RSM Canada’s 2024 year-end tax guide summarizes the key federal, provincial, and territorial tax updates that may create risk or opportunity for middle market taxpayers going into 2025.
Tax trends and topics discussed as the Canadian economy moves into 2025 include:
Increase to the capital gains inclusion rate
Introduction of the Digital Services Tax Act and Global Minimum Tax Act
Enactment of the excessive interest and financing expense rules
Updates to the general anti-avoidance rule
As year-end approaches, companies and individuals alike must carefully consider tax-planning opportunities in light of economic uncertainty and evolving tax legislation and regulations. Learn more in the year-end planner.
Federal and provincial tax rates, limits and phase-outs directly affect your business and personal tax planning strategies. Download the federal and provincial/territorial rate cards.
Canadian Tax Integration of Private Company Income
Tax integration is achieved when a particular stream of income is subject to the same or similar total tax rate once it reaches the individual taxpayer level. These tables provide an illustration of how the Canadian income tax integration system works.
The ultimate goal for most private business owners is to realize the value of their hard work and be in the position to step away from their company comfortably. But many business owners are woefully unprepared for what should be the capstone of their career—selling their business or transitioning ownership to the next generation.
What is one major factor in this common problem? Many private businesses have never been audited.
If you own a private company, you should consider the risks, challenges and potential missed opportunities that can arise if you don’t have it audited on a regular basis. Whether you are entertaining an offer from a potential acquirer, bringing on a new investor or management team, or refinancing your business, you may not be making the most of these opportunities if your business isn’t audited regularly.
Based on our experience working with scores of middle market companies over the years, we have identified seven key reasons for private business owners to consider an audit, as well as a few scenarios that help to bring these ideas to life. These are based on real-world situations we have witnessed time and again in our work with private business owners.
7 reasons to have your company audited
1. You never know when the right opportunity may arise. Most business owners will tell you they don’t have any plans to sell their company, but that idea can change quickly when a potential buyer approaches with a compelling offer. Getting your business audited allows you to be ready for these opportunities when they come up.
2. When opportunities do arise, time is of the essence. If you aren’t getting a regular audit, any potential deal timelines will be extended—perhaps significantly—to make room for the initial audit process required by a proposed transaction. An extended timeline means greater risk that the deal falls through.
3. Uncertainty diminishes value. A regular audit from a reputable firm provides assurance that your company’s financial house is in order. Without such an audit, a prospective buyer will likely assume a greater level of risk as part of the transaction and therefore require more return in compensation for the risk taken. This translates to less up-front value for you as the owner.
4. Peace of mind is meaningful. Regular audits help to provide some professional oversight of company management, which can provide a degree of comfort to shareholders, especially for owners who have transitioned out of a day-to-day management role.
5. Good governance leads to resilience. A regular audit is a regular feature of a professional, established company. As a private company grows, the company’s management and processes eventually must evolve and become more professionalized.
6. Your reputation matters. While it isn’t designed to detect fraud, an audit provides a degree of assurance that a company’s finance operations are functioning properly. In addition, the lack of an audit may raise questions about the company’s professionalism and sophistication.
7. Flimsy valuations have limited value. Many private company owners may assume that a simple valuation is sufficient if and when an opportunity to sell arises. However, the rigor of an audit from a reputable firm can carry more weight in a potential transaction process.
Common scenarios shine light on the value of an audit
Scenario 1: You are planning to sell your business—whether soon or someday.
Time and again, owners who thought they would never sell end up selling because a hard-to-ignore offer comes in unexpectedly or family circumstances change suddenly. If you wait until circumstances like these arise before you get your books in order, you may miss a valuable opportunity.
A prospective buyer typically will require three years of audited financial statements. If you haven’t had your company audited as a normal course of business, the process likely won’t be as simple as receiving an offer and conducting the required audit. Annual audits going back three years can take several months to complete. Often, time is of the essence in a deal process, and a buyer may lose interest or walk away if there are delays.
Time is not the only issue. If your company is being audited for the first time in conjunction with a proposed transaction, you don’t know exactly what the audit will find. The more issues the audit uncovers, the more questions the buyer will likely ask, which may extend the due diligence process. Issues and surprises during the audit process also could cause the buyer to reassess their valuation of your company. These challenges may be mitigated by performing timely audits well before you consider selling your business.
