Income tax can be defined as a governmental policy, which is solely imposed on entities or individuals. This tax might vary depending on the monthly or yearly income and other profitable deals. The details of income tax policy vary from one jurisdiction to another. In maximum cases, income taxes are levied on business companies or company or corporate tax. Partners are solely taxed on the items, associated with partnership jobs. However, tax can be easily imposed by both subdivisions and country; where else some other jurisdictions exempt charitable organizations from paying taxes. If the taxation rate increases, then the tax amount will do the same. The rate can also vary by characteristics and type of the payer. Credits can also happen to reduce the amount of tax.

More about Tax haven

Whenever the main focus is on tax haven, then it denotes a country or territory, where taxes on certain products on services are imposed at a lower rate, or even entirely without any taxation services. It can be prove to be a fruitful deal for the corporate entities if they are planning to establish shell subsidiaries, with nil taxation rates. This might give rise to tax competition as various jurisdictions might want to focus on tax haven on different categories of people or their services.

Special taxes for non-residential personalities

Income tax rate varies from one person to another, and also on different sectors. There are separate measures, which need to be taken when the main concern is nonresident tax. It can be defined as a mandatory step towards prepayment of individual taxation or other entities, who are not a resident of that particular state. A vital and common example of such taxstatement can be seen on natural gas and oil interest revenue. In order to get a stipulated amount of money from the gas and oil leases, the state levied a particular amount of money on the oil tax if it addresses to a place outside that state. It is mainly done for security measure to check if the state is receiving a particular amount of money from oil and gas segment, which needs to be paid directly to the State.

More about non-residential taxation

In maximum cases, states with special imposed income taxes on them, try to levy same requirements on S corporation and partnerships, with various non-residential shareholders or partners. Majority states plans for imposing such income taxes on separate wages of a non-resident, on the basis of business operations. These taxes are generally stated as prepaid taxes as the final round of taxation is included under the same residential and non-residential computations.

Major significances associated with offshore taxes

Nowadays, offshore tax has been imposed on a large section of foreign investors. In this regard, the government imposes a separate taxation on the businessmen, who are planning to spread their business in offshore regions. In certain metropolitan areas, the taxes paid by any business account, can be 50% of their profit level. This entire procedure can also be stated as tax havens, which is a new invention in tax category.

Companies and corporations pay tax on profit income and on capital. Canadian corporate tax makes up a relatively small portion of total tax revenue. Tax is paid on corporate income at the corporate level before it is distributed to individual shareholders as dividends. A tax credit is provided to individuals who receive dividend to reflect the tax paid at the corporate level. This credit does not eliminate double taxation of this income completely, however, resulting in a higher level of tax on dividend income than other types of income. (Where income is earned in the form of a capital gain, only half of the gain is included in income for tax purposes; the other half is not taxed.) Corporations may deduct the cost of capital following capital cost allowance regulations. All resident corporations in Canada have to pay corporate tax and have to file a corporation tax return (T2) every year. Even if there is no tax payable to the CRA, corporations have to file the T2 return.

Canadian corporate tax includes taxes on corporate income in Canada and other taxes and levies paid by corporations to the various levels of government in Canada. These include capital and insurance premium taxes; payroll levies (e.g., employment insurance, Canada Pension Plan, Quebec Pension Plan and Workers’ Compensation); property taxes; and indirect taxes, such as goods and services tax (GST), and sales and excise taxes, levied on business inputs.

Canadian residents and corporations pay income taxes based on their world-wide income. Canadians are protected against double taxation receiving income from certain countries which gave agreements with Canada through the foreign tax credit, which allows taxpayers to deduct from their Canadian income tax otherwise payable from the income tax paid in other countries. A citizen who is currently not a resident of Canada may petition the CRA to change her or his status so that income from outside Canada is not taxed.

Corporate tax in Canada is collected by the CRA for all provinces and territories except Quebec and Alberta. Provinces and territories subject to a tax collection agreement must use the federal definition of “taxable income”, i.e., they are not allowed to provide deductions in calculating taxable income. These provinces and territories may provide tax credits to companies; often in order to provide incentives for certain activities such as mining exploration, film production, and job creation.

You need to know the tax year end of your corporation if you want to pay your corporation tax promptly and file the T2 return on time. The fiscal period of a corporation or the corporation’s tax year has to be less than 53 weeks. While filing the first T2 return, new corporation can choose the tax year end and the subsequent tax year can be calculated according.

In most countries there are different types of taxes and levies that must be paid. There are often many variations that exist in states, countries and provinces all around the world. Taxes in Canada are no exception, as there are several sorts that exist that must be followed.

Companies and corporations pay tax on profit income and on capital. These make up a relatively small portion of total tax revenue. Tax is paid on corporate income at the corporate level before it is distributed to individual shareholders as dividends. A tax credit is provided to individuals who receive dividend to reflect the tax paid at the corporate level. This credit does not eliminate double taxation of this income completely, however, resulting in a higher level of tax on dividend income than other types of income. (Where income is earned in the form of a capital gain, only half of the gain is included in income for tax purposes; the other half is not taxed.) Corporations may deduct the cost of capital following capital cost allowance regulations.

Corporate tax is collected by the CRA for all provinces and territories except Quebec and Alberta. Provinces and territories subject to a tax collection agreement must use the federal definition of "taxable income", i.e., they are not allowed to provide deductions in calculating taxable income. These provinces and territories may provide tax credits to companies; often in order to provide incentives for certain activities such as mining exploration, film production, and job creation.

