According to a report published by the Government of Canada in 2020, the country is home to 1.2 million small businesses. These numbers show that most businesses in Canada are small companies, as Canada only has 22,725 medium-scale businesses and 2,936 large corporations. Additionally, from 2014 to 2018, 97,640 small businesses were launched annually. Small businesses in Canada contribute around 37.5 to the country’s GDP, making them a vital part of economic growth. Additionally, these small companies have hired 7.7 million workers, increasing employment opportunities in the country.
Therefore, it shouldn’t be surprising that the Canadian Government has introduced some tax credits and deductions for small businesses. This blog discusses some tax benefits for small businesses in Canada.
Investment Tax Credits
One of the most common tax benefits for businesses in Canada is the Investment Tax Credit. This program allows small businesses to get tax credits if they have done any of the following activities after their launch.
- Purchased new machinery and equipment for various business processes like manufacturing, farming, fishing, logging, etc.
- Conducted scientific research or played your part in experimental development by launching an innovative product or service
- Have hired someone who falls under the eligible apprentice category
Any of these activities can make your small business eligible for tax credits. The more tax credits you have, the more amount will be deducted from your payable tax, allowing your company to pay less money as income tax. Additionally, you must remember that you don’t have to claim these various tax credits yearly. You can also carry forward the tax credits for up to 20 years, saving a lot of money when your company finally decides to claim the tax credits. Additionally, if you haven’t claimed tax credits for the past 10 years, the Canada Revenue Agency lets you get more Investment Tax Credits.
Tax Credits for Charitable Donations
According to the Canada Revenue Agency (CRA), small businesses that make significant charitable donations can get tax credits. However, you need to ensure that you have donated enough money to charities to be eligible for these tax credits, which is an amount of $300 or any items with the same price. Additionally, your company can claim these tax credits for around 5 years.
Input Tax Credit
The Canadian Input Tax Credit allows small-sized businesses to recover the GST they have paid as their company expenses. Here are some purchased items that companies can show to get a GST return.
- Fuel costs
- Money spent on the maintenance and repair of the company’s building or machinery
- Outsourcing costs like getting third-party legal or accounting services
- Travel expenses
- Money spent on utilities like electricity and water
Small businesses need to take advantage of these tax benefits and save as much money as possible. At Accounting Plus Financial Services Inc., we offer tax accounting services in Toronto. Our corporate tax accountants analyze your small-scale company’s expenses, helping you find tax benefit programs you’re eligible for. Additionally, we also help you get tax benefits for small businesses by guiding you through the application process.
Get in touch with us and hire our tax services to get tax benefits for small businesses.