As December approaches, Quebec business owners can enhance their tax position by implementing effective Year-End Tax planning strategies. The right choices now—regarding compensation, credits, assets, and sales tax—can lower taxes and boost cash flow without risking compliance.
Year-End Tax Considerations for Business Owners
1) Fine-tune your salary–dividend mix
Owner-managers should reassess their pay structure. A sufficient salary can create RRSP room for next year. RRSP contributions made in the first 60 days of the new year can still lower last year’s personal taxes. Paying taxable dividends may also help your corporation recover refundable dividend tax on hand (RDTOH) if it has passive investment income. Balance these with your long-term goals and cash needs. (Canada.ca)
2) Declare bonuses—then pay them on time
If you plan a year-end management bonus, remember unpaid remuneration must be paid within 180 days after year-end to be deductible. If not, the deduction shifts to the year you pay. Set payment dates now to keep the write-off. (Justice Laws)
3) Watch the small-business rate “grind”
Corporate passive investment income can limit access to the federal small business deduction on active business income. If your adjusted aggregate investment income is between $50,000 and $150,000, model the impact. Consider rebalancing investments or timing dividends.
4) Time asset purchases strategically
Purchasing eligible equipment or technology before year-end can start depreciation sooner. Canada’s Accelerated Investment Incentive offers an enhanced first-year capital cost allowance for certain new assets. This is useful for manufacturers, tech users, and service firms modernizing operations. Confirm eligibility and documentation before buying.
5) Leverage Quebec credits (C3i and the new CRIC)
Quebec provides valuable corporate tax credits. The C3i (Investment and Innovation) credit supports specific equipment and management software purchases. Ensure your planned buys meet the definitions and filing rules. Quebec’s new CRIC (tax credit for research, innovation, and commercialization) begins for corporations with tax years starting after March 25, 2025. This credit includes some pre-commercialization work, not just classic R&D. Align your project timelines with these rules and gather documentation early. (Revenu Québec, Quebec Finance)
6) Reconcile GST/QST and clean up receivables
Do a year-end GST/QST check. Make sure you’ve claimed all input tax credits/refunds (ITCs/ITRs) on business purchases. Consider writing off genuine bad debts to adjust the net tax you’ve remitted. Quebec’s rules state a debt must be truly “bad” (not just doubtful) and written off in your books. Adjustments are time-limited, so act quickly.
7) Use your Capital Dividend Account (CDA) wisely
If your private corporation has a CDA balance—from the non-taxable portion of capital gains or certain life-insurance proceeds—you may pay a tax-free capital dividend to shareholders. Be precise: follow CRA guidance and file the election (T2054) correctly. Many corporations request CDA balance verification via Schedule 89 in My Business Account before electing. Errors can lead to penalties.
Bottom line: Year-end is the best time to align compensation, investments, credits, and sales-tax compliance with your 2026 plans. A quick review now can prevent costly surprises in April. For a tailored checklist for your industry and corporate structure, contact InfoCplus—we’ll help you turn year-end into an advantage.
