Taxation and Taxes
Comprehensive glossary of accounting and taxation in Quebec (2026)
3/8/2026
The Quebec Accounting Glossary RDTOH, TOSI, CCA, LCGE, T2, CO-17, the SBD business limit…
Key Takeaways
Table of Contents
Mandatory advance tax payments, required when the balance due exceeds $1,800 per year
See also: Late Filing Penalty, Statute of limitations for tax purposes. In-depth article: GST/QST Instalments for Quebec Entrepreneurs.
its allocation among associated corporations
A document issued by the CRA or Revenu Québec after processing a tax return. It confirms or adjusts the amounts reported, indicates the refund or balance due, and serves as official proof of filing. It must be retained for at least 6 years for audit or dispute purposes.
See also: Notice of Reassessment, Objection, Tax Audit. In-depth article: What Is a Notice of Assessment in Quebec?.
A document issued when the CRA or Revenu Québec amends a tax return after the initial assessment, following an audit, an adjustment, or an objection. It may increase or decrease the tax due. The taxpayer generally has 90 days to file a formal objection.
A notional tax account balance accumulated in a private corporation that allows it to pay dividends that are entirely tax-free
See also: CDO, Capital gain, CCPC / SBD.
the balance of non-eligible dividends that a CCPC may pay. Funded primarily by active income taxed at the SBD rate.
Tax-Free Savings Account. Contributions are not tax-deductible, but earnings and withdrawals are entirely tax-free. Annual limit set by the federal government ($7,000 in 2026, indexed). A complementary tool to RRSPs, useful for short-term savings, emergency funds, or tax diversification in retirement.
Corporate tax return in Quebec, the provincial equivalent of the federal T2 form. Any corporation with a place of business in Quebec must file this return annually, within 6 months of the end of its fiscal year. It is prepared using professional software such as Taxprep or ProFile, typically by an accountant.
See also: T2, TP1, Fiscal Year. In-depth article: Avoiding CO-17 Errors.
The amount of income each taxpayer can earn without paying tax, set annually at the federal level ($16,129 in 2026) and at the provincial level ($18,056 in Quebec in 2026). The first credit applied in the calculation of individual income tax. Indexed annually for inflation.
input tax refund (ITR) (Quebec)
In-depth article: Input Tax Credits (ITC) and ITR.
Withholdings made from payroll by the employer and remitted to the government: federal and provincial income tax, QPP, EI, and QPIP. The employer acts as a collector on behalf of the tax authorities. Payments are made monthly, quarterly, or on an accelerated basis, depending on the payroll. Any failure to make these payments results in penalties and interest.
A periodic form (monthly, quarterly, or annual, depending on revenue) used to report collected GST/QST, deduct ITCs/ITRs, and remit or claim the difference. The filing frequency is determined by Revenu Québec based on annual taxable sales. Late filing triggers automatic penalties.
In-depth article: Understanding the GST and QST for Businesses in Quebec.
An eligible dividend is derived from corporate income taxed at the general rate (without the SBD) and entitles the shareholder to an enhanced tax credit. A non-eligible dividend comes from income taxed at the SBD rate and results in a smaller tax credit. The mix of these dividends determines the shareholder’s personal tax liability.
See also: CDA, CDO, Salary-Dividend Strategy.
Class 8 furniture (20%), Class 10 vehicles (30%), Class 50 computers (55%), Class 1 buildings (4%)
See also: Depreciation, Fixed Assets. In-depth article: Guide to Depreciation and CCA classes.
applies to income of a registered (status) Indian that is situated on a reserve
In-depth article: Section 87 and Tax Exemptions for First Nations Entrepreneurs in Quebec.
with a separate limit for fishing and farming property
See also: Capital gain, Estate Freeze. In-depth article: LCGE: Lifetime Capital Gains Exemption for the Sale of a Business.
