Entrepreneurship & Small Business

Taxation - answering any questions here

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  • Mar 20th, 2024 10:57 am
Newbie
Jun 17, 2019
5 posts
Thanks Philip for your reply. The business is losing concern. If I charge depreciation for leasehold assets as per terms, the lose will be huge, even for Machinery and Furniture. In that case, should I use the CRA specified rate for depreciation or I can calculate depreciation at different rate for tax?
Member
User avatar
Oct 30, 2017
250 posts
71 upvotes
Ottawa, Ontario
asifnana wrote: On the final year of disposal of an asset can you take CCA and Terminal Loss in SCH8 of the T2? For example if UCC start of the final year is $100 and the CCA rate is 20% and the asset was sold march 31. Can you take CCA for the first 3 months of the year so $5 (3/12th of 20% of $100) and then write off the rest of the balance $95 as terminal loss assuming the class allows for it and no other assets remain in that class.
no CCA for year of sale. only terminal loss or recapture
thank you very much
Philip Kwok, CPA, CGA
Jr. Member
Oct 27, 2018
126 posts
56 upvotes
PhilipK796978 wrote: first of all, 2 thing to consider, do you need the funds now? and how is your personal income now? without this information, it will be difficult to help you

if you can defer taking them out, do so and wait until you have lower income

for these methods,
1. does your cousins have shares to the corporation? will they agree ? with the new rule last year, any dividends paid must pass the new rule that means the receiver must have enough contribution to the corporation to receive dividends, for more detail if you like, you can discuss with me privately.

2. not sure what you mean here,

3. you should do that, you should set up a auto or housing loan and have a repayment schedule with fair market value interest rate. but that means you need to repay the corporation with interest, if you are interested doing this, you can ask me for more detail. things to consider will be how the corporation future is like? profit? loss? what is the purpose of taking this funds out?

4. I will keep the $$ in the corporation if you don't need it for the moment and have it doing some investments, if your personal income level is high. and have the funds investment and accumulate for retire, use it similar to the RRSP. Or if your personal income is not high, I will take the funds out as dividends annually, slower to keep your personal income level at the low rate. you can plan with me and I will be happy to help you, if you like to do this.

For #3, need to consider shareholder benefit rules and whether the entire loan will be included as income.
Member
User avatar
Oct 30, 2017
250 posts
71 upvotes
Ottawa, Ontario
s7yl3x wrote: For #3, need to consider shareholder benefit rules and whether the entire loan will be included as income.
that's a good point, that is why the interest rate must be fair market value that means you will pay the same interest as if you borrow from a bank
thank you very much
Philip Kwok, CPA, CGA
Newbie
Jun 22, 2019
5 posts
1 upvote
Toronto
Hi PhilipK,

I am running a small business and I have several shareholders.
These shareholders hold different class of non-voting shares so I pay them different and irregular dividends.
However I found some mistakes in these dividends paid out during the past 2 years and I am going through a painful process of restatementing their T5s.

My question is: do I also need to restate their personal income tax (T1) as well as my corporate tax (T2) for the past 2 years? would this raise any red flags from CRA?

thanks.
Jr. Member
Sep 27, 2010
169 posts
43 upvotes
Toronto
PhilipK796978 wrote:
it doesn't matter if your supplier charged HST or not, if your sales world wide is over 30000, then you need to charge your customers HST
Is it considered my own sales, or am I getting a royalty or commission? In my case, all I do is upload designs, the company does the marketing, sales, manufacturing, printing, etc. Then I get a cut. Anyone else can do the same and upload designs.
PhilipK796978 wrote: for retroactively, no, I don't think you can do that. first, the corporation need to exist to earn income, 2nd, all the invoice probably paid to you personally, not to the name of the corporation, therefore, it is personal income.
Good point. Right now, the invoice is paid to my paypal under my name. But I guess I could change my paypal to a business account. And incorporate as MyName Inc.
Member
User avatar
Oct 30, 2017
250 posts
71 upvotes
Ottawa, Ontario
fairbairn wrote: Thanks for the response Philip. I am selling goods that are zero-rated and shipping within Canada only. Does the $30,000 mean sales to customers in Quebec or worldwide? I plan on registering gst/hst and pst but not sure if required for the others.
$30000 to world wide.
for sales tax, these are all you need to registry, PST, QST . if you need other license or not, you should do some research to find out.
thank you very much
Philip Kwok, CPA, CGA
Member
User avatar
Oct 30, 2017
250 posts
71 upvotes
Ottawa, Ontario
ghuraba wrote: Is it considered my own sales, or am I getting a royalty or commission? In my case, all I do is upload designs, the company does the marketing, sales, manufacturing, printing, etc. Then I get a cut. Anyone else can do the same and upload designs.



