Canada Revenue Agency
www.cra.gc.ca
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Definitions
Terms that appear in capital letters have their own listing elsewhere in these definitions.
Appeal – a process by which you ask a Court to review the decision the Appeals Division made on behalf of the Minister of National Revenue.
Articles of incorporation – a legal document filed with a provincial or territorial government, or the federal government, which sets out a CORPORATION’s purpose and regulations.
Assessment – a formal determination of taxes, duties, or other amounts to be paid or refunded. An assessment includes a reassessment. See NOTICE OF ASSESSMENT.
Assets – any property owned by a person or business. Assets include money, land, buildings, investments, inventory, cars, trucks, boats, or other valuables that belong to a person or business. They also may include intangibles such as GOODWILL.
Bad debt – money owed to you that you cannot collect.
Balance – the amount remaining in an account after recording all deposits and withdrawals.
Budget – a plan outlining an organization’s financial and operational goals.
Business expenses – certain costs that are reasonable for a particular type of business and that are incurred for the purpose of earning INCOME. Business expenses can be deducted for tax purposes. Personal, living, or other expenses not related to the business cannot be deducted for tax purposes.
Business number (BN) – is a numbering system that simplifies and streamlines the way businesses deal with the federal government. Each business should have only one BN number.
Calendar year – means a year that begins on January 1 and ends on December 31.
Canada Pension Plan (CPP) – an insurance program to help Canadians provide INCOME for their retirement. It also gives them income if they become disabled. Contributions are directly related to annual earnings.
Capital cost allowance (CCA) – a yearly deduction or depreciation on the cost of certain ASSETS. You can claim CCA for tax purposes on the assets of a business such as buildings or equipment, as well as on additions or improvements, if these assets are expected to last for some years.
Capital gains – the amount by which PROCEEDS OF DISPOSITION less outlays and expenses exceed the adjusted cost base of capital property.
Capital loss – the amount by which the adjusted cost base and outlays and expenses of CAPITAL PROPERTY exceeds PROCEEDS OF DISPOSITION.
Capital property – generally, any property of value, including DEPRECIABLE PROPERTY. Common types of capital property include principal residences, cottages, stocks, bonds, land, buildings, and equipment used in a business or rental operation.
Commercial activity – means any business or adventure or concern in the nature of trade carried on by certain persons, but does not include:
- the making of exempt supplies; or
- any business or adventure or concern in the nature of trade carried on without a reasonable expectation of profit by an individual, a personal trust, or a partnership where all the members are individuals.
However, commercial activity includes a supply of real property, other than an exempt supply, by any person, whether or not there is a reasonable expectation of profit, and anything done in the course of making the supply or in connection with the making of the supply.
Confidentiality – the CRA will protect income tax, GST/HST, excise duty, tax, and other related tax and DUTY information. The only people with access to this information are those who are authorized by law or those to whom the taxpayer, registrant or LICENSEE has authorized online through My Business Account or My Account; or provided written authorization, by completing Form RC59, Business Consent Form or Form T1013, Authorizing or Cancelling a Representative.
Corporation – a form of business authorized by federal, provincial, or territorial law to act as a separate legal entity. Its purpose and regulations are set out in its ARTICLES OF INCORPORATION. One or more persons may own a corporation.
Cost of goods sold – the actual cost of the items sold in the normal course of business during a specific period.
Debt – an amount that is owed. If you borrow money or purchase something on credit, you have created a debt.
Deemed – a legal term used when something is considered to be something else for certain purposes.
Depreciable property – this is property on which you can claim CCA. It is usually capital property used to earn income from a business or property. The capital cost can be written off as CCA over a number of years. See CAPITAL COST ALLOWANCE.
Disposition – generally means the disposal of property by sale, gift, transfer, or change in use.
Duty – generally means the duty imposed under the Excise Act, 2001, the Excise Act, and the duty levied under certain sections of the Customs Tariff and, with some exceptions, includes special duty.
Election – a formal choice among specific options on how tax laws are applied to a taxpayer’s financial affairs. Usually, you make an election on your tax return.
Employment Insurance (EI) – a federal program that provides financial assistance to people who are temporarily out of work. It is an insurance program, with employers and employees making payments into the Employment Insurance Fund.
Employment Insurance premiums – deductions that an employer must make from employees’ paycheques and send to the Receiver General for Canada. Employers must also contribute EMPLOYMENT INSURANCE payments.
Excise – taxes and DUTIES on the manufacture, sale, or use of goods and items.