Profit realized upon the sale of property at a price higher than its adjusted cost base (ACB). In Canada, 50% of the gain is taxable from June 25, 2024, up to $250,000 per year for individuals, and 66.67% on amounts exceeding that threshold (and from the first dollar for corporations). Applies to the sale of stocks, real estate, and business assets.
A tax strategy that transfers a business’s future growth to heirs or a family trust, while freezing the current value of the shares in the founder’s name. Generally involves a Section 86 stock exchange or a Section 85 rollover. When combined with the LCGE, it multiplies the exemption among family members.
See also: LCGE, Section 85 Rollover, Family Trust. In-depth article: Estate Freeze in Quebec: A Guide for Entrepreneurs.
Consists of two accounts: eligible RDTOH and non-eligible RDTOH.
See also: Passive vs. Active Income, CCPC / SBD, Business limit (SBD). In-depth article: RDTOH: Explanation of the Tax Refund on Dividends.
Accrual accounting: Revenue and expenses are recognized when earned or incurred, regardless of cash flows. Cash basis accounting: Transactions are recorded at the time of actual payment. Self-employed individuals can generally use the cash method; corporations must use the accrual method. This has a direct impact on reported income and tax instalments.
In-depth article: Understanding Accrual and Cash Basis Accounting.
annual taxable sales under $400,000
A 9-digit identification number assigned to every Canadian resident by Service Canada. Required to work, file a tax return, open an RRSP or TFSA, and receive government benefits. An accountant needs this number to file Form T1 and issue T4, T4A, and RL-1 tax slips.
A formal appeal to challenge a notice of assessment or reassessment. Must be filed within 90 days of the date of the notice (or within 1 year for individuals, depending on the situation). This is a mandatory first step before filing an appeal with the Tax Court of Canada or the Court of Québec.
In-depth article: How to Handle Tax Disputes.
A penalty imposed by the CRA or Revenu Québec when a tax return is filed late. At the federal level for T1 and T2 returns: 5% of the amount due, plus 1% per month of delay (up to 12 months). In the event of a repeat offence within 3 years, the penalties are doubled. This is in addition to daily compound interest.
The first $500,000 of eligible business active income qualifies for the federal small business tax rate (SBD). Quebec applies the same cap. This cap is reduced when taxable capital exceeds $10 million or passive income exceeds $50,000. It is shared among affiliated corporations via Schedule L.
The time limit beyond which the CRA or Revenu Québec can no longer issue a new assessment. Generally 3 years after the initial notice of assessment for standard tax returns filed by an individual or a CCPC, 4 years for other corporations, 6 years in cases of negligence, and unlimited in cases of fraud.
The tax basis of a property for the purpose of calculating capital gains upon sale. Includes the purchase price plus acquisition costs (commissions, transfer taxes, capitalized improvements). Reduced by certain capital repayments or deductions for depreciation. Essential for correctly calculating the tax upon the disposition of a property.
Tax slip issued in Quebec by an employer, supplementing the federal T4 form. It details employment income and provincial withholdings (Quebec income tax, QPP, QPIP, HSF). Must be submitted to the employee and Revenu Québec no later than the last day of February following the calendar year.
Registered Retirement Savings Plan (RRSP). Contributions are deductible from taxable income; earnings grow tax-free; taxes are paid upon withdrawal. Contribution limit based on 18% of the previous year’s earned income, up to $32,490 in 2026. Dividends do not generate RRSP contribution room, unlike salary, a key factor in the salary-dividend strategy.
A structural transaction that alters a corporation’s share capital or structure for tax, estate planning, or business reasons. Includes estate freeze, Section 85 rollover, merger, liquidation, Section 86 stock swap, and business transfer. Requires the expertise of a tax specialist to avoid unintended tax consequences.
A strategy that involves leaving profits within a corporation (taxed at the reduced corporate rate under the SBD, approximately 12.2% combined in Quebec) rather than immediately withdrawing them as salary or dividends (taxed at the marginal personal tax rate). This difference creates a cash flow advantage that can be reinvested. This is the main tax benefit of incorporation.
