Every tax acronym,
explained.

A federal tax rule that lets you claim 1.5x the normal Capital Cost Allowance rate in the first year you put an asset into service. Improves cash flow versus the standard half-year rule.

Revenue earned from the actual operation of your business, like selling products or providing services. Distinct from passive investment income.

The tax cost of an asset for capital gains calculations. Original cost plus capital improvements, minus depreciation claimed and certain other adjustments. Critical for share sales and property dispositions.

Total passive investment income earned by a Canadian-Controlled Private Corporation. Affects eligibility for the Small Business Deduction once it exceeds $50,000 per year.

Corporations linked by ownership or control. They share the Small Business Deduction limit, meaning a group cannot claim more SBD by splitting income across related companies.

The federal agency that collects taxes and administers most tax programs in Canada.

Income earned from Canadian sources. Important for non-residents and businesses with mixed activities. The location of the source (not where the money is paid) generally determines whether income is Canadian-source.

The tax depreciation system in Canada. Instead of deducting the full cost of an asset, you deduct a percentage each year based on the asset class.

Old terminology for intangible capital assets like goodwill, customer lists, and franchise rights. As of 2017, these are tracked under Class 14.1 for CCA purposes instead of the old eligible capital property regime.

Intangible business assets like goodwill, customer lists, and franchises. Treated as Class 14.1 for CCA purposes since 2017.

A dividend paid out of corporate income that has been taxed at the general corporate rate. Carries a higher gross-up and dividend tax credit at the shareholder level.

A share issued by a mining, oil and gas, or renewable energy company that allows the company to transfer exploration expenses to the investor. The investor claims the deduction or credit on their personal return.

A running total of after-tax income that has been taxed at the general corporate rate. Determines how much eligible dividend a corporation can pay.

The mechanism by which a GST/HST-registered business recovers the tax it paid on business expenses. Claimed on each GST/HST return.

A federal exemption that lets you sell qualifying small business corporation shares tax-free, up to a lifetime cap of $1.25 million as of 2026, indexed to inflation.

A dividend paid out of corporate income that was taxed at the Small Business Deduction rate. Carries a lower gross-up at the personal level.

The CRA summary of your filed return showing income, deductions, taxes owed, and any adjustments. Issued after the CRA processes your filing. Keep these forever; they prove what was reported in any given year.

Income earned without active business effort: interest, dividends, rental income from a small operation, capital gains on investments. Taxed at higher corporate rates and reduces the Small Business Deduction limit.

A corporation that is essentially a single individual providing services to a single client where, without the corporation, the individual would be an employee. PSBs are taxed at the full general rate plus an extra 5 percent, with sharply limited deductions. Major risk area for solo consultants incorporating to bill one client.

A scheduled payment of tax owing made before year-end. Required if you owe more than $3,000 in tax (federal plus provincial combined) in the current or two preceding years. Missing instalments triggers interest charges that compound.

The CRA test that determines whether an activity is a business (deductible losses) or a hobby (no losses allowed). Persistent losses without a clear path to profitability can trigger reclassification as a hobby, disallowing deductions.

A pool of refundable taxes paid by a corporation on investment income. When the corporation pays dividends, a portion of this tax is refunded. Tracks separately for eligible vs non-eligible dividends.

A tax credit that pays out as a cash refund even if you owe no taxes. Valuable for new businesses and pre-profit startups.

A personal retirement account where contributions are tax-deductible and growth is tax-deferred until withdrawal. Contribution room based on 18% of prior-year earned income, capped annually. Owner-managers paying themselves salary build RRSP room.

The federal SR&ED schedule filed with a T2. Reports eligible R&D expenditures and calculates the federal investment tax credit.

The Ontario Innovation Tax Credit schedule. Filed with Ontario corporate returns to claim the provincial R&D credit.

The schedule filed with a T2 corporate return that calculates aggregate investment income, used for the Small Business Deduction calculation.

A federal tax preference that reduces the corporate tax rate from 15% to 9% on the first $500,000 of active business income for qualifying Canadian-Controlled Private Corporations.

Money withheld from employee paycheques for income tax, CPP, and EI, plus employer contributions. Remitted to the CRA on a strict schedule. Late remittance penalties are immediate and serious.

A corporation whose principal purpose is to earn income from property (rents, interest, dividends). These do not qualify for the Small Business Deduction because they are not active businesses. Five or more full-time employees can shift the classification back to active.

The annual federal corporate income tax return filed by every Canadian corporation, including small CCPCs.

The schedule used by self-employed individuals and sole proprietors to report business income and expenses on their personal tax return.

A personal account where investment growth and withdrawals are tax-free. Annual contribution room accumulates from age 18 (currently $7,000/year). Useful for personal savings but cannot be used for active business income.

The measure of corporate size used to phase out the Small Business Deduction. Above $10 million it starts phasing out, above $15 million it is fully eliminated.

A qualifying electric, hydrogen, or plug-in hybrid vehicle that can be fully deducted in the year of acquisition under Class 54 CCA rules.

The 9-digit identifier the CRA uses to track your business across federal programs. Required to register for GST/HST, payroll, import/export, and most government programs. You get one by registering at canada.ca or by filing your first business return.

A private corporation that is incorporated in Canada, not publicly traded, and not controlled by non-residents or public corporations. The status that gives you access to the Small Business Deduction and most other corporate tax benefits.

A defined-benefit pension plan typically set up by owner-managers. Allows much larger annual contributions than an RRSP, especially for older business owners.

A federal form an employer issues to a departing or laid-off employee, used by Service Canada to calculate EI benefits. Must be issued within 5 days of the interruption of earnings.

Provincial bodies (WSIB in Ontario, WCB elsewhere) that administer workplace injury insurance. Most businesses with employees must register and pay premiums based on payroll and industry risk classification.

The specific costs a government program will actually fund, as opposed to what you spent on the project overall. Programs usually fund a subset: eligible labour, eligible materials, sometimes overhead. Before applying, read the eligible-expenditure section carefully so you can budget the gap.

A government-backed loan program (not a grant) that helps SMBs access financing from participating lenders for buying equipment, leasehold improvements, or real estate. The federal guarantee makes banks more willing to lend. Loans up to $1 million; SMBs apply through a bank, not the government directly.

A clause in most grant contribution agreements that requires the recipient to repay some or all of the funding if they fail to meet conditions (employment targets, project completion, sale of the business, ceasing operations in Canada). Less common in tax credits, but standard in active-management grants.

The legal document a recipient signs when awarded a government grant or contribution. Typically defines the project scope, eligible expenditures, payment milestones, reporting obligations, and clawback conditions. Read it before signing - some agreements require employment maintenance for years post-funding.

A federal program from the National Research Council that funds salary and contractor costs for innovation projects at Canadian SMBs. Typical awards range from $25,000 in the small stream to $1 million+ in the standard stream. Designed for businesses doing genuine technical R&D with commercialization potential.

Canada's flagship federal R&D tax incentive. Reimburses a percentage of eligible R&D expenditures as a tax credit, often refundable for CCPCs.