Fair market value – generally means the highest dollar value that you can get for your property in an open and unrestricted market between an informed and willing buyer and an informed and willing seller who are dealing at arm's length with each other.
Fiscal period – is the twelve‑month period over which a business or profession reports its income‑earning activities. The fiscal period may or may not coincide with the CALENDAR YEAR. The business usually establishes its fiscal period when it files its first income tax return. See TAX YEAR.
Goodwill – the excess of the purchase price of a business over the FAIR MARKET VALUE of the net ASSETS of the business.
Income – the sum of revenues earned in a specific period of time. It includes revenues from salaries, wages, benefits, tips, and commissions, profits from operating a business or profession, and investments earned.
Income statement – a financial statement that summarizes the results of business activities (income and expenses) for a given period of time. Sometimes called a profit and loss statement.
Information slips – are forms that employers, trusts, and businesses use to tell taxpayers and the CRA how much income was earned, and how much tax was deducted.
Input tax credit (ITC) – means a credit GST/HST registrants can claim to recover the GST/HST paid or payable for property or services they acquired, imported into Canada, or brought into a participating province for use, consumption, or supply in the course of their commercial activities.
Instalments – are periodic payments of income tax that individuals are required to pay to the CRA to cover tax they would otherwise have to pay on April 30. For GST/HST purposes, instalments are periodic payments that may also be payable by persons who file annual returns.
Inventory – generally refers to the total value of the goods on hand that a business intends to sell, uses for manufacture, or uses to render a service. In certain cases, inventory can also include services.
Lease – a contract under which a property is rented from one person or business to another for a fixed period of time at a specified rate.
Liability – DEBT owed by a person or business.
Licensee – a person who holds a licence issued under the Excise Act, 2001, the Excise Tax Act or the Excise Act.
Loss – the amount by which expenses exceed revenues.
Motor vehicle ‑ an automotive vehicle designed or adapted for use on highways and streets. A motor vehicle does not include a trolley bus or a vehicle designed or adapted to be operated on rails.
Net income – income subject to income tax after allowable deductions have been subtracted from gross or total income.
Notice of assessment – a form that we send to taxpayers and GST/HST registrants after we process their returns. It tells taxpayers or GST/HST registrants if we made any corrections to the returns or rebate applications and, if so, what they are. It also informs taxpayers or registrants if they owe more tax or what the amount of their refund will be.
Objection – a statement of facts and reasons detailing why a taxpayer, registrant, LICENSEE or other person disagrees with an ASSESSMENT.
Operating expenses – the routine costs of running a business. They include expenses for gasoline, electricity, and office supplies. They do not include the cost of buildings or machinery that are expected to last for several years. See CAPITAL COST ALLOWANCE.
Participating provinces – means the provinces of Ontario, British Columbia, Nova Scotia, New Brunswick, and Newfoundland and Labrador.
Passenger vehicle ‑ a motor vehicle designed or adapted primarily to carry people on highways and streets. It seats a driver and no more than eight passengers. Most cars, station wagons, vans, and some pick‑up trucks are passenger vehicles. They are subject to the limits for CCA, interest, and leasing. A passenger vehicle does not include:
- an ambulance;
- clearly marked police and fire emergency‑response vehicles;
- a motor vehicle you bought to use more than 50% as a taxi, a bus used in the business of transporting passengers, or a hearse in a funeral business;
- a motor vehicle you bought to sell, rent, or LEASE in a motor vehicle sales, rental, or leasing business;
- a motor vehicle (except a hearse) you bought to use in a funeral business to transport passengers;
- a van, pick‑up truck, or similar vehicle that seats no more than the driver and two passengers which, in the tax year you bought or leased, was used more than 50% to transport goods and equipment to earn income;
- a van, pick‑up truck, or similar vehicle that, in the tax year you bought or leased, was used 90% or more to transport goods, equipment, or passengers to earn income;
- a pick‑up truck that, in the tax year you bought or leased, was used more than 50% to transport goods, equipment, or passengers while earning or producing income at a remote work location or at a special work site that is at least 30 kilometres from the nearest community having a population of at least 40,000 persons; and
- a clearly marked Emergency Medical Service vehicle used to carry paramedics and their emergency medical equipment.
Payroll deductions – are income tax deductions, CANADA PENSION PLAN (CPP) or QUEBEC PENSION PLAN (QPP) contributions, and EMPLOYMENT INSURANCE (EI) PREMIUMS which are deducted from an employee’s wages or salary and sent regularly to us. Employers also make their own contributions to the CPP or QPP, and EI.
