The tax return deadlines for businesses are fast approaching (June 30 for corporations with a Dec. 31 year-end and June 16 for unincorporated businesses), and business owners who conduct commercial activities over the Internet have a newtax form to fill out for 2013.
Late last year, Canada Revenue Agency quietly introduced T2 Schedule 88, Internet Business Activities, which has to be filled in by every corporation that earns income from one or more web pages or websites. If your business is unincorporated, you have to provide the information above as part of your 2013 T1 personal tax return filing on Form T2125, Statement of Business or Professional Activities.
According to the instructions on the new schedule, a corporation is considered to earn income from the web if the corporation sells goods and/or services on its pages or websites. Even if your site doesn't support e-business transactions, but your customers call, complete, and submit a form, or email you tomake a purchase, order, booking, etc., you must still file the schedule.
Businesses that sell goods and/or services on auction, marketplace or similar websites operated by others or earn income from advertising, income programs or traffic your site generates must also file the schedule. Income from ads includes: static advertisements you place on your site for other businesses, affiliate programs, advertising programs such as Google AdSense or Microsoft adCentre, and other types of traffic programs.
Finally, your corporation must file the schedule even if it doesn't have a website and you've merely created a profile or other page describing your business on a blog, auction, marketplace or any other portal or directory website fromwhich your company earns income.
Luckily, the schedule itself is only one page and is very straightforward. It asks how many web pages or websites your corporation earns incomefromand then asks you to provide theweb page orwebsite url addresses. If your corporation has more than five websites, you must enter the addresses of those that generate themost Internet income.
If your corporation doesn't have its own website, but you've created a corporate profile or other page describing your business on a blog, auction, marketplace or any other portal or directory website, you would enter the addresses of those pages if they generate income.
Finally, you are asked to report the percentage of the corporation's gross revenue generated fromthe Internet in comparison to the corporation's total gross revenue.
According to a news alert from Ernst & Young LLP, quoting Canada Revenue Agency, the purpose of the new schedule, which was initiated by CRA's Compliance Programs Branch, is to "help the CRA fulfill its role to identify, deter, and correct potential non-compliance."