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What is a professional corporation?

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Professional Corporation

Professional Corporation

What is a professional corporation? 

A professional corporation operates much like a business corporation with few exceptions. A professional corporation has to abide by the regulations set by the Business Corporations Act (Ontario) and by the respective governing body. A professional corporation  can-only carry on activities of its profession. A professional corporation must meet the requirements of its governing body and receive a Certificate of Authorization or equivalent.

Many professionals are allowed to operate their business as a professional corporation.  Examples of professions that can operate under a professional corporation:

 Accountants  Lawyers  Medical professionals
 Engineers  Architects  Social Workers
 Veterinarians  Pharmacists  Chiropractors

Historically professionals have operated through a sole proprietorship or partnership which limits tax planning  and results in higher taxes (see “How to setup a business in Ontario” for more in depth discussion). Professionals have lobbied the provincial governments which have allowed them to incorporate their practices.

Does a professional corporation have limited liability? 

In “How to setup a business in Ontario” we discussed that a corporation is a separate legal entity and it has limited liability. A professional corporation is slightly different and does NOT have full limited liability (exception for architects and engineers). A professional corporation only offers limited liability in certain areas. When it comes to business debts, the shareholder is only liable up to his or her investment in the business.  However, in other circumstances such as malpractice, the corporate veil is lifted resulting in unlimited liability.

 

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GST/HST Rates Across Canada

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Canadian Provincial Tax Map 2015

GST HST Rates Across Canada

 GST/HST Rates Across Canada

With eCommerce more and more businesses are selling goods and services across Canada. This has resulted in confusion on which sales tax rates apply. Majority of Canadian businesses must collect sales taxes from customers and remit them to the government. Depending on the province your business operates in, the rates are different.

Based on the province or territory in which your business operates in, you need to collect either:

  • A combination of GST and PST
  • GST only
  • HST

 What sales tax should I charge my customer in another province?

Generally speaking the sale tax you charge your customer depends on where the supply of the goods or services is made. If a business in Alberta sends products to a business in Ontario, the place of supply is Ontario and you will be charging your customer the HST at the rate for Ontario.

GST/HST sales tax rates that apply in Canada by province:

Province Type PST GST HST Total Tax Rate
(%) (%) (%) (%)
Alberta GST 5 5
British Columbia GST+PST 7 5 12
Manitoba GST+PST 8 5 13
New Brunswick HST 13 13
Newfoundland and Labrador HST 13 13
Northwest Territories GST 5 5
Nova Scotia HST 15 15
Nunavut GST 5 5
Ontario HST 13 13
Prince Edward Island HST 14 14
Quebec GST+QST *9.975 5 14.975
Saskatchewan GST+PST 5 5 10
Yukon GST 5 5

 

 

What sales tax should I charge my customer in another Country?

If you sell good outside of Canada this is considered a zero-rated supply and you do not charge your customers GST or HST. However, if the goods are picked up from Canada then the supply is made in Canada and you are required to charge GST/HST depending on your respective province.

How to calculate GST/HST?

Example 1: In Alberta, where only GST applies and you sold a $100 item.

Retail price: $100
GST (5%): $5
Total: $105

Example 2: In Ontario, where HST applies and you sold a $100 item.

Retail price: $100
HST (13%): $13
Total: $113

Example 3: In Manitoba and Saskatchewan, PST, like GST, is calculated on the retail price only. The two taxes are then added to the retail price for your total. For example, in Manitoba:

Retail price: $100
GST (5%): $5
PST (7%): $7
Total: $112

 Visit the CRA website for more information 

Foreign Income Reporting T1135: Tax Accountant

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Foreign Income Reporting T1135: Tax Accountant

T1135 Foreign Income Reporting

T1135 Foreign Income Reporting

 

Canadians that have accumulated wealth in other parts of the world need to be aware of the Canadian reporting requirements. If you are a Canadian resident you are required to report foreign assets which have a cost value of over $100,000. On a personal income tax return you must answer “Did you own or hold foreign property at any time in the year with a total cost of more than $100,000 Canadian?” If the answer is yes to this question, then you would be required to file the T1135. Over the past few years the foreign reporting requirements have changed which are outlined on the newly redesigned T1135 (Foreign income Verification Statement) tax forms.

Where to disclose my foreign assets?

Canadian resident taxpayers are required to file T1135, with their T1 personal income tax return if at any time in the year the total foreign property they hold was more than $100,000 (Canadian). The CRA will impose hefty penalties if this form is not filed. For 2014, taxpayers can file form T1135 electronically, but corporations must still file a paper version of the form.

Examples of foreign property that needs to be disclosed?

Cash, stocks, bonds, land and buildings which are located outside Canada. Other foreign property that would be disclosed on the T1135:

  • Funds held in foreign bank accounts
  • Shares of foreign corporations, foreign mutual funds
  • Foreign investments
  • Interest in foreign insurance policy

For the full list refer to the T1135 form.

Examples of foreign property that does not needs to be disclosed?

You are not required to report personal properties such as art, jewelry, or vacation properties that you use primarily for personal use. Also you are not required to report a personal residence, or property exclusively related to your active business.

Penalties for not reporting foreign income? 

The Canada Revenue Agency imposes hefty penalties for not reporting foreign assets over $100,000. The current penalty is $25 a day to a maximum of $2,500 per year. The foreign reporting requirement was implemented back in 1998. To avoid the penalties this reporting can be made through the Voluntary Disclosure Program (VDP). 

Download Foreign Income Reporting T1135: Tax Accountant

Download (PDF, 7KB)

SDVC LLP – Chartered Professional Accountants  is an accounting firm located in Mississauga, Ontario. We can professionally prepare pare your personal income taxes and make sure that your foreign income is reported correctly on the T1135. We can help file the T1135 for past years and for over due returns. We can help reduce the penalties and interest by using the Voluntary Disclosure Program.