Scenario 2: You want to transition management of the company to the next generation.
When a longtime owner’s personal or professional objectives eventually compel them to step away from their business, they will sometimes transfer management to a professional management team or perhaps to the next generation of family ownership. When these circumstances arise, it is helpful to build a layer of financial oversight between the company’s shareholders and its management team.
An audit can help serve that function. Audits provide a degree of comfort when longtime owners are no longer keeping close tabs on the company’s day-to-day operations. Shareholders may sleep better at night knowing that there is more professional oversight of senior management. The audit is not designed to find fraud, but it can inspire confidence in the accuracy of financial statements and effectiveness of controls, which can bring peace of mind to shareholders.
Scenario 3: Your company has reached a certain size, and you want to improve its governance—and protect its reputation.
As a private company grows, eventually it will no longer be feasible for a small group of individuals to know everything that is happening inside the company. Management must evolve, and governance must become more comprehensive.
A professional audit can serve a critical role in this process by:
Reassuring shareholders and other stakeholders—including customers and suppliers—that the company’s financial records are accurate and reliable
Supporting and protecting your company’s valuation
Speeding up due diligence for investors and lenders—should such processes be needed
Helping to improve your company’s reputation as best-in-class—part of a group of forward-thinking companies that are regularly audited and thus perceived as better-run and more sophisticated
In fact, once a company reaches a certain size, the lack of an annual audit may raise serious questions about the company’s sophistication and professionalism.
The value of an audit firm
Depending on the type of audit firm you engage, audits can also unlock additional strategic value for your company.
When a multiservice auditing firm is engaged, you can tap into its deep knowledge of your industry and best practices plus the combined intelligence of all the specialists in the audit firm. Business owners can benefit from perspective and actionable advice on multiple aspects of your business, ranging from internal controls and operations to tax planning, M&A, financing, technology and more.
By approaching the audit as an opportunity for improvement and insight, a business owner can go beyond compliance and verification and extract significant strategic value—value that could positively affect your company’s financial stability, operational efficiency and long-term success.
RSM Canada LLP is a limited liability partnership that provides public accounting services and is the Canadian member firm of RSM International, a global network of independent assurance, tax and consulting firms. RSM Canada Consulting LP is a limited partnership that provides consulting services and is an affiliate of RSM US LLP, a member firm of RSM International. The member firms of RSM International collaborate to provide services to global clients but are separate and distinct legal entities that cannot obligate each other. Each member firm is responsible only for its own acts and omissions, and not those of any other party. Visit rsmcanada.com/about for more information regarding RSM Canada and RSM International.
Individuals and trusts who benefit from tax deductions, credits and exemptions may find themselves paying a higher rate of tax under the Alternative Minimum Tax (AMT) regime. The 2023 and 2024 Federal Budgets proposed changes to the calculation of AMT by limiting the inclusion rates of some significant deductions and credits, including charitable donations.
What is AMT?
For each taxation year, individual taxpayers and certain trusts calculate their taxes payable under two methods: regular income tax and AMT. The method which yields the higher taxes payable determines the amount the taxpayer owes for the year. Compared to the regular income tax method, the AMT limits the ability to offset income earned with certain eligible deductions and credits. Typically, AMT applies in situations where high-income taxpayers substantially lowered their taxes payable due to deductions and credits.
If a taxpayer is subject to AMT in a given year, the difference between the amount calculated under the AMT method and the amount calculated under the regular tax method can be carried forward for seven years. The carry forward is treated as a credit against taxes payable calculated under the regular tax method.
Charitable Donations under the Current AMT regime
Under the regular tax system, taxpayers that make donations of publicly listed securities receive a tax receipt for the fair market value of the securities donated and an exemption on any applicable taxes on the accrued capital gain of those donated securities.
Similarly, under the current AMT regime, charitable giving does not have an impact on the AMT calculation as:
the full amount of all donation tax credits can be fully applied against any AMT owing and;
the full capital gains from donating public securities are excluded in calculating AMT owing
For high income taxpayers, the current method allows them to shelter potentially large accrued gains on the donation of publicly traded securities, as opposed to donating an equivalent cash amount.
Charitable Donations under the Proposed AMT regime
The following changes will be effective Jan. 1, 2024.
