Entrepreneurship & Small Business

Post your CORPORATE TAX questions here

  • Last Updated:
  • Jun 14th, 2017 9:45 am
Tags:
None
Member
Aug 17, 2011
448 posts
137 upvotes
CALGARY
Buy it personally.

If it is held as a corporate asset (assuming you'll be living in it) the corporation will be deemed to charge FMV rent, and be taxed on that. There are also personal benefit rules. And you lose the principal residence exemption if you ever choose to sell it.

If this is a second property/rental property or something, then the above is not as relevant.
mjj1978 wrote:
Sep 30th, 2015 8:30 pm
hi ,
i need an advice, i have my own business so it is in my corporation, in which i am also un employee .
i have already bought a condo and it is under construction in Montreal, and i want to buy a home near Montreal.
is it better to buy it as personal,
or buy it by the corporation. ( maybe i could pay more deposit , and less interest / tax)
Jr. Member
Nov 20, 2011
116 posts
27 upvotes
NEPEAN
Question Regarding T2 Corporate Tax
GIFI Schedule 100, Element 1180 - Short Term Investments
Which value should be recorded here - the cost (ACB) of the investments or the market value of the investments at year end.
Thanks,
Dave
Penalty Box
Aug 2, 2010
10797 posts
2089 upvotes
I have a question regarding COGS and revenue recognition for income tax purposes when you are a Canadian company purchasing inventory and recognizing revenue in USD:

My company purchased its initial inventory in USD by converting CAD to USD so I know exactly my COGS cost in CAD. Is that the COGS I use for income tax return purposes? Also, I keep the revenue in USD and then use it to buy more inventory in USD. What exchange rate do I apply to calculate the COGS in CAD for this new inventory? Would it be the exchange rate on the date I sent the wire transfer to purchase the inventory?

For revenue purposes what exchange rate do I apply to the USD revenue? Would it be the exchange rate on the date of sale? I can't see it being the rate on when I exchange the USD back to CAD as I am just going to keep the revenue in USD for the most part.

Thanks so much for your help.
Sr. Member
User avatar
Jan 1, 2009
770 posts
123 upvotes
Vancouver
eonibm wrote:
Mar 16th, 2016 6:32 pm
I have a question regarding COGS and revenue recognition for income tax purposes when you are a Canadian company purchasing inventory and recognizing revenue in USD:

My company purchased its initial inventory in USD by converting CAD to USD so I know exactly my COGS cost in CAD. Is that the COGS I use for income tax return purposes? Also, I keep the revenue in USD and then use it to buy more inventory in USD. What exchange rate do I apply to calculate the COGS in CAD for this new inventory? Would it be the exchange rate on the date I sent the wire transfer to purchase the inventory?

For revenue purposes what exchange rate do I apply to the USD revenue? Would it be the exchange rate on the date of sale? I can't see it being the rate on when I exchange the USD back to CAD as I am just going to keep the revenue in USD for the most part.

Thanks so much for your help.
1)Is that the COGS I use for income tax return purposes? Yes
2)Would it be the exchange rate on the date I sent the wire transfer to purchase the inventory? Yes
3)Would it be the exchange rate on the date of sale? Yes

You're doing everything by the book so keep it up.
Penalty Box
Aug 2, 2010
10797 posts
2089 upvotes
I talked to my Chartered Professional Accountant that does my other (Canadian) company returns and it looks like you are incorrect.

All transactions are based on CAD at the time of the transaction. For the inventory the COGS for a sale is based on the date of sale converted from USD to CAD and same for the revenue. So, if I make a sale today, the COGS is the whatever the inventory cost me in USD converted at today's exchange rate. The revenue is whatever it was sold also at today's exchange rate since it is paid immediately by credit card. I will then have a foreign exchange gain or loss for the USD in the bank account depending on what it was bought for and what it is worth in CAD at the end of the year. Same for any inventory at the end of the year.
Newbie
Jan 1, 2008
57 posts
Mississauga
Hi all,

As we all know tax deadline is here (ugh!). This year I am doing my own personal income tax using the turbotax. For the past 3 years, I was considered a self-employed individual who had an incorporated business. I had my accountant prepared the T2 corporation income tax return. This year though I dissolved my corporation and back to being employed (since the second half of 2015).

My question is, how do I report my personal income (salary) from my corporation business to my T1? I've been searching for weeks now and and it only says that you should complete the form T2125 only if you are self-employed or a professional but not an incorporated business. It says any business income or business related expenses (incorporated business) can only be claimed in the T2 form. My T2 was filed and the tax owed was already paid. I really don't know how to report the personal income (salary) i had received from my corporation. Any help would be greatly appreciated.

Thanks!
Member
Aug 17, 2011
448 posts
137 upvotes
CALGARY
A 2015 T4 and payroll remittances should have been drafted/remitted by your corporation covering the 2015 salary.

