Canada

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TAXES - ACCOUNTING

 

 

Corporate tax

Tax rate for resident companies

The federal general corporate rate is 21% plus a 1.12% surcharge, with provincial rates bringing the effective tax rate to approximately 32%-38%.

   
Tax rate on long-term capital gains Taxable capital gains are included in taxable income and taxed at normal rates.
   
System governing groups of companies and dividends paid by subsidiaries to their parent companies Dividends are subjected to a restraint at source at the rate of 15% of their gross amount (5% if the actual beneficiary is a company other than a society, which directly possesses at least 10% of the rights to vote of the company which pays dividends),
   
Tax rate on branches The rate of branch profits tax is 25% which may be reduced depending on the tax residence of the corporation and the terms of any tax conventions between Canada and its country of residence.




Income tax

Fiscal year The fiscal year begins on January 1, and ends on December 31, of the same year.
   
Income tax rate The federal tax rate is progressive from 16% to 29% in 2003 and shared out into 4 brackets :
Lower than 31,677 $16%
31,677 $ - 63,354 $22%
63,354 $ - 103.000 $26%
Beyond 103.000 $29%

The provincial income tax is calculated in percentage of the federal basic tax for all the provinces, except Quebec, Ontario and Alberta which perceive their taxes according to their own rules.
   
Tax deductions or other allowances There are several types of reductions or dejections in Canada: removal expenses, living allowances, investments etc.



VAT rates

Standard rates There is a Goods and Services sales tax (GST) which rate varies depending on the states between 6 and 14%.
   
Reduced rates 4,5%
Exemptions are provided for basic foods, health care and education.



 

Accounting

Introduction
Accounting rules in Canada aim at communicating financial results to the shareholders.
Indeed, accounting practices can be transmitted to anybody involved in the company. It is a way to identify the activities and the "health" of the company.


General accounting principles
BALANCE SHEET : on December 31 n, to compare with December 31 n-1
1) Assets
- Current assets
- Short-term investments
- Debts
- Stocks Inventories
- Expenses paid
- Deferred income taxes
- Tangible assets
- Deferred costs
- Intangible assets
- Long-term debts
2) Liabilities
- Debts of less than one year
- Supplier accounts
- Income tax
- Long-term debts
- Deferred income tax
- Total passive
3) Shareholders balance sheet
- Ordinary shares
- Retained profits
- Total

Obligations and publications
Financial accounts in Canada include generally, a balance sheet, a profit and loss account, an account of retained profits and a consolidated account of cash flows.

Certification and auditing
Each year, all financial accounts of companies must be controlled by an auditor. It is an obligation ordered by the CBCA, the "Canada Business Act corporations" of 1987.

Professionals and representative organizations
- The Canadian Council of Financial Analysts.



Useful links
For further information, please contact Canada Customs and Revenue Agency.

Last modified in 2006 - ongoing update
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