Steps To Starting A Small Business
Step 9: Federal Taxation Issues (Canada only)
By law, every employer is responsible for deducting, remitting, and reporting employees’ personal income tax with-holdings, unemployment insurance premiums and Canada Pension Plan deductions to Revenue Canada Taxation. This remittance is required by the 15th day of every month, or twice monthly in the case of large employers where deductions are in excess of $15,000. If you do not remit in time there is a penalty of 10% of the remittance amount. As well, the employer must provide employees with completed T4 forms by February 28th each year.
Contributions to both the Federal Unemployment Insurance Commission and the Canada Pension Plan are cost shared by the employer and the employee. Currently an employer must provide 1.4 times the amount of the employees’ EI premium and an amount equal to the employee’s Canada Pension Plan premium.
Where a person and her or his spouse own more than 40% of the common shares of an incorporated company, they are not eligible to receive unemployment insurance benefits and thus do not pay premiums. Operators of unincorporated businesses, proprietorships or partnerships, similarly do not pay EI premiums but must pay CPP with their annual personal tax return.
On request, District Offices of Revenue Canada Taxation will provide an account number and a package of the necessary forms, instructions and tables for calculating payroll deductions. They can also help answer any specific questions regarding tax deductions or remittances.
Businesses must also collect and remit the Goods and Services Tax, charged on most goods and services in Canada. Businesses are also entitled to reclaim the GST they have paid on eligible business expenses. Revenue Canada Excise, will provide an account number and explain the collection and remittance process, including rate schedules and remittance requirements of various product, service and industry classifications.