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Tax Requirements for Corporatons Operating in Ontario

October 29, 2021

Question:

What are the tax requirements for corporations operating in Ontario?

Facts:

The taxable income of corporations operating in Ontario is subject to federal and provincial corporate tax. A tax credit is available to corporations operating in qualified manufacturing and processing industries. Unless the corporation qualifies as a small supplier, HST registration is also required. In addition, Workplace Safety and Insurance Board (WSIB) registration and premiums must be completed by employers in non-exempt industries and Employer Health Tax (EHT) must be paid on total remuneration paid to employees.

Discussion:

Corporate Tax

Corporations operating a fixed place of business in Ontario must pay federal and provincial tax at the following rates:

  • Income of a Canadian Controlled Private Corporation (CCPC) below $500,000 – 12.2%.
  • Income of a CCPC above the small business limit – 26.50%.
  • Income of non-CCPCs – 26.50%.
  • Investment income – 50.17%.


Monthly or quarterly corporate tax installments are required when tax payable exceeds $3,000 in the prior year. Taxes that remain outstanding three months after year-end are subject to interest.

Manufacturing and Processing Tax Credit

A tax credit reducing the corporate income tax rate by 10% for income not eligible for the small business deduction is available for corporations who operate in the fishing, farming, mining and logging industries.

HST

While corporations selling exempt supplies are not required to register for HST, those with worldwide taxable income in excess of $30,000 must register and charge HST on all non-exempt items.

HST is charged to customers on taxable supplies at a rate of 13%. An 8% point-of-sale rebate should be provided on the sale of certain items including books, children’s clothing and newspapers and sales to First Nations individuals with a status card, bands, and band councils of an Ontario First Nations reserve.

For expenses related to a business’s commercial activities, an input tax credit (ITC) can be claimed for HST paid. Corporations with taxable income less than $30,000, are not required to register for HST, however, where such a small supplier has voluntarily registered, ITCs may be claimed on business expenses.

The filing dates for HST returns are determined by the business’s annual taxable income and can be annual, quarterly or monthly.

WSIB

Businesses with employees must generally register with, and pay premiums to, the Workplace Safety and Insurance Board. Registration must be completed within 10 days from the date the first employee was hired. Premiums are based on the level of risk involved in the industry and the business’s prior claims history.

EHT

Employers in Ontario are required to pay EHT, a tax calculated on remuneration paid to employees. Rates vary from 0.98% to 1.95% of total remuneration and are dependant on the total size of payroll. An exemption is available to eligible employers on the first $1 million of payroll expense.

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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