Word of Mouth… 6 Main Ways to Reduce Taxes for Business

Reduce Taxes for Business 17-2-ENG-6-ways-to-reduce-business-taxes-in-Canada-Part2-777Taxes-Accountant-Toronto-Vaughan
Part 1 Reduce Private Taxes https://777taxes.com/word-of-mouth-three-main-ways-to-reduce-taxes/

Reduce Taxes for Business: Write Off Expenses.

Owners of small businesses or citizens working under a contract have the right to reduce taxes for business and write off almost all business-related expenses from their total income – and only after that pay tax on “net” profit. It is not difficult to guess that businessmen are trying to write off as many expenses as possible, and the CRA is trying in every possible way to resist this. Let’s look at some of the tricks that entrepreneurs resort to.

Illegal tax evasion is a criminal offense in Canada, and we do not recommend that you break the law under any circumstances.

 Disclaimer: The information is provided for “general development” only, and in no case is an action guide.

1. “Shared” Receipts are Illegal in Most Cases to Reduce Taxes for Business

It’s simple, extremely effective, but completely illegal. This method is based on the principle “The Tax Service will not check everyone” (the fairness of this postulate determines its effectiveness). In this case, a group of businessmen – often engaged in similar types of activities – agrees among themselves to “transfer” receipts to each other if necessary, i.e. tax audit.

Naturally, the goods on these expense receipts must be purchased in cash because the tax service always closely monitors who exactly paid the bill. The idea that “cash” is king everywhere is always applicable in any country. It is extremely difficult to catch taxpayers in this kind of prank, especially when they are smart enough to prove the origin of this cash.

Therefore, this strategy is like a casino: not everyone wins every day, and sugar moms die relatively irregularly…

2. Purchase of Equipment/Fixed Assets from «Friends”

It seems that the Canadian tax service itself unwittingly suggested this decision to businessmen with its “attacks.” The fact is that any entrepreneur uses, at a minimum, a computer, monitor, office desk and chair, etc. in his activities.

The CRA requires receipts for the purchase of these items. It’s good if you bought them yesterday for business and kept the documentation – but what if the furniture was bought 5 years ago, and you only started your business last month? So, friends write receipts stating that they sold a sofa/suitcase/satchel/picture/basket/cardboard to you… and so on in the text… Written or printed receipts can completely replace store receipts. The thing is that this scheme may or may not be legal, depending on how real the deal was.

3. Reduce Taxes for Business on Vacations and Business Trips.

It is a completely natural desire of businessmen to relax at a resort and write off the trip as a business expense. At the same time, the natural desire of the CRA is to prevent such disgrace. Here are the main questions you should always have answers to:

  • What was the purpose of the trip?
    The main evidence that such a trip was undertaken for business purposes will be correspondence with the organizers of the seminar, conference or simply other entrepreneurs with whom you needed to meet to discuss, etc. (choose and fill as appropriate). It means, first, you should collect and print all relevant emails and only then buy a flight ticket (tour, etc.) to the point on the map that interests you. During your trip, you can swim and sunbathe as much as you like, but don’t forget to bring a lot of business booklets, business cards of promising partners/clients, etc. Keep a diary of business meetings and seminars, indicating the location and time.
  • Why couldn’t this be done “at your place of residence”?
    It’s a good question, and if you have well-prepared papers according to point 1, it can be easy to answer – just use your brain and think logically. Let’s say, it was closer (and cheaper) for your business partners to fly to Cyprus than to Toronto, etc.

In general, this topic is not an easy one, and the line between legal and illegal schemes is often elusive. We recommend that you consult your tax professional before traveling.

4. Barter means that Taxes, by Law, Must be Paid by Both Participants

Not everyone knows that business barter transactions are taxed in the same way as regular ones – i.e. in operations like “you will lay a tile for me, and I will rebuild the engine in your car,” taxes, by law, must be paid by both participants. Since the shadow economy is steadily gaining momentum, there is no doubt that illegal barter transactions will take their rightful place on the list of abuses.

5. Creating Fake Employees is Illegal

To learn how to competently hire relatives, read the article “How to properly pay salaries to family members.” The methods and rules described in it are completely legal, but some businessmen go further and pay salaries and simply write checks to people who have never worked for this organization. Most of them are predominantly new immigrants who do not yet have income, as well as elderly people who are not on welfare. This is a typical example of a rather primitive illegal tax evasion.

We will not dwell on this topic in detail but note that the CRA is suspicious of tax reports that contain large numbers in the “Salaries and Wages” or “Subcontractors” columns. It’s worth keeping in mind that the undisputed leader in tax audits is the construction industry. It has already reached the point that some accountants simply avoid offering their services to construction companies…

6. “Gifts” From Abroad is a Loophole.  

This is one of the remaining holes in Canadian tax law. The scheme is as follows: a wealthy family immigrates to Canada, leaving one of its members and all its home country behind. His (her) whole task is to regularly transfer money to his relatives. The Canadian tax service shows no interest in how and where this capital operates. Since the “relative” is not a resident, he or she avoids paying taxes in Canada, and these “new” immigrants are also exempt from taxes on gifts from non-residents.

Now these “new Canadians” can work for “cash,” and no one will be able to find fault with them – in the sense of asking: “What do you do for a living?”

Currently, the underground economy is growing due to different types of loopholes, and this is happening at a time when high-income Canadians receive a little more than half because the rest is taken by the state. This is just another example of, to put it mildly, oddities in Canadian tax legislation…

Thank you for reading this post till the end. We appreciate your comments, likes and sharing with friends and colleagues.

For more insights and a free consultation, visit 777taxes.com and call us at (416)857-7570. Subscribe on our https://www.youtube.com/@777taxes   GMB profile: https://maps.app.goo.gl/HgfQdsenRFaaXtNY9

Your success starts with informed tax strategies!

#CanadianTax #VaughanAccountant #ReduceTaxes #TaxStrategies #TaxSavings #TaxPlanning #TaxAdvisor #TaxConsultation #TaxLaws #TaxReduction #TaxCredits #TaxRefund #FinancialPlanning #LegalTaxStrategies