All resident corporations have to pay Canadian corporate tax and file the T2 return except charities that are registered. T2 return has to be filed by the corporation even if they have no corporation tax to pay and non-profit organizations, inactive corporations and tax-exempt corporations should file the returns mandatorily.

If you want to pay your corporation tax promptly and file the T2 return on time, you need to know the tax year end of your corporation. The fiscal period of a corporation or the corporation's tax year has to be less than 53 weeks. New corporation can choose the tax year end while filing the first T2 return and the subsequent tax year can be calculated according.

The final area of concern will be the importance of hiring a professional accountant. As a business owner, the CRA doesn't look kindly on businesses preparing their own taxes. You should have a professional accountant manage all of your books each and every year. In addition to professionally filing your corporate tax return, they will also be able to provide you with important tax advice that you should take advantage of.

As in many other countries, non-residents in Canada are also subjected to taxation and they will have to pay taxes for the income that they generate from sources that are within Canada. The Canadian non-resident taxation policies can be a bit confusing for people as there are a lot of different rules in the taxation laws and if you are not aware of the terms that are used typically in taxation, then you may find it even more difficult to understand. Some of the non-residents are exempted from tax as per the tax treaties that are signed between the respective countries and some of the income have to be taxed like it is done for Canadian residents.

What You Should Know about Canadian Non-Resident Taxation

There are a few important points that one has to know about Canadian non-resident taxation and they are discussed below.

• Identifying your residency status in Canada is the first step that one has to do. There are different types of residency status like residents, non-residents, deemed residents and deemed non-residents in Canada and the taxation for each of the residency status will vary.

• Identifying your tax obligations to Canada is the next thing that you will have to assess. Most of the types of income that is generated from Canada is taxed and therefore find out the tax bracket that your income will fall under.

• Identifying the Canadian non-resident taxation package that you will have to use is very important and it is decided by the type of income that you generate.

• Knowing the filing due date and filing your IT returns along with the necessary forms before the deadline.

• Pay any tax that is due to the Canadian Revenue Agency before the deadline so that you avoid penalties or other consequences.

Corporate Tax and Non-Residents

Non-resident corporations who have business interests in Canada and generate revenue from a business that is located in Canada will have to pay corporate tax to the Canadian Government. The clauses that govern the corporate tax in Canada are a bit complicated and the complications will only increase if you are a non-resident. If you are ‘carrying on business’ in Canada either directly or indirectly then the profit that is earned out of the business will be subject to taxation. Like in income tax, the residency status of the corporation will have to be determined and the corporate tax that is levied will be based on the residency status of the corporation.

Hiring Tax Experts for Taxation Issues

If you are a non-resident then it will be a wise decision to avail the services of tax experts to help you in filing your taxes. As the Canadian non-resident taxation policy is complicated paying personal income tax or corporate tax can be rather confusing for nonresidents. A good tax expert will be aware of the various exemptions that you can avail and will also know about what forms are necessary while filing your Tax Return. You may have to spend a small sum of money as hiring charges but then it will save a lot of your time and will ensure that you do not miss out anything while filing your return which can then result in penalties.

Tax havens are considered to be a target by many countries across the world as these territories reduce the revenue of many governments across the globe. People resort to them to save on taxes and when taxes and assets are hidden from the government there is loss of revenue and that hampers to the functioning of the many projects that the governments introduce to benefit its people. Most of the people pay their taxes promptly, but there are others who will look at tax havens as an opportunity to avoid taxes. Corporate companies also use this as an option to reduce the corporate tax that they pay to the government.

What Is A Tax Haven Country?

Tax havens are countries that impose very low taxes or in any case no tax on investments and income earned out of that country. This is done to encourage people from investing in the country so as to boost the economic status of the country. Such countries will provide its investors with any or some of the following.

• Lower rates of taxation or no tax

• Option to operate bank accounts in secrecy

• No transparency in the tax system and way it operates

• No effective information exchange with other countries

Generally most countries across the globe will have international treaties that are signed between them that will allow exchange of information relating to financial transactions and financial investments. But these countries will not have signed such treaties and therefore the exchanges of important financial information that are done by citizens of other countries in tax havens are not accessible. This is why it is not easy to identify such financial transactions to tax them and people often get ways by investing in such countries.

How are Tax Havens Used?

The most straightforward use of tax havens is when a person or a corporate opens a bank account in the country and routes a bulk of the payments received through that bank account. These offshore bank accounts will not be accessible to the tax authorities and therefore are not possible to be traced easily and this is a form of tax evasion that the tax authorities consider a serious act of hiding income and assets. There are also trusts and offshore corporations that are setup in these countries that will not have transparency about the owners and the promoters. Such foundations are clearly designed to hide information from the tax authorities and will help to hide some of the most important parts of a transaction. Tax authorities consider this as a type of aggressive personal and corporate tax planning and are labeled as tax evasion.

Is It Worth the Risk?

As there is very little transparency in the entire system, there have been reports where people have been swindled of their money in trying to resort to tax havens. If an event like this occurs, the individual or corporate cannot approach any organization to help them out as there will be no proper records of the transactions that are being made and they can be rest assured that the money they have lost is not recoverable. If the tax authorities identify you as a person who is using such countries to hide information from them, then you will face strict actions that will be taken by the officials. Apart from the 505 penalty that you will have to pay, there will also be criminal charges framed against you and that can lead to jail term up to 5 years and a fine of up to 200%. This is much higher when corporate are involved as corporate tax rates are generally higher than personal taxes. With such severe actions, it is definitely not worth taking the risk of investing in tax havens.