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Taxation Guide

TABLE OF CONTENTS

  1. Introduction
  2. The Basics
  3. Income Taxes
  4. Municipal Taxes
  5. Tax Information for Employers
  6. Keeping and Correcting Tax Records
  7. Next Steps

1. Introduction

When you operate a business in Ontario, you are responsible for charging, collecting, and remitting the appropriate taxes. Your business type, location and legal structure will determine which taxes will apply to you, and what you will need to submit. This guide will give you an overview of the different taxes that may affect your business and provide you with information on tools, programs and services that can help you meet your business tax obligations.

2. The Basics

It is important to know which taxes to charge, collect and remit on the goods and services you sell. Common tax requirements for businesses in Ontario include:

  • Business Number
    Your Business Number is your single account number for dealing with the federal government regarding taxes, payroll, import/export and other activities. If you plan to hire employees, or if you will be importing and/or exporting products or services, you must register for a business number.

    If you sell goods and services in Ontario, you may need a business number to charge, collect and remit the Harmonized Sales Tax (HST). Most businesses that make less than $30,000 in any 12 month period are not be required to register for HST; however, you can register voluntarily and claim input tax credits. Speak with the Canada Revenue Agency (CRA) for more information.

    Contact CRA:
    1-800-959-5525
    Canada Revenue Agency – Business
    Information on Registering Your GST/HST Account 
    Business Number (BN) Registration 
     
  • Charging Sales Tax Outside of Ontario
    When you sell products or services to customers that are located in other provinces, territories or countries, you may be required to charge taxes based on their location. The regulations may vary depending on the method of selling (e.g. online sales, mail orders, phone orders).  To find out what the requirements are for selling to non-Ontario customers, contact the appropriate tax office for the province, territory or country where your customers are located.

    Read Online:
    E-Business and Selling to Customers Outside of Ontario

To help you manage your business tax accounts, the following services are available from the federal and provincial governments:

  • My Business Account
    You can register for a business account that gives you online access to your Canada Revenue Agency accounts, including GST/HST, payroll, corporation income taxes, excise taxes and excise duties.

    Use Online:
    My Business Account
     
  • ONT-TAXS
    You can get Ontario tax information and manage your tax accounts through the Ontario Ministry of Finance’s Ontario Tax Services (ONT-TAXS). You can set up a secure account online, or access information through the ONT-TAXS toll-free number.

    Contact the Ministry of Finance:
    1-866-ONT-TAXS (1-866-668-8297)
    ONT-TAXS, Ontario's Tax Services

3. Income Tax

When you operate a business in Ontario, you need to keep track of your business income and report the information to the Canada Revenue Agency. If you are self-employed, or if your business is a partnership, you are responsible for including your business income and expenses on your personal income tax return. If your business is incorporated, you are required to file a separate corporate tax return.

  • Reporting Self-Employed Income
    If you are self-employed and not incorporated, you must report your business income on your T1-General income tax return. Any money that you make through your business must be claimed on your tax return and business expenses that you are claiming should also be included. Contact the Canada Revenue Agency for a complete list of the required forms, or for more information on claiming business income and expenses.

    Contact Canada Revenue Agency:
    1-800-959-5525
    Self-employed
     
  • Reporting Corporate Income
    Corporations have requirements for filing taxes that differ from the requirements for sole-proprietorships and partnerships. If you own or operate a corporation, you will be required to file a corporate income tax return with the Canada Revenue Agency. For more information on taxes for incorporated businesses in Ontario, please refer to our corporate tax guide.

    Contact Canada Revenue Agency:
    1-800-959-5525
    Corporate Taxation Guide

4. Municipal Taxes

Each municipality sets tax rates that may apply to your business, including rates for commercial property tax. Depending on your location and the types of products or services you are offering, different municipal taxes could apply to your business. To learn more about local tax requirements that will affect your business, contact your local municipal tax office.

You can find your local government office in the government section of your telephone book or online.

