Corporate tax for Courtenay companies

For an incorporated Courtenay trade, restaurant or contractor, bookkeeping, payroll and the year-end T2 with statements usually come to $450–$650 a month as one bundle. Corporate tax on its own is quoted after a free consultation, once we have seen the books and the number of companies involved. Every published fee is on the pricing page.

Two BC rates and the limit between them

On the current BC tax facts, active business income that qualifies for the small business deduction is taxed at a combined 11%: 9% federal and 2% BC. Income above the limit is taxed at 27%: 15% federal and 12% BC. The limit is $500,000 a year, and it is shared by every corporation in an associated group. A company with a short taxation year, or a group with a second company, can find the limit smaller than expected.

Passive investment income kept inside the company can also grind the limit down. For most Courtenay operating companies that is not an issue in the early years. It becomes one after several good years, when retained cash has been invested rather than spent on the business. We check it every year rather than when it bites. Passive income and the small business deduction explains how the grind works.

Equipment, boats and the year-end

A Comox Valley company buying an excavator, a work van, a tractor or a boat is making a tax decision as well as an operating one. Equipment is written off through capital cost allowance (CCA), class by class, and the first-year claim depends on when the unit is available for use. Buying a week before year-end rather than a week after can bring a full year’s deduction forward. Buying only for the deduction rarely makes sense; buying what the business needs at the right moment often does.

Trade-ins work the other way. The value received for an old unit comes off its class, and if more CCA was claimed than the unit really lost, the difference comes back as income. When a class is emptied with a balance left over, a terminal loss may be available instead. Both are worth knowing before the dealer paperwork is signed.

Restaurants and shops have a different capital item: the fit-out. Leasehold improvements are generally written off over the lease term, so a downtown Courtenay lease renewal can change the schedule. Landlord allowances toward the work have their own treatment, and we read the lease before booking them.

Owner pay: salary, dividends and the shareholder loan

How you take money out of the company is the other big lever. A salary is deductible to the corporation, creates RRSP room and requires CPP contributions and a T4. Dividends are not deductible, carry no CPP and are reported on a T5. Most owners land on a mix, and the right mix changes with the year’s profit and the family’s other income. The salary vs dividends calculator gives a first view, and salary vs dividends sets out the reasoning.

Withdrawals that are neither salary nor dividend sit in the shareholder loan account. If that balance is not repaid within one year after the corporation’s year-end, it is generally taxed as the owner’s income. That is common in a busy Comox Valley summer, when the company card pays for a personal item and nobody records it. We clear it at year-end, before it becomes a problem.

Family groups and associated companies

Farming, building and hospitality families often end up with more than one company: an operating company, a company that owns the land, the yard or the building, and sometimes a holding company above them. Those companies are usually associated, which means they share one $500,000 limit and must agree on how to split it on Schedule 23. Rent and management fees between them need to be supported and consistent. Associated corporations and the small business deduction explains the rules.

Family ownership also shows up on Schedule 50, which lists every shareholder and their percentage. When a son or daughter takes shares in the farm or the building company, the change has to be reflected there and in the minute book. Dividends paid to family members who do not work in the business can also fall under the tax on split income, so who holds which shares is worth deciding with a CPA before the paperwork is drawn up.

How the T2 fits Courtenay’s main industries

• Construction: work in progress and holdbacks at year-end, T5018 reporting and equipment CCA.
• Trades: the work van, tools, apprentices and the personal services business question.
• Restaurants: thin margins, leasehold improvements and food and liquor inventory at year-end.
• Farms and food producers: the cash method, inventory choices and land held in the company.
• Realtors: a personal real estate corporation, commission timing and salary against dividends.

The BC filings that sit beside the T2

The T2 is due six months after year-end, and the balance owing two months after, or three for a CCPC that claims the small business deduction and meets the conditions. Once the tax bill grows, corporate instalments start too. Alongside the T2, a BC company files an annual report with BC Registries within two months of its incorporation anniversary, PST returns if it is registered, and WorkSafeBC reports if it has workers. Once BC payroll passes $1,000,000, the employer health tax applies as well. The T2 deadline calculator sets out your dates, and BC annual report vs the T2 explains the difference.

The City of Courtenay’s business licence is another calendar-year renewal that sits outside the tax system. It costs little to track and is easy to miss when the owner is busy.

Choosing a year-end that suits the valley

A new Courtenay corporation can pick its first year-end, and the choice matters for years afterwards. A builder or restaurant whose busiest months are in summer usually does better closing in the quieter months, when inventory is low, crews are smaller and there is time to count and reconcile. A farm may prefer a date after the harvest and the last market sales. A December year-end is not required, and it is not always the easiest.

Fully virtual

EverStone is a one-CPA firm that works online. There is no Courtenay office. Your books and statements come in through a secure upload link, CRA access is set up through Represent a Client in your My Business Account, and the return is signed electronically. Questions go by email first, and a video meeting is booked when a decision needs one.

If the books themselves need work first, see bookkeeping in Courtenay. For the owner’s own return, see personal tax in Courtenay, and for staff, payroll in Courtenay.