Tax Question:
What are Government Taxes Payable on a Balance Sheet?
Facts:
The Government Taxes Payable category appears under Current Liabilities on a Balance Sheet as it is expected that the amounts owing will be paid within one year. It represents funds that a company has an obligation to pay to government bodies such as Canada Revenue Agency (CRA).
Government Taxes Payable may consist of various taxes collected and payable to the government such as payroll liabilities, sales taxes and corporate taxes. Payroll liabilities such as Canada Pension Plan, Employment Insurance and personal income taxes are deducted from an employee’s paycheque during each payroll run. They are calculated using the payroll tax tables provided by CRA. The payroll deductions for the month are usually remitted to CRA by the 15th of the following month.
There are significant penalties and interest charges if the remittances are not filed and paid on time. Goods and Services Tax (GST) is a federal tax of 5% collected on goods and services. It is remitted to CRA on a monthly, quarterly or annual basis depending on your corporation’s income level. You can usually request a filing frequency when you first register for GST. GST is also recoverable for input tax credits (GST paid on purchases). The net amount of GST (GST collected less GST paid in input tax credits) is calculated on the remittance and filed with CRA. CRA also requires you to pay instalments for the next remittance if you reach a certain threshold. Provincial Sales Tax (PST) is a provincial tax (7% in British Columbia) collected on goods and services. It is remitted to a separate government agency called the Ministry of Finance. Some provinces have harmonized the sales tax (known as HST) and collect just one tax together with the GST. For example, Ontario collects HST at a rate of 13% and this is administered by CRA.
Corporate taxes payable to CRA usually appear on a separate line on the Balance Sheet. Like GST, CRA requires instalment payments if the corporation reaches a certain threshold and CRA will charge you interest if you don’t make these payments on time. The Government Taxes Payable mentioned above can be presented differently on the Balance Sheet depending on the accountant who is preparing the financial statements. We believe that it is important for the reader of the financial statements to have these amounts segregated.
If you would like more information on this topic, please contact a member of the Empire CPA team by filling out the contact form below.
Canadian and foreign tax laws are complex and have a tendency to change on a frequent basis. As such, the content published above is believed to be accurate as of the date of this post. Before implementing any tax planning, please seek professional advice from a qualified tax professional. Empire, Chartered Professional Accountants will not accept any liability for any tax ramifications that may result from acting based on the information contained above.
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