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Does an Online Business Mean You Don’t Have Canada Tax Obligations?

Online business and taxes

More and more people have taken up the operation of a small business from the confines of their home, and more often than not they do this through a website, which is often a E-commerce site.   Some do this thinking that because their business is primarily conducted online that it is not subject to the same income tax rules and regulations that a brick and mortar business is.

The CRA has made it very clear that as of 2013, any web page or site that is generating money is subject to the tax laws.

It doesn’t matter whether your online income is generated through a Corporation, partnership or self employed, you have a tax filing obligation.

For Corporations they now have to file a Schedule 88, Internet business activities, which is to accompany your corporation income tax T2 has the due date after Dec, 31, 2014.   If you happen to have a partnership business that earns income from one or more web pages or sites, then at the present time you are not obligated to report internet income information.   Now for self employed individuals who earn an income from a web page or site they have to complete the internet business section of their applicable tax form along with the income tax and benefit return (T1).

Of course this new addition to the CRA rules comes with its own rules and regulations. Anyone earning an income on the net must be sure to learn these rules correctly, and bring the internet business activities to the attention of their accountant.

One of the first confusions that is sure to arise is what constitutes a money making web page or site.   A lot of people have directory listings or a an information web page but its sole purpose is not to pull in an income.   The type of internet action that the CRA is most interested in is e-commerce websites which are specifically designed to make money.   Outside of this there are many other types of sites that allow for the submission of orders and/or payments for good and services.   Plus, the CRA rules and regulations for online income is not just restricted to internet pages or sites that are just hosted within Canada with the purpose of generating an income.

If you have an online business presence it is most important that you make your accountant aware of this and discuss the details concerning it with him.  This way he will be able to handle your tax situation according to the CRA rules related to this.

 

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Sam Seidman, CPA, CA, LPA
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Toronto, Ontario
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Email: sam@torontoaccountant.ca

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