As the name suggest, Canadian Corporation Income Tax is paid by corporations in Canada, and these are divided into two distinct groups. There are resident or non-resident corporations and then private or public corporations. The easiest way to show the difference is to explain how they pay tax. For a company based in Canada- therefore a resident corporation ? there is the need to pay tax on all income, while one based elsewhere would only pay tax relating to business they carried out in Canada.
Resident corporations can be either private, or public organisations, and a public one will be listed on the Canadian Stock Exchange but both need to pay Canadian Corporation Income Tax. A private corporation will have to be run at least 50% by Canadians and as such, may find that they will be eligible for certain tax credits such as being exempt from paying provincial tax or business tax credit. As the criteria for paying Canadian Corporation Income Tax is so complicated, it is not surprising that there will be people who are not sure whether or not they are paying the correct amount of tax. Mistakes can be costly, so it is important that they are avoided and for this reason, many people decide that they will employ someone with greater knowledge and experience than themselves to work out just what they need to pay.
One of the things that people will find confusing is the percentages that need to be paid when it comes to Canadian Corporation Income Tax. A resident corporation will pay 38% on worldwide income and non residential pay the same percentage but just on their Canadian income. It is however the percentages added that will catch out a lot of people. 4% can be added as a surtax, while there are decreases of 10% for some provinces and 7% if Canadian process were used. This is before the small business tax credit can lower federal income tax by an additional 16% for certain levels of earning. Clearly the Canadian Corporation Income Tax system will confuse and confound all who are not fully conversant with its nuances.
Once the amount to be paid in Canadian Corporation Income Tax has been determined, then there are the refundable items. Certain corporations can get back large proportions of tax that would be payable on funds received from other corporations in Canada. $1 of every $3 paid in tax can be refunded when dividends have been paid out to shareholders.
It would be incredible difficult for people who are not experts to wade through all the rules and regulations and when it comes to Canadian Corporation Income Tax and get the figures right. Fortunately there are people who have studied for years and are able to keep up to date with any changes that are made. To make sure that you do not fall foul of any of the rules regarding Canadian Corporation Income Tax, – as if you do there could suddenly be a large bill to pay, and possibly the need to answer why you made the mistake, – you will be well advised to seek help and make sure you pay what you owe ? not a cent more and not a cent less.