Information for Canadian

Small Businesses

This guide is available only in digital format.

RC4070(E) Rev.17
Is this guide for you?
Are you starting a new small business in Canada? Are you ■ payroll deductions
operating one already? Then this guide is for you. It will
■ income tax reporting and payment
introduce you to the Canada Revenue Agency (CRA)
programs and online services you need to know about, and ■ audits (how to prepare for and handle an audit)
give an overview of your obligations and entitlements
under the laws that we administer. ■ objections and appeals

Many activities of a small business are subject to different ■ digital services

forms of taxation. This guide will help you with each of For details on some topics, we will refer you to other
these, and will explain how to plan for taxes, keep records, publications which are available at canada.ca/cra-forms.
and make and report payments.
Note
It will also explain all of the following: This guide includes no GST/HST information that is
■ different kinds of business structures specific to small businesses that are financial institutions
for GST/HST purposes. For this information, see
■ goods and services tax/harmonized sales tax (GST/HST) Guide RC4022, General Information for GST/HST
Registrants.
■ excise tax, excise duties, and the softwood lumber
products export charge

The success of small businesses is an essential part of Canada’s economic growth. At the CRA, our goal is to provide all the
support we can. We work closely with small businesses to improve services, reduce paperwork, reduce the cost and time of
compliance, and maintain confidence in Canada’s tax system.

Our publications and personalized correspondence are available

in braille, large print, e-text, or MP3 for those who have a visual
impairment. Find more information
at canada.ca/cra-multiple-formats or by calling 1-800-959-5525.
This guide uses plain language to explain the most common tax situations. It is provided for information only and does not
replace the law.

Unless otherwise stated, all legislative references are to the Income Tax Act and the Income Tax Regulations.
La version française de cette publication est intitulée Renseignements pour les petites entreprises canadiennes.

canada.ca/taxes
Table of contents
Page Page
Definitions .......................................................................... 4  Chapter 6 – Audits ............................................................... 25 
What is an audit?................................................................... 25 
Chapter 1 – Setting up your business ............................. 7 
Underground economy........................................................ 25 
Finding information on the web ........................................ 7 
Tax alert .................................................................................. 26 
Business structure ................................................................ 7 
Sole proprietorship ........................................................... 8  Chapter 7 – Objections and appeals ................................ 26 
Partnership ........................................................................ 8  Income Tax ............................................................................. 26 
Corporation ....................................................................... 8  How to register a formal dispute ....................................... 26 
Corporation’s debts .......................................................... 8 
Chapter 8 – At your service ................................................ 27 
Business number .................................................................. 8 
Digital services for businesses ............................................ 27 
Keeping records .................................................................... 10 
Advance income tax rulings and interpretations ............ 28 
Legal requirements for keeping records....................... 10 
Scientific Research and Experimental Development
Retaining and destroying records ................................. 10 
(SR&ED) Program ............................................................. 28 
Bringing assets into a business........................................... 11 
Canada business service centres ........................................ 28 
Buying a business ............................................................. 11 
Innovation, Science and Economic
Chapter 2 – Goods and services tax/ harmonized Development Canada ....................................................... 28 
sales tax (GST/HST) ........................................................ 12  Your rights, entitlements, and obligations ....................... 28 
What is the GST/HST? ........................................................ 12  What is the Voluntary Disclosures Program? .................. 29 
Who pays the GST/HST?.................................................... 12  Cancel or waive penalties or interest ................................. 29 
Do you have to charge the GST/HST? ............................. 12 
Important dates for businesses ......................................... 30 
Should you register for the GST/HST? ............................ 13 
Due dates ............................................................................ 30 
Fiscal year for GST/HST purposes ................................... 14 
Reporting periods................................................................. 14  Addresses on our website .................................................. 31 
Input tax credits .................................................................... 15 
Calculating your net tax ...................................................... 16  Forms and publications ...................................................... 32 
Bad debt adjustments....................................................... 16  Guides ..................................................................................... 32 
GST/HST returns ................................................................. 16  Pamphlets, brochures, and slips ......................................... 32 
Filing and remitting due dates ........................................... 16  Forms....................................................................................... 32 
Monthly and quarterly filers .......................................... 16  Archived Interpretation bulletins ...................................... 33 
Income Tax Folios ................................................................. 33 
Chapter 3 – Excise taxes, excise duties, the softwood Information circulars ............................................................ 33 
lumber products export charge, and the Air Excise duty memoranda ...................................................... 33 
Travellers Security Charge ............................................ 17  Excise tax and special levies memoranda ......................... 33 
What are excise taxes and excise duties?.......................... 17  GST/HST memorandum ..................................................... 33 
Softwood lumber products export charge ....................... 17 
Air Travellers Security Charge........................................... 17  Online services ..................................................................... 34 
Online services for individuals ........................................... 34 
Chapter 4 – Payroll deductions and remittances .......... 18  Online Services – Small businesses and
Do you need to register for a payroll program self-employment ................................................................ 34 
account? .............................................................................. 18  MyCRA – Mobile app .......................................................... 34 
What to deduct from your employees’ remuneration ... 18  Electronic payments ............................................................. 35 
Canada Pension Plan/Quebec Pension Plan ............... 18 
Employment insurance.................................................... 18  For more information .......................................................... 36 
Income tax .......................................................................... 19  What if you need help? ........................................................ 36 
Remittances........................................................................ 19  Direct deposit......................................................................... 36 
How to report payroll deductions ..................................... 19  Forms and publications ....................................................... 36 
Electronic mailing lists ......................................................... 36 
Chapter 5 – Income tax ....................................................... 19  Tax Information Phone Service (TIPS) .............................. 36 
Accounting for your earnings ............................................ 19  Teletypewriter (TTY) users ................................................. 36 
The accrual method .......................................................... 19  The Taxpayer Bill of Rights ................................................. 36 
The cash method ............................................................... 19  Service complaints ................................................................ 36 
Fiscal period for income tax purposes .............................. 19  Reprisal complaint ................................................................ 36 
Income .................................................................................... 20  Tax information videos ........................................................ 36 
Expenses................................................................................. 22 
How to report your business income................................ 24 
Sole proprietor .................................................................. 24 
Partnership ........................................................................ 24 
Corporation ....................................................................... 24 

canada.ca/taxes 3
Definitions
Adjusted cost base (ACB) – the cost of a property plus any Bad debt – money owed to you that you cannot collect.
expenses you incur to acquire it, such as commissions and
Balance – the amount left in an account after recording all
legal fees.
deposits and withdrawals.
The cost of a capital property is its actual or deemed cost, Budget – a plan outlining an organization’s financial and
depending on the type of property and how you acquired operational goals.
it. It also includes capital expenditures, such as the cost of
additions and improvements to the property. You cannot Business expenses – costs that are considered reasonable
add current expenses, such as maintenance and repair that your business incurs to operate and earn income. You
costs, to the cost base of a property. can deduct business expenses for tax purposes.
For more information on ACB, see archived Interpretation Business number (BN) – a nine-digit number given to your
Bulletin IT-456R, Capital Property – Some Adjustments to Cost business to simplify its dealings with the federal
Base, and its Special Release. government and the provincial, territorial, and municipal
governments. A business will have one BN.
Appeal – a process by which you ask a court to review the
decision that the CRA’s Appeals Branch made for the Calendar year – a period of twelve months that begins on
Minister of National Revenue. January 1 and ends on December 31.
Arm’s length – refers to a relationship or a transaction Canada Pension Plan (CPP) – a pension plan that provides
between persons who act in their separate interests. An contributors and their families with partial replacement of
arm’s length transaction is generally a transaction that earnings in the case of retirement, disability or death.
reflects ordinary commercial dealings between parties
Capital cost allowance (CCA) – you may have acquired
acting in their separate interests.
depreciable property like a building, furniture, or
■ Related persons are not considered to deal with each equipment to use in your business. You cannot deduct the
other at arm’s length. Related persons include initial cost of these properties in the calculation of the net
individuals connected by blood relationship, marriage, income of the business or professional activities of the year.
common-law partnership, or adoption (legal or in fact). A However, since these properties wear out or become
corporation and another person or two corporations may obsolete over time, you can deduct the cost over a period of
also be related persons. several years. This deduction is called CCA.
■ Unrelated persons may not be dealing with each other at Capital gains – the profit you make when you sell, or are
arm’s length at a particular time. Each case will depend considered to have sold, a capital property for more than
upon its own facts. The following criteria will be the total of its adjusted cost base and the amount it cost to
considered to determine whether parties to a transaction sell it.
are not dealing at arm’s length:
Capital loss – the loss you realize when you sell, or are
– whether there is a common mind which directs the considered to have sold, a capital property for less than the
bargaining for the parties to a transaction total of its adjusted cost base and the amount it cost to
sell it.
– whether the parties to a transaction act in concert
without separate interests; “acting in concert” means, Capital property – generally, any property of value,
for example, that parties act with considerable including depreciable property, that you buy for
interdependence on a transaction of common interest investment purposes or to earn business income. Common
types of capital property include principal residences,
– whether there is de facto control of one party by the cottages, stocks, bonds, land, buildings, and equipment
other because of, for example, advantage, authority used in a business or rental operation.
or influence
Commercial activity – any business or adventure or
For more information, see Income Tax Folio S1-F5-C1, concern in the nature of trade carried on by a person but
Related persons and dealing at arm’s length. does not include either:
Articles of incorporation – legal document filed with a ■ the making of exempt supplies
provincial or territorial government, or the federal
government, which sets out the purpose and regulations of ■ any business, adventure or concern in the nature of trade
a corporation. carried on without a reasonable expectation of profit by
an individual, a personal trust, or a partnership where all
Assessment – the CRA’s formal calculation of taxes, duties the members are individuals
or other amounts to be paid or refunded. This definition
also applies to a reassessment. Commercial activity also includes the making of a supply
of real property, other than an exempt supply, by any
Assets – any property that you or your business owns. person, whether or not there is a reasonable expectation of
Assets include money, land, buildings, investments, profit, and anything done in the course of making the
inventory, cars, trucks, boats, and other valuables. Assets supply or in connection with the making of the supply.
can also include intangibles such as goodwill.

4 canada.ca/taxes
Confidentiality – the CRA protects income tax, GST/HST, the GST/HST paid or payable on property and services you
excise duty, excise tax, and other related tax and duty acquired to make exempt supplies.
information. The only people with access to this
Fair market value (FMV) – generally, it is the highest dollar
information are those who are authorized by law or those
value that you can get for your property or a service in an
whom the taxpayer, registrant, or licensee has either:
open market from an informed and willing buyer. You
■ authorized online through My Account at must be an informed and willing seller and deal with the
canada.ca/my-cra-account for Individuals or buyer at arm’s length.
My Business Account at
Fiscal period – the 12-month period for reporting
canada.ca/my-cra-business-account
income-earning activities. The fiscal period may or may not
■ authorized by completing Form RC59, Business Consent match the calendar year. Your business creates its fiscal
for Access by Telephone and Mail or Form T1013, period when it files its first income tax return.
Authorizing or Cancelling a Representative
Goodwill – an intangible asset that belongs to a business.
Corporation – a form of business authorized by federal, When you purchase a business at arm’s length for more
provincial, or territorial law to act as a separate legal entity. than the fair market value of its assets less its liabilities, the
Its purpose and by-laws are set out in its articles of excess is goodwill.
incorporation. A corporation may be owned by one or
Income – the total sum of money or other assets you earn in
more persons.
a period of time from your work, business, or investments.
Cost of goods sold – the actual cost of items sold in the It includes money from salaries, wages, benefits, tips,
normal course of business during a specific period. commissions, and profits from operating a business
or profession.
Debt – an amount that is owed. If you borrow money or
buy something on credit, you have created a debt. Income statement – a financial statement that sums up the
profits or losses of your business for a specified period of
Deemed – a legal term used for something that is
time. An income statement is also known as a profit and
considered something else in a specific situation. It is also
loss statement.
used to describe something that has not yet happened but is
considered to have happened in a specific situation. Information slips – the forms that an employer, a trust, or a
business prepares to tell employees and the CRA how
Depreciable property –the property on which you can
much income the employee earned, and how much tax
claim CCA. It is usually capital property from a business or
was deducted.
property. The capital cost can be written off as CCA over a
number of years. You usually group depreciable properties Input tax credit (ITC) – a credit that GST/HST registrants
into classes. Diggers, drills, and tools that cost $500 or more may be eligible to claim to recover the GST/HST paid or
belong in Class 8. You have to base your CCA claim on the payable for property or services they acquired, imported
rate assigned to each class of property. into Canada, or brought into a participating province for
use, consumption, or supply in the course of their
Disposition – generally, this is the disposal of property by
commercial activities.
sale, gift, transfer, or change in use.
Instalments – a periodic payment you have to pay to the
Duty – the tax imposed under the Excise Act, 2001 and the
CRA on certain dates. For example, GST/HST, instalments
Excise Act, as well as the tax charged under certain sections
are periodic payments that may also be payable by persons
of the Customs Tariff.
who file annual returns.
Election – a formal choice made between different options
Inventory – generally, the total value of the goods on hand
available under tax legislation that may be applied to your
that your business intends to sell, use to manufacture
financial tax affairs. Generally, you make an election using
goods, or use to provide a service. In certain cases,
a specific form and have to submit it by a set deadline.
inventory can include services.
Employment insurance premiums – amounts that an
Lease – a contract to rent property to a person for a set
employer has to deduct from the employees’ insurable
period of time at a specified rate.
earnings. These deductions are sent to the CRA. Employers
must also pay their share of employment Liability – money or a debt you or your business owes.
insurance premiums.
Licensee – a person who holds a licence issued under the
Employment Insurance Program – a federal program that Excise Act, 2001, the Excise Tax Act, or the Excise Act.
gives financial support to Canadians if they are temporarily
Loss – when your expenses are more than your revenues.
out of work. The employee and the employer pay amounts
into the Employment Insurance Fund. Motor vehicle – an automotive vehicle designed or adapted
for use on highways and streets. A motor vehicle does not
Excise – taxes and duties on the manufacture, sale, or use of include a trolley bus or a vehicle designed or adapted to
goods and items. use only on rails.
Exempt supplies – supplies of property and services that Net income – the income that is the result of your gross
are not subject to the GST/HST. This means you do not income minus your allowed expenses.
charge GST/HST on your supplies of these property and
services. You generally cannot claim input tax credits for

