Corporate tax accountant in New Westminster

The BC rates on a New Westminster T2

BC corporate tax is calculated on the federal T2, so one return covers both. The provincial rate on active business income eligible for the small business deduction is 2%. Income above the $500,000 business limit is taxed at the general BC rate of 12%. Current figures sit on the BC tax facts page.

The small business deduction is claimed only by a Canadian-controlled private corporation, and only on active business income. Investment income inside the company is taxed differently and can erode the limit. Schedule 50 lists the shareholders, and the return carries the CCA schedule and financial statement data with it.

Deadlines that come before the return

The T2 is due six months after year-end, but the money is due sooner. The balance is payable two months after year-end, or three months for a CCPC that claimed the small business deduction and meets the conditions. Interest runs from the balance-due date even if the return is filed on time.

Once a company owes tax, the CRA expects instalments for the following year. A December year-end company therefore has its cash commitments in February or March, not June. The T2 deadline calculator works out the dates for any year-end.

Associated companies and the shared limit

Growth in New Westminster often means a second company rather than a bigger one. A restaurant owner opens a second location under a new corporation. A contractor sets up a holding company. A realtor’s spouse incorporates a consulting practice. Each step can create associated corporations, and associated corporations share one $500,000 business limit.

The sharing has to be allocated on each T2, and getting it wrong means the BC 2% rate is claimed on income that should have been taxed at 12%. Read how association works before the second company is formed.

Taking money out: salary, dividends and the loan account

A salary is deductible to the company, creates RRSP room and comes with CPP contributions; it is reported on a T4. A dividend is paid from after-tax profit, carries no CPP and is reported on a T5. The right mix depends on what you need personally and what the company will keep. The salary vs dividends calculator runs the comparison.

Money taken without either decision lands in the shareholder loan account. If it is not repaid within one year after the corporation’s year-end, it is generally taxed as the owner’s income. That is the most common surprise on a small company’s year-end.

Equipment, vehicles and capital cost allowance

Trucks and tools for a renovation firm, kitchen equipment for a restaurant, a fit-out in an older Columbia Street storefront: each is capital, claimed through capital cost allowance by class. Leasehold improvements in a rented unit follow their own schedule over the lease. Timing a purchase just before or just after year-end changes the first year’s CCA, so the conversation belongs before the purchase. See the CCA classes guide.

PST and the employer health tax inside the corporation

Two BC taxes sit outside the T2 but affect it. PST is owed on taxable goods and some services the company buys for its own use, and anything not charged by the supplier is self-assessed. The BC Employer Health Tax applies once annual BC remuneration passes $1,000,000, and associated employers share the exemption. Both show up in the year-end working papers. See New Westminster payroll for the employer side.

Planning before the year-end, not after

A T2 records decisions that were made, or not made, during the year. By the time the return is prepared, the useful choices are gone. So the engagement includes a planning conversation two or three months before year-end, by video, with the books current to that point.

That conversation covers a short list. How much profit is expected, and how much the owner needs personally. Whether a bonus should be declared and paid within the rules for accrued bonuses. Whether an equipment purchase should land this year or next. Whether the shareholder loan balance needs clearing. And whether the company is building passive investments that could start to reduce the small business deduction.

For a New Westminster restaurant or renovation firm, the answers often come down to cash. A profitable year on paper can still be a tight one in the bank, especially with the balance due only two or three months after year-end. Setting the corporate tax aside monthly, in its own account, removes most of that pressure. The year-end checklist for incorporated owners sets out what to gather. Where the company also needs reporting a lender will read, the statements are prepared with the T2.

After the return is filed, the notice of assessment is checked against it. If the CRA changes anything, there are 90 days from the notice to object. Records behind the return are kept for six years, in the same secure folder as the working papers.

Fully virtual, based in Abbotsford

EverStone prepares New Westminster T2 returns virtually, from a base in Abbotsford. There is no New Westminster office, and nobody on the ground there. Year-end documents come through a secure upload link, the planning conversation happens by video before year-end, and the return is approved by e-signature and filed electronically.