SME Taxation: Five rules to succeed

Owning one’s own business is the culmination of a dream for many people. But, once started, an enterprise demands dedication and attention to details. Entrepreneurs who familiarize themselves with accounting and SME taxation can often rapidly pull themselves out of debt. 

Our corporate tax filing experts share the five rules to apply to be successful and stay in the good graces of the Canada Revenue Agency and Revenu Quebec.

Recognize the importance of the cash flow

The importance of the cash flow cannot be overstated. The cash flow is whatever amount of money you put aside to cover your corporation’s current expenses (rent, invoices, etc.). Newcomers to SME taxation are sometimes oblivious to the many statutory deadlines for returns and/or tax remittances. 

In order to not get caught sleeping on the job, the shrewd entrepreneur uses the cash flow to pay up for any contingency and/or taxes. Caught off guard, an enterprise without sufficient cash flow – when for instance a client delays paying – may fail. The wise therefore will set aside a monthly amount sufficient to face up any headwinds and pay current expenses and/or taxes. 

Do not throw away your invoices

Make sure you take advantage of all permissible corporate taxation deductions. Many corporate expenses give rise to tax allowances whenever the following conditions are met:

•    The expenses are related to your professional activities.

•    You kept hold of your invoices.

•    The amounts claimed are reasonable.

•    The expenses claimed are not personal.

Deductions may be claimed on many grounds: interest for loans, yearly permits, bank fees, office expenses, supplies, employee allowances, websites, etc. This also applies for public relations expenses necessary to keep your clientele, such as meals in restaurants, or tickets for shows, etc. You should therefore use tax credits in order to play SME taxation in your favor.

Amortize your expenses

Amortizing your expenses will allow you to claim for the depreciation over many years of the value of a good, and thereby increase your yearly expenses without increasing your cash flow. Although it is mostly seen in the light of accounting, amortizing also exists for income tax purposes. It is then called capital cost allowance (CCA). 

The goods eligible for amortization through a CCA are tangible assets, i.e. your production equipment like machines, tools, computers and electronic devices, motor vehicles, and buildings. 

For amortization matters, it is always advisable to consult a tax accountant, to avoid any reporting error. 

A tool for SMEs: the business reminder mobile app

Although sometimes viewed as a necessary encumbrance slowing down productivity, governmental taxation agencies provide taxpayers with a trove of reliable information directly concerning SME taxation. 

CRA has been for some time offering a Business Reminder mobile app, working on iOS, Android, and Blackberry, that could help you to never again miss your taxation deadlines, and to properly establish your SME taxation calendar. Don’t count yourself among the many late taxpayers who end up having to pay heavy penalties.

Registering on business registries

If you are a small supplier, you may want to consider registering on the mandatory business registries soon after making your first taxable sales. Do not wait until you cease to be considered a small supplier (which you will when you do more than 30,000$ for a quarter on taxable products and services) to register on the Revenu Québec GST and TVQ registry.

Finally, to be at the top of your game with your SME, never overlook the help that a corporate tax specialist can give you in optimizing your tax strategy. In fact, a few meetings may be all it takes to clarify your situation and enable you to take charge of your tax affairs.

To file your T2 return, your CO-17 return, or for any other accounting and tax needs, trust the experts at T2inc.ca. Contact us today!