, e.g. one of my cars, to the corporation. It's not clear to me what the implications would be - is this something the CRA frowns upon? Would there also be implications as far as insuring the car is concerned - would I have to tell the insurance company, and could this trigger a change in my insurance rate?

Are there other options you would recommend? Thanks in advance!
Newbie
Nov 15, 2009
41 posts
2 upvotes
Barrie
If you have your wife as a shareholder then paying dividends is a great tax saving vehicle. Company pension contributions is another great tax saver that will benefit you down the road.
Jr. Member
Sep 23, 2011
183 posts
42 upvotes
Mississauga
I have a Sole proprietorship and I want have 2 contractors working for me regularly (20hrs a week). Do I have to pay a payroll tax?
Also, do I stay in the guidelines of employing contractors as long as I don't provide them equipment? Do I have to pay them as soon as the task is done? Can they be held to a non compete and still be contractors?
Newbie
May 21, 2013
1 posts
My business was incorporated in Aug 2012 in British Columbia. I know haven't been collecting HST/GST/PST because my billing is considerably less than the required 30K/year(small entity) required to collect and pay these taxes to the government.
1. How much should I be setting aside to pay income tax if my yearly revenue is about 8K?
2. I need to file an income tax statement before my first anniversary or soon after correct?

Thank you.
[OP]
Member
Mar 13, 2013
317 posts
56 upvotes
Mississauga, Ontario…
moevsworld wrote:
May 21st, 2013 7:40 pm
I have a Sole proprietorship and I want have 2 contractors working for me regularly (20hrs a week). Do I have to pay a payroll tax?
Also, do I stay in the guidelines of employing contractors as long as I don't provide them equipment? Do I have to pay them as soon as the task is done? Can they be held to a non compete and still be contractors?
You only have to pay payroll taxes (EI & CPP) if they are considered employees. There are other conditions that must be met for them to be considered contractor, tools is just one of the conditions. Other things such as control, profits of the business, etc... will also be considered. A contractor does not need to be paid immediately, they can be paid at the end of the week/month. As for the non-compete you would have to speak to a lawyer. All I know is forcing a non-compete clause on a employee is very very very difficult in Canada.
Sarb Cheema, CPA, CGA
Cheema & Associate Professional Corporation
[OP]
Member
Mar 13, 2013
317 posts
56 upvotes
Mississauga, Ontario…
kmsnaz wrote:
May 22nd, 2013 12:18 pm
My business was incorporated in Aug 2012 in British Columbia. I know haven't been collecting HST/GST/PST because my billing is considerably less than the required 30K/year(small entity) required to collect and pay these taxes to the government.
1. How much should I be setting aside to pay income tax if my yearly revenue is about 8K?
2. I need to file an income tax statement before my first anniversary or soon after correct?

Thank you.
As long as you didn't register for a HST number and your sales are below 30k you do not need to collect HST (please confirm this because BC switched back to the old GST/PST system).

As long as you have an active business you will have corporate taxes of around 13.5%, tax on the $8,000 would be around $1,080.

When is your corporate tax year end? If your corporate tax year end is December 31, 2012 than you have to remit amount owing by March 31, 2013, and submit the tax by June 30, 2013. You can select any year end as long as its less than 12 months.
Sarb Cheema, CPA, CGA
Cheema & Associate Professional Corporation
[OP]
Member
Mar 13, 2013
317 posts
56 upvotes
Mississauga, Ontario…
mindtry wrote:
May 21st, 2013 1:48 pm
I have recently started a corporation to do IT-type work on the side in addition to my day job. I don't have much in the way of corporate expenses, so there's going to be a fair bit of retained earnings in my corporate bank account.

I am wondering what is the most tax-efficient way of accessing that money.

A couple of options I'm aware of:
1) Paying a dividend to my wife - she has a lower personal income than I do, and I have issued preferred shares in her name.
2) Selling an asset, e.g. one of my cars, to the corporation. It's not clear to me what the implications would be - is this something the CRA frowns upon? Would there also be implications as far as insuring the car is concerned - would I have to tell the insurance company, and could this trigger a change in my insurance rate?

Are there other options you would recommend? Thanks in advance!
Is your wife a shareholder? Does she own the same class of share as you do? Remember dividends have to be declared to all shareholders with the same class of shares. Selling the car to the company would have to be done at FMV than you shouldn't have any problems. If you ever claimed CCA on the car in your personal taxes than you might get recapture, gain, or terminal loss.

Since the vehicle will be owned by the corporation you will definitely have to tell the insurance company and I'm not sure about how it will affect the rates in your case. Usually the rates are higher for corporate own vehicles.
Sarb Cheema, CPA, CGA
Cheema & Associate Professional Corporation
Sr. Member
Jul 30, 2008
772 posts
16 upvotes
Is my corporation allowed to fully cover the rent of my personal apartment? I.E. I pay for my apartment, but my company covers it because I'm using it as an office (answering emails, etc).
Deal Fanatic
User avatar
Dec 11, 2006
5141 posts
54 upvotes
Richmond bc
oops didn't see this here is my question,

If I register my corporation offshore do I still have to pay provincial tax on my corporate income? My business is international and is in no way bc based.

Thank you
[OP]
Member
Mar 13, 2013
317 posts
56 upvotes
Mississauga, Ontario…
tribe1689 wrote:
May 24th, 2013 11:36 pm
Is my corporation allowed to fully cover the rent of my personal apartment? I.E. I pay for my apartment, but my company covers it because I'm using it as an office (answering emails, etc).
Not fully. You can claim a portion that is actually used for a home office.
Sarb Cheema, CPA, CGA
Cheema & Associate Professional Corporation
[OP]
Member
Mar 13, 2013
317 posts
56 upvotes
Mississauga, Ontario…
ali123 wrote:
May 25th, 2013 8:10 am
oops didn't see this here is my question,

If I register my corporation offshore do I still have to pay provincial tax on my corporate income? My business is international and is in no way bc based.

Thank you
Not sure what the question is.

If your corporation is based outside Canada, than you would not be required to file a Federal or Provincial corporate tax return in Canada. If services are provided in Canada, than depending on the structure and invoicing there may be withholding tax by Canadian clients. FYI Canada has one of the lowest corporate tax rates.
Sarb Cheema, CPA, CGA
Cheema & Associate Professional Corporation

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