The federal government has proposed to increase the AMT flat rate from 15% to 20.5% when calculating adjusted taxable income. Moreover, it is proposed to concurrently raise the AMT exemption threshold, being the amount of adjusted taxable income to which AMT does not apply, from $40,000 to $173,000. This should result in fewer Canadians being subject to AMT.
Alongside the increased rate and exemption base, the treatment of charitable donations is proposed to be changed so that:
an increase in the inclusion of capital gains realized on the donation of qualifying securities from 0% to 30%, and,
A decrease in the recognition of the donation tax credit from 100% to 80%
For large donations of publicly traded securities, taxpayers may now find themselves with an AMT payable, when previously any accrued gains would have been exempt.
Impact on Taxpayers
The proposed changes to charitable donations will likely have a significant impact on how taxpayers subject to the new AMT make donations going forward.
Consider a taxpayer (below) that wants to make a significant donation of publicly traded securities with a large accrued capital gain. Under the proposed changes, the capital gain inclusion rate for the donated property is 30% alongside limiting the donation tax credit to 80%. This increases the taxpayer’s tax liability that they will have to personally fund even when no consideration has been received for the donated property and may result in taxpayers being less inclined to donate as a result.
Current AMT
Proposed AMT
Earned Income
1,000,000
1,000,000 (A)
Capital Gain on donated public securities
500,000
500,000
Taxable Capital Gain on donated public securities
–
150,000 (B)
Adjusted Taxable Income
1,000,000
1,150,000 (A+B)
Basic AMT exemption
(40,000)
(173,000)
Taxable Income
960,000
977,000
AMT rate
15%
20.5%
144,000
200,285
Donation Tax Credit
(165,000)
(132,000)
(21,000)
68,285
Planning Strategies
Taxpayers that consider donating significant cash or property on an annual basis need to start planning ahead to determine if these donations will result in any AMT being payable.
Perform charitable giving through a corporation
Taxpayers may consider donating publicly traded shares with accrued capital gains through a corporation, as AMT is not applicable at the corporate level. This may be advantageous as the tax-free amount of the capital gain of the donation of public securities will be added to the corporation’s Capital Dividend Account (CDA) and can be distributed to shareholders on a tax-free basis.
Spreading out the donations
Taxpayers may consider donating smaller amounts over the span of several years as opposed to one large lump-sum. This could help limit the amount calculated under the AMT method in a given year.
Managing taxable income
If taxpayers have the flexibility to do so, they may consider managing their income in future years to ensure they can get a credit from any tax paid under AMT that can be applied against regular income tax for up to seven years.
Charitable giving at death
AMT does not apply in the year of death. Taxpayers may consider charitable giving through their will at death to avoid AMT but still create the positive impact of giving.
The information contained herein is general in nature and based on authorities that are subject to change. RSM Canada guarantees neither the accuracy nor completeness of any information and is not responsible for any errors or omissions, or for results obtained by others as a result of reliance upon such information. RSM Canada assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect information contained herein. This publication does not, and is not intended to, provide legal, tax or accounting advice, and readers should consult their tax advisors concerning the application of tax laws to their particular situations. This analysis is not tax advice and is not intended or written to be used, and cannot be used, for purposes of avoiding tax penalties that may be imposed on any taxpayer.
RSM Canada Alliance provides its members with access to resources of RSM Canada Operations ULC, RSM Canada LLP and certain of their affiliates (“RSM Canada”). RSM Canada Alliance member firms are separate and independent businesses and legal entities that are responsible for their own acts and omissions, and each are separate and independent from RSM Canada. RSM Canada LLP is the Canadian member firm of RSM International, a global network of independent audit, tax and consulting firms. Members of RSM Canada Alliance have access to RSM International resources through RSM Canada but are not member firms of RSM International. Visit rsmcanada.com/aboutus for more information regarding RSM Canada and RSM International. The RSM trademark is used under license by RSM Canada. RSM Canada Alliance products and services are proprietary to RSM Canada.
The popularity of Airbnb, short-term rental pools for cottages and vacation properties continues to grow. One aspect of venturing into the short-term rental game is how GST/HST applies. The volume of rental income and the length of the rentals is the determining factor on whether you will need to charge GST/HST.