canada.ca/taxes 5
Non-arm’s length – generally refers to a relationship or ■ a clearly marked emergency medical service vehicle used
transaction between persons who are related to each other. to carry paramedics and their emergency
However, a non-arm’s length relationship might also exist medical equipment
between unrelated individuals, partnerships, or
Payroll deductions – amounts deducted from an
corporations, depending on the circumstances. For more
employee’s wages or salary, including deductions for
information, see the definition of “arm’s length.”
income tax, Canada Pension Plan (CPP) or Quebec Pension
Notice of assessment – a document that the CRA sends to Plan (QPP) contributions, and Employment Insurance
you after it assesses your tax return or rebate application. It (EI) premiums.
tells you if the CRA made any changes to your return or
These deductions are sent to the CRA regularly. Employers
rebate application and explains the changes. The notice of
must also pay their share of CPP or QPP contributions and
assessment also tells you if you owe tax or will get a refund.
EI premiums.
Objection – the first step in the formal process to resolve a
Penalties – amounts that you have to pay if you do not file
dispute between you and the CRA.
returns or pay amounts owing on time. You have to pay
Operating expenses – the routine costs of running your penalties if you knowingly, or under circumstances that
business. They include expenses for gasoline, electricity, amount to gross negligence, make a false statement, leave
and office supplies. They do not include the cost of out information on your return, or do not give the required
buildings or machinery that are expected to last for several information on a form that you must fill out.
years. See the related topic “capital cost allowance.”
Person– a person means an individual, a partnership, a
Participating province – a province that has harmonized its corporation, the estate of a deceased individual, a trust, or
provincial sales tax with the GST to implement the any organization such as a society, a union club, an
harmonized sales tax (HST). Participating provinces association, or a commission.
include New Brunswick, Newfoundland and Labrador, Prepaid expense – an expense you pay in advance. It is an
Nova Scotia, Ontario, and Prince Edward Island. They do expense that you will incur for property and services in a
not include the Nova Scotia offshore area or the later fiscal period, or an amount you pay in interest, income
Newfoundland offshore area except to the extent that tax, municipal tax, rent, dues, or insurance for later fiscal
offshore activities are carried on in that area. periods. A prepaid expense is listed on your balance sheet
Passenger vehicle – a motor vehicle designed or adapted as an asset at the end of a fiscal period.
primarily to carry people on highways and streets. It seats a Proceeds of disposition – generally, the amount you
driver and no more than eight passengers. Most cars, received or will receive for your property. In most cases, it
station wagons, vans, and some pick up trucks are refers to the sale price of the property. It could also include
passenger vehicles. They are subject to the limits for CCA, compensation you received for property that has been
interest, and leasing. A passenger vehicle does not include: destroyed, expropriated, or stolen.
■ an ambulance Quebec Pension Plan (QPP) – a pension plan equivalent to
the Canada Pension Plan (CPP) but offered in the province
■ a clearly marked police or fire emergency
of Quebec. The Quebec provincial government handles the
response vehicle
contributions to the QPP.
■ a motor vehicle you bought to use more than 50% as a
Rates of tax – the percentage of income for each income tax
taxi, a bus used in the business of transporting
bracket that must be paid as tax. The Canadian Parliament
passengers, or a hearse used in a funeral business
sets the basic income tax rates. These tax rates increase with
■ a motor vehicle you bought to sell, rent, or lease in a the amount of taxable income.
motor vehicle sales, rental, or leasing business Records – documents such as account books, sales and
■ a motor vehicle (except a hearse) you bought to use in a purchase invoices, contracts, bank statements, and
funeral business to transport passengers cancelled cheques. Your records must be in English or
French. You must keep them organized at your business or
■ a van, pick up truck, or similar vehicle that seats no more residence in Canada. You must keep your records for at
than the driver and two passengers and that, in the tax least six years from the end of the last fiscal year they relate
year you bought or leased it, was used more than 50% to to. You must make these books and documents available to
transport goods and equipment to earn income our CRA officers when requested.
■ a van, pick up truck, or similar vehicle that, in the tax Refund – an amount of money the CRA gives back to you
year you bought or leased it, was used 90% or more to as a result of an assessment or reassessment of your
transport goods, equipment, or passengers to tax return.
earn income
Regional excise duty office – an office that serves as the
■ a pick up truck that, in the tax year you bought or leased CRA’s liaison with you on matters relating to the excise
it, was used more than 50% to transport goods, duty program.
equipment, or passengers to earn or produce income at a
Registrant – a person that is registered or has to be
remote work location or at a special work site that is at
least 30 kilometres from the nearest community with a registered for the GST/HST.
population of at least 40,000

6 canada.ca/taxes
Remittance – a payment you send through a financial Zero-rated supplies – supplies of property and services
institution or directly to the CRA to pay CPP or QPP that are taxable at a rate of 0%. This means there is no
contributions, EI premiums, income tax, or GST/HST. It GST/HST charged on these supplies, but GST/HST
also includes your employer’s share of CPP contributions registrants may be eligible to claim an input tax credit (ITC)
and EI premiums. for the GST/HST paid or payable on property and services
acquired to provide these supplies.
Reserves – funds you set aside to cover future expenses,
losses, or claims.
Chapter 1 – Setting up your
Salary – the amount an employer pays an employee for
work done. Each employer records this type of business
employment income on a T4 slip.
Finding information on the web
Shareholder – the owner of shares of a corporation.
You can find information for businesses and search by topic
Social insurance number (SIN) – a nine-digit number that at canada.ca/business.
identifies you for federal income tax purposes. You need
this number in order to work in Canada or to have access to You can also find a list of websites for small businesses on
government programs and benefits. Everyone who files an page 32.
income tax and benefit return must give their SIN. For more information on starting a business, see Canada
Sole proprietorship – a form of business that one Business Network (Government Services for Canadian
individual owns entirely and that is not incorporated. Businesses) at canadabusiness.ca. There you will find
information from the federal government, provincial and
Spouse – for income tax purposes, the person you are
territorial governments, and other sources.
legally married to. The term common-law partner includes
partners who meet certain conditions. For more
information, see the General Income Tax and Benefit Guide. Business structure
Supply – the provision of property or a service in any way, A business is an activity that you intend to carry on for
including sale, transfer, barter, exchange, licence, rental, profit and there is evidence to support that intention.
lease, gift or disposition. The definition of a business from the Income Tax Act and the
Tax centres – CRA offices located in different parts of Excise Tax Act includes:
Canada where we process tax returns.
■ a profession
Tax payable – the amount of income tax that you have to
■ a calling
pay based on the amount of your taxable income for the tax
year. It is also the amount of tax payable on a taxable ■ a trade
supply (for GST/HST purposes).
■ a manufacture
Tax services offices (TSO) – CRA offices located across the
country that service various local areas. For the address of ■ an undertaking of any kind
your tax services office, go to canada.ca/cra-offices. It does not include an office or employment. For income tax
Taxable benefits – amounts of money, or the value of purposes only, a business also includes an adventure or
property or services, that an employer pays or gives an concern in the nature of trade.
employee in addition to their salary. For example, the For more information, see archived Interpretation
premium an employer pays to a provincial or territorial Bulletin IT-459, Adventure or Concern in the Nature of Trade.
health insurance plan for an employee is a taxable benefit.
For GST/HST purposes only, a business also includes any
Taxable income – the amount of income after all allowable
activity whether or not it is engaged in for profit and any
deductions have been subtracted from net income. The
regular or continuous activity that involves supplying
CRA uses this amount to calculate tax payable.
property by way of lease, licence or similar arrangement.
Taxable supplies – these are supplies of property and
The three most common types of business structures are:
services that are made in the course of a commercial
activity and are subject to GST/HST (including zero-rated ■ sole proprietorship
supplies).
■ partnership
Tax year – the term used to identify the period of time such
as a calendar year or fiscal period to assess tax amounts. ■ corporation
Tobacco products – manufactured tobacco, packaged raw The type of structure you choose for your business has a
leaf, or cigars. Generally, you have to have a tobacco licence significant effect on the way you report your income. The
from the CRA to manufacture tobacco products in Canada. business structure impacts the type of tax returns you file
each year, and many other matters.
Workers’ compensation – money paid as a benefit to you if
you are injured on the job. The money is paid out of an
insurance plan funded by employers and administered by a
provincial or territorial workers’
compensation organization.

canada.ca/taxes 7
Sole proprietorship When forming a corporation, the owners transfer money,
A sole proprietorship is an unincorporated business that is property, or services to the corporation in exchange for
owned by one individual. It is the simplest kind of shares. The owners of these shares are shareholders.
business structure. You can buy and sell shares of a corporation without
The owner of a sole proprietorship has sole responsibility affecting the corporation’s existence. A corporation
for making decisions, receives all the profits, claims all continues to exist unless it winds up, amalgamates, or gives
losses, and does not have separate legal status from the up its charter for reasons such as bankruptcy.
business. If you are a sole proprietor, you also assume all You set up a corporation by completing articles of
the risks of the business. The risks extend even to your incorporation and sending the documents to the
personal property and assets. appropriate provincial, territorial, or federal governments.
If you are a sole proprietor, you pay personal income tax on
the net income generated by your business. Corporation’s debts
You may choose to register a business name or operate As a shareholder of your corporation, you have limited
under your own name or both. liability. This means that you and the other shareholders
are not responsible for the corporation’s debts. However,
limited liability may not always protect you from creditors.
Partnership For example, if a smaller, more closely held corporation
A partnership is an association or relationship between two wants to borrow money from a bank or other creditor, the
or more individuals, corporations, trusts, or partnerships creditor may ask for the shareholder’s guarantee that the
that join together to carry on a trade or business. debt will be repaid. If you agree to this condition, you will
be personally liable for that debt if the corporation does not
Each partner contributes money, labour, property, or skills
pay it back.
to the partnership. In return, each partner is entitled to a
share of the profits or losses of the business. The business This applies to taxes owing as well. If your corporation
profits (or losses) are usually divided among the partners owes taxes and has obtained a loan or secured a line of
based on the partnership agreement. credit, an advance under the loan or line of credit can be
seized on account of the corporation’s tax arrears. Even
Like a sole proprietorship, a partnership is easy to form. In
though the proceeds of the advance have been paid to the
fact, a simple verbal agreement is enough to form a
CRA, the corporation is deemed to have received the
partnership. However, most partnerships are governed by
advance and is liable to the lender as such. When you have
a written agreement setting out rules for partners entering
personally guaranteed the loan or the line of credit for the
or leaving the partnership, the division of partnership
corporation, you and the corporation will be jointly
income, and other matters.
accountable for the amounts seized.
The partnership is bound by the actions of any member of
Directors may also be liable to pay amounts owed by the
the partnership, as long as these are within the usual scope
corporation if it has failed to deduct, withhold, remit or pay
of the operations.
amounts as required by the Income Tax Act, the Employment
A partnership is considered to be a person for GST/HST Insurance Act, the Canada Pension Plan, the Excise Act 2001,
purposes. Therefore, it is important that you structure your and the Excise Tax Act.
affairs in a clear and understandable manner, since your
For more information on director’s liability, see Information
reporting and remittance of GST/HST will depend on the
Circular IC89-2R3, Directors’ Liability.
type of structure you choose. If you are a partnership, you
may want to set up a separate bank account, have a written
partnership agreement, and take other steps to make sure Business number
that it is clear that the business is not a sole proprietorship.
Your first step to doing business with
For more information on partnerships, go to Income Tax the CRA
Folio S4-F16-C1, What is a partnership?
The first time you register a business with us, we assign it a
nine-digit business number (BN). The BN system is in place
Corporation to streamline the interactions between businesses and
A corporation is a separate legal entity. It can enter into the CRA.
contracts and own property in its own name, separately
The BN is part of a program account. There are four
and distinctly from its owners.
common CRA business program accounts. Their account
It may have some of the following features: identifiers are:
■ it is a separate legal entity with a lasting existence ■ RT – GST/HST
■ it can generally raise large amounts of capital (money or ■ RP – payroll deductions
other assets) more easily than a sole proprietorship
■ RC – corporation income tax
or partnership
■ RM – import/export
■ the shareholders cannot claim any loss the
corporation incurs

8 canada.ca/taxes
A program account number has three parts – a business Before you register for a BN, you need to decide on some
number, a program identifier, and a reference number. The details about your business operation. For example, decide
program account number is 15 characters, which includes: on the name of the business, its location, the legal structure
(sole proprietorship, partnership, or corporation), and the
■ the nine-digit BN to identify the business
fiscal year-end. You should have an idea of what the
■ a two-letter code to identify the program amount of sales your business will generate each year. This
information will help you complete Form RC1, Request for a
■ a four-digit reference number to identify each account in Business Number.
a program a business may have
If you are registering for a GST/HST account, it is
For example, your account number might look like this: important that you provide all of the information required
123456789 RP 0002 to register. If you register for the GST/HST and your
business claims a net tax refund, the refund may not be
If you had only one account (GST/HST for example), it paid if this information is inaccurate or incomplete.
would be designated as follows:
Notes
123456789 RT 0001 If you are a sole proprietor or a partner in a partnership,
When making payments or enquiries related to your you will use your social insurance number (SIN) to file
account, provide the nine-digit BN, the two-letter program your income tax and benefit return, even if you have
identifier, and the four-digit reference number. a BN.

You can register for a BN by Internet, telephone, fax, or If you decide to incorporate, you will need a BN to
mail. The Business Registration Online service identify your instalment payments of corporate income
at businessregistration.gc.ca is secure, easy to use, and tax to your corporate income tax account.
practical. It is a one-stop, self-serve application that lets you For more information about the BN, go
register for a BN and any of the four common CRA to canada.ca/taxes-register-business.
business program accounts. At the same time, you can
register for Ontario, New Brunswick, Nova Scotia, and
British Columbia programs. If your business’s mailing
Reasons to register
address is in Quebec, visit Revenu Québec’s website You only need to register for those business accounts for
at revenu.gouv.qc.ca. which you need a BN to meet your legal obligations.
Note For example, you do not have to register for the GST/HST
Not all businesses are required to have a BN. It is if you are a small supplier, unless you carry on a taxi
important that you review the information for each type business. You are a small supplier if your total revenues
of account before registering. For more information on from worldwide taxable supplies of property and services
these accounts and registering for any of these accounts, (including those of your associates) were $30,000 or less in
go to canada.ca/taxes-register-business. the last four consecutive calendar quarters combined and in
any single calendar quarter. The threshold is $50,000 if you
Are you doing business in Quebec? are a public service body such as a charity, non-profit
organization, municipality, university, public college,
For businesses located in Quebec, you have to register your school authority, or hospital authority.
program accounts for payroll, import-export, or
corporation income tax with the CRA. However, you will If you think your revenues will be more than $30,000
have to register your GST/HST program accounts with (or $50,000 if you are a public service body), it is probably
Revenu Québec, instead of the CRA, unless you are a wise to register for the GST/HST as soon as possible.
non-resident. Registering for the GST/HST is the same as registering for
a BN. However, once you are registered, you must charge
If you are registering for GST/HST program GST/HST on your taxable supplies of property and
accounts only services (other than zero-rated supplies). You would also
If you are registering for GST/HST program accounts only have to file a GST/HST return whether or not you are a
and you do not need to register for a BN with us. For more small supplier. You have to stay registered for at least one
information or to register, visit Revenu Québec’s website year before you can deregister if you are still a
at revenu.gouv.qc.ca or contact Revenu Québec at: small supplier.