Good point. Right now, the invoice is paid to my paypal under my name. But I guess I could change my paypal to a business account. And incorporate as MyName Inc.

Well, the most important piece of document is your bill. all sales should have a bill related. Where the $$ deposit doesn't really matter, because you can have a business paid your wife's bank, there is no problem with that. However, having a bank belongs to your corporation will make life alot easier for you when you prepare your book and file your return.

I hope I helped. if you need any more help when preparing the corporate return, let me know.
thank you very much
Philip Kwok, CPA, CGA
Newbie
Jun 17, 2019
5 posts
Hello,

Can I charge depreciation for Furniture and Fixture, Machinery and Equipment at the rate of 10% and Computer at the rate of 20% for Financial Statement purpose? For restaurant business, if I can't charge depreciation for vehicle, should I include fuel, maintenace, insurance in vehicle expense? How can I charge mileage?

Thank you in advance.

Sincerely,

Sajib
Member
User avatar
Oct 30, 2017
250 posts
71 upvotes
Ottawa, Ontario
websajib wrote: Hello,

Can I charge depreciation for Furniture and Fixture, Machinery and Equipment at the rate of 10% and Computer at the rate of 20% for Financial Statement purpose? For restaurant business, if I can't charge depreciation for vehicle, should I include fuel, maintenace, insurance in vehicle expense? How can I charge mileage?

Thank you in advance.

For financial statement, amortization has needs to be a reasonable amount. However, you can put a note there saying Management has decided to reduce annually rate. as well, it depends on the user of this statement, if the creditor does not accept with this, then no.

yes, you can charge related cost of the operating of vehicle. you can charge based on KM usage

Sincerely,

Sajib
thank you very much
Philip Kwok, CPA, CGA
Newbie
Jun 22, 2019
5 posts
1 upvote
Toronto
Hi PhilipK,

I am running a small business and I have several shareholders.
These shareholders hold different class of non-voting shares so I pay them different and irregular dividends.
However I found some mistakes in these dividends paid out during the past 2 years and I am going through a painful process of restatementing their T5s.

My question is: do I also need to restate their personal income tax (T1) as well as my corporate tax (T2) for the past 2 years? would this raise any red flags from CRA?

thanks.
Member
User avatar
Oct 30, 2017
250 posts
71 upvotes
Ottawa, Ontario
thebigfish325 wrote: Hi PhilipK,

I am running a small business and I have several shareholders.
These shareholders hold different class of non-voting shares so I pay them different and irregular dividends.
However I found some mistakes in these dividends paid out during the past 2 years and I am going through a painful process of restatementing their T5s.

My question is: do I also need to restate their personal income tax (T1) as well as my corporate tax (T2) for the past 2 years? would this raise any red flags from CRA?

thanks.
Hi,
correct me if I am wrong, your dividends declared did not reconcile with T5, is that right? now, we have 2 issues, these shareholders might have over/under paid tax due to mistaked T5, therefore, you need to be very careful to clarify how much was over/under stated. 2nd, since dividend declared might be wrong, you might have issue with the shareholder loan related to the ITA section 15 issue. I like you to give me declare of how each shareholder is over/under and I can see what I can suggest you. you can private msg me since this is a personal issue.
thank you very much
Philip Kwok, CPA, CGA
Jr. Member
Sep 27, 2010
169 posts
43 upvotes
Toronto
PhilipK796978 wrote: Well, the most important piece of document is your bill. all sales should have a bill related. Where the $$ deposit doesn't really matter, because you can have a business paid your wife's bank, there is no problem with that. However, having a bank belongs to your corporation will make life alot easier for you when you prepare your book and file your return.

