Guide for Canadian Small Businesses
RC4070(E) Rev. 08
he success of small businesses is an essential part of Canada’s economic growth. At the CanadaRevenue Agency (CRA), our goal is to provide all the support we can. We work closely with small businesses to improve services, reduce paperwork burden and the cost and time of compliance, andmaintain confidence in Canada’s tax system.
If you have a visual impairment, you can get our publicationsand your personalized correspondence in braille, large print,or etext (CD or diskette), or on audio cassette or MP3. Fordetails, visit our Web site at
www.cra.gc.ca/alternate
orcall
1-800-959-2221
.
Point. Click. It’s that quick!
That’s all it takes to get tax information when you need it. Visit
www.cra.gc.ca
today and find out howeasy managing your taxes can be.The Canada Revenue Agency (CRA) wants to decrease the demand for paper. The accessibility of theInternet continues to increase. In the future, we encourage you to view this guide on our Web site at
www.cra.gc.ca/E/pub/tg/RC4070
, and print the parts you need.This guide uses plain language to explain the most common situations. We regularly revise ourpublications to take into account changes in the law.La version française de cette publication est intitulée
Guide pour les petites entreprises canadiennes
.
T
www.cra.gc.ca
3
Page PageHow this guide can help you
........................ 5
Internet access................................................... 5About the CRA................................................. 5
Chapter 1: Setting up your business
........ 7
Sole proprietorship.......................................... 7How does a sole proprietor pay taxes?...... 7Partnership........................................................ 8How does a partnership pay taxes?........... 8Corporation....................................................... 9How does a corporation pay taxes?........... 9Are you responsible for yourcorporation’s debts?.................................. 9The Business Number (BN)............................ 10Your first step to doing business withthe CRA....................................................... 10Are you doing business in Quebec?........... 11Do you need a BN?....................................... 11Keeping records................................................ 11Five reasons why keeping records can benefit you.................................................. 11Legal requirements for keeping records.... 12Retaining and destroying records.............. 12Bringing assets into a business....................... 13Fair market value.......................................... 13Buying an existing business........................ 13Why it pays to plan ahead........................... 14
Chapter 2: Goods and servicestax (GST) and harmonizedsales tax (HST)
.......................... 16
What is GST/HST?.......................................... 16Types of goods and services........................... 16On which goods and services do youcharge GST/HST?...................................... 16Which goods and services aretax-exempt?................................................ 17Registering for GST/HST............................... 17Who registers for GST/HST........................ 17Small supplier................................................ 17Voluntary registration.................................. 18
How to register for GST/HST..................... 18Reporting periods......................................... 18How to collect GST/HST on the taxablegoods and services you provide................. 19Provincial sales tax....................................... 19Informing your customers........................... 19What to put on your invoices...................... 20Input tax credits (ITCs).................................... 20How to claim an input tax credit................ 21Simplified accounting methods...................... 21The Quick Method........................................ 21The Simplified Method for claiming ITCs. 22Filing your GST/HST returns........................ 22How to calculate the GST/HST you oweand file your return................................... 22How to file your return and remit anyamount owing............................................ 23Stop filing GST/HST returns temporarily 23GST/HST Rulings............................................ 24
Chapter 3: Excise taxes, excise duties andsoftwood lumber productsexport charge
............................. 25
What are excise taxes and excise duties?...... 25Excise taxes.................................................... 25Excise duties.................................................. 25Softwood lumber products export charge.... 25
Chapter 4: Payroll deductions andremittances
................................. 27Do you need to register for a payrolldeductions account?..................................... 27What to deduct from your employees’remuneration................................................. 27Canada Pension Plan (CPP)/QuebecPension Plan (QPP).................................... 27Employment Insurance................................ 28Income tax...................................................... 29Workers’ compensation............................... 29How to report payroll deductions................. 29The T4 slip...................................................... 29File your T4 information returnelectronically............................................... 30Quarterly remittances................................... 30Do you have a computer?............................ 30
Chapter 5: Income tax
.................................. 32
Accounting for your earnings........................ 32The accrual method...................................... 32The cash method........................................... 32How to keep sales and expense journals... 32How to record your business expenses..... 32Fiscal period...................................................... 32Income................................................................ 33Types of income............................................ 33Inventory and cost of goods sold................ 35
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The success of small businesses is an essential part of Canada’s economic growth. At the Canada Revenue Agency (CRA), our goal is to provide all the support we can. We work closely with small businesses to improve services, reduce paperwork burden and the cost and time of compliance, and maintain confidence in Canada’s tax system.
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