Revenu Québec A person may incur a number of expenses in the course of

3800, rue de Marly starting a business, even before any taxable supplies are
Québec QC G1X 4A5 made. Registering for GST/HST early may give you certain
benefits. For example, if you register you may be eligible to
Telephone: 1-800-567-4692 claim input tax credits (ITCs) for the GST/HST paid or
Outside Canada: 1-418-659-4692 payable on property and services you acquire to start your
business when certain conditions are met. For more
Do you need a BN? information, see Guide RC4022, General Information for
GST/HST Registrants.
If you need any of the four common CRA program
accounts, you need a BN.

canada.ca/taxes 9
If you intend to import goods into Canada, you should What records should you keep?
open an import/export account before you import the You must keep records of all your income. Also, keep all
goods. This will help avoid delays at the port of entry. receipts, invoices, vouchers, and cancelled cheques
concerning outlays of money. These outlays include:
If you plan to have employees, you should open a payroll
deductions account. This account will let you make regular ■ salaries and wages
payroll deductions for your employees and make payroll
deduction payments on time. For information on how to ■ operating expenses such as rent, advertising, and
make payroll deductions, see “Chapter 4 – Payroll capital expenditures
deductions and remittances.” ■ miscellaneous items such as charitable donations
If you import goods into Canada, your records must show
Keeping records the price you paid for imported goods and list their origin
The benefits of keeping records and description. They must also include any paperwork
about the reporting, release, and accounting of the goods,
1. Complete and organized records help identify the as well as the payment of duties and taxes.
sources of your income and can help you decide if
you should charge GST/HST. Your records must be permanent
You may receive cash or property from many different Regardless of the accounting method you use, your records
sources. If you do not have records showing your must be permanent. They must contain a systematic
income sources, you may not be able to prove that some account of your income, deductions, credits, and other
sources are non-business or non-taxable for income tax information you need to report on your income tax and
purposes. You also need to have complete and GST/HST returns.
organized records to show that your supplies are
zero-rated or not subject to GST/HST. What information should your records contain?
Your records must:
2. Complete and organized records can mean
■ let you determine how much tax you owe, or the tax,
tax savings.
duties, or other amounts to be collected, withheld, or
Good records serve as a reminder of the expenses you
deducted, or any refund or rebate you may claim
can deduct and the input tax credits (ITCs) you may be
eligible to claim. If you do not record your transactions, ■ be supported by vouchers or other necessary source
you may forget some of your expenses or ITCs when documents. If you do not keep your receipts or other
you prepare your income tax or GST/HST returns. For vouchers to support your expenses or claims, and there is
more information on ITCs, see Guide RC4022, General no other evidence available, we may reduce the expenses
Information for GST/HST Registrants. or claims you have made
Your records must meet the requirements of the law.
3. Complete and organized records are helpful if we Therefore, incomplete records that use approximate
audit your income tax or GST/HST returns. amounts instead of actual amounts are not acceptable.
If auditors cannot determine your income or taxable
revenues because your records are incomplete, they will Note
have to use other methods to establish your income and If you are required to charge GST/HST, you have to
GST/HST net tax. This will cost you time. In addition, if include specific information on your invoices. The
your records do not support your claims, they could information you have to include depends on the amount
be disallowed. of the invoice. For more information, see
Guide RC4022, General Information for GST/HST
Registrants.
4. Your records will help keep you informed about the
financial position of your business.
You need good records to establish your profit or loss, Retaining and destroying records
as well as the value of your business. Information from The six-year requirement
good records can also tell you what is happening in You have to keep records (other than certain documents for
your business and why. The successful use of records which there are special rules) for six years:
can show you trends in your business, let you compare
■ from the end of the last tax year to which they relate for
performance in different years, and help you prepare
income tax purposes
budgets and forecasts.
■ after the end of the last year to which they relate for
Legal requirements for keeping records GST/HST reporting purposes
All records, including paper documents and those stored in ■ after the goods are imported or exported
a digital medium, must be kept in Canada or made If you filed your income tax return late, keep your records
available in Canada at our request. The records must be in and supporting documents for six years from the date you
English or French. filed the late return.
You can keep your documents outside Canada if you get The time frame for keeping records usually starts from the
written permission from us. last year you used the records, not the year the transaction
occurred or the record was created.

10 canada.ca/taxes
If you filed an objection or appeal, you must keep all For GST/HST purposes, you may be able to claim an (ITC)
necessary records until the latest of the following dates: for the GST/HST paid or payable on property such as
capital property and inventory, that you have on hand on
■ the date the objection or appeal is resolved
the day you register. For more information, see
■ the date for filing any further appeal has passed Guide RC4022, General Information for GST/HST Registrants.
■ the six-year record keeping period has passed
Buying a business
Request for early destruction When you are considering becoming a business owner, you
If you want to destroy your records early, you have to get have the option of buying an existing business or starting a
written permission from the CRA. new one. The option you choose will affect how you will
account for the purchase of the business assets for income
To get this permission, you or your authorized tax purposes.
representatives can do one of the following:
When you buy a business, you generally pay a set amount
■ complete Form T137, Request for Destruction of Records for the entire business. In some cases, the sale agreement
■ apply in writing to the director of your tax services office sets out a price for each asset, a value for the inventory of
the business and, if applicable, an amount that can
In addition to our requirements, there might be other reasonably be attributed to goodwill.
federal, territorial, provincial, and municipal laws that
require you to keep records. Any permission received from If the individual asset prices are set out in the sale
the CRA for early record destruction does not extend to agreement, and the prices are reasonable, then you could
records you are required to keep because of these use these prices to calculate your claim for capital
other laws. cost allowance (CCA).

For more information, see Information Circular IC78-10R5, If the individual asset prices are not set out in the contract,
Books and Records Retention/Destruction. you have to decide how much of the purchase price you
should reasonably attribute to each asset, how much to
inventory, and how much, if any, to goodwill. These
Bringing assets into a business amounts should coincide with the amounts the vendor
You might transfer your personal assets to your business. determined when reporting the sale.
If you are operating a sole proprietorship, this is a The amount you attribute to each asset should be its FMV.
reasonably simple process. The Income Tax Act requires that You should attribute to goodwill the balance of the
you transfer these assets to the business at their fair market purchase price that remains after you attribute the FMV to
value (FMV). This means that we consider you to have sold each asset and to inventory.
the assets at a price equal to their FMV at that time. If this
amount is greater than your original purchase price, you Example
must report the difference as a capital gain on your income You buy a business for $480,000. The FMV of the net
tax and benefit return. identifiable assets of the business is as follows:
Your business will show a purchase of these assets, with a Accounts receivable .................................................... $ 80,000
cost equal to the FMV at the time of the transfer. This is the Inventory ...................................................................... 40,000
value that you will add to the capital cost allowance (CCA) Land............................................................................... 120,000
schedule for income tax purposes. Building ........................................................................ 200,000
For income tax purposes, when you transfer the property to Total net identifiable assets..................................... $ 440,000
a Canadian partnership or a Canadian corporation, you can You can determine the value of the goodwill by subtracting
transfer the property for an elected amount. This amount the total value of the net identifiable assets from the
may be different from the FMV, as long as you meet certain purchase price:
conditions. The elected amount then becomes your
proceeds for the property transferred, as well as the cost of Purchase price.............................................................. $ 480,000
the property to the corporation or partnership. Minus
Net identifiable assets ................................................ 440,000
The rules regarding these transfers of property are Amount assigned to goodwill ................................. $ 40,000
technical. They allow you to change your business type
from a sole proprietorship to a corporation or a
partnership, or from a partnership to a corporation, on a Once you have determined the values for the assets and the
tax-free basis. goodwill, sort the assets into the appropriate classes for the
purpose of claiming the capital cost allowance (CCA). On
For more information, see archived Interpretation January 1, 2017, the eligible capital property system was
Bulletin IT-291R3, Transfer of Property to a Corporation Under replaced with new capital cost allowance (CCA) class 14.1
Subsection 85(1), Information Circular IC76-19R3, Transfer of with transitional rules.
Property to a Corporation Under Section 85, and archived
Interpretation Bulletin IT-413R, Election by Members of a
Partnership Under Subsection 97(2).

canada.ca/taxes 11
Goodwill and certain other intangible properties are no The participating provinces harmonized their provincial
longer considered to be eligible capital expenditures. sales tax with the GST to implement the harmonized sales
Instead, these properties are now treated as depreciable tax (HST) in those provinces. Generally, the HST applies to
property in new Class 14.1. For more information see the same base of property and services as the GST. In some
Chapter 5 “Eligible capital expenditures” in Guide T4002, participating provinces, there are point-of-sale rebates
Self-employed Business, Professional, Commission, Farming, and equivalent to the provincial part of the HST on certain
Fishing Income. qualifying items. For more information, see “Point-of-sale
rebates” in Guide RC4022, General Information for
Treat the value of the inventory as a purchase of goods for
GST/HST Registrants.
resale, and include it in the calculation of cost of goods sold
in your income statement at the end of the year. GST/HST registrants that make taxable supplies (other
than zero-rated supplies) in the participating provinces
GST/HST when you buy a business collect tax at the applicable HST rate. The HST rate can vary
from one participating province to another. GST/HST
For GST/HST purposes, if you buy a business or part of a
registrants collect tax at the 5% GST rate on taxable supplies
business and acquire all or substantially all (at least 90%) of
they make in the rest of Canada (other than zero-rated
the property that can reasonably be regarded as necessary
supplies). Special rules apply for determining whether a
to carry on the business, you and the vendor may be able to
supply is made in Canada and in a participating province.
jointly elect to have no GST/HST payable on the sale by
For more information on the HST rates and the
completing Form GST44, Election Concerning the Acquisition
place-of-supply rules, see Guide RC4022, General
of a Business or Part of a Business. You cannot use this
Information for GST/HST Registrants.
election if the seller is a registrant and you are not a
registrant. In addition, you must buy all or substantially all Special rules apply for determining the rate of the
of the property, not only individual assets. GST/HST that applies to the sale of new housing. For more
information, see “Sales of new housing” in Guide RC4022,
For the election to apply to the sale, you have to be able to
General Information for GST/HST Registrants.
continue to operate the business with the property acquired
under the sale agreement. You have to file Form GST44 on
or before the day you have to file the GST/HST return for Who pays the GST/HST?
the first reporting period in which you would have Almost everyone has to pay the GST/HST on taxable
otherwise had to pay GST/HST on the purchase. supplies of property and services (other than zero-rated
Even when you use the election, GST/HST will still apply supplies). However, Indians and some groups and
to a taxable supply of a service made by the seller; a taxable organizations, such as certain provincial and territorial
supply of property made by way of lease, licence, or similar governments, do not always pay the GST/HST on their
arrangement; and, if the buyer is not a GST/HST registrant, purchases. For more information, refer to “Supplies to
a taxable sale of real property. diplomats, governments, and Indians” in Guide RC4022,
General Information for GST/HST Registrants.
Shares of a corporation
False GST/HST exemptions
Another way of acquiring an existing business is to buy the
shares of a corporation. This does not affect the cost base of Some individuals, businesses, and organizations are falsely
the assets of the business. A corporation is a separate legal claiming to be exempt from paying the GST/HST. In some
entity and can own property in its own name. A change in cases, they may even present a fake exemption card to
the ownership of the shares will not affect the tax values of avoid paying the tax on their purchases.
the assets the corporation owns. Generally, the purchase of If you do not collect the GST/HST from someone who
shares of a corporation is not subject to GST/HST. falsely claims to be exempt from paying the GST/HST, you
For more information on changes to your business, go still have to account for the tax you should have collected.
to canada.ca/en/revenue-agency/services/tax/businesses/ Some provinces exempt farmers, municipalities, and certain
topics/changes-your-business.html. businesses from paying the provincial sales tax. However,
these provincial exemptions do not apply to the GST/HST.
Chapter 2 – Goods and services
tax/ harmonized sales Do you have to charge the GST/HST?
Generally, GST/HST registrants have to charge the
tax (GST/HST) GST/HST on all taxable (other than zero-rated) supplies of
property and services they provide to their customers. You
What is the GST/HST? are a GST/HST registrant if you are registered or are
The GST is a tax that applies to most supplies of goods and required to register.
services made in Canada. The GST also applies to many
supplies of real property (for example, land, buildings and
interests in such property) and intangible personal property
such as trademarks, rights to use a patent, and digitized
products downloaded from the Internet and paid
for individually.

12 canada.ca/taxes
Should you register for the GST/HST? your associates in this calculation. For more information
about your total revenues from taxable supplies, see
You have to register for the GST/HST if you:
Guide RC4022, General Information for GST/HST Registrants.
■ provide taxable supplies in Canada
Note
■ are not a small supplier If your total revenues from taxable supplies are
over $30,000 (or over $50,000 if you are a public service
■ operate a taxi, commercial ride-sharing, or a body) in a calendar quarter or over four consecutive
limousine service calendar quarters combined, you are no longer a small
You do not have to register if one or more of the supplier and you have to register for the GST/HST.
following apply: Exception
■ You are a small supplier. If you operate a taxi, commercial ride-sharing, or
limousine service, you must register for GST/HST
■ Your only commercial activity is the sale of real property,
purposes, regardless of your revenue. Non-resident
other than in the course of a business (although you do
performers selling admissions to seminars,
not have to register for the GST/HST in this case, your
performances, and other events must also register for the
sale of real property may still be taxable and you may
GST/HST, even if they are small suppliers.
have to charge and collect the tax). For more information,
see Guide RC4022, General Information for
GST/HST Registrants. Effective date of registration
■ You are a non-resident who does not carry on business in The effective date of your GST/HST registration depends
Canada (see Guide RC4027, Doing Business in Canada – on when you go over the small supplier threshold amount
GST/HST Information for Non-Residents). of $30,000 (or $50,000 if you are a public service body).
Note If your revenues are over the threshold amount in one
For information on registration if you are a public calendar quarter, you are considered a registrant and must
service body (charity, non-profit organization, collect the GST/HST on the taxable supply (other than a
municipality, university, public college, school authority, zero-rated supply) that made you go over the threshold
or hospital authority), see Guide RC4022, General amount. Your effective date of registration will be the day
Information for GST/HST Registrants. the supply made you go over the threshold amount. You
must register within 29 days from that day.
Small supplier
You are a small supplier and do not have to register if you Example
meet one of the following conditions: Zuly began her business on January 1, 2017. Her total
revenues from taxable supplies (sales) were $5,000 during
■ you are a sole proprietor and the total amount of all the first calendar quarter and $7,000 during the second
revenues (before expenses) from your worldwide taxable calendar quarter, meaning she was still a small supplier. In
supplies from all your businesses and those of your the quarter from July 1 to September 30, she had sales
associates (if they were associated at the beginning of the of $40,000, which included an order on August 20
particular calendar quarter) is $30,000 or less in any for $25,000 that pushed her sales above $30,000 for the
single calendar quarter and in the last four consecutive quarter. Zuly is no longer a small supplier as of August 20
calendar quarters and she has to charge the GST/HST on the $25,000 sale and
■ you are a partnership or a corporation and the total any taxable sales made after this sale. She has 29 days after
amount of all revenues (before expenses) from your that day to register. In this case, although she is considered
worldwide taxable supplies and those of your associates to be a GST/HST registrant as of August 20, she has up to
(if they were associated at the beginning of the particular September 18, 2017, to register for the GST/HST.
calendar quarter) is $30,000 or less in any single calendar
quarter and in the last four consecutive calendar quarters If you are under the threshold amount in one calendar
■ you are a public service body and the total amount of all quarter, but you are over the threshold during four (or
revenues (before expenses) from your worldwide taxable fewer) consecutive calendar quarters combined, you are
supplies from all of the organization’s activities and considered to be a small supplier for those calendar
those of your associates (if they were associated at the quarters and a month after those quarters. Your effective
beginning of the particular calendar quarter), is $50,000 date of registration would be the day you make your first
or less in any single calendar quarter and in the last four taxable supply after you stop being a small supplier. You
consecutive calendar quarters have 29 days after this day to register for the GST/HST.