Active income: derived from the operation of a business (sale of goods and services, fees). Passive income: derived from investments (interest, portfolio dividends, rent, capital gains). Crucial distinction: Since 2019, annual passive income exceeding $50,000 in a CCPC gradually reduces the SBD limit (a $5 reduction in the limit for every $1 of passive income above the threshold).
Quebec Statement of Partnership Income, the provincial counterpart to Form T5013. Issued by a general partnership (SENC) or limited partnership (SEC) to each of its partners to report their share of income, deductions, and credits. The partner uses Form RL-15 to file their individual TP1 tax return.
Quebec Statement of Investment Income, the provincial equivalent of the T5. Issued by financial institutions and corporations to report interest, dividends, royalties, and other investment income paid to an individual residing in Quebec. Required for filing the TP1.
A mechanism that allows for the transfer of assets (such as property, shares, and intellectual property) to a Canadian corporation without triggering immediate capital gains tax. The transfer is made at the option of either the book value or fair market value, in exchange for shares of the corporation. Used in tax-advantaged incorporations, estate freezes, and corporate reorganizations.
In-depth article: Understanding Tax Carryover for Entrepreneurs.
SR&ED. Federal and provincial tax credit programs for businesses conducting eligible R&D in Canada. Refundable tax credit for CCPCs (up to 35% federal on the first $3 million + provincial top-up in Quebec). Covers salaries, subcontracting, and directly attributable materials.
In-depth article: R&D Tax Credits in Quebec.
Annual documents prepared by the employer to summarize all T4 (federal) and RL-1 (Quebec) slips issued during the year. Must be filed with the CRA and Revenu Québec no later than the last day of February. Any delay or error results in administrative penalties.
Compensation options for incorporated entrepreneurs: salary (tax-deductible for the company, creates RRSP contribution room, and contributes to the QPP and EI) or dividends (non-deductible, no social contributions, and eligible for a tax credit). The optimal mix depends on personal circumstances, cash flow needs, and family structure (TOSI rules).
See also: Eligible dividend, TOSI, RRSP. In-depth article: Choosing Between Salary and Dividends. Service: Taxation for Entrepreneurs.
| Criteria | Salary | Dividend |
|---|---|---|
| Deductible for the company | Yes | No |
| Creates RRSP contribution room | Yes (18%) | No |
| Contributes to QPP / EI | Yes | No |
| Dividend Tax Credit | Not applicable | Yes (eligible or non-eligible) |
| Subject to source deductions | Yes | No |
| Applicable TOSI Rules | No | Yes (family members) |
| Recommended for | Regular Cash Flow, RRSP Contributions | Tax Flexibility, Optimization |
Federal tax return for individuals and self-employed individuals. Must be filed by April 30 of each year (June 15 for self-employed individuals, but the balance due remains payable on April 30). Includes all worldwide income of a Canadian resident: employment, business, investments, and capital gains.
Every Canadian corporation (including CCPCs and incorporated NPOs) must file this return
In-depth article: What Is a T2 Tax Return?. Service: Corporate Tax.
Federal-provincial note: a single Form T2125 serves for both the T1 and the TP1.
Tax form and tax return for income from a trust: investment income, capital gains, dividends allocated to beneficiaries. Issued by the trustee no later than 90 days after the end of the trust’s fiscal year. Since 2024, the new expanded reporting rules have also applied to inactive trusts.
A tax statement issued by an employer showing employment income and source deductions (income tax, QPP, EI, QPIP) for a calendar year. Must be provided to the employee and submitted to the CRA no later than the last day of February. Required to file Form T1. Quebec equivalent: RL-1.
A federal form that reports payments made to an individual who is not an employee: commissions paid to self-employed individuals, subcontracting fees exceeding $500, educational assistance payments from an RESP, and retirement benefits. Issued by the paying organization no later than February 28 following the calendar year.
Tax statement for investment income: interest, dividends, royalties. Issued by financial institutions and companies that pay dividends to their shareholders. Minimum threshold: $50 in interest or dividends per year. Quebec equivalent: RL-3.