Essentially, long term-rentals are exempt from GST/HST, while short-term rentals are subject to the tax.
What is considered a short-term rental?
A short-term rental is generally one where the period of occupancy is less than one month and the consideration for the supply is more than $20 a day.
Am I considered a small supplier?
If you are supplying short-term rentals, you will need to determine if you are considered a small supplier for GST/HST purposes. A small supplier is one whose worldwide annual GST/HST taxable supplies, (including zero-rated supplies and including the sales of any associated parties) are less than $30,000, or less than $50,000 for public service bodies (colleges, non-profit organizations, charities, hospitals).
One of the most common oversights we see is forgetting to include any other associated business revenue into the small supplier test.
Should I voluntarily register for GST/HST?
If you are under the $30,000 of taxable supplies for your associated group, you can elect to voluntarily register for GST/HST. The benefits of this would be to enable the claim of any GST/HST paid on expenses related to your short-term rental income. It may also permit you to recover some or all of the GST/HST you may have paid on the unit.
But be aware – if you choose to register, you will be required to collect and remit the GST/HST on your short-term rental income.
There are many factors to consider when venturing into this market; especially if you will be using a portion of your principal residence.
DJB provides guidance and assistance with all of your business start-up, tax, and accounting needs including:
SELECTING THE LEGAL ENTITY FOR YOUR ENTERPRISE
There are 3 options for the legal entity of your business, we can help you determine what’s right for your business.
Sole Proprietorship
Partnership
Corporation
REGISTERING WITH THE TAX AUTHORITIES
We can help you register with the following tax authorities:
Canada Revenue Agency (CRA)
Ministry of Finance – Ontario (EHT) – Employer Health Tax
Workplace Safety and Insurance Board (WSIB)
Sales Tax (GST/HST)
TAX CALENDAR
The creation of a tax calendar is an important part of starting your business. DJB will help setup your tax calendar for services such as, Income Tax, Sales Tax (GST/HST), Ontario Employer Health Tax (EHT), Ontario Workplace Safety and Insurance Board (WSIB), and Employee Withholdings Tax (Source deductions), so that you won’t miss any filing dates and prevent penalties and/or late charges.
SELECTING A FISCAL PERIOD (YEAR END)
DJB will help you setup and plan your fiscal period. This is crucial to any business and can be stressful and costly if setup incorrectly.
On June 10, 2024, the Ministry of Finance announced amendments to the Income Tax Act to increase the capital gains inclusion rate effective June 25, 2024. Corporations and trusts will see an increase from 1/2 to 2/3, while individuals realizing capital gains of more than $250,000 will also be subject to the increased rate. The upcoming legislation will maintain the principal residence exemption, prohibit tax elections or on-paper realizations, and ensure that capital gains cannot be averaged over multiple years, among other measures.
Background
On June 10, 2024, the Ministry of Finance released a Notice of Ways and Means Motion (NWMM) to amend the Income Tax Act and Income Tax Regulations to implement the Budget 2024 initiative to increase the capital gains inclusion rate. Starting June 25, 2024, the capital gains inclusion rate was originally proposed to be adjusted as follows:
For corporations and trusts: The capital gains inclusion rate will be increased from 1/2 to 2/3.
For individuals: For capital gains that exceed an annual threshold of $250,000, the capital gains inclusion rate will be increased from 1/2 to 2/3.
The NWMM provides an overview of various measures introduced by the government to implement the higher capital inclusion rate proposed in the Budget 2024. This article will focus on measures impacting middle market taxpayers.
Little relief offered despite requests from numerous interested parties
In a related press release by the Department of Finance, certain suggestions put forth by interested regulatory parties were quelled, offering the following summary of the changes:
No changes to the principal residence exemption.
No ability to elect to internally trigger capital gains in anticipation of the June 25 deadline.
No ability to average capital gains over multiple years to stay under the $250,000 threshold.
No ability to split the $250,000 threshold with corporations.
No exceptions for specific assets or types of corporations.
No distinction based on how long an asset is held or otherwise.
On top of the summary above, the Department of Finance also released a more comprehensive summary of the changes.