I hope I helped. if you need any more help when preparing the corporate return, let me know.
Thanks. Yes, I will keep you in mind.
Jr. Member
Sep 27, 2010
169 posts
43 upvotes
Toronto
PhilipK796978 wrote: Hi,
depending on your current personal income, income in corporation is only being tax at less than 15%, so if you are having personal income at a higher than this rate area, it is worth it, right? as for corporate tax preparing, you can contact me in private for more detail.

in your example, what is CST? in Canada, we only have GST, or HST. if you mean GST or HST, then it is what they charged, and this amount if you need to pay, it will be your input tax credit.
It looks like in some cases, they are charging 5% and in others they are charging 13%. I am assuming the 5% is GST and 13% is HST depending on the province the customer is buying from.
Member
User avatar
Oct 30, 2017
250 posts
71 upvotes
Ottawa, Ontario
ghuraba wrote: It looks like in some cases, they are charging 5% and in others they are charging 13%. I am assuming the 5% is GST and 13% is HST depending on the province the customer is buying from.
Yes, that is correct. in province with HST, you will see 13 but in province like BC, only will see GST
thank you very much
Philip Kwok, CPA, CGA
Sr. Member
User avatar
Dec 21, 2015
725 posts
350 upvotes
Canada
Hi, Thanks for giving back to the community.
My questions are:
  • Can forex trading be considered as a side buisness?
  • Do I need to justify (have a supporting document) for my Business expense use of home? (like have a document explaining how I came about the number)
  • My side business exeeds 30k a year so I registered gsthst (Ontario) however 100% of my said income is from overseas payment (I run a web service) Do I still need gsthst account?
Member
User avatar
Oct 30, 2017
250 posts
71 upvotes
Ottawa, Ontario
FJF23J12DAZ wrote: Hi, Thanks for giving back to the community.
My questions are:
  • Can forex trading be considered as a side buisness?
  • Do I need to justify (have a supporting document) for my Business expense use of home? (like have a document explaining how I came about the number)
  • My side business exeeds 30k a year so I registered gsthst (Ontario) however 100% of my said income is from overseas payment (I run a web service) Do I still need gsthst account?
you mean currency trading? cyber currency? if it is, yes it is a business. currency trading is the same as buying bonds or stocks

yes, you need supporting documents for home office, and you need to allocate an area for home office, may be a room

if you are doing cyber currency only, then you don't fall into supply goods, meaning this business doesn't need to registry HST. that is only when you are only trading it and get business gain/loss. if you are using this trade to purchase somethings else to sell, that will be different
thank you very much
Philip Kwok, CPA, CGA
Newbie
Jan 10, 2014
8 posts
1 upvote
Hi Philip,

I have a question re the income taxation on CCPC's passive investment income for your kind comments. If the investment income is "eligible dividend income" generated from investment in Canada publicly listed corporations, S3 dividend seems 100% refundable once CCPC distributes the equivalent eligible dividend to its shareholder. Is the above understanding correct?

If so, is is fair to say the best way in order to keep retained earning within CCPC is making investment in public company and receiving eligible dividend.

Thanks
Member
User avatar
Oct 30, 2017
250 posts
71 upvotes
Ottawa, Ontario
rainwindcloud wrote: Hi Philip,

I have a question re the income taxation on CCPC's passive investment income for your kind comments. If the investment income is "eligible dividend income" generated from investment in Canada publicly listed corporations, S3 dividend seems 100% refundable once CCPC distributes the equivalent eligible dividend to its shareholder. Is the above understanding correct?

If so, is is fair to say the best way in order to keep retained earning within CCPC is making investment in public company and receiving eligible dividend.

Thanks
Hi,
all dividends income tax are refundable even if they are non eligible. the eligible or non eligible dividends are only get taxed differently when paid to personal. Therefore, even your corporation received non eligible dividends, it will still only to be part 4 tax and will refund once dividends declare to shareholders.
thank you very much
Philip Kwok, CPA, CGA
Newbie
Jan 10, 2014
8 posts
1 upvote
Thanks for swift reply. But other type's passive income (interest, REIT distribution) is subject to non-refundable tax (about 8% federal and 12% provincial in BC)? It looks the only exception is eligible dividend income earned by CCPC, whereby 100% tax is refundable.

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