Federal income statement for a partnership. Form issued by a SENC or SEC to each of its partners to report their share of income, expenses, deductions, and credits. Quebec equivalent: RL-15. Required whenever a partnership has 6 or more partners.
A federal carbon tax applied in provinces without an equivalent system. Businesses that use fossil fuels pay the tax, which is built into the price. Eligible small and medium-sized enterprises (SMEs) can receive a refund through a tax credit. Quebec operates its own cap-and-trade system (SPEDE).
Tax on Split Income. Federal rules in effect since 2018 that tax dividends or interest paid by a private corporation to a family member who does not actively and regularly contribute to the business at the highest marginal tax rate. Several exceptions apply: age 25 or older with a 10% investment, retirement of the owner, or a retired spouse.
See also: Salary-Dividend Strategy, Family Trust. In-depth article: TOSI and Income Splitting Among Family Members in Quebec.
Good to Know - TOSI and Incorporated Entrepreneurs
If you pay dividends to your spouse or adult children through your company, check with your accountant to ensure that the TOSI exceptions apply. Without an applicable exception, the dividend is taxed at the highest marginal rate (approximately 53% in Quebec), which negates the intended tax benefit.
Summary of employer withholdings and contributions in Quebec. The provincial counterpart to the federal T4 Summary: summarizes the source deductions made to Revenu Québec during the year, including Quebec income tax, QPP, HSF, and CNESST.
Quebec tax return for individuals and self-employed individuals. The provincial counterpart to Form T1. Must be filed by April 30 (June 15 for self-employed individuals, but any balance due must be paid by April 30). Includes all of the taxpayer’s income and applies specific provincial credits (childcare expenses, child support, home care for seniors).
Registration is mandatory for businesses whose taxable sales exceed $30,000
In-depth article: GST and QST Registration. Service: Taxes.
Quebec sales tax, set at 9.975% and calculated on the price before GST. Same mandatory registration threshold of $30,000 as for the GST. Registration is done jointly for both taxes with Revenu Québec, which administers the GST in Quebec through an agreement with the CRA. Both taxes appear together on invoices.
A detailed review of a tax return by the CRA or Revenu Québec, which may be random or targeted. The taxpayer must provide the requested supporting documents (invoices, contracts, accounting records), generally within 30 days. This may result in a notice of assessment or an objection. The process can take anywhere from a few weeks to several months.
In-depth article: Business Tax Audits.
Federal agency responsible for tax administration, tax collection, GST/HST, and benefit programs. Issues notices of assessment, conducts audits, and manages program accounts: payroll (RP), GST (RT), corporate income tax (RC), and import/export (RM).
A contract that defines the rights and obligations of a corporation’s shareholders: buy-sell agreement, right of first refusal, exit provisions in the event of death or disagreement, share valuation, and non-compete clause. Essential for any SPA with multiple shareholders. Difference from a unanimous agreement: more limited scope; does not bind future shareholders unless a specific clause is included.
In-depth article: Shareholders’ Agreement: The Fundamental Pact.
An agreement signed by all shareholders that restricts the powers of the board of directors and transfers certain decision-making authority to the shareholders themselves. Provided for under the Canada Business Corporations Act (CBCA) and the Quebec Business Corporations Act (LSAQ). It is binding on future shareholders and is enforceable against third parties.
and governance is democratic (one member = one vote, regardless of the amount of capital invested). It has a special tax regime (deductible patronage dividends).
Simplest legal structure: the owner and the business are a single legal entity. No incorporation required. Income is reported on the owner’s T1/TP1 form via Form T2125. Unlimited personal liability, the owner’s personal assets can be seized to pay the business’s debts. Synonymous with unincorporated self-employed worker.
In-depth article: What Is a Sole Proprietorship?.