Given that you dissolved the company, in theory you could claim the draws through the T2125, but it's somewhat awkward and technically not correct. You'll also be hit with CPP on the draws as well, so be prepared for a higher tax balance than you were likely expecting. It'll work though.
Deal Addict
Jun 12, 2015
1682 posts
413 upvotes
Ontario
caltex wrote:
Apr 28th, 2016 8:43 pm
Hi all,

As we all know tax deadline is here (ugh!). This year I am doing my own personal income tax using the turbotax. For the past 3 years, I was considered a self-employed individual who had an incorporated business. I had my accountant prepared the T2 corporation income tax return. This year though I dissolved my corporation and back to being employed (since the second half of 2015).

My question is, how do I report my personal income (salary) from my corporation business to my T1? I've been searching for weeks now and and it only says that you should complete the form T2125 only if you are self-employed or a professional but not an incorporated business. It says any business income or business related expenses (incorporated business) can only be claimed in the T2 form. My T2 was filed and the tax owed was already paid. I really don't know how to report the personal income (salary) i had received from my corporation. Any help would be greatly appreciated.

Thanks!
Wouldn't your corporation prepare you a t4 before it dissolved? If so use that as employment income.
Newbie
Jan 1, 2008
57 posts
Mississauga
Sorry my accountant did not issue any T4 from my corporation.. This is really confusing...
Newbie
May 1, 2016
1 posts
Hi, in the past, I've traditionally done my own personal taxes using intuit software and had no issues... I've recently transitioned (two years ago) to an inc. and still questioning if having a c.a. is worth it. My situation is relatively simple, work from home and won't have any expenses other than phone/internet/medical. My situation is very stable (long term contract with my client, and myself being my only employee)... When I run through the tax doc's my accountant prepares, I just can't see why tax software can't do the same... Admittedly, I haven't explored the tax software realm for small businesses, but is it really worth paying upwards of 900 annually to prep and file?
Member
Jul 4, 2012
359 posts
25 upvotes
Calgary
Question
Does a business pay Income tax if net income is more than zero regardless how little it is or it has to reach a certain amount?
Member
Feb 15, 2010
414 posts
221 upvotes
Surrey
caltex wrote:
Apr 28th, 2016 9:17 pm
Sorry my accountant did not issue any T4 from my corporation.. This is really confusing...
Do you know for certain that your income was treated as a salary? If so a T4 should be issued. If it hasn't been you would need to to create and file one even though your corporation has dissolved.

Could your income have been declared as a dividend? If so a T5 should have been issued with the same issues as above.

I would go through and check your corporate income statement and see where it was recorded. It might have even just been recorded as a payable by you to the corporation, so check your corporate balance sheet as well.
Member
Feb 15, 2010
414 posts
221 upvotes
Surrey
coolibop wrote:
May 2nd, 2016 6:41 pm
Hi, in the past, I've traditionally done my own personal taxes using intuit software and had no issues... I've recently transitioned (two years ago) to an inc. and still questioning if having a c.a. is worth it. My situation is relatively simple, work from home and won't have any expenses other than phone/internet/medical. My situation is very stable (long term contract with my client, and myself being my only employee)... When I run through the tax doc's my accountant prepares, I just can't see why tax software can't do the same... Admittedly, I haven't explored the tax software realm for small businesses, but is it really worth paying upwards of 900 annually to prep and file?
You can usually determine how complicated a tax return depending on the number of adjustments made on Schedule 1 of your return or if you have separate provincial returns that are prepared. Though with the information you provided I wouldn't expect many adjustments. As for preparing it yourself, corporate tax return software is not cheap, and there is always the possibility of not preparing something correctly as there are a lot of schedules. When we prepare returns we do just run it through the software and let it determine the calculations. I have no experience with non-enterprise level corporate tax software but the difference between the personal tax software we have at our office vs off the shelf personal tax software is night and day in ease of use, clarity, and diagnostics ensuring everything is completed appropriately. I would imagine the difference would be even greater in the corporate tax software side. Therefore, I would likely recommend maintaining your accountant.

However, I don't know if you also have financial statements prepared with your tax return, but if so you can negotiate to not have statements prepared and have yourself limited to a tax compliance only engagement and reduce your fees. That would likely save you a couple hundred dollars.
Member
Feb 15, 2010
414 posts
221 upvotes
Surrey
nabilbb wrote:
May 10th, 2016 1:30 pm
Question
Does a business pay Income tax if net income is more than zero regardless how little it is or it has to reach a certain amount?
Generally, yes. It is important to note that there is a clear difference between accounting net income and taxable income for tax purposes. There are certain adjustments made from accounting net income to get to taxable income (eg. how amortization on capital assets is calculated for accounting purposes vs Capital Cost Allowance (CCA) for tax purposes). Taxable income is what will determine whether or not you have a tax liability.

If the business is incorporated, and considered a Canadian Controlled Private Corporation (CCPC), then tax rate will vary on the level of income generated. If less then $500K you will have a federal tax rate of 11%, and income above this threshold will be approximately 26%.

Of course all of the above can vary depending on your situation and any special tax planning, but should be close enough for your average business.

Top