Most times, business owners do not bother to think about taxes until they are asked to pay. They remain busy, passionately dream about the changes they can bring to the world. However, this is totally the wrong approach for running a long-term successful business.

As a business owner, you need to plan out every strategy possible. Likewise, you need to plan for your taxes as well. It can never be too early to start thinking about tax planning and build strategies to reduce your tax burden. So, to help you build your tax strategies, we have brought this article. We have some amazing tax planning strategies for companies in Canada. So, let’s begin!

Five Tax Planning Strategies for Companies:

  • Incorporate Your Business

Whether you are a small business owner or own a big brand, it is natural to look for ways to minimize it. That’s when you have to consider incorporating your business. However, the decrease in the taxable amount depends on what your business is and where it is located. Depending on these two things, incorporating the business can lead to tax deferrals. Once you incorporate your business, you can have the pleasure to enjoy its benefits. One of the major advantages will be lowering your corporate tax rates. In Canada, when you claim the small business deduction, the net tax rate becomes 9%.

Another benefit of incorporating your business is limited liability. Once your business is incorporated, it is considered as a separate body from the owner. That’s why incorporated businesses operate on their own and are responsible for any liabilities. So, it is advised to incorporate their businesses, especially to small business owners.

  • Take advantage of business at home

Just like you, other business owners across Canada operate their business out of their homes. However, if you shift your workplace to your home, you will have several advantages. You can use your home as your primary workplace. More specifically, you can have your meetings with your customers there. So, it will be a good thing if you can allow at least 10% of your home to your workplace. This will help you can deduct certain portions of your home expenses that were related to your business, like:

  • Utilities
  • Property taxes
  • House insurance
  • Mortgage interest
  • Cleaning materials
  • Capital cost allowance

  • Collect original receipts for business-related activities

If you want to reduce your tax burden, you have to collect receipts for all business-related activities. In other words, you have to keep a record of all your business expenses. These expenses include all the investments you are making, from online advertising to promotional materials like business cards. However, make sure to collect the original receipts. This is because the Canada Revenue Agency doesn’t accept any other form of evidence as proof of business expenses.

  • Manage your RRSP and TFSA contributions

You should think of registering to the Registered Retirement Savings Plans (RRSP) and Tax-Free Savings Accounts (TFSA). These two ways can be great for maximizing your tax deductions. However, the amount you have to contribute may vary depending upon your income every year. Properly investing in an RRSP plan can provide immediate tax relief and tax-sheltered growth. To get the maximum benefit, you should contribute to it when you are in a higher taxable amount bracket. Also, if there is any unused contribution from previous years, it will be carried forward to the next year. So, it is better to keep investing RRSP in the year when you expect to make a better income. Moreover, with TFSA, you won’t receive any up-front tax relief.

  • Claim non-capital losses

If ever your business expenses exceed business income, you need to find a year that you can use to lessen your taxable amount. You have to think about this when your business has a non-capital loss. These non-capital losses can be carried back three years or carried forward up to twenty years. However, you will need a tax consultant to help you out. With the help of a professional tax consultant, you can decide whether to carry your non-capital losses back to recover the income tax you paid then, or carry it forward to offset a larger tax bill.

Conclusion

We have tried our best to help you plan your strategies. Now, it is your turn to identify their goals and plan your strategies accordingly to find more opportunities to save more tax. So buckle up and start planning!

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