Every residential corporation in Canada has to file a corporation income tax return irrespective if you earned any profit or not. This can be a tedious matter, especially for small corporates. Corporates may need the help of an accounting firm who can assist them to plan their tax returns. Thus, enabling them to focus more on the daily operations rather than taking time in filing tax returns. Most of the times, the firms do not have a corporate tax planning structure. If you have a corporate tax planning policy, then you can avail tax benefits in a better way. Some of the tax benefits for corporations are as follows.
Pension Plans for Individuals
Individual Pension Plan also known as IPP, are defined benefit pension plan which is managed usually by an investment advisory organization or an insurance company. If you are a business owner, you can make use of IPP to get tax benefits and also earn a pension. Payments made by your corporation to an IPP are tax deductible. The payments are invested in stock markets and bonds for a long period of time. Later on, as these investments grow, you receive a fixed payment once you retire.
Lease of Company Vehicle
One of the tax benefits for corporations is to lease the company vehicle. Even if you use the car for personal use, only two-third of the lease payments made by your corporation is taxable. However, make sure that the company name is provided in the lease contract to avail the benefit. The tax law allows you to write off the lease expense as a business expense.
Medical expense reimbursement for employees is provided by most of the corporates. Therefore, any kind of medical expense for drugs prescribed, treatment, fees to physician and other medical expenses are tax deductible. The Canadian Income Tax Act allows corporations to claim a tax deduction for Health Insurance Premiums paid for its employees. You must, therefore, ensure your corporation has a corporate tax planning structure and accordingly maintain the records for such expenses.
Plan for Income as Dividends
If your business generates net income, then you would withdraw all or part of it as your income. You can decide to do that in the form of salary or dividends. It is advised to take it in the form of a dividend. The reason being, salary is a tax deductible expense for the corporates, whereas dividends are not. Anyways, you will have to pay less tax on dividends.
Corporate tax planning can be prepared well if you take the assistance of accounting or financial firm. To know more about tax benefits for corporation seek the help of Edmonton’s leading accounting and book-keeping firm.