Carrying on business in Canada

• Income tax
• Business Number
• Goods and services tax/harmonized sales tax (GST/HST)
• Employer obligations

Income tax

All sorts of business activities are being pursued in anticipation of the 2010 Winter Games. Theatres for sport are being designed and built, transportation enhancements are underway, and other opportunities are being pursued. Incomes arising from these activities are subject to Canada's income tax laws.

In general, Canadian residents are taxed on their worldwide income and non-residents of Canada are taxed on their Canadian-source income, including income earned from carrying on business in Canada. For information on residency status for Canadian tax purposes, see Residency - Individuals, Residency of a corporation, Residency of a trust, and Non-residents of Canada.

The meaning of "business" is defined in section 248 of Canada's Income Tax Act and is described in What is a business? The meaning of "carrying on business in Canada" is extended in section 253 of the same Act and captures a wide variety of activities including soliciting orders, satisfying contracts, and offering goods or services for sale in Canada.

Any corporation that carries on business in Canada has to file a corporate income tax return each tax year, even if no tax is payable. This applies even if a taxpayer claims that profits or gains are exempt from tax in Canada due to the provisions of a tax treaty. Individuals with tax payable, with capital gains, or who dispose of certain Canadian property in a particular year are similarly required to file an income tax return for that year.

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Business Number

If you are carrying on business in Canada you may have to register for a Business Number (BN). The CRA uses the BN for the purposes of corporate income tax, payroll deductions, and GST/HST. For information on the requirement to register for a BN, see Business Number (BN) registration.

Goods and services tax/harmonized sales tax (GST/HST)

Goods and services tax (GST) is a national value-added tax charged on the supply of most goods and services. GST is charged at a rate of 5% in most of Canada including British Columbia, the provincial host to the 2010 Winter Games. In certain Atlantic provinces, GST has been combined with a provincial tax and is known as harmonized sales tax (HST). The rate of HST is 13%.

As a general rule, every person that commercially supplies goods and services in Canada is required to register for GST/HST purposes. Registrants are responsible for collecting and remitting the GST/HST they charge in compliance with the Excise Tax Act. In addition, registrants are entitled to claim input tax credits to recover the GST/HST they pay on purchases made in the course of carrying on their commercial activities. If you are a non-resident of Canada making supplies in Canada, there are some special rules you should be aware of. For more information, see Guide RC4027, Doing Business in Canada - GST/HST Information for Non-Residents.

Employer obligations

Employers should be aware of various employer obligations imposed under Canadian law. Employers are legally responsible for withholding certain amounts from the wages, salaries, and other remuneration of their employees including income tax, Canada Pension Plan (CPP) contributions, and Employment Insurance (EI) premiums.