A legal arrangement whereby a trustee holds and manages assets (stocks, real estate, investments) for the benefit of beneficiaries. Three distinct roles: settlor (creates the trust), trustee (administers), beneficiary (receives). Used for tax planning, estate planning, and asset protection. Annual T3 filing is required.
used to split income among family members, multiply the LCGE on the sale of eligible shares
Mandatory filing with the Quebec Registraire des entreprises, to be submitted annually within the filing period assigned to the business. This filing allows for updating information such as the business address, directors, and major shareholders. Failure to file results in escalating penalty fees and may ultimately lead to automatic removal from the registry.
A 9-digit federal business number assigned by the CRA, to which program accounts are linked: GST/HST (RT), payroll deductions (RP), corporate income tax (RC), import/export (RM), and reporting (RZ). A single business uses one Business Number for all its federal accounts.
A unique 10-digit identifier assigned by the Quebec Registraire des entreprises to every business registered in Quebec. Required for government contracts, grant applications, legal audits, and business transactions. Distinct from the federal business number (NE).
In-depth article: How to Register My Business in Quebec.
Nonprofit organization. An entity whose income in excess of expenses is not distributed to members but is reinvested in the organization’s mission. May be exempt from income tax if the majority of its activities are conducted for nonprofit purposes. Different filing requirements depending on status: federal T1044, T2 if taxable.
A Quebec organization that manages the public registry of businesses registered in Quebec. Any business (TA, SPA, SENC, or NPO) with a place of business in Quebec must register with it. It is responsible for the mandatory annual update, change reports, and deregistration. Public information available online.
Provincial agency responsible for tax administration in Quebec. Collects income tax from individuals (TP1) and corporations (CO-17), manages the GST/QST through an agreement with the CRA, administers social contribution programs (QPP, QPIP, HSF) and Quebec’s social and tax credits.
A business operated by two or more partners, without a legal entity separate from the partners. Each partner reports their share of income on their own tax return (T1/TP1) using Form T5013/RL-15. Joint and several liability: a creditor may claim the entire debt from a single partner. Requirement to register with the REQ.
Determining associated status has major tax implications.
A corporation owned by a professional (CPA, physician, lawyer, engineer) or an entrepreneur, which receives the owner’s professional income or operating dividends, manages the owner’s investments, and optimizes the owner’s tax situation. Allows for tax deferral, leveraging the LCGE, separating operating assets and liabilities, and estate planning. Very common among incorporated professionals.
See also: SPA, CCPC / SBD, LCGE. In-depth article: Management company (Gesco) for professionals in Quebec.
A partnership with two types of partners: general partners (responsible for management, with unlimited liability) and limited partners (passive investors, with liability limited to their capital contribution). Used in real estate financing, investment structures, and certain tax planning arrangements.
Federal (CBCA) or provincial (QBCA)
In-depth article: Corporation in Quebec.
A Canadian-controlled private corporation eligible for the small business deduction. This provides a reduced tax rate (approximately 12.2% combined in Quebec) on the first $500,000 of active business income. The cap is shared among affiliated corporations and reduced based on taxable capital and passive income.
A legal entity automatically created upon the establishment of a divided co-ownership. Composed of all co-owners, it manages the common areas: maintenance, insurance, contingency fund, and annual budget. It has its own accounting obligations and must file a T2 form if there is taxable income. Quebec’s Act 16 requires a maintenance log and a review of the contingency fund.
A person who carries out a business activity as a self-employed individual, without being incorporated. Must file a T1 and a TP1 with Schedule T2125 to report business income and expenses. Responsible for their own GST/QST remittances, tax instalments, and doubled QPP contributions. Synonyms: sole proprietorship, freelancer, independent contractor.