New draft legislation
Transitionary rules for the new capital gains inclusion rate
The draft legislation acknowledged that the inclusion rate increase date of June 25, 2024, being in the middle of many ordinary taxation years, offers complications. As a result, the draft legislation introduces transitionary measures to identify how the inclusion rate will be applied based on a taxpayer’s individual circumstances. Firstly, the draft legislation separates out a taxation year between two relevant periods:
The beginning of the taxation year until the end of the day June 24, 2024 (“Period 1”); and,
The beginning of the day June 25, 2024 until the end of a taxpayer’s taxation year (“Period 2”)
Taxpayers would then need to net capital gains against capital losses for each period to determine whether that particular period yielded either a cumulative net capital gain or net capital loss. Then, the following capital gains inclusion rates would apply:
If a taxpayer only has net capital gains or net capital losses in Period 1 and Period 2, a 1/2 inclusion rate would apply for gains/losses incurred in Period 1 and a 2/3 inclusion rate would apply for gains/losses incurred in Period 2.
If a taxpayer has no net capital gains or net capital losses in either period, a 2/3 inclusion rate would apply for all gains/losses.
If a taxpayer has net capital gains in Period 1 that exceed net capital losses in Period 2, a 1/2 inclusion rate would apply for all gains/losses.
If a taxpayer has net capital losses in Period 1 that exceed net capital gains in Period 2, a 1/2 inclusion rate would apply for all gains/losses.
If a taxpayer has net capital gains in Period 1 that are less than net capital losses in Period 2, a 2/3 inclusion rate would apply to all gains/losses, to the extent not sheltered by the $250,000 threshold.
If a taxpayer has net capital losses in Period 1 that are less than net capital gains in Period 2, a 2/3 inclusion rate would apply for all gain/losses.
Interested parties should consider reading the draft legislation for specific timing considerations that may apply to their situation when trying to determine whether certain gains/losses arise during Period 1 or Period 2.
New $250,000 threshold for individuals
Individuals (excluding most trusts) will be able to shelter the first $250,000 of their capital gains to remain taxable at 1/2 even after June 24, 2024. This threshold would apply to all capital gains incurred on or after June 25, 2024 and will be net of any capital losses for the year, the lifetime capital gains exemption, the employee ownership trust tax exemption, and the proposed Canadian entrepreneurs’ incentive. This threshold will be algebraically determined by multiplying the threshold by 1/6 and allowed as a deduction from taxable capital gains, allowing for an effective 1/2 inclusion rate. Note that this threshold will not be prorated for 2024.
Capital gains reserves
Under certain circumstances, taxpayers are able to defer the recognition of capital gains in situations where the proceeds of the sale of capital property are received over a number of years. In these circumstances, a capital gain is realized in income with a reserve being taken based on the amount of proceeds that have not yet been received, with a minimum of 10% or 20% of the gain to be brought into income each year (depending on the type of asset sale and subject to the new draft intergenerational transfer rules). The reserve enters into taxable income in the following year.
For purposes of the capital gains inclusion rate change, reserves will be considered to enter into income on the first day of the taxation year. This means that taxation years that begin before June 25, 2024 will have that capital gain subject to a 1/2 inclusion rate. As the reserve enters into income in subsequent years, the prevailing capital gains inclusion rate for that year would apply (i.e., possibly 2/3). In other words, the capital gains inclusion rate on the actual date of sale does not get maintained as the reserve is utilized.
Net capital loss carryforwards
Net capital losses can be carried back three years and forward indefinitely to offset capital gains in other years, with adjustments made to reflect the applicable inclusion rate. For example, net capital losses incurred when the inclusion rate was 1/2 and utilized when the capital gains inclusion rate is 2/3 will be multiplied upwards to 4/3, in order to allow the relevant capital loss to offset an equivalent capital gain regardless of inclusion rates.
Employee stock option deduction
Under the current rules, when an employee exercises a stock option, the difference between the fair market value of the stock and its exercise price results in a taxable benefit (the “stock option benefit”) and is included in the employee’s income. Where the employer is a Canadian-controlled private corporation (CCPC), the stock option benefit arises at the time the shares are ultimately disposed of or exchanged by the employee. Generally, the taxation of employee stock options in Canada mirrors the taxation of capital gains and hence, the employees can claim a stock option deduction at the rate of 1/2 of the stock option benefit.