Total revenues from taxable supplies means your revenues

Example
from your worldwide supplies of property and services
Using the previous example, Zuly had the same sales, with
that are subject to the GST/HST (including zero-rated
the exception of the August 20 sale. Her total revenues from
supplies), or that would be subject to the tax if supplied in
taxable sales in her first three calendar quarters combined
Canada. It does not include goodwill, supplies of financial
were $27,000, and were $15,000 in the quarter that ended
services, or sales of capital property. You also have to
December 31, 2017 (each quarter is less than $30,000 but the
include the total revenues from taxable supplies of all of
last four quarters combined are more than $30,000). In this

canada.ca/taxes 13
case, she is a small supplier until January 31, 2018. Any You or your authorized representative can change your
taxable sale she makes after January 31, 2018, is subject fiscal year by using our online services:
to GST/HST.
■ If you are a business owner, go to My Business Account
The day Zuly makes her first taxable sale after at canada.ca/my-cra-business-account.
January 31, 2018, is her effective date of registration.
■ If you are an authorized representative, go to Represent a
She has 29 days after this date to register for the GST/HST.
Client at canada.ca/taxes-representatives.
■ You can also send a completed Form GST70, Election or
Voluntary registration Revocation of an Election to Change a GST/HST Fiscal Year
If you are a small supplier and you are engaged in a to your tax centre. To get the address of your tax center,
commercial activity in Canada, you can choose to register go to canada.ca/cra-offices.
for GST/HST voluntarily. Once you are registered, you
have to charge and remit the GST/HST on your taxable Reporting periods
supplies of property and services. You may be eligible to
Reporting periods are the periods of time for which you file
claim ITCs for the GST/HST paid or payable on property
your GST/HST returns.
and services you acquired for making these supplies. You
have to stay registered for at least one year before you can Generally, your reporting period is determined based on
ask to cancel your registration. For more information, see the revenue from your total taxable supplies of property
Guide RC4022, General Information for GST/HST Registrants. and services made in Canada in your immediately
preceding fiscal year or in all preceding fiscal quarters
If you choose not to register, you do not charge the
ending in your current fiscal year.
GST/HST (other than on certain taxable supplies of real
property), and you cannot claim ITCs. This revenue includes zero-rated supplies of property and
services made in Canada, and those of your associates.
How to register Do not include revenue from:
You can register for a GST/HST account when you register
■ supplies made outside Canada
for a business number (BN). Your BN will be your business
identification for all your dealings with us. If you are ■ zero-rated exports of property and services
incorporated, you may already have a BN and a
corporation income tax account. ■ zero-rated supplies of financial services

Note ■ exempt supplies

It is the person or business entity that registers for the ■ taxable sales of capital real property
GST/HST. For example, it is the partnership that
registers and not each partner. ■ goodwill
Generally, when you register for the GST/HST, we assign
Fiscal year for GST/HST purposes an annual reporting period. However, you may choose a
Usually, your fiscal year for GST/HST purposes is the same more frequent reporting period. The following chart shows
as your tax year for income tax purposes. Generally, the tax the threshold revenue amounts that determine the assigned
year of the following persons is a calendar year: reporting periods, and the optional reporting periods
available if you want to file a return more frequently.
■ individuals and certain trusts
■ professional corporations that are members of a Assigned and optional reporting periods
partnership (such as a corporation that is the professional Annual taxable Assigned reporting Optional reporting
practice of an accountant, a lawyer, or a doctor) supplies threshold period periods
amounts
■ partnerships, where at least one member of the
partnership is an individual, a professional corporation, $1,500,000 or less Annual Monthly,
or another affected partnership Quarterly
More than Quarterly Monthly
However, some persons use non-calendar tax years. If you $1,500,000 up to
use a non-calendar tax year approved by the CRA, you may $6,000,000
want to use that same year as your GST/HST fiscal year.
More than Monthly Nil
A corporation generally uses the same fiscal year for both $6,000,000
income tax purposes and GST/HST purposes. However, if
Charities Annual Monthly or
a corporation has a non-calendar tax year for income tax Quarterly
purposes, it can elect to use a calendar year for its
GST/HST fiscal year.
If you are a corporation that uses a non-calendar year for
both income tax purposes and GST/HST purposes, and
you change to another non-calendar tax year for income tax
purposes, inform us of the change as soon as possible and
we will change your GST/HST fiscal year to match it.

14 canada.ca/taxes
You or your authorized representative can change your to the basic tax content of the property. As a result, you
assigned reporting period by using our online services: may be eligible to claim an ITC for the tax you are
considered to have paid.
■ If you are a business owner, go to My Business Account
at canada.ca/my-cra-business-account. In addition, certain services, such as legal and accounting
fees and regulatory fees acquired to set up a corporation,
■ If you are an authorized representative, go to Represent a
may be treated as depreciable property included in
Client at canada.ca/taxes-representatives.
class 14.1 for income tax purposes. In this case, the services
■ You can also send a completed Form GST20, Election for would be treated as property and an ITC may be available.
GST/HST Reporting Period to your tax centre. To get the
For more information, see archived Interpretation
address of your tax center, go to cra.gc.ca/tso.
Bulletin IT-143R3, Meaning of Eligible Capital Expenditure.

Input tax credits For information on the meaning of basic tax content, and
the availability of ITCs for start-up costs, see Guide RC4022,
As a registrant, you can recover the GST/HST paid or General Information for GST/HST Registrants; Policy
payable on property and services you acquired for your Statement P-018R, Limitation on ITC Eligibility where a Person
commercial activities by claiming an input tax credit (ITC). Becomes a Registrant; and Policy Statement P-019R, Eligibility
If you are filing electronically, claim your ITC in your line for ITC on start-up costs – Eligible capital property.
108 calculation. If you are filing a paper GST/HST return,
calculate your ITC on line 106. Operating expenses
You may be eligible to claim ITCs only to the extent that the The following are examples of operating expenses for
property and services you acquired are for consumption, which you may be eligible to claim an ITC:
use, or supply in your commercial activities.
■ commercial rents
There are some property and services you acquired for
which you cannot claim an ITC, such as: ■ equipment rentals

■ certain capital property. For more information on these ■ advertising

properties, see Guide RC4022, General Information for ■ utilities
GST/HST Registrants
■ office supplies such as postage, computer disks, paper,
■ taxable supplies of property and services acquired or and pens
imported to make exempt supplies of property
and services You can claim an ITC equal to 100% of the GST/HST paid
or payable by you for a particular operating expense
■ membership fees or dues to any club whose main (property or service) if substantially all (90% or more) of
purpose is to provide recreation, dining, or sporting your consumption or use of that property or service is (or is
facilities (including fitness clubs, golf clubs, and hunting intended to be) in the course of your commercial activities
and fishing clubs), unless you acquire the memberships and all the other ITC criteria are satisfied.
to resell in the course of your business
You cannot claim an ITC for any of the GST/HST paid or
■ property or services you acquired or imported for your payable by you for a particular operating expense (property
personal consumption, use, or enjoyment or service) if substantially all of your consumption or use of
To claim an ITC, the property and services you acquired that property or service is (or is intended to be) other than
must be reasonable in quality, nature, and cost in relation to in the course of your commercial activities (for example,
the nature of your business. consumed or used to make exempt supplies).

Note Exception
The invoices you use to claim an ITC must contain If you have both commercial activities and
specific information. For more information on the non-commercial activities (such as exempt supplies), and
specific information that these invoices must contain, see at least 90% of an operating expense cannot reasonably
the Input tax credit information requirements chart in be allocated to either your commercial or your
Guide RC4022, General Information for GST/HST non-commercial activities, you apportion the GST/HST
Registrants. paid or payable for the property or service between
these two activities for ITC purposes. You can generally
Becoming a registrant only claim ITCs for the portion of the GST/HST paid or
When you become a GST/HST registrant, you may be payable for the property or service that relates to its
eligible to claim an ITC to recover the GST/HST you paid consumption or use in your commercial activities. Any
or owe on certain property and services you acquired method used to apportion must be fair, reasonable, and
before you became a registrant. used consistently throughout the year.

In the case of property, you are considered to have

purchased the property when you became a registrant if
you held the property for consumption, use or supply in
the course of your commercial activities just before you
became a registrant. You are also considered to have paid
GST/HST on the purchase. The amount of tax paid is equal

canada.ca/taxes 15
Home office expenses or payable on your purchases, send us the difference. If the
You may be eligible to claim ITCs for your home office GST/HST paid or payable is more than the GST/HST you
expenses, as long as you meet one of the charged or collected, you can claim a refund of
following conditions: the difference.

■ it is your principal place of business For more details on calculating your net tax, see
Guide RC4022, General Information for GST/HST Registrants.
■ consumed or used 90% of the time or more to earn To help reduce paperwork and bookkeeping costs, most
income from your business and used on a regular and small businesses can use the quick method of accounting to
continuous basis for meeting your clients, customers, or calculate their GST/HST remittance. For more information,
patients see Guide RC4058, Quick Method of Accounting for GST/HST.
This restriction for home office expenses is similar to that
used for income tax purposes. For more information, see Bad debt adjustments
Income Tax Folio S4-F2-C2, Business Use of Home Expenses. If you have already reported and remitted the GST/HST
for a credit sale on your GST/HST return, and all or part of
Meal and entertainment expenses the amount owed to you became a bad debt, you can
recover the GST/HST that relates to that bad debt as a tax
You may be eligible to claim an ITC for the GST/HST you
adjustment when you calculate your net tax.
pay on reasonable meal and entertainment expenses that
relate to your commercial activities. When the deduction If you claimed a GST/HST adjustment on a previous
for income tax purposes is limited to 50% of the cost of GST/HST return for a bad debt you wrote off and later you
meals and entertainment, you can only claim 50% of the receive a payment toward that debt, you have to add back
GST/HST you pay on those expenses as an ITC. the GST/HST part of that payment as a tax adjustment in
the calculation of your net tax on the GST/HST return for
Passenger vehicles and aircraft the reporting period in which you received the payment for
the bad debt.
Corporations follow a primary use rule (more than 50% use
in commercial activities) to determine their ITCs for
passenger vehicles and aircraft. GST/HST returns
However, individuals and partnerships usually claim ITCs Unless you have filed a GST/HST return online, we will
for passenger vehicles and aircraft based on the capital cost automatically send you Form GST34, Goods and Services
allowance (CCA) claimed for income tax purposes. If the Tax/Harmonized Sales Tax (GST/HST) Return for Registrants,
use in commercial activities is 10% or less, you cannot claim which includes personalized pre-printed information about
any ITC. If the use in commercial activities is 90% or more, your account. You can stop receiving the GST/HST returns
you may be eligible to claim a full ITC. automatically by using our online service:

You usually calculate your CCA for income tax purposes at ■ If you are a business owner, go to My Business Account
the end of your fiscal year. Once you have calculated your at canada.ca/my-cra-business-account
CCA, you can calculate your ITC. ■ If you are an authorized representative, go to Represent a
Note that ITC claims relating to passenger vehicles are Client at canada.ca/taxes-representatives
subject to the capital cost limitations for passenger vehicles, Note
which are currently $30,000 for purchases and $800 per In some cases, GST/HST registrants are required to file
month for leases. their GST/HST returns electronically. For more
For more information on calculating and claiming ITCs, information, go to canada.ca/gst-hst-filing.
restrictions for ITCs, time limits for claiming ITCs, and
special rules that apply to charities, refer to Filing and remitting due dates
Guide RC4022, General Information for GST/HST Registrants. Monthly and quarterly filers
If you have a monthly or quarterly reporting period, you
Calculating your net tax have to file your GST/HST return and send any amount
You have to calculate your net tax for each GST/HST owing no later than one month after the end of your
reporting period and report this on your GST/HST return. reporting period.
To do so, calculate both:
■ the GST/HST collected or that became collectible by you Annual filers
on your taxable supplies made during the If you have an annual reporting period, you usually have to
reporting period file your return and send any amount owing no later than
three months after the end of your fiscal year.
■ the GST/HST paid and payable on property and services
you acquired for which you can claim an ITC
The difference between these two amounts, including any
adjustments, is called your net tax. It is either your
GST/HST remittance or your GST/HST refund. If you
charged or collected more GST/HST than the amount paid

16 canada.ca/taxes
 Exception For more information, go to canada.ca/excise duty or
Usually, your GST/HST payment is due by April 30 if call 1-866-330-3304.
all of the following conditions are met:
■ you are an individual with business income for Excise duties
income tax purposes Excise duties are charged on spirits, wine, beer, and tobacco
products. The rates of duty on spirits, wine, and tobacco
■ you file annual GST/HST returns products are given in the Excise Act, 2001 and duty rates on
■ you have a December 31 fiscal year-end beer are given in the Excise Act.

Although your payment is due April 30, you have until When these goods are manufactured in Canada, duty is
June 15 to file your GST/HST return. payable on the goods at the point of packaging rather than
at the point of sale. Generally, when they are imported into
As an annual filer, you may also have to pay quarterly Canada, duty is payable by the importer when the goods
instalments. If so, they are due no later than one month are imported.
after the last day of each fiscal quarter. For more
information, see Guide RC4022, General Information for All persons who manufacture these goods in Canada must
GST/HST Registrants. be licensed. Most licensees must provide security of at
least $5,000.
Chapter 3 – Excise taxes, excise For more information, go to canada.ca/excise-duty or
contact the nearest regional excise duty office. For a listing
duties, the softwood lumber of their offices and numbers, see Excise Duty
products export charge, and the Memoranda EDM1-1-2, Regional Excise Duty Offices,
at canada.ca/cra-forms.
Air Travellers Security Charge
Softwood lumber products
What are excise taxes and excise
export charge
duties?
The Softwood Lumber Agreement 2006 has expired.
There are two types of federal levies on products However, the Softwood Lumber Products Export Charge Act,
manufactured or produced in Canada: excise taxes and 2006 remains in force for administrative purposes to cover
excise duties. things like late filing, corrections, or appeals.
These levies are applied to a limited range of goods at For more information, go
different rates and in different ways, depending on the to canada.ca/en/revenue-agency/services/tax/businesses/
product. Excise tax and excise duty apply to goods before topics/softwood-lumber-products-export-charge.html. For
the GST/HST is added. information on registration or returns and payments,
call 1-800-935-0313.
Excise taxes
For technical enquiries regarding the Softwood Lumber
Excise taxes are charged on: Products Export Charge Act, 2006, call 1-866-330-3304.
■ fuel-inefficient vehicles
■ automobile air conditioners
Air Travellers Security Charge
The CRA is responsible for administering the Air Travellers
■ certain petroleum products
Security Charge (ATSC). The ATSC is collected by
The Excise Tax Act sets out the excise tax rate for each of registered air carriers, and their agents, when an airline
these goods. ticket is purchased.
When goods are made in Canada, excise tax is payable All designated air carriers that provide air transportation to
when the goods are delivered to the buyer. When they are individuals on an aircraft having a maximum certified
imported, excise tax is payable by the importer at the time take-off weight greater than 2,730 kilograms and whose
the goods were imported. service includes chargeable enplanements must register to
collect the ATSC.
Under certain circumstances, you may be able to claim a
refund of the excise taxes you paid. These air transportation services, regularly scheduled
flights, and charter flights generally include:
Manufacturers need an excise tax licence (“E” licence)
unless they qualify as a small manufacturer. You qualify as ■ flights from listed airports in Canada to other
a small manufacturer if your total annual sales are not more listed airports
than $50,000.
■ transborder flights
A wholesaler licence (“W” licence) lets you buy goods for
■ international flights
resale without paying excise taxes. You may qualify for
a W licence under certain limited circumstances. When you
have this licence, you collect and send the excise tax when
you sell the goods.