In-depth article: Difference Between a Self-Employed Individual and an Employee.
| Criteria | TA / Sole Proprietorship | SENC | SPA | Cooperative |
|---|---|---|---|---|
| Separate legal entity | No | No | Yes | Yes |
| Personal Liability | Unlimited | Joint and several, unlimited | Limited by capital | Limited by capital |
| Tax Return | T1/TP1 + T2125 | T5013/RL-15 per partner | T2 + CO-17 | T2 + CO-17 |
| Access to the SBD | No | No | Yes (if CCPC) | Variable |
| Incorporation Costs | Low | Moderate | High | High |
| Suitable for | Getting Started, Freelancing | Unincorporated Partners | Growth, Optimization | Collaborative Projects |
Assets and receivables held with the intent of converting them into cash within the next 12 months: cash on hand, accounts receivable, inventory, prepaid expenses, and short-term deposits. An essential component of working capital and the calculation of the liquidity ratio.
Work performed by a tenant in leased premises: renovations, improvements, and installations. Capitalized as fixed assets and depreciated over the remaining term of the lease or the useful life (whichever is shorter). Separate CCA class (generally Cat. 13).
The systematic allocation of the cost of a long-term asset over its useful life. In accounting, it is a non-cash expense that reduces the asset’s value on the balance sheet and net income on the income statement. This is distinct from CCA: the accounting (straight-line) and tax (declining-balance) rates differ, resulting in deferred taxes.
NPOs receiving significant grants
See also: Review Engagement, Compilation. In-depth article: Accounting and Financial Audits. Service: Audit Services for Businesses.
Earnings Before Interest, Taxes, Depreciation, and Amortization. Measures a business’s operating performance, regardless of its financing structure and tax choices. Used for business valuation, sales transactions, and industry multiples (the buyer pays X times the EBITDA).
A list of all general ledger accounts with their debit and credit balances as of a given date. The debit and credit totals must be exactly equal. A control tool used by the accountant before preparing financial statements, an imbalance indicates an accounting error.
Profits accumulated by a company since its inception, less dividends paid to shareholders and losses incurred. A component of shareholders’ equity on the balance sheet. A positive retained earnings balance indicates an accumulation of corporate wealth; a negative retained earnings balance (accumulated deficit) indicates that historical losses exceed profits.
A financial snapshot of a business at a specific date: assets (what the business owns), liabilities (what it owes), and equity (the difference). Follows the fundamental accounting equation: Assets = Liabilities + Equity. Also known as a statement of financial position under NCECF and IFRS.
A projection of actual cash inflows and outflows over a future period (week, month, quarter). A management tool for anticipating cash shortfalls, planning financing, and coordinating tax instalments. Unlike an operating budget, it focuses on the actual timing of cash inflows and outflows.
The residual value of a business after subtracting all liabilities from its assets. Includes paid-in capital, retained earnings, and capital surplus. Represents the book value of the business to its owners. This is distinct from fair market value (which may be higher for a profitable business).
Expenses paid today for services to be rendered in the future: annual insurance premiums, rent paid in advance, prepaid software subscriptions. These are capitalized as current assets on the balance sheet and then gradually recognized as expenses on a matching basis.
Basic attestation level by a CPA: preparation of financial statements based on figures provided by the client, without independent verification. The CPA issues a compilation engagement report that provides no assurance as to accuracy. This is the most cost-effective service, sufficient for the majority of Quebec SMEs and for filing tax returns.
In-depth article: Compilation Engagement and Notice to Reader. Service: Corporate Accounting.
Amounts a business owes its suppliers for goods or services received but not yet paid for. A current liability on the balance sheet. Managing accounts payable (payment terms, cash discounts for early payment) is an important cash flow management tool. A payment cycle of 30 to 60 days is standard in Quebec, depending on the industry.
Amounts owed to the business by its customers for goods or services delivered but not yet collected. A current asset on the balance sheet. Accounts receivable management (customer payment terms, collections, allowance for bad debts) directly impacts cash flow. Aging accounts receivable is a financial red flag.
The consolidation of the financial statements of several related entities (parent company and subsidiaries) into a single set of financial statements. Eliminates intercompany transactions (sales, loans, internal dividends). Required when a company controls one or more subsidiaries under NCECF or IFRS.
