What Tax Breaks Exist for Canadian Small Businesses

March 13, 2014 Published by
Post Categories: Tax Accounting

When you are running a small business or pursuing an entrepreneurial enterprise, tax breaks can help to provide a buffer for your bottom line. The government hopes to enablethe success of Canadian small businesses by providing, at times substantial, tax incentives. Below, we discuss a variety of tax breaks that Canadian small businesses can take advantage of. Please be advised that, when it comes to tax credits, there are many small details that will affect your eligibility. If you are not certain regarding a particular rule or regulation, contact a seasoned tax professional for support.

Hiring Credit for Small Business (HCSB)

Chain representing tax breaks

If you are a small business, you may be eligible for a one-time tax credit of up to $1,000. A small business’ eligibility for this tax break depends upon the amount that you paid in employment insurance (EI) for 2013. If your EI payment for 2012 was $15, 00 or less but increased in 2013, you may be eligible for this hiring credit. If a small business is eligible, the CRA will automatically calculate the amount of the HCSB using the EI information from the T4 slips that a small business filed with its 2012 and 2013 T4 information returns.

Once the Canada Revenue Agency (CRA) has calculated HCSB, they will apply it to any outstanding balance on a small business’ payroll program account(s), and then transfer the remaining credit to the current year.

Apprenticeship Job Creation Tax Credit

This tax credit is a substantial incentive for Canadian small businesses that create opportunities for eligible apprentices. The Apprenticeship Job Creation Tax Credit (AJCTC) is a non-refundable tax credit equal to the lessor of: (1) $2,000 per eligible apprentice; and (2)10% of the eligible salaries and wages payable to the apprentice during the year.

To determine the eligibility of an apprentice, you must establish if they are working in the first two years of their apprenticeship. The apprentice must be working in a prescribed trade and be registered in a government certified apprenticeship program. Documentation will be required to prove this eligibility for each and every apprentice that you attempt to claim salary for.

It is often the case that more than one company may employ a single apprentice at one time. If your apprentice works for another company, the government will allow both companies to claim the maximum benefit – it will not be split between the two parties.

Investment Tax Credit for Child Care Spaces

An exceptional workplace is one that helps its employees to enjoy a healthy work-life balance. More and more often, both parents are working full-time and this presents many challenges in regards to properly caring for the family’s children. The government applauds small businesses who help to alleviate this stress by providing a child care facility for their employees. So, employers in any industry other than childcare services can leverage a tax credit for licensed childcare spaces that they make available to their employees.

For each new childcare space that the Canadian small business creates in their facility, the small business will be eligible for a tax credit. These childcare spaces, housed within the facility that the small business operates, must be intended for the use of the children of the small business’ employees at no cost. This non-refundable credit is lessor of: (1) $10,000 times the number of new spaces created during the year; and (2) 25% of eligible expenditures incurred during the year to create those spaces.

Please know that taxpayers cannot file for expenditures that they incurred prior to March 18, 2007.

When you are looking toward your business’ financial future, keep in mind that leveraging the expertise of a hard-working accountant may enhance your ability to take advantage of tax break opportunities. Contact Hogg, Shain & Scheck today and learn how effective accounting services can be extremely advantageous to your Canadian business.