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.

In Canada, corporation have to pay tax on their income generated. Canadian Corporate tax only makes for a small portion of the entire taxes that are collected and the major share of the revenue is from personal income tax. Canadian Corporate tax has to be paid by the corporation before dividends are distributed among the individual shareholders. For the people who receive dividends from Canadian corporations, some credit is given for underlying tax. All resident corporations in Canada have to pay corporate taxes 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.

Who Have to File T2 Returns And When

All resident corporations have to pay Canadian corporate tax and file the T2 return except charities that are registered, Crown corporations and Hutterite colonies. 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. Non-resident corporations are also required to file T2 return if any of the following situations can be applied to them:

• The corporation has carried on business in the country

• The corporation has disposed of taxable Canadian properties

Any disposition that has been done after 2008 will have a few additional criteria that it will have to consider and there have been other amendments to the definition of taxable Canadian property . T2 return forms have to be submitted to the CRA no later than 6 months from the end of the year. The date of filing will change according to the when the tax year ends and one has to ensure that it is not beyond six months of the end of the year or else they may have to pay a penalty.

How to Determine the Tax Year of The Corporation

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. If the professional corporation is a partnership firm, then the tax year will end on December 31. The tax year end cannot be changed by the corporation unless approved by the CRA and they have to pay their corporation tax and file the T2 returns before the deadline until they get a notification of change of tax year end.

Filing A T2 Return Form

IF the annual gross revenue of the corporation exceeds $1 million, then the corporation will have to file the T2 return online. Some companies are exempted from this rule and they are

• Nonresident corporations

• Insurance corporations

• Corporations that are exempted from paying tax under section 149 of the Canadian Income Tax Act

• Corporations that are reported in functional currency

Corporations that have less than $1 million revenue can send their T2 return forms to their respective tax centers and the nonresident corporations can send their forms to the International Tax Services Office.

Determining Your Residency Status

The taxation in Canada differs with your Residency status. If you are a Canadian Resident, then you are taxed on your worldwide income and filing of returns to the Canadian Revenue Agency is mandatory. If you are a non-resident, the taxation policy is different and you have to declare all Canadian income while filing the returns. But to know how to file your taxes, you first need to determine your residency status for tax purposes.

• You Are Considered As Non-Residents If

o You live normally and routinely outside Canada and are not a resident of Canada.

o You do not have any residential ties in Canada and

o You were living outside Canada during the entire tax year or

o You have lived for less than 183 days in Canada during the tax year

• You Are Considered a Deemed Resident If

o You have been staying in Canada for more than 183 days of the tax year

o You have no residential ties with Canada that are significant and

o You are not considered to be a resident of any other country as per the terms of the tax treaty Canada has signed with another country

• You Are a Deemed Non-Resident If

o You are considered to be a factual resident of Canada and also the resident of another country which has signed a tax treaty with Canada, and under the terms of that treaty, you are considered a resident of that other country rather than Canada

Non-Resident Tax Obligations

Any non-resident of Canada is obliged to pay non-resident tax tips on that income that he or she received from Canadian sources and the type of tax one has to pay or the requirement of filing the income tax return is decided by the type of income you receive. Generally, non-resident tax is filed under Part I tax or Part XIII tax. If you receive income from dividends, rental payments, royalty payments, pension payments, management fee, retiring allowances, old age security pension, Canada Pension Plan, registered retirement savings or income plan payments or annuity payments then you will be taxed under Part XIII. If you are running a business in Canada or if you sell, transfer or plan to sell a Canadian property, then you will pay tax under Part I.

Offshore Tax Planning

If you are planning on doing some offshore tax planning, by investing some money offshore, then you should be aware that almost all countries have signed tax treaties with Canada, and if you are a Canadian Resident, then income from these investments will also be calculated and considered as income and will have to be declared while filing the income tax returns. But if you are a non resident of Canada, there are options for you to do some offshore tax planning, but it is always better to avail the services of a tax expert to help you.

Is It Better To Hire Tax Experts For Offshore Tax Planning

Taxation can be tough to master and there are tax experts who will be aware of all the different tax laws that a country will have. This is why it is always better to opt for the services of a tax expert, especially if you are a non-resident and you are looking for offshore tax planning. Find a reputed tax expert company and get their advice before you start any activity off-shore.