Consequent to the proposed amendment to the inclusion rate, the stock option deduction would be 1/3 of the stock option benefit for stock options exercised (or disposed of or exchanged in case of a CCPC) on or after June 25, 2024. The annual $250,000 limit described above would apply to the total amount of stock option benefit and capital gains for a particular taxation year. In a situation where the total stock option benefit and capital gains exceed $250,000, the taxpayer would have the discretion to choose the preferential tax treatment (lower inclusion rate) for allocating the amounts.
Allowable business investment losses
A business investment loss arises when bad debt arises on the amount owed by a small business corporation (SBC) or the shares of a bankrupt SBC are disposed of. 1/2 of the capital losses, referred to as allowable business investment losses (ABIL), can be used to offset other income like income from business, property, and employment. Any unused ABIL can be used to offset income from any source and can be carried back three years and carried forward 10 years. Any amount of ABIL remaining after 10 years gets converted to an ordinary capital loss that can be carried forward indefinitely and used to offset only capital gains.
With the increase in the capital gains inclusion rate, 2/3 of business investment losses realized on or after June 25, 2024, would be deductible. Furthermore, unlike other capital losses carried over, ABILs would not be adjusted in value to reflect the new inclusion rate that applies in the year the loss is claimed. In other words, ABILs realized on or after June 25, 2024 would be determined based on the 2/3 inclusion rate even if carried back and applied in any of the three previous years.
Partnership allocations and trust designations
Generally, partnerships calculate net income as if they are a taxable entity for Canadian tax purposes. The income is then allocated to the partners based on the partnership agreement. Capital gains earned in a partnership are typically transferred out as taxable capital gains for the year. For partnerships that have capital gains in a fiscal period that straddle June 25, 2024, those taxable capital gains, allowable capital losses, or ABILs will instead be grossed up back to the original amount and deemed to be realized by the relevant partner. Partnerships would be required to disclose to partners which gains arose during which period, to potentially allow access to the $250,000 threshold.
Trusts are taxable entities for Canadian tax purposes and compute taxable income accordingly. Trusts can allocate its income to beneficiaries at the end of the trust’s taxation year, and also preserve the character of the income for beneficiaries, to allow them to take advantage of various tax preferred treatments. For trust taxation years that straddle June 25, 2024, trusts would similarly gross-up their net capital gains back to their original amount and have them deemed to be recognized by the relevant beneficiary. Trusts would be required to disclose to those beneficiaries which gains arose during which period, with certain simplifying calculations for commercial trusts.
International tax adjustments
Certain international tax measures will be adjusted to be brought in line with the change in capital gains inclusion rate, including:
Computing the foreign accrual property income of a foreign affiliate and deductions for dividends received from a foreign affiliate’s hybrid surplus.
The withholding tax rate for non-residents disposing of taxable Canadian property will increase from 25% to 35%, effective for dispositions occurring on or after Jan. 1, 2025.
Only two weeks left for implementation
Overall, the changes to the capital gains inclusion rate and related measures remain largely unchanged from when they were originally announced in Budget 2024. Despite updated draft legislation being expected at the end of July, it is not expected to affect the new measures significantly. Taxpayers are only left with two weeks to finalize any tax planning they would like to implement prior to June 25, 2024, after which they should expect a significantly different tax landscape for capital gains in Canada.
RSM Canada LLP is a limited liability partnership that provides public accounting services and is the Canadian member firm of RSM International, a global network of independent assurance, tax and consulting firms. RSM Canada Consulting LP is a limited partnership that provides consulting services and is an affiliate of RSM US LLP, a member firm of RSM International. The member firms of RSM International collaborate to provide services to global clients but are separate and distinct legal entities that cannot obligate each other. Each member firm is responsible only for its own acts and omissions, and not those of any other party. Visit rsmcanada.com/about for more information regarding RSM Canada and RSM International.
The information contained herein is general in nature and based on authorities that are subject to change. RSM Canada LLP guarantees neither the accuracy nor completeness of any information and is not responsible for any errors or omissions, or for results obtained by others as a result of reliance upon such information. RSM Canada LLP assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect information contained herein. This publication does not, and is not intended to, provide legal, tax or accounting advice, and readers should consult their tax advisors concerning the application of tax laws to their particular situations. This analysis is not tax advice and is not intended or written to be used, and cannot be used, for purposes of avoiding tax penalties that may be imposed on any taxpayer.