canada.ca/taxes 17
If you provide such air transportation services, you must Do you need to register for a
complete registration Form B248, Registration Form Under
the Provisions of the Air Travellers Security Charge Act, and
payroll program account?
mail it to: You need to register for a payroll program account if you
are in one of the following situations:
Canada Revenue Agency
Prince Edward Island Tax Centre ■ pay salaries or wages
275 Pope Road ■ pay tips and gratuities
Summerside, PE C1N 6A2
■ pay bonuses and vacation pay
Registered air carriers must file Form B249, Air Travellers
Security Charge Return, on a monthly basis, unless they have ■ provide benefits and allowances to employees
been approved by the CRA to file semi-annually.
■ need to deduct amounts, send those amounts, and report
The current ATSC rates are highlighted in Notice amounts from other types of remuneration (such as
ETSL 0072. For more information on the ATSC, go pension or superannuation)
to canada.ca/en/revenue-agency/services/tax/individuals/
If you already have a business number (BN), you only need
topics/individuals-air-travellers-security-charge-atsc.html.
to add a payroll program account to that BN. If you don’t
Individuals in Canada or the United States with ATSC have a BN, you have to get one and register for a payroll
registration or account-related questions can call the SBR program account before your first remittance due date.
Unit toll free at 1-877-432-5472. Individuals outside these
countries can call 902-432-5472. Individuals in Canada or What to deduct from your
the United States with technical questions can call the CRA
toll free at 1-866-330-3304. employees’ remuneration
To calculate the various deductions, you can use the Payroll
Chapter 4 – Payroll deductions Deductions Online Calculator at canada.ca/pdoc, or see
Guide T4001, Employers’ Guide – Payroll Deductions
and remittances and Remittances, Guide T4032, Payroll Deductions Tables, or
Guide T4127, Payroll Deductions Formulas for Computer
If you are an employer, you must make regular deductions Programs. The calculator and these publications can help
from your employees’ remuneration also known as pay for you determine how much to deduct and what type of
services rendered. income is pensionable, insurable or taxable.
You are an employer if one of the following applies to you: Payroll deductions can be complex. If you need more
information, go to canada.ca/payroll.
■ you pay salaries, wages (including advances), bonuses,
vacation pay, or tips to your employees
Canada Pension Plan/Quebec Pension Plan
■ you provide certain taxable benefits or allowances such
The Canada Pension Plan (CPP) came into effect as a way to
as board and lodging to your employees
provide financial assistance to Canadians when they retire
An individual is an employee if the employment from the workforce. Every person who works in Canada is
arrangement between the worker and the payer is an eligible to get benefits when he or she retires.
employer-employee relationship. Although a written
If you run a business in Quebec, instead of CPP
contract might say that an individual is self-employed
contributions, you deduct Quebec Pension Plan (QPP)
(working under a contract for services), we may not
contributions. Any deducted QPP contributions should be
consider the individual to be self-employed if there is
sent to Revenu Québec, instead of the CRA.
evidence of an employer-employee relationship. For more
information on employment status, see Guide RC4110, For more information on deducting CPP, see “Chapter 2 -
Employee or Self-Employed? Canada Pension Plan contributions” in Guide
T4001, Employers’ Guide -Payroll Deductions and Remittances.
Your responsibilities For information on the QPP, visit the Revenu Québec web
As an employer, you must: site at revenuquebec.ca/en/entreprises/ras/calculer-ras/
rrq/default.aspx.
■ deduct Canada Pension Plan/Quebec Pension Plan
(CPP/QPP) contributions, employment insurance (EI)
Employment insurance
premiums, and income tax from the amounts you pay to
your employees The Employment Insurance (EI) Program is a federally
administered program that gives financial assistance to
■ send the deducted amounts plus your share of CPP/QPP people who are unemployed. The program also helps
contributions and EI premiums that you pay to CRA people get training for jobs.
throughout the year for your employees
As an employer, you are responsible for deducting
■ report the employees’ remuneration and deductions on a employment insurance (EI) premiums from your
T4 information return and give an information slip to employees’ insurable earnings.
each of your employees

18 canada.ca/taxes
The rates for EI premiums may vary from year to year. For Chapter 5 – Income tax
the most current rates, go to canada.ca/payroll.
This chapter introduces you to the process of reporting
Note
income and paying income tax on your business profits. We
You must also make contributions to the EI program for
explain how to account for the amount your business earns
your employees. Generally, the employer’s contribution
and the kind of income you have to report. This chapter
will be slightly more than the employee’s.
explains what expenses you can deduct. It also tells you
You also have to deduct provincial parental insurance plan how the three most common business structures pay tax.
(PPIP) premiums such as the Quebec Parental Insurance
Plan (QPIP) premiums. You must contribute employer Accounting for your earnings
amounts for PPIP premiums.
Generally, you have to report business income using the
Income tax accrual method of accounting. Farmers, fishers, and self-
employed commission agents can use the cash method or
As an employer, you are responsible for deducting income the accrual method to report income, but not a combination
tax from the salaries, wages, or other remuneration you pay of both.
your employees.
To help you calculate the amount of income tax to deduct The accrual method
from the remuneration of your employees, you may need Under the accrual method, you have to report income in the
various federal and provincial forms, such as Form TD1, fiscal period you earn it, regardless of when you receive the
2017 Personal Tax Credits Return. amount for payment.
For more information on these forms, see You can deduct allowable expenses in the fiscal period that
Guide T4001, Employers’ Guide – Payroll Deductions you incur them, whether or not you pay for them in that
and Remittances. period. Incur usually means you paid or will have to pay
the expense.
Remittances
As an employer, you have to send to the CRA all The cash method
CPP contributions, EI premiums, and income tax that is If you use the cash method, you report income in the year
deducted from your employees’ income. Also send your you receive the amount whether it is in cash, property, or
employer share of CPP contributions and EI premiums. services. You deduct allowable expenses in the year you
We must receive your payment for deductions, along with pay them. If you are a farmer, fisher, or self-employed
your remittance form on or before your remittance due commissioned sales agent, you can use the cash method.
dates. Due dates vary depending on the type of remitter For more information about the cash method, see
you are. Guide T4002, Self-employed Business, Professional,
Most employers have to send the deducted amounts Commission, Farming, and Fishing Income.
monthly. Small business employers may be able to send
their deductions quarterly. How to keep sales and expense journals
For more information on the remittance methods, go You should keep a day-to-day record of your receipts and
to canada.ca/payroll or see Guide T4001, Employers’ Guide – expenses. Keep this record with your duplicate deposit
Payroll Deductions and Remittances. slips, bank statements, cancelled cheques, and receipts. This
will support your sales income and expense claims.
You can check your payroll remittance requirements using
the “View remitting requirements” service in My Business How to record your business expenses
Account at canada.ca/my-cra-business-account.
You can generally deduct business expenses only if you
incur them to earn income. If you claim expenses, you have
How to report payroll deductions to be able to back up the claim. You do this by keeping all
Generally, you report your employees’ salary, wages your business-related vouchers and receipts, and record
taxable benefits, and deductions on the T4 slip, Statement of your expenses in a journal, a computerized file, or a
Remuneration Paid. software accounting program.
You have to fill out and give your employees their copies of
the T4 slip no later than the end of February after the Fiscal period for income tax purposes
calendar year to which the slip relates. There is a penalty You have to report your business income on an
for missing this deadline. For more information on this annual basis.
penalty, go to canada.ca/penalty-information-returns.
For sole proprietorships, professional corporations that are
For more information about T4 reporting requirements and members of a partnership, and partnerships in which at
filing methods, go to canada.ca/taxes-slips or see least one member is an individual, professional
Guide RC4120, Employers’ Guide – Filing the T4 Slip and corporation, or another affected partnership, your business
Summary. income is generally reported on a calendar-year basis.

canada.ca/taxes 19
If you are a sole proprietor or if you are in a partnership in How to account for your business income
which all the members are individuals, you can elect to Business owners have to provide information about their
have a non-calendar-year fiscal period. To make this business income and expenses.
change, complete Form T1139, Reconciliation of 2017 Business
Income for Tax Purposes. For more information, see Although we accept other types of financial statements, we
Guide RC4015, Reconciliation of Business Income for Tax encourage you to use any of the following forms that apply
Purposes. to you:

A corporation’s tax year is its fiscal period. A fiscal period ■ Form T2125, Statement of Business or Professional Activities
cannot be longer than 53 weeks (371 days). A new ■ Form T2042, Statement of Farming Activities
corporation can choose any tax year-end as long as its first
tax year is not more than 53 weeks from the date the ■ Form T1163, Statement A – AgriStability and AgriInvest
corporation was incorporated or formed as a result of an Programs Information and Statement of Farming Activities
amalgamation. The corporation has to file its income tax for Individuals
return within six months of the end of its fiscal period. ■ Form T1164, Statement B – AgriStability and AgriInvest
When the fiscal year ends on the last day of the month, the Programs Information and Statement of Farming Activities for
return is due on or before the last day of the sixth month Additional Farming Operations
after the end of the tax year. When the fiscal year ends on a
day other than the last day of the month, the return is due ■ Form T1273, Statement A – Harmonized AgriStability and
on or before the same day of the sixth month after the end AgriInvest Programs Information and Statement of Farming
of the tax year. Activities for Individuals

It is a good idea to become familiar with the rules of fiscal ■ Form T1274, Statement B – Harmonized AgriStability and
periods when planning your business. For more AgriInvest Programs Information and Statement of Farming
information, see Guide RC4015, Reconciliation of Business Activities for Additional Farming Operations
Income for Tax Purposes, and Guide T4002, Self-employed ■ Form T2121, Statement of Fishing Activities
Business, Professional, Commission, Farming, and
Fishing Income. We have designed the forms to accommodate the most
common income and expense categories used in business.
Note You can use the categories included on the forms when you
If you are a GST/HST registrant, how you set up your start up your own accounting records.
fiscal period-end for income tax purposes may affect
your GST/HST reporting periods, filing, and remitting You also have to record as income any amount credited to
due dates. For more information, see Guide RC4022, your account or set aside for you as payment for providing
General Information for GST/HST Registrants. goods and services. This includes amounts credited to your
accounts as offsets against an amount you owe.
Income You have to support all income entries in your records with
This part of the guide gives an overview of the business original documents—sales invoices, cash register tapes,
income that you account for in your business records. receipts, fee statements, and contracts. Keep these
supporting documents in calendar order or numerical
order. Keep them available in case we ask to see them.
Types of income
You may receive income from sources other than your You must keep a separate record of your income from all
sales. If they relate to your business, you have to include other sources, such as professional fees and income from
them in your business income. property, investments, taxable capital gains, estates, trusts,
employment, and pensions.
What is business income
Bad debts
Business income is income you earn from a profession, a
trade, a manufacture or undertaking of any kind, an If, during the year, you received any amount that you
adventure or concern in the nature of trade, or any other wrote off as a bad debt in a previous year, you have to
activity you carry on for profit and there is evidence to include that amount in your income for the current year.
support that intention. For example, income from a service For more information, see archived Interpretation
business is business income. Business income does not Bulletin IT-442R, Bad Debts and Reserves for Doubtful Debts.
include employment income, such as wages or salaries
received from an employer. There may be GST/HST implications on the recovery of
bad debts. For more information, see Guide RC4022,
You must include all your income when you calculate it for General Information for GST/HST Registrants.
tax purposes. If you fail to report all your income, you may
pay a penalty of 10% of the amount you failed to report
after your first omission.
A different penalty may apply if you knowingly, or under
circumstances amounting to gross negligence, participate in
the making of a false statement or omission on your income
tax return. The penalty is 50% of the tax attributable to the
omission or false statement (minimum $100).

20 canada.ca/taxes
Reserves The rental of real property may have GST/HST
You have to bring any reserve you claimed in a previous implications. For more information, see Guide RC4022,
year back into income the next year. The Income Tax Act lets General Information for GST/HST Registrants.
you take a new reserve based on your circumstances at
Do not include rental income, whether from farm property
that time.
or real estate, with your income from business or farming.
For more information, see archived Interpretation You have to report it separately on your tax and
Bulletin IT-154R, Special Reserves. benefit return.
For more information on rental income and how to report
Vacation trips and awards it, see Guide T4036, Rental Income.
If you received vacation trips or other kinds of awards
(such as jewellery or furniture) as a result of your business Barter transactions
activities, you must include the value of these awards in
A barter transaction takes place when two persons agree to
your business income.
exchange goods or services between them.
Vacation trips and awards may have GST/HST
If you are involved in a barter transaction, the goods or
implications. For more information, see Guide RC4022,
services you receive could be considered proceeds from a
General Information for GST/HST Registrants.
business operation.
Government grants and subsidies If you are in a business or profession that provides goods or
If you get a grant or subsidy from a government or services, and you exchange these goods or services in a
government agency, you have to report it as income or as a barter transaction, you have to include the value of the
reduction of an expense. Generally, a grant or subsidy: goods or services you exchanged in your income.
■ increases your income or reduces your expenses Barter transactions may also have GST/HST implications.
For more information, see Guide RC4022, General
■ relates to an income deficiency Information for GST/HST Registrants.
■ relates to specific expenses
Selling a property
For example, if you are a farmer and you received a If you sell a capital property, you may have:
payment to subsidize your income in a drought year, you
would add the payment to your income. However, if you ■ a recovery of capital cost allowance, known as recapture
are a business that receives a government employment
■ an undepreciated balance in a class and no property
grant to allow you to hire more students, you would
remaining in that class, known as a terminal loss
generally deduct the amount of the grant from the wage
expense you are claiming. ■ a capital gain or a capital loss. For example, if you sell a
capital property for more than it cost, you have a capital
Government assistance that enables you to acquire capital
gain, and if you sell it for less than it cost, you have a
property does not increase your net income. However, for
capital loss
depreciable property, you reduce the capital cost of the
property by the amount of assistance received. For other For more information on recaptures and terminal losses, see
capital property, reduce the adjusted cost base accordingly. the Income Tax Folio, S3-F4-C1, General Discussion of Capital
Cost Allowance.
For more information, see archived Interpretation
Bulletin IT-273R2, Government Assistance – General For more information on capital gains and capital losses,
Comments. see Guide T4037, Capital Gains, and for additional rules
relating to farmers, see Guide T4002, Self-employed Business,
Surface rentals for petroleum or natural gas exploration Professional, Commission, Farming, and Fishing Income.
If you have land that you usually use in your farming or There may be GST/HST implications when you sell a
business operation, and you are leasing it out for petroleum property. For more information, see Guide RC4022, General
or natural gas exploration, you may have to include the Information for GST/HST Registrants.
leasing proceeds in your income as a capital receipt or an
income receipt.
Inventory and cost of goods sold
Surface rentals for the exploration of petroleum or natural You need to do an annual inventory. This is usually a list of
gas may also have GST/HST implications. For further goods held for sale. If you are a manufacturer, this includes
information, you may call 1-800-959-8287. raw materials as well as packaging material and supplies,
For more information, see archived Interpretation work-in-progress (goods and services that you have not yet
Bulletin IT-200, Surface Rentals and Farming Operations. completed at the end of your fiscal period), and finished
goods that you have on hand. Inventory is used to calculate
Rental income the cost of goods sold and net income on Form T2125,
Rental income can be income from property or income from Statement of Business or Professional Activities.
business. For income tax purposes, income from rental If you have a professional practice and you are an
operations is usually income from property. accountant, dentist, lawyer, medical doctor, notary,
veterinarian, or chiropractor, you can elect to exclude your
work-in-progress (WIP) when you determine inventory.

canada.ca/taxes 21
Under proposed changes, if you have a tax year that begins Running a business from your home
after March 21, 2017, you can no longer elect to exclude You can deduct expenses for the business use of a work
amounts for WIP. Transitional rules will phase in the space in your home, as long as you meet one of
inclusion of WIP into income evenly over 5 years. these conditions:
However, the new proposed rules allow you to include ■ it is your main place of business
your WIP progressively if you elected to use billed basis
accounting for the last tax year that started before ■ you use the space only to earn your business income, and
March 22, 2017. Generally, for the first tax year that starts to meet your clients or customers
after March 21, 2017, you must include 20% of the lesser of
You can deduct part of your maintenance costs, such as
the cost and the fair market value of WIP; the inclusion rate
heating, home insurance, electricity, and cleaning materials.
increases to 40% in the second year that starts after
You can also deduct part of your property taxes, mortgage
March 21, 2017, 60% in the third year, 80% in the fourth
interest, and capital cost allowance (CCA). To calculate the
year, and finally 100% in the fifth and all subsequent tax
part you can deduct, use a reasonable basis, such as the
years that start after March 21, 2017.
area of the work space divided by the total area of
For more information, see Guide T4002, Self-employed your home.
Business, Professional, Commission, Farming, and
For more information, see Guide T4002, Self-employed
Fishing Income.
Business, Professional, Commission, Farming, and
Fishing Income.
How to value your inventory
The value you place on the items in your year-end
inventory is important in determining your income.
Types of operating expenses
Personal or living expenses
For income tax purposes, the two acceptable methods of In most cases, you cannot deduct personal or living
valuing your inventory are by determining either: expenses. However, you can deduct travel expenses you
■ the fair market value of your entire inventory (use either incur in the course of carrying on a business while away
the price you would pay to replace an item or the from home.
amount you would get if you sold an item) The general rule is that you cannot deduct outlays or
■ the value of individual items (or classes of items, if expenses that are not related to earning business income.
specific items are not easy to distinguish) in the
inventory, at their cost or their fair market value, Prepaid expenses
whichever is lower A prepaid expense is an expense you pay ahead of time. If
you use the accrual method of accounting, you can claim
Other methods of valuing inventory may be available or
any expense you have prepaid in the year or years in which
required depending on the type of business. For example,
you receive the benefit related to that expense.
property described in the inventory of a business that is an
adventure or concern in the nature of trade must be valued For more information, see archived Interpretation
at the cost at which the taxpayer acquired the property. Bulletin IT-417R2, Prepaid Expenses and Deferred Charges.
If you have property that is a swap agreement, a forward
Accounting and legal fees
purchase or sale agreement, a forward rate agreement, a
futures agreement, an option agreement, or any similar You can deduct fees you incur for external professional
agreement, different rules may apply to you. advice, services, and consulting fees.

