Reference
Canadian & Québec tax glossary
Plain-language definitions of the tax, accounting and payroll terms Canadian business owners and individuals actually run into — written for Québec, where federal and provincial rules both apply.
Definitions describe how each rule works rather than quoting dollar figures, because brackets, limits and credit amounts change every year. Where a threshold is stable it is stated and sourced.
Returns & filing
- T1 return
- The T1 is the federal personal income tax and benefit return every Canadian resident files with the Canada Revenue Agency to report a calendar year of income.
- TP-1 return
- The TP-1 is the Québec personal income tax return, filed with Revenu Québec in addition to the federal T1.
- Notice of assessment (NOA)
- A notice of assessment is the CRA’s formal statement of how it assessed your return, showing any changes it made, your balance, and your remaining RRSP room.
- CRA review vs audit
- A review is a routine request for documentation supporting specific claims on a filed return; an audit is a broader formal examination of your books and records.
- Bookkeeping
- Bookkeeping is the ongoing recording and classification of a business’s financial transactions, producing the records that tax filings, financial statements and sales-tax returns are built from.
- Notice of Objection
- A Notice of Objection is the formal filing that disputes a CRA assessment or reassessment and sends the file to the Appeals division for an independent second look.
- Voluntary Disclosures Program
- The Voluntary Disclosures Program lets a taxpayer correct unfiled returns or inaccurate filings before the CRA contacts them about the issue, in exchange for relief from penalties and part of the interest.
Personal tax
- Tax instalments
- Instalments are periodic prepayments of income tax required when too little tax is withheld at source, due quarterly on March 15, June 15, September 15 and December 15 for individuals.
- Capital gain
- A capital gain is the profit realised when you dispose of a capital asset for more than its adjusted cost base, of which only a portion is included in taxable income.
- Adjusted cost base (ACB)
- The adjusted cost base is what an asset is treated as having cost you for tax purposes, and it is subtracted from the proceeds to compute a capital gain or loss.
- Principal residence exemption
- The principal residence exemption shelters some or all of the capital gain on the sale of a home that you or your family ordinarily inhabited during the years you owned it.
- Departure tax
- Departure tax is the tax on the deemed disposition of most of your property at fair market value on the day you cease to be a resident of Canada.
- T1135
- The T1135 is an information return required when the total cost of your specified foreign property exceeds $100,000 CAD at any point in the year.
- T2200
- The T2200 is the form an employer signs to certify that an employee was required to pay certain expenses as a condition of employment, which the employee needs before deducting them.
Corporate tax
- T2 return
- The T2 is the federal corporate income tax return that every corporation resident in Canada must file for each fiscal year, even when it had no income.
- CO-17 return
- The CO-17 is the Québec corporation income tax return, filed with Revenu Québec by corporations with a permanent establishment in the province.
- CCPC
- A CCPC is a private corporation resident in Canada that is not controlled, directly or indirectly, by non-residents or public corporations.
- Small business deduction (SBD)
- The small business deduction reduces the federal corporate tax rate on the first tranche of active business income earned by a Canadian-controlled private corporation.
- Capital cost allowance (CCA)
- Capital cost allowance is the deduction that spreads the cost of a depreciable asset over its useful life for tax purposes, replacing accounting depreciation.
- Fiscal year-end
- A fiscal year-end is the closing date of a corporation's tax year, which it chooses on its first return and which then fixes every subsequent filing and payment deadline.
- Salary vs dividends
- Salary and dividends are the two ways an owner-manager takes money out of their corporation, and they differ in deductibility, payroll obligations and what they build for the future.
- Shareholder loan
- A shareholder loan is the running account between an owner and their corporation, recording money each has advanced to the other.
- Holdback
- A holdback is the portion of a construction contract price that the payer legally retains until the lien period expires, and it is not recognised as revenue until it becomes receivable.
- Notice to Reader
- A Notice to Reader — now formally a compilation engagement report — is the lowest level of financial statement service, in which an accountant assembles statements from information the client supplies without auditing or reviewing it.
- Holding company
- A holding company is a corporation whose purpose is to hold assets — commonly the shares of an operating company, along with investments or real estate — rather than to carry on the business itself.
GST, QST & HST
- GST / QST
- GST is the 5% federal Goods and Services Tax; QST is the 9.975% Québec Sales Tax. Businesses operating in Québec generally register for, collect and remit both.
- Small supplier
- A small supplier is a business whose worldwide taxable supplies stay at or below $30,000 over four consecutive calendar quarters, and which is therefore not required to register for GST/QST.
- Input tax credit (ITC / ITR)
- An input tax credit recovers the GST — or, as an input tax refund, the QST — that a registered business paid on purchases made to produce taxable supplies.
- HST
- HST is a single combined federal-provincial sales tax used by the provinces that harmonized their sales tax with GST, replacing separate GST and provincial tax.
- GST/HST registration
- GST/HST registration is the process of obtaining a sales-tax account so a business can charge GST or HST, claim input tax credits, and file returns with the CRA — or with Revenu Québec if the business operates in Québec.
- Quick Method
- The Quick Method is an election that lets an eligible small business remit a reduced flat percentage of its tax-included sales instead of tracking input tax credits on every purchase.
Payroll
- Source deductions
- Source deductions are the income tax, CPP/QPP, EI and QPIP amounts an employer withholds from pay and remits to the CRA and Revenu Québec, together with the employer portions.
- T4 slip
- A T4 reports an employee’s annual employment income and the amounts withheld from it, and must be issued and filed by the last day of February following the year.
- RL-1 slip
- The RL-1 is the Québec equivalent of the T4, reporting employment income and Québec withholdings to Revenu Québec.