Penalties – amounts taxpayers, registrants, or LICENSEES must pay if they fail to file returns or remit or pay amounts owing on time, or if they try to evade paying or remitting tax by not filing returns. Penalties must also be paid by people who knowingly, or under circumstances amounting to gross negligence, participate in or make false statements or omissions in their returns, and by those who do not provide the information required on a prescribed form.
Prepaid expense – an expense you pay for in advance; an expense you incur for goods and services you will receive in a later FISCAL PERIOD; amounts you pay in interest, income taxes, municipal taxes, rent, dues, or insurance for later fiscal periods. These amounts are included as assets on the balance sheet at the end of a fiscal period.
Proceeds of disposition – generally means the selling price of property when it is disposed of. Proceeds of disposition also include compensation received for property that has been destroyed, expropriated, stolen, or damaged. It is also the fair market value of property when it is transferred to another person, or when there is a change in its use.
Quebec Pension Plan (QPP) – a pension plan equivalent to the CANADA PENSION PLAN (CPP) but offered in the province of Quebec. The provincial government handles the contributions.
Rates of tax – percentages of INCOME that must be paid as tax. The Department of Finance sets the basic income tax rates, which vary progressively with the amount of TAXABLE INCOME.
Records – are documents such as account books, sales and purchase invoices, contracts, bank statements, and cancelled cheques. You must keep records in an orderly manner at your business or residence in Canada for at least six years from the end of the last TAX YEAR to which the records relate. You must make these books and other documents available to our officers when requested.
Refund – the overpayment of income tax or GST/HST returned to a taxpayer after we assess the return.
Regional Excise Duty Office – is an office that serves as the CRA’s liaison with registrants, LICENSEES, and the general public on all matters relating to the excise duty program.
Remittance – a payment of CPP or QPP, EI, income tax, or GST/HST that is paid to us through a financial institution, or that a business or individual sends directly to us. It also includes the employer’s share of CPP contributions and EI premiums.
Reserves – funds set aside to cover future expenses, losses, or claims.
Salary – the amount an employer pays an employee for work done. Each employer records this type of employment income on T4 slips.
Shareholder – is a person (individual or corporation) who owns shares of a corporation.
Social insurance number (SIN) – a number given to each contributor to the CANADA PENSION PLAN, QUEBEC PENSION PLAN, and EMPLOYMENT INSURANCE. It helps record the contributions and premiums paid into and the benefits paid out of the plans. Since these social insurance programs are connected to the tax system, the SIN is also used as an identifier for federal income tax purposes. Everyone who files an income tax and benefit return must provide a SIN.
Sole proprietorship – an unincorporated business entirely owned by an individual.
Spouse – for purposes of the Income Tax Act, the term spouse only means a married partner. The term common‑law partner includes partners of the same sex or opposite sex, who meet certain conditions. For more information, see the General Income Tax and Benefit Guide.
Supply – means the provision of property or a service in any way, including sale, transfer, barter, exchange, licence, rental, lease, gift, or other disposition.
Tax centres – offices in different regions of Canada where we process tax returns.
Tax Court of Canada – a court that hears appeals about income tax and GST/HST assessments. In addition, the Court has jurisdiction to hear appeals under the Canada Pension Plan, Employment Insurance Act, and several other acts. The Tax Court maintains four offices (Vancouver, Ottawa, Toronto, and Montréal) and regularly conducts hearings in major centres across Canada.
Tax payable – the amount of income tax that you must pay on TAXABLE INCOME for the TAX YEAR. It is also the amount of tax payable on a TAXABLE SUPPLY (for GST/HST purposes).
Tax services offices (TSO) – offices across the country that provide a point of contact for the public. Go to Tax services offices and tax centres for the address and services available at your TSO.
Taxable benefits – amounts of money, or the value of goods or services, that an employer pays or provides in addition to SALARY. For example, the contribution by an employer to a provincial or territorial health insurance plan for an employee is a taxable benefit.
Taxable supplies – are supplies of goods and services that are made in the course of a COMMERCIAL ACTIVITY and are subject to the GST/HST (including zero rated supplies).
Taxable income – the amount of INCOME left after all allowable deductions have been subtracted from NET INCOME. This amount is used to calculate the TAX PAYABLE.
Tax year – the CALENDAR YEAR or FISCAL PERIOD for which income tax is to be paid.
Tobacco products – refers to manufactured tobacco, packaged raw leaf, or cigars.
Workers’ compensation – money paid to compensate a person injured on the job. It is an insurance plan paid for by employers and administered by the Workers’ Compensation Board.