After you choose a method of inventory valuation, you You can deduct accounting and legal fees you incur to get
have to continue to use the same method in later years. For advice and help in keeping your books and records. You
more information, see archived Interpretation can also deduct fees you incur for preparing and filing your
Bulletin IT-473R, Inventory Valuation. income tax and GST/HST returns.
For more information, see archived Interpretation
Expenses Bulletin IT-99R5-CONSOLID, Legal and Accounting Fees.
This part of the guide gives you an overview of the
Advertising expenses
business expenses that you can claim for income tax
You can deduct expenses for advertising, which include ads
purposes. For more information, go to canada.ca/business
in Canadian newspapers, on Canadian television and radio
or see Guide T4002, Self-employed Business, Professional,
stations. You can include any amount you paid as a
Commission, Farming, and Fishing Income.
finder’s fee.
What are business expenses? Certain restrictions apply to the amount of the expense you
can deduct for advertising in a periodical. You can deduct
A business expense is a cost you incur for the sole purpose
all the expense if your advertising is directed to a Canadian
of earning business income.
market and the original editorial content in the issue
If you pay cash for any business expenses, be sure to get is 80% or more of its total non-advertising content.
receipts or other vouchers. Receipts should include the
vendor’s name and the date.

22 canada.ca/taxes
You can deduct 50% of the expense if your advertising is in earn income. However, you cannot deduct the value of
a periodical directed to a Canadian market and the original your own labour.
editorial content in the issue is less than 80% of its total
You cannot deduct costs you incur for capital repairs.
non-advertising content.
However, you may be able to claim capital cost allowance
You cannot deduct expenses for advertising directed on repaired property.
mainly to a Canadian market when you advertise with a
For more information about capital cost allowance, see
foreign broadcaster.
Guide T4002, Self-employed Business, Professional,
Commission, Farming, and Fishing Income.
Business tax, fees, licences, and dues
You can deduct all annual licence fees and some business
Meals and entertainment
taxes you incur to run your business. Some examples of
The maximum part you can claim for food, beverages, and
licence fees are: beverage licenses; business charges; trade
entertainment expenses is 50% of either the amount you
licences; motor vehicle licenses; and motor vehicle
incur or an amount that is reasonable in the circumstances,
registration permits. Some examples of business taxes that
whichever is less.
may be deductible are: municipal taxes; land transfer taxes;
gross receipt tax; health and education tax; and hospital tax. The 50% limit also applies to the cost of your meals when
Income taxes are not deductible. you travel or go to a convention, conference, or similar
event. Special rules can, however, affect your claim for
You can deduct annual dues or fees to keep your
meals in these cases. For more information, see “Meals and
membership in a trade or commercial association.
entertainment,” “Convention expenses,” or “Travel,” in
However, you cannot deduct club membership dues
Guide T4002, Self-employed Business, Professional,
(including initiation fees), if the main purpose of the club is
Commission, Farming, and Fishing Income.
to provide dining, recreational, or sporting facilities for
its members. For more information, see archived Interpretation
Bulletin IT-518R, Food, Beverages, and Entertainment
Insurance expenses Expenses.
You can deduct regular commercial insurance premiums
that you pay for buildings, machinery, and equipment that Motor vehicle expenses
you use for your business. You can deduct expenses you incur to run a motor vehicle
that you use to earn business income. However, several
Interest and bank charges factors can affect your deduction.
You can deduct the interest you pay on money you borrow
to run your business. However, there are some limits. What kind of vehicle do you own?
The kind of vehicle you own can affect the expenses you
There is a limit on the interest you can deduct on money
deduct. For income tax purposes, there are two types
you borrow to buy a passenger vehicle. For more
of vehicles:
information, see “Motor vehicle expenses” in Guide T4002,
Self-employed Business, Professional, Commission, Farming, and ■ motor vehicle
Fishing Income.
■ passenger vehicle
There is also a limit on the amount of interest you can
deduct for vacant land. For more information about capital cost allowance limits,
interest limits, and leasing costs, see
You can choose to capitalize the interest expense you pay Guide T4002, Self-employed Business, Professional,
on the money you borrow for any of the Commission, Farming, and Fishing Income.
following purposes:
You can deduct motor vehicle expenses only when they are
■ to buy depreciable property reasonable and you have receipts to support them.
■ to buy a resource property The types of expenses you can deduct include:
■ for exploration and development ■ fuel and oil
For exploration and development, when you choose to ■ maintenance and repairs
capitalize interest, you add the interest to the cost of the
property or the exploration and development costs. ■ insurance

Do not deduct the capitalized interest as a current expense. ■ licence and registration fees
For more information, read “Line 8710 – Interest and bank ■ capital cost allowance
charges” in Guide T4002, Self-employed Business, Professional,
Commission, Farming, and Fishing Income. For more ■ interest you pay on a loan used to buy a motor vehicle
information on deducting interest, see Income Tax Folio ■ leasing costs
S3-F6-C1, Interest Deductibility.
For more information about motor vehicles,
Maintenance and repairs see Guide T4002, Self-employed Business, Professional,
You can deduct the cost of labour and materials for any Commission, Farming, and Fishing Income.
minor repairs or maintenance done to property you use to

canada.ca/taxes 23
Office expenses When you file your income tax and benefit return, you
You can deduct office expenses for small items such as must include financial statements or one or more of the
pens, pencils, paper clips, stationery, and stamps. Expenses forms that applies to your business income listed
for capital items such as calculators, filing cabinets, chairs, previously at “Income – How to account for your
and desks are claimed differently. For more information, business income.”
see capital cost allowance in the Guide T4002, Self-employed
Business, Professional, Commission, Farming, and Fishing Partnership
Income.
A partnership by itself does not pay income tax on its
operating results and does not file an annual income tax
Salaries, including employer’s contributions return. Instead, each partner includes a share of the
You can deduct the cost of salaries you pay to employees. partnership income (or loss) on a personal, corporate, or
You report each salary by the end of February on a T4, trust income tax return.
Statement of Remuneration Paid, or T4A, Statement of Pension,
Retirement, Annuity and Other Income. For more information Each partner has to file financial statements or one of the
on these slips, see Guide T4001, Employers’ Guide – Payroll forms referred to above that outlines the statement of
Deductions and Remittances. business activities.
A partnership that carries on a business in Canada, or a
Can you deduct business start-up costs? Canadian partnership with Canadian or foreign operations
To deduct a business expense, you need to have carried on or investments, has to file Form T5013, Statement of
the related business in the fiscal period in which the Partnership Income, for each of the fiscal periods of the
expense was incurred. You need to be clear about the date partnership where, one of the following occurs:
your business started.
■ at the end of the fiscal period, the partnership has an
To determine what you can claim as a start-up expense, see absolute value of revenues plus an absolute value of
archived Interpretation Bulletin IT-364, Commencement of expenses of more than $2 million, or has more than
Business Operations, or Guide RC4022, General Information for $5 million in assets
GST/HST Registrants.
■ at any time during the fiscal period:
How to report your business income – the partnership is a tiered partnership (has another
partnership as a partner or is itself a partner in another
Sole proprietor partnership)
A sole proprietor pays taxes by reporting income (or loss)
– the partnership has a corporation or a trust as a partner
on a T1 income tax and benefit return.
– the partnership invested in flow-through shares of a
If you are a sole proprietor, you or your authorized
principal-business corporation that incurred Canadian
representative have to file a T1 return if you:
resource expenses and renounced those expenses to the
■ have to pay tax for the year partnership
■ disposed of a capital property or had a taxable capital – the Minister of National Revenue asked in writing for a
gain in the year completed Form T5013, Statement of Partnership Income
■ have to make Canada Pension Plan/Quebec Pension For more information, see Guide T4068, Guide for the
Plan (CPP/QPP) payments on self-employed earnings or Partnership Information Return (T5013 Forms).
pensionable earnings for the year
■ want to access employment insurance (EI) special Corporation
benefits for self-employed persons A corporation has to file a T2 corporation income tax return
no later than six months after the end of every tax year,
■ received a demand from us to file a return
even if it does not owe taxes. It also has to attach complete
You also need to file a return if you are claiming an income financial statements and the necessary schedules to
tax refund, a refundable tax credit, a GST/HST credit, or the return.
the Canada Child Benefit. You should also file a return if
A corporation usually pays its taxes in monthly or quarterly
you are entitled to receive provincial tax credits.
instalments. For more information on instalment payments
The list above does not include every situation where you and the filing requirements for corporations, see
might have to file. Guide T4012, T2 Corporation – Income Tax Guide, or Guide
T7B-CORP, Corporation Instalment Guide, or go
Note to canada.ca/payments.
As a sole proprietor, you may have to pay your income
tax by payments called instalments. You may also need The tax year for a corporation is its fiscal period. For more
to make instalment payments for CPP contributions on information on corporations, go to canada.ca/t2-return.
your own income. For more information, go
to canada.ca/taxes-instalments.

24 canada.ca/taxes
Chapter 6 – Audits Delays in the audit, and how to avoid them
The time an audit takes depends on the state of your
What is an audit? accounting records and related documents, and the size
Auditing is a way for the CRA to monitor and inspect and complexity of your business. Your co-operation will
GST/HST, income tax and benefit returns, excise taxes and help keep this time to a minimum.
duties, and payroll records. There is a high standard of
compliance with the law in Canada. Audits help us Finalizing an audit
maintain public confidence in the fairness and integrity of Once the auditor completes the examination of the records
Canada’s tax system. provided, the outcome will determine the next steps.
■ Correct assessment: If the auditor finds that your
How we choose returns to audit previous assessment is correct, nothing more has to be
The CRA’s risk-assessment system selects files to audit done. You will receive a completion letter and the audit
based on a number of conditions such as the potential for will be closed.
errors in tax returns or indications of non-compliance with
tax obligations. ■ More taxes owed or a refund: If the auditor finds that
your return has to be reassessed (which means you will
The CRA also looks at the information it has on file and have to pay more taxes or you are entitled to a refund),
may compare that information to similar files or consider you will receive a proposal letter explaining the reason
information from other audits or investigations. for the reassessment. You will have 30 days to agree or
For more information, go to canada.ca/taxes-audit. disagree with the proposed reassessment. The auditor
can further explain the reassessment if necessary.
How we conduct audits If you disagree with the proposal, you are encouraged to
A CRA auditor will write to you or call you, or both, to contact the auditor to try and resolve factual disagreements.
begin the audit process and inform you of where the audit The auditor will carefully consider your explanations and
will take place. Normally, it is expected that the audit take respond to your questions about the proposal. If issues
place at your place of business (on-site audit). This allows remain unresolved, you can contact the auditor’s team
questions to be addressed quickly and minimizes delays in leader to discuss them further.
completing the audit. In certain rare situations, the audit For more information go to canada.ca/taxes-audit.
may be conducted at a CRA office (office audit).
What are your responsibilities?
What does an auditor examine during a By law, you have to keep adequate books and records to
business audit? determine your tax obligations and your entitlements.
The auditor will examine books and records, documents, Generally, books and records must be kept for a minimum
and information (collectively referred to as records) such as: of six years.
■ information available to the CRA (such as tax returns If you use a computer for your accounting records, you
previously filed, credit bureau searches, or property must keep your books and records in an online readable
database information) format, even if you also keep them on paper. Using the
services of a tax professional does not relieve you of
■ your business records (such as ledgers, journals, invoices, your responsibilities.
receipts, contracts, and bank statements)
For an audit, please make available to the auditor your
■ your personal records (such as bank statements, records (both paper and digital), any supporting
mortgage documents, and credit card statements) documents, and explanations to the questions the auditor
■ the personal or business records of other individuals or will have.
entities not being audited (for example, a spouse, family
members, corporations, partnerships, or a trust [settlor, Underground economy
beneficiary, and trustee])
The underground economy typically involves economic
■ adjustments made by your bookkeeper or accountant to activity that is not reported or that is under-reported for
arrive at income for tax purposes tax purposes.
Note The activities that classify as underground economy
Your personal records and the personal or business include failure:
records of other individuals or entities are legally
considered to be part of the items that relate, or may ■ to file
relate, to the business being audited. An auditor can also ■ to register
examine the records of family members. An auditor may
ask questions of the employees who do your accounting ■ to report a business activity
entries or know about the operations of your business. ■ to report business income

For more information, go to canada.ca/taxes-audit. ■ to report employment income

canada.ca/taxes 25
For more information, go writing to the Chief of Appeals at your Appeals Intake
to canada.ca/taxes-underground-economy. Centre or by using our online services:
– If you are an individual, go to My Account at
Tax alert canada.ca/my-cra-account.
Protect yourself! – If you are a business, go to My Business Account
Most taxpayers, given the proper information and tools, canada.ca/my-cra-business-account.
will voluntarily meet their tax obligations.
■ In every other case, including taxes that were assessed
Our website contains information that will help taxpayers for over-contributions to an RRSP or a TFSA, you have to
understand how to protect themselves against tax schemes, file an objection within the 90 days following the date on
and understand the consequences they might face. the notice of assessment or notice of reassessment.
For example, some taxpayers don’t realize the financial and You or your authorized representative can file an
personal risks they are exposed to by paying cash for jobs objection by:
for home renovations. Other taxpayers don’t know that
participating in certain tax shelter schemes to avoid paying ■ using our online services:
taxes could mean a loss of their principal, the repayment of – “Register my formal dispute” for individuals through
taxes owed, penalties and interest, and lead to fines My Account at canada.ca/my-cra-account or through
and imprisonment. Represent a Client at canada.ca/taxes-representatives
For information about how to protect yourself against tax – “Register a formal dispute (Notice of Objections)” for
schemes, go to canada.ca/tax-alert. business through My Business Account
at canada.ca/my-cra-business-account or through
Chapter 7 – Objections and Represent a client at canada.ca/taxes-representatives

appeals ■ sending us a completed

Form T400A, Objection – Income Tax Act
If you disagree with an assessment, you can get an ■ sending a signed letter to the Chief of Appeals at your
explanation by calling 1-800-959-5525. Many disputes are appeals intake centre
resolved this way, without having to file a formal dispute.
GST/HST
Income Tax To file an objection, use Form GST159, Notice of Objection
If you want to change your assessment because of new or (GST/HST). The time limit for filing an objection is within
additional information, you have two choices: 90 days after the day we send you the notice of assessment
or reassessment.
■ go to canada.ca/change-tax-return
In the province of Quebec, Revenu Québec administers the
■ send a letter to the tax centre address shown on your
GST/HST. To get information on time limits and how to
notice of assessment
file an objection to a GST assessment or reassessment
Note completed by Revenu Québec, contact them directly. For
In your letter include your social insurance number and more information, visit the Revenu Québec website
any documents supporting the request. at revenu.gouv.qc.ca/en/entreprise/
taxes/tvq_tps/default.aspx.
If you still disagree with the assessment, you have the right
to register a formal dispute. Excise duty – You or your authorized representative can
file a notice of objection within the 90 days following the
day of your notice of assessment or notice of
How to register a formal dispute reassessment using either:
If you disagree with your assessment or reassessment, you
can register a formal dispute. Filing an objection is the first ■ the “Register a formal dispute (Notice of Objection)”
step in the formal process of resolving a dispute. service through My Business Account
at canada.ca/my-cra-business-account, or through
Represent a Client at canada.ca/taxes-representatives
Income Tax
The time limit for filing a dispute is as follows: ■ Form E680, Notice of Objection (Excise Act, 2001)

