Glossary

This refers to the highest level of assurance an accountant may provide based on their examination of the underlying financial information including collaborating evidence from third party sources. An audit indicates the accountant is providing a high level of assurance that the financial information is free from material misstatement to the readers of the financial information.

Is a Canadian Federal Agency that manages tax laws on behalf of the government for all provinces and territories.

When a business buys a long lived asset the tax deduction for that purchase is spread out over time. Capital Cost Allowance (CCA) is the tax deduction for depreciable property, property such as furniture, equipment, computers or even buildings that wear out over time (depreciate).

Capital Dividend Account refers to the current amount that a corporation may pay to its shareholders as a non-taxable dividend.

Compilation financial information is prepared without an audit or a review of the underlying financial information. As such compilation financial information comes with no assurance that the financial information is free from material misstatement.

This is the law governing GST and HST.

This is the law governing federal income tax

Each Canadian is entitled to a capital gains exemption of up to $1,000,000 on certain small business shares, as well as on qualified farm and fishing properties during their lifetime.

Notice To Reader financial statements, also known as compilation level financial statements. These are financial statements prepared without an audit or a review of the underlying financial information. As such compilation/NTR financial information comes with no assurance that the financial information is free from material misstatement. Please note that for years ended after December 2021, these statements are now refered to as compilations and are subject to different professional standards than were in place prior to that.

This is a structure where a person sets up their own corporation (“PSBco”) and then provides services to another corporation. If it weren’t for their PSBco they would be considered an employee for tax purposes. Unlike most small businesses a PSB is not allowed to get the small business tax rate on the first $500,000 of earnings, and can often end up paying more tax than if they really were an employee.

These are tax deferred retirement savings vehicles available to individuals.

Review refers to the middle level of assurance an accountant may provide based on their examination of the underlying financial information. A review indicates the accountant is providing a moderate level of assurance that the financial information is free from material misstatement to the readers of the financial information.

A tax deferred (delayed) sale of assets to a business.

A short-term rental is defined in subsection 67.7(1) as a residential property rented or offered for rent for periods of less than 90 consecutive days. Income generated from short-term rentals is taxable. Normally, the Income Tax Act allows the deduction of reasonable expenses incurred in earning this income. However, under subsection 67.7(2), any expenses related to a non-compliant short-term rental is a non-compliant amount and cannot be deducted. This rule applies to ensure that non-compliant operations do not benefit from tax deductions. A short-term rental is considered non-compliant for two main reasons under subsection 67.7(1): 1. The rental is located in a province or municipality that prohibits short-term rentals at the location of the short-term rental. 2. The rental does not adhere to all registration, licensing, and permit requirements of the jurisdiction where it is located.

This is a reduction in corporate taxes for Canadian controlled private corporations, or CCPCs. The reduced rate of tax is available on active business income up to the corporation's business limit for the year. The federal business limit is $500,000 for 2009 and later years.

Where a small business earns passive income (such as rents, royalties and investment type revenues) and has fewer than five full time employees. These corporations are specifically denied the Small Business Deduction.

Personal Income Tax Return

Corporate Income Tax Return

Trust Income Tax Return, can also refer to the information slips showing income earned from a trust such as a mutual funds.

A tax information slip showing employment earnings.

A tax information slip showing various non-employee type incomes

A tax information slip for investment incomes such as dividends and interest.

Is an account that provides tax benefits for saving. Any investment income (I.e. dividends, capital gains) or salary that is placed in a TFSA is often not taxed.

Tax on split income (“TOSI”) prohibits tax planning via splitting the income of a business amongst family members. The tax applies to a specified individual who receives “split income”. In such a case, income tax computed at the top marginal rate (which is currently 33% plus provincial tax) is levied. Though TOSI originally applied only to income split with a person who was under the age of 18, the rules were substantially expanded in 2018 to include adult family members. Tax on split income (“TOSI”) is levied pursuant to section 120.4 of the ITA. A related business is essentially a business carried on by an individual who is related to the taxpayer, and income derived from the business is subject to the TOSI. There are many exclusions from the TOSI, which are found in the definition of excluded amount. As its name implies, the TOSI is intended to prevent income splitting.