Another very positive tax change for 2008 is the federal government's concerted effort to cut down on the amount of tax-related paperwork that Canadian businesses have to file (starting with the 2008 tax year).
In Budget 2007, the Department of Finance Canada says that the proposed 2008 tax changes will reduce the filing and remitting requirements of more than 350,000 small businesses by, on average, about one-third - a meaningful reduction when you realize that, as they say in the same document, that currently "depending on the amount of its payroll, sales and income tax liability, a small business could have 34 remittance and filing requirements in these areas per year."
5. Reducing Tax Instalment Frequency
For corporations, the instalment threshold will triple from $1000 to $3000, so that corporations will not have to pay corporate income tax by instalment unless their total tax liability is more than $3000.
Small Canadian-controlled private corporations (CCPCs) that are required to pay tax instalments may make those tax instalments quarterly rather than monthly if they meet certain conditions, such as having a taxable income for either the current or previous year that does not exceed $400,000 and having qualified for the small business tax deduction in either the current or the previous year.
For self-employed individuals (sole proprietorships and partnerships), the personal income tax instalment threshold increases to $3000 from $2000.
The instalment thresholds for remitting source deductions and for GST/HST will also change, starting with the 2008 tax year.
For employers, the tax instalment threshold rises to $3000 from $1000, so employers with a perfect compliance history whose average monthly withholding amount for either of the two preceding calendar years is less than $1,000 will be able to pay by quarterly instalments rather than monthly.
For GST/HST registrants, the taxable supplies threshold triples to $1,500,000 from $500,000; so businesses than have taxable supplies that do not exceed $1,500,000 in a fiscal year file an annual GST/HST return and make quarterly instalment payments. The net tax threshold is also changing, increasing to $3000 from $1500, giving small businesses more of a chance of only having to make one annual tax remittance.
2008 Tax Changes to Personal Income Tax Will Also Benefit Small Businesses
If your business is a sole proprietorship or partnership, you will also be cheered to hear that the personal income tax rate is reduced to 15% (as of January 1, 2007) and the basic personal amount increases to $9,600 for 2007 and 2008.
Every Canadian small business will benefit from these business tax reductions one way or another. How much benefit your small business sees from them will depend on your individual situation. As always when it comes to taxes, I recommend discussing the full ramifications of how these 2008 income tax changes will affect your particular business with your accountant.