Make a payment to the CRA through online banking, the same way you pay your phone or hydro bill.
Sign in to your financial institution’s online business banking service.
Under “Add a payee,” look for an option such as:
Federal – Corporation Tax Payments – TXINS
Federal – GST/HST Payment – GST-P (GST-P)
Federal Payroll Deductions – Regular/Quarterly – EMPTX – (PD7A)
Federal Payroll Deductions – Threshold 1 – EMPTX – (PD7A)
Federal Payroll Deductions – Threshold 2 – EMPTX – (PD7A)
Federal – Canada emergency wage subsidy repayment
Enter your 15 digit business number as your CRA account number.
You are responsible for any fees that may be charged by your financial institution.
Debit Card Payments Via ‘My Payment’
Make a payment with your Visa® Debit, Debit MasterCard®, or Interac® Online debit card.
My Payment is an electronic payment service offered by the CRA that uses Visa® Debit, Debit MasterCard® or Interac® Online for businesses to make payments directly to the CRA using their bank access cards. The CRA does not charge a fee for using the My Payment service. Credit Cards not accepted with this service.
To use My Payment you need a card with a Visa Debit logo, a Debit MasterCard logo, and/or an Interac Online logo from a participating Canadian financial institution.
If your bank access card has both a Visa Debit logo and an Interac logo, use the Visa Debit option to pay.
If your bank access card has both a Debit MasterCard logo and an Interac logo, use the Debit MasterCard option to pay.
Before you start ask your financial institution about your daily or weekly transaction limit and any fees for making online payments. The CRA does not charge a fee for using this service.
To make a payment at your Canadian financial institution, you will need a personalized remittance voucher. Financial institutions will not accept photocopies of remittance vouchers or payment forms.
You can make a payment in foreign funds. The exchange rate you receive for converting the payment to Canadian dollars is determined by the financial institution handling your transaction on that day. You are responsible for any fees that are incurred.
Arrangements will need to be made with your financial institution if you are making a payment of more than $25 million.
Be sure to provide accurate information to help the CRA apply your payment to the intended account. A personalized remittance voucher will help CRA apply your payment properly. You can request personalized remittance vouchers online or by phone.
Mailing Your Payment
The government released legislation, effective January 1, 2024, that any tax payment or remittance made by a corporation to the CRA exceeding $10,000 must be done through electronic means.
If your tax payments exceed $10,000, you should no longer make these payments using a cheque.
It is highly encouraged to remit payments to the CRA electronically even if the amount is less than $10,000 as electronic payments are processed quicker. This will also significantly reduce the risk of lost or misapplied payments. Furthermore, it is usually far easier and faster for the CRA to trace a lost or misapplied electronic payment than a cheque mailed to the CRA.
If you still wish to send a cheque or money order, make it payable to the Receiver General for Canada and include your remittance voucher. Note: Payment is considered received on the date CRA receives the cheque, not the postmark date.
Mailing address: Canada Revenue Agency PO Box 3800 STN A Sudbury ON P3A 0C3
Payment by Pre-Authorized Debit (PAD)
Set up a pre-authorized debit agreement and eliminate the need for postdated cheques.
Pre-authorized debit (PAD) is a secure, online, self-service payment option for individuals and businesses. This option lets you set the payment amount that you authorize the CRA to withdraw from your Canadian chequing account to pay your taxes on a date, or dates, of your choosing.
Due to the processes that must take place between the CRA and the financial institution, the taxpayer’s selected payment date must be at least 5-business days from the date their PAD agreement is created or managed.
There is a ‘pay by pre-authorized debit’ option through GST/HST netfile available for an amount owing.
A PAD agreement can only be set up online, not over the phone.
Steps to create a pre-authorized debit agreement for businesses
To create a PAD you have to be registered for My Business Account. Click on ‘CRA register’ or ‘Continue to Sign-In Partner’ and complete the steps. Once completed, your official access code will be sent to you by mail. Once you enter the access code into My Business Account you will have full access, which allows you to view, create, modify, cancel, or skip a payment.
This option is not designed to be used frequently due to the limitations on payments and the fees involved.
Steps to create a pre-authorized debit agreement for individuals
To create a PAD, you must to be registered for My Account. Once signed in:
Select the ‘Proceed to pay’ button and select the ‘Pay later’ option to create a PAD agreement.
