Business tax basics for starting a company in Quebec

A key step when starting a business in Quebec is understanding the related tax implications. Here is everything you need to know before proceeding.

You got into business to bring your products or services to the world at large. You aren't an accountant, so figuring out financial matters at tax time is a frustrating task. This is particularly true if you have never filed business taxes for a startup.

Understanding Quebec business taxes for a startup partnership or corporation is essential to paying the appropriate charges and getting the credits your business is entitled to.

The filing process differs depending on your business structure.

Corporations

A corporation files form CO-17, the corporate income statement, in order to declare income. Whether you owe taxes to Quebec depends on how much income your corporation made, the total profit, and the credits and refunds applied to your potential tax liability.

Partnerships

A partnership is handled differently. Quebec determines the exact tax liability depending on whether the partnership is a joint venture, a general partnership or a joint partnership. The partnership itself isn't required to pay income tax.

Instead, Quebec requires the partnership to file forms denoting their partnership income. This income is taxed through the partner's personal income tax instead of a business tax.

If your corporation or partnership exceeded $30,000 in business income in the province, consumption taxes are collected from your clients and customers.

• The GST and QST apply to any taxable sales you conduct through your company.
• This rate is 9.975 per cent QST and 5 per cent GST, which applies to products such as books, hotel rentals, car sales, legal services and most other goods.

You pay these taxes along with your business income taxes to Quebec. The only items you don't collect GST and QST on are those specifically exempt from this law.

The Quebec business taxes seem extensive, but you get credits and refunds to soften the blow.

• Quebec offers tax credits for money spent on research and development, tax holidays, e-business establishment cost, multimedia production, supplies tax credits and more.

Filing business taxes in Quebec is a daunting task, but understanding the province's tax expectations helps you keep on track. Once you get your business tax payment process established, it won't be anywhere near as frustrating to get it figured out in the future.