How to Evaluate and Reduce Your Business’s Tax Burden Throughout the Year

For many business owners in Surrey, "tax planning" is something that happens in a panicked rush during the last two weeks of April.

This reactive approach is arguably the single biggest leak in your financial bucket. By the time you sit down to sign your T2 corporate return, the year is already history. The opportunities to save money, defer taxes, or claim credits have often expired with the calendar year.

The goal is to shift your mindset from "filing taxes" to "managing liabilities." By evaluating your position throughout the fiscal year, you can make operational decisions that legally reduce what you owe, keeping more capital in your business for growth and stability.

Timing Your Capital Expenditures for Maximum Write-Offs

One of the most powerful tools in a business owner’s arsenal is the Capital Cost Allowance (CCA). This is the mechanism by which you deduct the depreciation of assets like vehicles, machinery, and computers. However, the timing of these purchases is everything.

In 2025, the rules for writing off assets have evolved. If your business is looking to upgrade its fleet, you should be aware that the ceiling for Class 10.1 passenger vehicles has increased to $38,000 (plus taxes).

Furthermore, for manufacturing and processing businesses, common in Surrey’s industrial zones, new federal incentives proposed in 2024/2025 allow for accelerated write-offs on certain buildings and equipment. If you purchase qualifying equipment before the end of your fiscal year, you can claim a significant portion of that expense immediately, lowering your taxable income for the current year. Conversely, if you buy it on day one of the new year, you delay that tax savings for a full 12 months.

Optimizing Your Compensation Mix: Salary vs. Dividends

The age-old question for incorporated business owners is how to pay themselves. The answer is rarely static; it should change based on your personal cash flow needs, your RRSP contribution room, and the current tax rates.

Taking a salary creates a deduction for your corporation, lowering its taxable income. It also builds your personal RRSP contribution room and ensures you are contributing to the Canada Pension Plan (CPP). Dividends, on the other hand, are paid out of after-tax corporate profits. They do not require CPP contributions, which can improve immediate cash flow, but they do not create RRSP room.

With the recent changes to the capital gains inclusion rate (increasing from 50% to 66.67% for gains over $250,000), retaining earnings inside the corporation has become a more complex decision. If your corporation earns significant investment income, it might trigger the "passive income grind," which reduces your access to the small business tax rate.

A mid-year review with a tax professional allows you to model different scenarios. You might decide to take a bonus in December to reduce corporate income below the $500,000 small business limit, or you might choose to pay dividends to sprinkle income to a lower-earning spouse (within the strict confines of the Tax on Split Income, or TOSI, rules).

Leveraging Provincial Credits for Local Operations

While federal taxes get the most attention, British Columbia offers specific incentives that many Surrey businesses overlook. These credits are often targeted at specific behaviors, such as hiring apprentices or retrofitting buildings for energy efficiency.

For example, if you own your warehouse or office building, the Clean Buildings Tax Credit is a refundable income tax credit for qualifying energy-efficiency retrofits. Given the age of many commercial buildings in Newton and Whalley, this can be a substantial opportunity to upgrade your HVAC or insulation while getting the government to foot part of the bill.

Additionally, the BC Small Business Venture Capital Tax Credit was recently expanded. If you are an investor in a qualifying local business, or if your business is raising capital, this program offers a 30% refundable tax credit to investors. This can be a massive selling point when trying to attract local investment to grow your operations.

• Investigate the BC Training Tax Credit if you employ apprentices in Red Seal trades.
• Review your eligibility for the Interactive Digital Media Tax Credit if you are in the tech or creative sectors.
• Ensure you are registered for PST correctly to claim exemptions on production machinery and equipment.

Proactive Planning is Your Best Deduction

The tax landscape is not designed to be simple, but it is designed to be navigated. The difference between a business that bleeds cash to the CRA and one that builds retained earnings is often just a matter of timing and attention.

By reviewing your capital assets, compensation structure, and eligible credits throughout the year, rather than just at the deadline, you change the dynamic.

You stop asking "How much do I owe?" and start asking "How much can I keep?" For a business in the competitive Lower Mainland market, that difference is your margin for success.

Located in Surrey (Cloverdale), British Columbia, since 1971, HWG, Chartered Professional Accountants proudly helps clients throughout the Lower Mainland and across Canada.

Our team of chartered professional accountants provides helpful business and personal tax services. Our continued growth proves the success of our client relationships.