Access ‘Manage pre-authorized debit’ under the Related services within the Accounts and payments section to view, modify, cancel, or skip a payment.
A PAD agreement can also be created within MyCRA, for an amount owing, by selecting the ‘Proceed to pay’ button and the ‘Pay later’ option. Your credentials are the same as in My Account.
Cash or Debit Card Payments
Make a payment with cash or debit in person at any Canada Post outlet.
You can pay your individual tax, benefits, and credits repayments, Part XIII – non-resident withholding tax, source deductions, T2 corporation tax, or GST/HST payments to the Canada Revenue Agency (CRA) in person with cash or debit card at any Canada Post outlet across Canada for a fee. To do so you will need a self-generated quick response (QR) code. This QR code will be personalized by you and will contain information that will allow the CRA to credit your account. Canada Post uses a third-party service provider to generate and process the QR code. To create your QR code, see the link below*.
It is a simple two-step process. On the site, you will be asked to select the tax type you want to pay, your social insurance number or account number, your name, and the amount you want to pay. A service fee will be charged based on the amount of the payment and displays when creating the QR code.
When you have completed the required fields, press ‘Continue’ to select where you want your QR code to display. The choices are: Send to Email; Send to Mobile or Print at Home. You can choose any or all of these options. If you choose Send by Email, you will need to enter your email address. If you choose Send to Mobile, you will need to enter your 10-digit Mobile Number. If you choose to print at home, a print icon will display.
Be sure to bring your phone or printed QR code to any Canada Post outlet to make a payment. The clerk will scan your QR code and ask you how much you want to pay. The amount you initially entered is for your reference only and is not displayed to the clerk. The clerk does not see any CRA account information. The clerk will key in the amount you want to pay, add the service fee and accept payment by cash or debit card. The clerk will then give you a paper receipt with the amount paid and the reference number for your files.
Credit Card Payments via Third-Party Service Providers
You can make a payment with a credit card by using a third-party service provider.
The third-party service provider will send your business or individual payment and remittance details online to the CRA for you.
Ensure that you set up your payment well in advance of your payment’s due date as payment delivery is not immediate, and is determined by the third-party service provider that is used.
Note: Third-party service providers charge a fee for their services. Click here for a full list of third-party service providers.
Payments via Wire Transfer for Non-Residents
Non-residents who do not have a Canadian bank account can make payments to the CRA by wire transfer.
Wire transfers for submitting your non-resident GST/HST security deposit are not available at this time.
What you need to know
All wire transfers must be in Canadian dollars.
Your financial institution may have standard charges that apply to wire transfer payments. Make sure that your financial institution does not deduct the wire transfer fee from the total payment amount due as this will result in an underpayment.
Wire details
You will need the following information to transfer funds to the CRA’s account:
Name of banking institution:
The Fédération des Caisses Desjardins du Québec 100 rue de Commandeurs Levis, Quebec Canada G6V 7N5
SWIFT:
CCDQCAMM
Bank number:
815
Transit number:
98000
Beneficiary name:
Receiver General of Canada
Beneficiary account number:
MFI09708060815CAD3 (if space limitations, use at least: 815980000970806)
Beneficiary address:
11 Laurier Street Gatineau, Quebec K1A 0S5
Description field:
Authorization number: 122-25678-CRA
ABA code, if required:
081598000
Charges field:
“OUR”
To avoid processing delays include the following information with your wire transfer:
For Businesses:
non-resident account number or business number
business name
period end date
fiscal year
telephone number
return/remittance
Provide a copy of your tax remittance or GST/HST return/remittance by fax to the CRA:
Attention: Revenue Processing Section
Fax: 204-983-0924
Provide the amount paid, the date paid and the confirmation number if available
Avoid late fees
You are responsible for making sure the CRA receives your payment by the payment due date. If you are using a third-party service provider, please ensure that you clearly understand the terms and conditions of the services that you are using.
Since 1940, Durward Jones Barkwell & Company LLP (DJB) has been providing financial and business consulting services to companies of all sizes. We can assist with complex mergers and acquisitions or guide you through the many facets of starting a small business. We do all this while remaining personally involved with our clients and the communities where we work and live.
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