Disclaimer: Please note this article is not financial advice. The purpose of our blog is purely educational, so please consult a professional accountant or financial advisor before making any financial decision.
Bringing to life a business in Canada can be an exciting venture. But it's also important to be aware of the various tax laws and regulations that govern businesses operating in Alberta. Some small business owners may be wondering what the income tax rate in Alberta is, how it affects them, among other questions. Running a small business is hard enough without worrying about complicated tax laws, but the great news is, we’re here to help.
This blog post will explain why it is important for startup business owners like you to comply with tax laws and dive into details of what you need to do to stay compliant. Read on for helpful tips!
Why Alberta Startup Businesses Should Comply
In Alberta, the line of businesses ranges from delivery enterprises, daycare and pet care, home cleaning, dairy, and farming. Aside from the brick and mortar stores, Alberta small businesses venturing online have also grown, especially in the light of the pandemic lockdowns. Today, almost all sorts of products can be bought and sold online. Since you are one of the brave hearts who built a startup, know the reasons why tax compliance is an essential part of your business.
Mandated by the law
Alberta is no stranger to tax laws. It follows the Canada Income Tax Act that mandates both individuals and corporations to pay tax based on their income. As a business owner, you should ensure that you pay these taxes promptly.
The government collects taxes to fund the different projects, and while the federal government collects most Canadian provinces’ income tax, Alberta, together with Ontario and Quebec, also collects corporate tax. When you pay personal and corporate taxes, you may be eligible for an income tax return.
eStores are also under it
Alberta is Canada’s fourth-largest province. Today, online businesses from Alberta range from businesses selling sneakers, alcoholic beverages, home supplies, and various tech-related services. Developments continue as businesses are encouraged to go digital to boost the growth of eCommerce.
Taxes cover even these ventures on the world wide web. Aside from your personal and corporate income tax, sales taxes are also as crucial. They are the value you include in your tax report to get your total taxable income as a business. So whether you are selling on physical stores, online, or both, you should be paying taxes.
Essential as you scale your business
How do you see your startup business five to ten years from now? You surely have laid up a plan to grow it quarter by quarter and year after year. If you learn the ropes of taxation early and comply with the rules, you’ll be an expert when the time comes that you need to calculate more. You’ll also get an idea about your average income tax rate (Alberta taxes).
When your business grows, you’ll track more business income and expenses; your sales taxes will grow too. This situation will not be difficult for you anymore as, by this time, you’ve learned to practice excellent accounting and bookkeeping for tax season to be smoother.
The Hows of Tax Compliance
Taxes mandated by the law are a good enough reason to comply with paying taxes. The fact that it also covers online selling and the growth of your business encourages you to learn taxes and properly file them. To get it right, here are the hows you need to remember.
Determine if you are a taxpayer
First, you have to determine if you are a taxpayer. The Canada Revenue Agency (CRA) has a complete list of people to pay income tax returns. If you live in Alberta, have a business, or are employed, you should pay taxes. Know by heart the tax deadline, which is April 30 for permanent residents, workers, and companies, April 30 or six months after death for deceased individuals, June 30 for non-residents, and June 15 for self-employed individuals. Missing the tax deadline can mean receiving penalties after, so pay in advance if you can.
Know how much you need to pay
Your income from January 1 to December 31 should be computed and matched against the Alberta income tax brackets for you to know how much you need to pay. Here is the personal income tax bracket and the rates you need to pay aside from your 8% business income tax. Note that Alberta and Quebec have their separate collection of corporate tax: they collect corporate taxes instead of the CRA.
| Personal Income | Tax rate |
| CAD131,220 or less | 10% |
| CAD131,220.01 - CAD157,464 and up | 12% |
| CAD157,464.01 - CAD209,952 and up | 13% |
| CAD209, 952.01 - CAD314,928 and up | 14% |
| CAD314,928.01 and up | 15% |
Check out the ways to pay
In paying your Alberta corporate income tax, you need to have an account in the Tax and Revenue Administration Client Self-Service (TRACS) account. If you have firms or third parties handling your accounting, you can enroll an account for them.
In this portal, you can view your tax balance, statement of accounts, financial and assessment information, and notice of reassessments. You should electronically make the payment, too, as well as registration, income tax returns, and other claims. The Alberta government has established a guide on paying taxes you can check to ensure compliance.
Assistance for Alberta Income Tax Rate Computation
Complying with the Alberta income tax may seem daunting, but it is a necessary step in growing your business. By determining if you are a taxpayer and understanding the various ways to pay, you can make this process as smooth as possible. If you have any questions or want to seek partnership, feel free to reach out to us. Unloop can help you out with bookkeeping and income tax. If you’d like to know more about our services, you can call us at 877-421-7270. We’d love to discuss our services with you!