Read Online:
Association of Municipalities of Ontario - Ontario Municipal Homepages

5. Tax Information for Employers

When your business employs people, you are responsible for payroll deductions and must register for a business number with the Canada Revenue Agency (CRA). To register for a business number or to get more information on payroll deduction like Employment Insurance and the Canada Pension Plan, contact CRA directly.

Contact Canada Revenue Agency:
1-800-959-5525
Business Number (BN) Registration

  • The Ontario Health Premium
    You are required to deduct Ontario Health Premium from your employees’ pay if they make more than $20,000 a year in employment or pension income. You can get more information online or by calling the Canada Revenue Agency directly.

    Contact CRA:
    1-800-959-5525
    Ontario Health Premium
     
  • Employer Health Tax (EHT)
    If your business is permanently located in Ontario, you are required to pay EHT on payroll paid to employee wages, unless your business is exempt. In general, the first $400,000 of your annual payroll may be exempt from EHT. You can get more information on the EHT requirements by contacting ServiceOntario.

    Contact ServiceOntario:
    1-800-267-8097
    Employer Health Tax - Guide for Employers

CRA offers the following tools and resources to help you with employee payroll and deductions.

  • Payroll Deductions Online Calculator
    CRA’s online payroll deduction calculator can help you determine how much to deduct from your employee’s pay. You are able to calculate the amount of federal and provincial payroll deductions that are required, including Canada Pension Plan (CPP) and Employment Insurance (EI).

    Use Online:
    Payroll Deductions Online Calculator
     
  • New Employer Visits
    As a new employer, you can request a visit from a CRA staff member to discuss your responsibilities for employer taxes and deductions. There is no charge for the service. Contact your local tax services office to book an appointment.

    Read Online:
    Employer Visits Program 
    Tax Services Offices - Ontario 
     

6. Keeping and Correcting Tax Records

The Canada Revenue Agency (CRA) offers information on how long to keep tax records, how to make appeals, and how to correct errors on previous tax dealings. Refer to the links below for details on a specific topic.

  • Retention/Destruction of Books & Records
    You are responsible for keeping accurate tax records and making them available to CRA if requested. Learn more about what to keep and how long to keep it.

    Read Online:
    Books and Records Retention/Destruction
     
  • Objections and Appeals
    You can dispute tax assessments or taxes imposed on your business under the Income Tax Act through CRA’s Appeals Branch.

    Read Online:
    Objection and Appeal Rights under the Income Tax Act
     
  • Voluntary Disclosures Program
    If you need to correct incomplete or incorrect information on previous dealings with CRA, you can provide the corrected information without penalty or prosecution through this program.

    Read Online:
    Voluntary Disclosures Program

7. Next Steps

Taxpayer Rights


As a small business, there are taxpayer rights and commitments that apply to you. You can learn more by visiting the Canada Revenue Agency Website

Read Online:
CRA - Taxpayer Bill of Rights

Government Acts and Legislation

The tax-related acts and legislation covered in this guide include, but are not limited to the following:

If you are interested in reading more about laws and regulations that could apply to your small business, or if you would like to stay up to date on new legislation, you can refer to the following resources:

Provincial Laws, Regulations, Consultations, and Announcements

Federal Laws, Regulations, Consultations, and Announcements

You can also find books, magazines and other relevant print material at business service organizations in your community. To locate a Canada Business Ontario (CBO) community partner, contact us through the Business Info Line at 1-888-745-8888.

Need more information?

Click: Canada Business
Call: The Business Info Line, a collaboration between ServiceOntario and Industry Canada, at 1-888-745-8888
Visit: Find a Community Partner Location near you

DISCLAIMERS

Information contained in this document is of a general nature only and is not intended to constitute advice for any specific situation. Users concerned about the reliability of the information should consult directly with the source, or seek legal counsel.

Some of the organizations listed above are not subject to the federal Official Languages Act or the French Language Services Act of Ontario. Their services may not be available in both official languages.

Date Modified: 2012-05-10

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