Understanding business taxation in Canada is essential for every entrepreneur aiming to stay compliant and maximize profitability. The Canadian tax system offers a variety of deductions, credits, and incentives designed to support small and growing businesses. By planning strategically and filing accurately, companies can reduce their tax burden, stay audit-ready, and focus more on growth and innovation. Canadian corporations are subject to both federal and provincial tax rates, with small businesses often benefiting from reduced small business deductions. Businesses can claim expenses such as salaries, rent, and utilities, as well as access credits for research, innovation, and training.
Filing and managing business taxes in Canada involves a few structured steps to ensure compliance and efficiency. Whether you run a small business or a corporation, following these key stages helps you stay organized and avoid costly errors.
Register your business with the Canada Revenue Agency (CRA) to obtain a Business Number (BN) and set up your corporate tax account, GST/HST account, and payroll account if needed.
01Maintain accurate financial records of all income, expenses, invoices, and receipts throughout the year — this forms the basis for your tax return and deductions.
02Determine your taxable income after allowable deductions such as salaries, rent, utilities, and business expenses.
03File your T2 Corporate Income Tax Return (or T1 for sole proprietors) within six months of your fiscal year-end.
04Keep records for at least six years and be prepared for possible CRA reviews or audits to ensure ongoing compliance and transparency.
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