Tax season is a challenging time for any small or medium sized business in British Columbia (BC). Knowing when to file and where to find the correct forms is half the battle. There are also small business deductions available and credits you can claim. All forms are available online through the Canada Revenue Agency (CRA).
The corporate tax accountants at T2inc share with you a guide to filing your T2 corporate tax assessment right the first time for your BC small business.
Do small business owners need to file a tax return in BC?
In the province of BC, all corporations with a permanent address must file a T2 corporate income tax return. If you are a business with multiple locations, it is important to declare these addresses and jurisdictions in a supplemental form (Form 5) with your tax return.
If you are an individual proprietor or a self-employed enterprise that is not incorporated, you must file your business tax return with your personal tax return. This guide is intended for incorporated small and medium sized businesses.
How much can a small business make before paying taxes in BC?
In BC, small corporate enterprises can earn up to $499,999 to qualify for the small business tax rate during a taxable year. If your income is $500,000 or more, other rates apply.
If your business’ income crosses the $500,000 threshold during a tax year, you can apply the different rates based off of the number of days your income earned between the $500,000 mark.
What is the small business tax rate in BC?
In BC, there are two different tax percentages – the general corporate income tax rate and the small business corporate income tax rate. The difference is large, the general tax rate is 12% while the small business tax rate is 2%.
General corporate income tax rate:
|Effective January 1, 2018||12,0 %|
|April 1, 2013 – December 31, 2017||11,0 %|
|January 1, 2011 – March 31, 2013||10,0 %|
|January 1, 2010 – December 31, 2010||10,5 %|
|July 1, 2008 – December 31, 2009||11,0 %|
|July 1, 2005 – June 30, 2008||12,0 %|
|January 1, 2002 – June 30, 2005||13,5 %|
|July 1, 1993 – December 31, 2001||16,5 %|
Small business corporate income tax rate
|Effective April 1, 2017||2,0 %|
|December 1, 2008 – March 31, 2017||2,5 %|
|July 1, 2008 – November 30, 2008||3,5 %|
|January 1, 2001 – June 30, 2008||4,5 %|
|July 1, 2000 – December 31, 2000||4,75 %|
|July 1, 1999 – June 30, 2000||5,5 %|
|January 1, 1999 – June 30, 1999||8,5 %|
Record keeping requirements in BC
When you are assessing your small business taxes, it is important to keep diligent notes. It is always recommended to digitize your documents wherever possible. This is because ink and paper can fade, tear or go missing over time.
To ensure that you have the correct information of your business, include:
- The industry or business type that you have
- The format of your documentation for your business (electronic, paper or both)
- Identify if you have digitized your files
- If your operations in business also include an e-commerce platform
- If you are an employer
- If you are registered as a GST/HST business
In addition, it is important to declare these documents:
- Your incurred income for the tax year
- Any motor vehicle expenses and logbooks
- Business property records
It is a general rule to keep your previous tax receipts and records for up to 6 years in the case of an audit. If you are missing any documents or forms, you can access the forms you have on file by going to your My Business Account on the CRA website.
How to file corporate taxes in BC
As a corporation, once you file your T2 tax return, you must include Forms 427 and 5. It is also important to provide the appropriate documents when you are assessing your taxes.
Using Form 427, this is the British Columbia Corporation Tax Calculation, you can claim and find your current amount due or owing. Using Part 1, you identify your eligible income and in Part 2, you multiply this figure by your tax rate.
Form 5 is the CRA’s Tax Calculation Supplementary document where you claim your operating address, any territorial or provincial tax credits and if you have multiple locations. This is where you declare your tax calculated for all documents.
To file your corporate T2 tax return, assemble your documents, use a calculator, and add all of your respective income and expenditures. This is important to do and can take some time. Keep all of your evidence aside during your tax assessment.
You may file using a paper copy of your taxes or file online through the CRA or a third party software.
Avoid late fees or penalties for missing payments of instalments by setting up direct deposit payment information. You can do this through your financial institution associated with your enterprise. If you have payments to make, this balance of tax is often paid 2-3 months after you file for your tax year.
To ensure that you are getting the most out of your tax return, it’s always a good idea to get a professional tax expert to help you assess your corporate finances. Using regular bookkeeping and digitizing all of your files makes this process simpler.
List of deductions and tax credits for BC corporations
As a BC corporation, you may have several avenues of expenditures and overtures. There are several tax credits available to you including:
- Credit union tax reduction
- Logging tax credit
- Farmer’s food donation tax credit
- Small business venture capital tax credit
- Scientific research and experimental development (SR&ED) tax credit
- SR&ED refundable tax credit
- SR&ED non-refundable tax credit
- Recapture of BC SR&ED tax credit
- Qualifying environmental trust tax credit
- Film and television tax credit
- Production services tax credit
- Mining exploration tax credit
- Book publishing tax credit
- Training tax credit
- Interactive digital media tax credit
- Shipbuilding and ship repair industry tax credit
Where to find help with small business taxes in BC
As a small business or a growing medium sized enterprise, finding the right tax solution can be a challenge. The tax experts at T2inc are CPA certified and have years of experience delivering the best tax solutions for small and medium sized corporations.