Canada Accounting & Tax Glossary

A Business Number is a unique 9-digit identifier issued by the Canada Revenue Agency to identify a business or legal entity. The BN is the root identifier to which CRA program accounts are added: RC (corporation income tax), RT (GST/HST), RP (payroll deductions), and RM (import/export). All CRA business filings and remittances use the BN and program account suffix.

The T2 is the annual corporate income tax return filed with the Canada Revenue Agency by all Canadian resident corporations and certain non-resident corporations with a taxable presence in Canada. The return is due within 6 months of the corporation's fiscal year-end. The balance of corporate tax owing is due 2 months after year-end (3 months for eligible CCPCs).

Capital Cost Allowance is Canada's tax depreciation system for business assets. Instead of deducting the full cost of a depreciable asset in the year of purchase, businesses claim CCA at prescribed rates over time. Different asset classes attract different CCA rates: Class 10 (30% declining balance for most vehicles), Class 8 (20% for office equipment), Class 14.1 (5% for goodwill and eligible capital property).

GST (Goods and Services Tax) is a 5% federal tax on most goods and services supplied in Canada. In participating provinces, GST is combined with the provincial sales tax into the Harmonized Sales Tax (HST): Ontario 13%, New Brunswick, Nova Scotia, Newfoundland and Labrador, and PEI 15%. Businesses must register once taxable sales exceed CAD 30,000.

The Lifetime Capital Gains Exemption allows Canadian residents to shelter up to CAD 1,250,000 of capital gains from tax on the sale of qualifying small business corporation shares, qualified farm property, or qualified fishing property. Capital gains remain at the 50% inclusion rate (the proposed 2/3 increase was cancelled in March 2025). The LCGE is reduced by the individual's cumulative net investment loss.

Refundable Dividend Tax on Hand is a mechanism that allows a CCPC to recover a portion of the tax paid on investment income when it pays taxable dividends to shareholders. When a CCPC pays taxable dividends, CRA refunds 38.33% of those dividends from the RDTOH balance. This prevents investment income from being permanently double-taxed at both the corporate and personal levels.

The Small Business Deduction reduces the federal corporate tax rate from 15% to 9% for Canadian-Controlled Private Corporations on the first CAD 500,000 of active business income per year. The deduction is subject to reduction for associated corporations, passive investment income, and taxable capital above CAD 10 million.

SR&ED is Canada's primary tax incentive for research and development. CCPCs receive a 35% refundable investment tax credit on the first CAD 3 million of qualified SR&ED expenditures annually. Other corporations receive a 15% non-refundable credit. Qualifying work must resolve scientific or technological uncertainty through systematic investigation.

A Canadian-Controlled Private Corporation is a private corporation controlled by Canadian residents. CCPCs qualify for the 9% Small Business Deduction rate on active business income, the 35% refundable SR&ED investment tax credit, and the Lifetime Capital Gains Exemption on a qualifying share sale.

The Canada Pension Plan is Canada's mandatory public pension scheme for employed and self-employed workers. In 2025, both employer and employee each contribute 5.95% on earnings between CAD 3,500 and CAD 71,300 (the Year's Maximum Pensionable Earnings). A second tier (CPP2) applies 4% on earnings between CAD 71,301 and CAD 81,200. Self-employed individuals pay both sides.

Employment Insurance is Canada's federal programme providing temporary income support to workers who lose their jobs or cannot work due to illness, pregnancy, or caregiving. Employees pay 1.64% on insurable earnings up to CAD 65,700 (2025), and employers pay 1.4 times the employee rate (2.296%). Quebec employees pay a reduced rate due to the Quebec Parental Insurance Plan.

The T4 slip is issued by employers to each employee and to CRA by the last day of February following the taxation year. It summarises employment income, CPP contributions, EI premiums, and income tax withheld during the year. Employers who pay 5 or more employees must file T4s electronically. Late filing attracts penalties of CAD 25 per day up to CAD 2,500.