In Canada, small and medium-sized business owners are eligible for certain tax incentives than can help them save on costs and grow their companies. To take advantage of these tax incentives, business owners must know about them in the first place, as well as comply with the rules and policies put in place by the government.
One benefit for individuals who buy a business for the sake of carrying it on is that they may qualify to be exempt from GST/HST payables. This applies to the buyer and the vendor and can be done by filling out the GST44 form. The form requires information pertaining to the company owner in addition to the nature of the business itself. It should be noted, however, that this case applies to individuals who buy at least 90% of a business, which accounts for a substantial part of it.
If the nature of a business is a sole proprietorship, then the individual can transfer their personal assets to their business. According to the Income Tax Act, the transfer of assets must also be at fair market value. If the fair market value is greater than the original purchase price, then the information must be reported on the benefit and income tax return. In addition, one’s business would show a purchase of the aforementioned assets during the time of transfer along with the cost that’s equal to the relative fair market value.
Another factor to take into account when abiding by tax-related policies is that when one transfers the property from a sole proprietorship to either a corporation or partnership, then it can be done on a tax-free basis. It is important to report one’s income and transfers properly, as doing otherwise would result in legal penalties.
According to the Government of Canada, small businesses account for 70% of jobs within the private sector. As a means of supporting these businesses, the tax rate for them has been cut from 10.5% to 10% in 2018. In 2019, this was further cut to 9%. This reduction was made so small businesses could save approximately $7,000 in terms of federal taxes on an annual basis. As a result, businesses are able to reinvest in new employees, equipment, as well as new products for the sake of growth.
If one’s small or medium-sized business encompasses projects and equipment that are energy-efficient, then they can take advantage of the Climate Action Incentive Fund, too. This program allows businesses in all eligible sectors to receive a percentage of their project costs. At the time of writing this post, businesses that operate in Manitoba, New Brunswick, Ontario, and Saskatchewan can apply to the program.
It should be noted that small-sized business are, by definition, comprised of one to 99 employees. Meanwhile, medium-sized businesses are comprised of 100 to 499 employees. As for the rebate amounts, businesses can get up to 25% of a project’s cost. The project itself should not exceed $250,000 and not be less than $20,000.
In order to take full advantage of these tax incentives while abiding by the policies set out by the Government of Canada, business owners should contact a tax expert for help and clarification. Prasad & Company LLP is a proudly Canadian accounting firm that has been in operation for over 30 years. To speak with an expert, contact the firm via email at email@example.com. Interested business owners may also call 416-226-9840.