■ If you are an individual other than a trust, or if you are Other taxes – You or your authorized representative can
filing for a graduated rate estate, the time limit for filing file a notice of objection using:
a dispute or an objection is either one year after the due ■ the “Register a formal dispute (Notice of Objection)”
date for the return in question or within the 90 days after service through My Business Account
the date on the notice of assessment or notice of at canada.ca/my-cra-business-account, or through
reassessment, whichever is latest. If you did not file your Represent a Client at canada.ca/taxes-representatives
objection on time, you can apply for a time extension
within one year of your original time limit to file an ■ Form E413, Notice of Objection (Excise Tax Act)
objection. In your objection, you must include why you
were prevented from filing on time. You can apply by

26 canada.ca/taxes
■ Form RC45, Notice of Objection (Softwood Lumber Products tax, and import/export). Businesses with a physical
Export Charge Act, 2006) address in Quebec that need a GST account will be linked
automatically to the Revenu Québec website. For more
■ Form E676, Notice of Objection (Air Travellers Security
information, go to canada.ca/business-registration-online.
Charge Act)
If you are using one of these forms, send a completed form Filing returns
to your tax service office.
File your income tax and benefit return using NETFILE
Canada Pension Plan and employment insurance – If you NETFILE is one of our digital tax-filing options. This
think we have misinterpreted the facts or not applied the service lets you file your income tax return with us using
law correctly, you have the right to appeal assessments and the Internet. You can only send your own return to us using
rulings related to the Canada Pension Plan (CPP) and NETFILE. Authorized representatives cannot send returns
employment insurance (EI). for their clients through NETFILE. When you use this
service, you cannot change any of your personal
If you disagree with the explanation you have received, you
information such as your name, address, date of birth, or
may be able to file an appeal to the Minister. In all cases,
direct deposit information.
you have to explain why you disagree. Include all relevant
facts and supporting documents. To do so, you have If you have registered with the My Account service, you
three options: can change your address before using NETFILE by going
to canada.ca/my-cra-account.
Online: through My Account at canada.ca/my-cra-account
or through My Business Account If you are not registered, call 1-800-959-8281 to make the
at canada.ca/my-cra-business-account. If you are a level 2 necessary changes to your address before using NETFILE.
or 3 representative, go to Represent a Client
at canada.ca/taxes-representatives. Click on “Register a File your corporate income tax return over the Internet
formal dispute (Appeal)”. To send supporting documents, You can file your corporation income tax return with us
click on “Submit documents.” online. All corporations with annual gross revenue of more
In writing: Send Form CPT100, Appeal of a Ruling under the than $1 million must file their corporate income tax return
Canada Pension Plan and/or Employment Insurance Act; or online. Businesses can use our corporate Internet filing
Form CPT101, Appeal of an Assessment under the Canada service or file through My Business Account at
Pension Plan and/or Employment Insurance Act, or a letter to canada.ca/my-cra-business-account, and authorized
the Chief of Appeals to the following address: representatives can file through Represent a Client at
canada.ca/taxes-representatives without a web access code.
CPP/EI Appeals Division
Canada Revenue Agency Mandatory digital filing for GST/HST registrants
451 Talbot Street Some GST/HST registrants have to file their GST/HST
London ON N6A 5E5 return online. Your filing options, however, depend on
your reporting circumstances.
By fax: Send your documents to 1-888-287-7800.
For more information on options for the digital filing of
In all cases, you can send us a letter detailing your request,
GST/HST returns, go to canada.ca/gst-hst-filing.
signed by you, the appellant or by an authorized officer of
a corporation. You may also be able to file your return online and make
your payment through a participating financial institution
For more information on the formal process of resolving a
or third-party service provider. Contact your local branch
dispute, go to canada.ca/cra-complaints-disputes.
or service provider to see if they offer this service, or go
to canada.ca/gst-hst-edi.
Chapter 8 – At your service Note
Eligible T2 corporation income tax, GST/HST, and
Digital services for businesses information returns can be filed online by business
Digital services help businesses by streamlining owners using our online services:
communications with the CRA and simplifying the ■ If you are a business owner, go to My Business
preparation and submission of tax information. For more Account, at canada.ca/my-cra-business-account
information, go to canada.ca/taxes-business-online.
■ If you are an authorized representative, go
Registering your business to Represent a Client
at canada.ca/taxes-representatives
Business Registration Online is a CRA web page that is a
one-stop registration service that lets you apply for a
business number (BN) and register for programs
The GST/HST Registry
administered by British Columbia, Nova Scotia, The GST/HST Registry is an online service that you can use
and Ontario. to validate the GST/HST number of a business. This
ensures that the ITCs you claim only include GST/HST
You can also use this online service if you have a BN and charged by GST/HST registrants.
need to register for any of the four common program
accounts (GST/HST, payroll deductions, corporate income For more information, go to canada.ca/gst-hst-registry.

canada.ca/taxes 27
You can validate a Quebec sales tax (QST) registration We provide our GST/HST rulings and interpretations
number for a person who is registered for the QST, other service from rulings centres across Canada (except in
than a selected listed financial institution (SLFIs), by Quebec). You or your authorized representative can call us
accessing the QST registry on the Revenu Québec website at 1-800-959-8287. For service in Quebec, call
at revenu.gouv.qc.ca/en/sepf/ Revenu Québec at 1-800-567-4692.
services/sgp_validation_tvq/default.aspx.
For more information, see Pamphlet RC4405, GST/HST
Note Rulings – Experts in GST/HST Legislation and GST/HST
The CRA administers the QST for selected listed Memorandum 1.4, Excise and GST/HST Rulings and
financial institutions. Interpretations Service.

Getting help Excise duty rulings and interpretations

To get help using My Business Account, GST/HST You can ask for a written ruling or interpretation on how
NETFILE, GST/HST TELEFILE, Information Returns, excise duties apply to certain goods such as alcohol and
Digital Filing, Represent a Client, and the Payroll tobacco products. For more information, contact a regional
Deductions Online Calculator, you or your authorized excise duty office. For a listing of their numbers, see Excise
representative can call Business enquiries at 1-800-959-5525. Duty Memoranda EDM1-1-2, Regional Excise Duty Offices,
at canada.ca/cra-forms.
To find other telephone numbers go
to canada.ca/en/revenue-agency/corporate/
contact-information/telephone-numbers.html. Excise taxes and other levies rulings and
interpretations
Note
The e-Services Helpdesk is not available on weekends, You can ask for a written ruling or interpretation on how
statutory, or civic holidays. the excise tax or air travellers security charge applies to
your operations or transactions. For more information on
For help with Corporate Internet Filing, call 1-800-959-2803. requesting an excise tax or other levies ruling, go
to canada.ca/en/revenue-agency/services/forms-
For general business enquiries, call 1-800-959-5525.
publications/publications/contacts-excise-taxes-contacts/
For more information about our digital services for excise-taxes-contacts.html.
businesses, go to canada.ca/taxes-business-online.
Scientific Research and Experimental
Advance income tax rulings and Development (SR&ED) Program
interpretations The Scientific Research and Experimental Development
An advance income tax ruling is a written statement from (SR&ED) Program is a federal tax incentive program
CRA that says how we will interpret and apply Canadian designed to encourage Canadian businesses of all sizes and
income tax law to transactions a taxpayer is considering. in all sectors to conduct research and development (R&D)
For more information, see Information Circular IC70-6R7, in Canada. Whether you are a first-time claimant, or need
Advance Income Tax Rulings and Technical Interpretations. help to understand the requirements of the program, we
have various free services and tools that can help you. For
Ruling for a Canada Pension Plan (CPP) or more information on this credit and these sessions, go
employment insurance (EI) to canada.ca/taxes-sred or call 1-800-959-5525.
You can ask for a ruling on the status of a worker or
workers under the Canada Pension Plan or the Employment Canada business service centres
Insurance Act, using the “Request a CPP/EI ruling” service On the Government of Canada website, canada.ca, you
by using our online services: can find a list of links to the websites of Government of
Canada departments, agencies, and Crown corporations.
■ If you are a business owner, go to My Business Account,
You can also find links to websites maintained by
at canada.ca/my-cra-business-account
organizations for which federal departments and agencies
■ If you are an authorized representative, go to Represent a are responsible.
Client at canada.ca/taxes-representatives
To ask for a ruling for a given year, you have to send your Innovation, Science and Economic
request by June 29 of the next year. Development Canada
To access Innovation, Science and Economic Development
GST/HST rulings and interpretations Canada’s extensive expertise and information resources,
You can ask for a written ruling or interpretation on how visit ic.gc.ca.
the GST/HST applies to your operations or transactions.
We will provide guidance, and as much certainty as
possible, about how the GST/HST applies and the
Your rights, entitlements,
consequences of your transactions or proposed and obligations
transactions. If you need general information about The CRA operates on the fundamental belief that taxpayers
GST/HST, go to canada.ca/gst-hst or call 1-800-959-5525. are likely to comply with the law if they are treated fairly

28 canada.ca/taxes
and have the information, advice, and services they need to Cancel or waive penalties or interest
meet their obligations. These obligations may include filing
The CRA administers legislation, commonly called the
required returns, paying taxes, providing information, and
taxpayer relief provisions, that gives the CRA discretion to
properly declaring imported or exported goods.
cancel or waive penalties or interest when taxpayers are
unable to meet their tax obligations due to circumstances
What is the Voluntary Disclosures beyond their control.
Program? The CRA’s discretion to grant relief is limited to any period
The Voluntary Disclosures Program allows you to come that ended within 10 calendar years before the year in
forward and correct inaccurate or incomplete information which a request is made.
or to disclose information you had not previously reported For penalties, the CRA will consider your request only if it
to us. relates to a tax year or fiscal period ending in any of the 10
You may avoid penalties and prosecution if you make a calendar years before the year in which you make your
valid disclosure before you become aware of any request. For example, your request made in 2018 must
compliance action being initiated against you by us. You relate to a penalty for a tax year or fiscal period ending in
will only have to pay the taxes owing plus interest. 2008 or later.
A disclosure is valid if it: For interest on a balance owing for any tax year or fiscal
period, the CRA will consider only the amounts that
■ is voluntary accrued during the 10 calendar years before the year in
■ contains complete information which you make your request. For example, your request
made in 2018 must relate to interest that accrued in 2008
■ involves the application or the potential application of a or later.
penalty
To make a request, fill out Form RC4288, Request for
■ generally includes information that is more than one Taxpayer Relief – Cancel or Waive Penalties or Interest. For
year overdue more information about relief from penalties or interest and
The Voluntary Disclosure Program provides an avenue for how to submit your request, go
you to correct past errors and omissions and become to canada.ca/taxpayer-relief.
compliant with tax laws.
For more information, go
to canada.ca/taxes-voluntary-disclosures or see
Information Circular IC00-1R5, Voluntary Disclosures
Program, or GST/HST Memorandum 16.3, Cancellation or
Waiver of Penalties and/or Interest.

canada.ca/taxes 29
Important dates for businesses
Sole proprietorships and partnerships Corporations
Monthly, by Send us the payroll deductions from your Monthly, by Send us the payroll deductions from
the 15th employees’ remuneration, along with your the 15th your employees’ remuneration, along
part of Canada Pension Plan (CPP) with your part of CPP contributions and
contributions and employment insurance EI premiums, by the 15th of the next
(EI) premiums by the 15th of the next month.
month.
Quarterly, by If you are self-employed, make your Monthly Corporations have to pay instalments of
the 15th instalment payments of tax and CPP or their income tax by the last day of each
contributions by these dates: Quarterly month or each quarter.
1st instalment: March 15
2nd instalment: June 15
3rd instalment: September 15
4th instalment: December 15
Last day of File your T4 and T4A slips along with the Last day of File your T4 and T4A slips along with the
February related Summary form. Distribute the slips February related Summary form. Distribute the
to your employees. slips to your employees.
March 31 If required, partnerships (except those Two months The balance of corporation income tax
made up of corporations, or a from your tax payable is due.
combination of individuals, corporations, year-end
and trusts with different filing dates) must
file a partnership information return before
this date.
April 30 File your income tax and benefit return for Three months For Canadian controlled private
the previous year. Pay any tax amounts from your tax corporations claiming the small business
owing. Self-employed individuals and year-end deduction, the balance of the corporation
their spouses or common-law partners tax payable is due.
have until June 15 to file their returns.
June 15 Self-employed individuals (and their Six months Corporations must file a T2, Corporation
spouses or common-law partners) must from your tax Income Tax Return, no later than
file their income tax and benefit returns by year-end six months after the corporation’s
June 15. However, to avoid interest year-end.
charges, you have to pay any balance
owing by April 30.
December 31 For farmers and fishers, calculate and
pay the amount of your current-year
instalment payment.

Note Due dates

It is important that you file required returns and remit
When the due date falls on a Saturday, a Sunday, or a
payments on time. If you do not file and remit on time,
public holiday recognized by the CRA, we consider your
penalties apply and interest is charged on unpaid taxes
payment to be on time if we receive it on the next business
and penalties.
day. Your return is considered on time if we receive it or if
To help you remember important business dates, you can it is postmarked on or before the next business day.
use the Business Tax Reminders mobile app. For more
information, go to canada.ca/cra-mobileapps.
For more information on important dates, including dates
for GST/HST, go to canada.ca/taxes-important-dates.

