Status Of All Relevant Government Tax Accounts
In Canada, business owners must comply with various tax-related responsibilities, depending on the nature, structure, and location of their business.
Here are the main types of government tax accounts that Canadian business owners typically need to be aware of:
1. GST/HST Account: Goods and Services Tax (GST) and Harmonized Sales Tax (HST) are consumption taxes applied to the supply of most goods and services. Businesses that meet certain criteria are required to register for a GST/HST account and collect these taxes from customers, then remit them to the Canada Revenue Agency (CRA).
2. Payroll Deductions Account: If a business has employees, it must open a payroll program account with the CRA. Through this account, the business remits deductions such as Canada Pension Plan (CPP) contributions, Employment Insurance (EI) premiums, and income tax withheld from employees' wages.
3. Corporate Income Tax Account: Corporations in Canada must file a corporate income tax return annually. Even if a corporation doesn't owe taxes, it still may have to file a return. This account is used to manage the corporation's income tax obligations.
4. Provincial Sales Tax (PST) Account: In provinces where PST is applicable (British Columbia, Saskatchewan, Manitoba, and Quebec), businesses must register for a PST account if they sell taxable goods and services. Quebec administers its sales tax as Québec Sales Tax (QST), which is harmonized with the GST.
5. Excise Tax and Duty Accounts: These are for businesses that manufacture or sell certain products like gasoline, alcohol, and tobacco, or who are involved in activities that require these taxes or duties to be paid.
6. Import/Export Account: Businesses involved in importing goods into Canada or exporting goods to other countries may need to register for an import-export account, which is used to manage duties and taxes on international trade.
7. Property Taxes: While not managed by the federal government, businesses owning real property will need to pay property taxes to their local municipal government.
8. Health Taxes and Levies: Certain provinces require additional health-related taxes. For example, employers in Ontario may need to pay the Employer Health Tax.
Business financing providers will typically ask if all relevant government taxes for a business are up to date and they may require the business to provide the last required remittance return for each type of tax relevant to the business along with a government issued notice of assessment and/or statement of account to show that the business is up to date with all relevant government accounts.
If government accounts are in arrears, this can result in an automatic financing decline by some financing providers. And while other providers may still be prepared to provide incremental business financing to a business with government tax arrears, the finance company is still going to want to know the amount of arrears owing, how the arrears came to be, and what the plan is to bring the account up to date.
Government tax arrears can take priority over all registered financing security so its always going to be important for a financing provider to clearly understand the current status of any and all government tax accounts the business has.