30 canada.ca/taxes
Addresses on our website
Visit our website at cra.gc.ca. Below is a list of some useful addresses for small businesses:

Topic Website
Aboriginal peoples canada.ca/taxes-aboriginal-peoples
AgriInvest Program agr.gc.ca/agriinvest
AgriStability Program agr.gc.ca/agristability
Businesses home page canada.ca/business
Business number (BN) registration canada.ca/taxes-register-business
Complaints and disputes canada.ca/cra-complaints-disputes
Contact us canada.ca/cra-contact
Contract payment reporting canada.ca/contract-payment-reporting-system
Corporation income tax canada.ca/t2-return
Corporation Internet filing canada.ca/corporation-internet
Direct deposit – Business canada.ca/cra-direct-deposit
Electronic payments canada.ca/payments
Electronic mailing lists canada.ca/cra-email-lists
Electronic services canada.ca/cra-electronic-services
E-services for businesses canada.ca/taxes-business-online
canada.ca/en/revenue-agency/services/tax/technical-
Excise taxes and special levies
information/excise-taxes-special-levies.html
canada.ca/en/revenue-agency/services/help-cra-website
Frequently asked questions
-electronic-services/faqs-available-on-cra-website.html
Filing information returns electronically canada.ca/taxes-iref
Forms and publications canada.ca/cra-forms
Forms and publications – Online order forms canada.ca/get-cra-forms
GST/HST Information for businesses canada.ca/gst-hst
GST/HST electronic filing and remitting canada.ca/gst-hst-edi
Informant Leads Program canada.ca/taxes-informant-leads
Make a Service Complaint canada.ca/cra-service-complaints
Mobile Apps canada.ca/cra-mobile-apps
My Business Account canada.ca/my-cra-business-account
Payroll canada.ca/payroll
Payroll Deductions Online Calculator canada.ca/pdoc
Prescribed interest rates canada.ca/taxes-interest-rates
Public holidays and due dates canada.ca/cra-due-dates
Represent a Client canada.ca/taxes-representatives
Scientific Research and Experimental Development canada.ca/taxes-sred
Security options – Taxable benefit canada.ca/taxes-security-options
Small businesses canada.ca/taxes-self-employed
T4 information returns (how to file) canada.ca/taxes-slips
Taxpayer Bill of Rights canada.ca/taxpayer-rights
Taxpayers’ Ombudsman oto-boc.gc.ca
Taxpayer relief provisions canada.ca/taxpayer-relief
Tax services offices and tax centres canada.ca/cra-offices
canada.ca/en/revenue-agency/news/newsroom/
Tax myths
debunking-tax-myths.html
Underground economy canada.ca/taxes-underground-economy
Voluntary Disclosures Program canada.ca/taxes-voluntary-disclosures

canada.ca/taxes 31
Forms and publications
Guides Forms
■ RC17, Taxpayer Bill of Rights Guide: Understanding Your ■ B200, Excise Tax Return
Rights as a Taxpayer
■ B248, Registration Form Under the Provisions of the Air
■ RC4015, Reconciliation of Business Income for Tax Purposes Travellers Security Charge Act
■ RC4022, General Information for GST/HST Registrants ■ B249, Air Travellers Security Charge Return
■ RC4027, Doing Business in Canada – GST/HST Information ■ B253, Softwood Lumber Products Export Charge –
for Non-Residents Registration Form
■ RC4033, General Application for GST/HST Rebates – ■ B275, Softwood Lumber Products Export Charge Return
Includes Forms GST189, GST288, and GST507
■ B284, Election or Revocation of the Election for
■ RC4052, GST/HST Information for the Home Semi-Annual Reporting
Construction Industry
■ CPT100, Appeal of a Ruling under the Canada Pension Plan
■ RC4058, Quick Method of Accounting for GST/HST – and/or Employment Insurance Act
Includes Form GST74
■ CPT101, Appeal of an Assessment under the Canada Pension
■ RC4060, Farming Income and the AgriStability and Plan and/or Employment Insurance Act
AgriInvest Programs Guide – Joint Forms and Guide 2017
■ E413, Notice of Objection (Excise Tax Act)
■ RC4082, GST/HST Information for Charities
■ E676, Notice of Objection (Air Travellers Security
■ RC4110, Employee or Self-Employed? Charge Act)
■ RC4120, Employers’ Guide – Filing the T4 Slip and Summary ■ E680, Notice of Objection (Excise Act, 2001)
■ RC4408, Farming Income and the AgriStability and ■ GST20, Election for GST/HST Reporting Period
AgriInvest Programs Harmonized Guide 2017
■ GST44, Election Concerning the Acquisition of a Business or
■ RC4420, Information on CRA – Service Complaints Part of a Business
■ T4001, Employers’ Guide – Payroll Deductions ■ GST70, Election or Revocation of an Election to Change a
and Remittances GST/HST Fiscal Year
■ T4002, Self-employed Business, Professional, Commission, ■ GST159, Notice of Objection (GST/HST)
Farming, and Fishing Income
■ L15, Application for Licence under the Provisions of the Excise
■ T4008, Payroll Deductions Supplementary Tables Tax Act
■ T4012, T2 Corporation – Income Tax Guide ■ N15, Excise Tax Act – Application for Refund/Rebate
■ T4032, Payroll Deductions Tables ■ RC1, Request for a Business Number
■ T4036, Rental Income ■ RC45, Notice of Objection (Softwood Lumber Products Export
Charge Act, 2006)
■ T4037, Capital Gains 2017
■ RC59, Business Consent for Access by Telephone and Mail
■ T4068, Guide for the Partnership Information Return (T5013
Forms) – 2017 ■ RC193, Service-Related Complaints
■ T4088, Scientific Research and Experimental Development ■ RC257, Request for an Information Return Program
(SR&ED) Expenditures Claim- Guide to Form T661 Account (RZ)
■ T4127, Payroll Deductions Formulas for Computer Programs ■ RC366, Direct Deposit Request for Businesses
■ T4130, Employers’ Guide – Taxable Benefits and Allowances ■ T137, Request for Destruction of Records
■ T7B-CORP, Corporation Instalment Guide – 2017 ■ RC4288, Request for Taxpayer Relief – Cancel or Waive
Penalties or Interest
Pamphlets, brochures, and slips ■ T400A, Objection – Income Tax Act
■ P148, Resolving Your Dispute: Objections and Appeal Rights ■ T661, Scientific Research and Experimental Development
Under the Income Tax Act (SR&ED) Expenditures Claim
■ RC4405, GST/HST Rulings – Experts in ■ T1013, Authorizing or Cancelling a Representative
GST/HST Legislation
■ T1139, Reconciliation of 2017 Business Income for
■ T4, Statement of Remuneration Paid (slip) Tax Purposes
■ T4A, Statement of Pension, Retirement, Annuity and
Other Income

32 canada.ca/taxes
■ T1163, Statement A – AgriStability and AgriInvest Programs ■ IT478R2, Capital Cost Allowance – Recapture and
Information and Statement of Farming Activities Terminal Loss
for Individuals
■ IT-518R, Food, Beverages, and Entertainment Expenses
■ T1164, Statement B – AgriStability and AgriInvest Programs
Information and Statement of Farming Activities for Income Tax Folios
Additional Farming Operations
■ S1-F5-C1, Related persons and dealing at arm’s length
■ T1175, Farming – Calculation of Capital Cost
Allowance (CCA) and Business-use-of-home Expenses ■ S3-F4-C1, General Discussion of Capital Cost Allowance

■ T1273, Statement A – Harmonized AgriStability and ■ S4-F2-C2, Business Use of Home Expenses
AgriInvest Programs Information and Statement of Farming
Activities for Individuals Information circulars
■ T1274, Statement B – Harmonized AgriStability and ■ IC00-1R5, Voluntary Disclosures Program
AgriInvest Programs Information and Statement of Farming
Activities for Additional Farming Operations ■ IC07-1, Taxpayer Relief Provisions

■ T2042, Statement of Farming Activities ■ IC70-6R7, Advance Income Tax Rulings and
Technical Interpretations
■ T2121, Statement of Fishing Activities
■ IC76-19R3, Transfer of Property to a Corporation Under
■ T2125, Statement of Business or Professional Activities Section 85
■ T5013-INST, Statement of partnership income – Instructions ■ IC78-10R5, Books and Records Retention/Destruction
for Recipient
■ IC89-2R3, Directors’ Liability
■ TD1, 2017 Personal Tax Credits Return
■ T2, Corporation Income Tax Return Excise duty memoranda
■ T4SUM, Summary of Remuneration Paid ■ EDM1-1-1, The Excise Duty Program
■ EDM1-1-2, Regional Excise Duty Offices
Archived Interpretation bulletins ■ EDM2-1-1, Licence Types
■ IT-99R5-CONSOLID, Legal and Accounting Fees
■ EDM2-3-1, Registration Types
■ IT-154R, Special Reserves
■ IT-200, Surface Rentals and Farming Operations Excise tax and special levies
■ IT-273R2, Government Assistance – General Comments memoranda
■ IT-291R3, Transfer of Property to a Corporation Under ■ X2-1, Licences
Subsection 85(1) ■ X2-2, Small Manufacturers
■ IT-364, Commencement of Business Operations ■ X2-3, Bonds Given as Security by Licensed Wholesalers
■ IT-413R, Election by Members of a Partnership Under ■ X3-1, Goods Subject to Excise Tax
Subsection 97(2)
■ X6-1, Books and Records
■ IT-417R2, Prepaid Expenses and Deferred Charges
■ X6-2, Returns and Payments
■ IT-442R, Bad Debts and Reserves for Doubtful Debts
■ IT-456R, Capital Property – Some Adjustments to Cost Base GST/HST memorandum
■ IT-459, Adventure or Concern in the Nature of Trade ■ GST/HST Memorandum 1.4, Excise and GST/HST Rulings
and Interpretations Service
■ IT-473R, Inventory Valuation

canada.ca/taxes 33
Online services
Online services for individuals ■ submit account related enquiries and view answers to
common enquiries
My Account
■ submit an enquiry about your audit
The CRA’s My Account service is fast, easy, and secure.
■ download reports
Use My Account to:
■ much more
■ view your benefit and credit payment amounts and dates
To log in to or register for the CRA’s online services, go to:
■ view your notice of assessment
■ My Business Account at
■ change your address, direct deposit information, and canada.ca/my-cra-business-account, if you are a business
marital status owner; or
■ sign up for account alerts ■ Represent a Client at canada.ca/taxes-representatives, if
■ check your TFSA contribution room and RRSP you are an authorized representative or employee.
deduction limit For more information, go
■ check the status of your tax return to canada.ca/taxes-business-online.

■ request your proof of income statement (option ‘C’ print)

Sign up for online mail
■ link between your CRA My Account and My Service Sign up for the CRA’s online mail service to get most of
Canada Account your CRA mail, like your notice of assessment, online.

How to register For more information, go

to canada.ca/taxes-business-online-mail.
For information, go to canada.ca/my-cra-account.
Authorizing the withdrawal of a pre
Sign up for online mail determined amount from your bank account
Sign up for the CRA’s online mail service to get most of
Pre authorized debit (PAD) is a flexible online payment
your CRA mail, like your notice of assessment online.
option managed by you. Through this option, you agree to
For more information, go to canada.ca/taxes-online-mail. authorize the CRA to withdraw a pre determined amount
from your bank account to pay tax on a specific date or
dates. You can set up a PAD agreement using the CRA’s
Online Services – Small businesses secure My Business Account service at
and self-employment canada.ca/my-cra-business-account. You can view
Handling business taxes online historical records, modify, cancel, or skip a payment. For
more information, go to canada.ca/payments and select
Use the CRA’s online services for businesses throughout “Pre authorized debit.”
the year to:
■ make payments to the CRA by setting up pre-authorized MyCRA – Mobile app
debit agreements in My Business Account or by using the
Use MyCRA throughout the year to:
My Payment service
■ view the amounts and dates of your personal benefit and
■ file a return, view the status of filed returns and amend
credit payments
returns online
■ check your TFSA contribution room
■ submit documents to the CRA
■ change your address, direct deposit information, and
■ authorize a representative for online access to your
marital status
business accounts
■ let us know if a child is no longer in your care
■ register for online mail to get mail from the CRA directly
in My Business Account ■ sign up for online mail and account alerts
■ change addresses ■ request your proof of income statement (option ‘C’ print)
■ manage direct deposit information Getting ready to file your income tax and benefit return?
Use MyCRA to:
■ view account balance and transactions
■ check your RRSP deduction limit
■ calculate a future balance
■ look up a local tax preparer
■ transfer payments and immediately view
updated balances ■ see what tax filing software the CRA has certified
■ add another business to your account

34 canada.ca/taxes
Done filing? Use MyCRA to: ■ your financial institution’s online or telephone
banking services
■ check the status of your tax return
■ the CRA’s My Payment service
■ view your notice of assessment
at canada.ca/my-cra-payment
For more information, go to canada.ca/cra-mobile-apps.
■ pre-authorized debit at canada.ca/my-cra-account

Electronic payments For more information on all payment options, go

to canada.ca/payments.
Make your payment using:

canada.ca/taxes 35
For more information
What if you need help? There are three steps to resolve your
service-related complaint.
If you need more information after reading this publication,
go to canada.ca/taxes-self-employed or call 1-800-959-5525.
Step 1 – Talk to us first
If you are not satisfied with the service you received, you
Direct deposit can file a service complaint. Before you do this, we
Direct deposit is a fast, convenient, reliable, and secure way recommend that you try to resolve the matter with the
to get your CRA payments directly into your account at a employee you have been dealing with or call the telephone
financial institution in Canada. number provided in the CRA’s correspondence. If you do
not have contact information, go to canada.ca/cra-contact.
You can view your direct deposit information and online
transactions at canada.ca/my-cra-business-account. If you still disagree with the way your concerns were
addressed, you can ask to discuss the matter with the
To enrol for direct deposit or to update your banking
employee’s supervisor.
information, go to canada.ca/cra-direct-deposit.
Step 2 – Contact the CRA Service Complaints
Forms and publications Program
To get our forms and publications, go The CRA Service Complaints Program is for individuals
to canada.ca/cra-forms or call 1-800-959-5525. and businesses. The program provides another level of
review if you are not satisfied with the results from step 1
Electronic mailing lists in the service complaint process. Generally, service-related
complaints refer to the quality and timeliness of our work.
The CRA can notify you by email when new information on
a subject of interest to you is available on the website. To To file a complaint with the CRA Service Complaints
subscribe to the electronic mailing lists, go Program, fill out Form RC193, Service-Related Complaint.
to canada.ca/cra-email-lists.
For more information on the CRA Service Complaints
Program and how to file a complaint, go
Tax Information Phone Service (TIPS) to canada.ca/cra-service-complaints.
For personal and general tax information by telephone, use
our automated service, TIPS, by calling 1-800-267-6999. Step 3 – Contact the Office of the Taxpayers’
Ombudsman
Teletypewriter (TTY) users If, after following steps 1 and 2, your service-related
If you have a hearing or speech impairment and use a TTY, complaint is still not resolved, you can submit a complaint
call 1-800-665-0354. with the Office of the Taxpayers’ Ombudsman.

If you use an operator-assisted relay service, call our For more information about the Office of the Taxpayers’
regular telephone numbers instead of the TTY number. Ombudsman and how to submit a complaint, go
to oto-boc.gc.ca.
The Taxpayer Bill of Rights
Reprisal complaint
The Taxpayer Bill of Rights describes and defines 16 rights
and builds on the CRA’s corporate values of If you believe that you have experienced reprisal, fill out
professionalism, respect, integrity, and cooperation. It Form RC459, Reprisal Complaint.
describes the treatment you are entitled to when you deal For more information about reprisal complaints, go
with the CRA. The Taxpayer Bill of Rights also sets out the to canada.ca/cra-reprisal-complaints.
CRA Commitment to Small Business to ensure their
interactions with the CRA are conducted as efficiently and
effectively as possible. Tax information videos
We have a number of tax information videos for
For more information about your rights and what you can
individuals on topics such as the income tax and benefit
expect when you deal with the CRA, go
return, the Canadian tax system, and tax measures for
to canada.ca/taxpayer-rights.
persons with disabilities. To watch our videos, go
to canada.ca/cra-video-gallery.
Service complaints
You can expect to be treated fairly under clear and
established rules, and get a high level of service each time
you deal with the CRA; see the Taxpayer Bill of Rights.
You can file a service complaint if you are not satisfied with
the service you get from the CRA.

36 canada.ca/taxes