The direct cost of goods sold during a period: purchases of merchandise, raw materials, direct production labour, and inbound shipping costs. Subtracted from revenue to calculate gross margin. Does not include general operating expenses (rent, administrative salaries, marketing).
Accounting adjustments recorded at the end of the period to reflect economic reality in accordance with the matching principle: depreciation, accrued expenses, deferred revenue, allowance for bad debts, prepaid expenses, and accrued interest. These adjustments are necessary to ensure that financial statements are accurate prior to the filing of tax returns.
Follows this sequence: revenue − COGS = gross margin − operating expenses − interest − taxes = net income.
Synonym: financial year.
The practice of billing the client as work progresses, rather than at the end of the engagement. Improves the firm’s cash flow, reduces work in progress (WIP) on the balance sheet, and limits the risk of bad debt. Common for long-term engagements (audit, corporate tax, development projects).
A financial statement that presents actual cash inflows and outflows over a period, classified into three categories: operating, investing, and financing. Often required by banks and investors. Not to be confused with accounting profit: a reported profit can coexist with a cash shortfall.
In-depth article: Cash Flow for Businesses.
The difference between current assets and current liabilities. Measures a business’s ability to pay its short-term obligations with its liquid resources. A key indicator monitored by bankers and lenders. Negative working capital is a red flag.
The main record of all accounting transactions, classified by account in the chart of accounts. Each journal entry appears with its date, amount, description, and double-entry counterpart. It serves as the reference document for tracing any historical transaction of the business and for preparing the trial balance.
International Financial Reporting Standards. Mandatory accounting framework for publicly traded companies in Canada since 2011. More complex than the NCECF, with a principles-based rather than rules-based approach. Used on a voluntary basis by certain private businesses with an international outlook or those planning an initial public offering.
Long-term assets held for use in operations (rather than for resale): buildings, equipment, vehicles, furniture, software, and leasehold improvements. These are recorded on the balance sheet at their acquisition cost and depreciated over their useful lives.
Inventory held for resale or used in production. Valued at the lower of cost and net realizable value at the end of each fiscal year. Accounting methods: FIFO (first-in, first-out), weighted average cost. Direct impact on cost of goods sold and reported profit.
A written agreement between a CPA and their client that defines the nature of the engagement (compilation, review, audit, tax), the responsibilities of each party, the fees (flat fee or hourly rate), the deliverables, and the deadlines. Required under CPA Canada’s professional standards.
Revenue minus the cost of goods sold, expressed in dollars or as a percentage of revenue. Indicates how much the business retains from each dollar of sales before general operating expenses. A key indicator of direct operating profitability and pricing.
Net income divided by total revenue, expressed as a percentage. Measures what the business retains after all expenses (cost of goods sold, operating expenses, interest, and taxes). The ultimate measure of financial profitability. Allows for comparison with other businesses in the same industry.
An intermediate level of assurance provided by a CPA, falling between a compilation and an audit. Involves analytical procedures and inquiries to management, but does not include comprehensive audit tests. Moderate level of assurance: The CPA concludes that nothing has come to their attention that would lead them to conclude that the financial statements are not fair. Often requested by banks.
Supplementary information accompanying the financial statements: accounting policies, details of significant line items, contractual commitments, contingencies, and events after the balance sheet date. These are an integral part of the financial statements and are essential for understanding the figures.
Liabilities due within the next 12 months: accounts payable, current portion of long-term debt, accrued liabilities (interest, wages, taxes), source deductions payable, GST/QST payable, declared dividends. A component of working capital.
Liabilities with maturities exceeding 12 months: mortgages, term loans, bond debt, long-term leases, deferred taxes. These are often subject to covenants that require certain financial ratios to be maintained; failure to comply with these covenants triggers a technical default.
Generally Accepted Accounting Principles (GAAP) / Accounting Standards for Privately Held Businesses. Canadian accounting framework used by private businesses (SMEs, NPO’s that do not issue shares) to prepare their financial statements. An alternative to IFRS for unlisted companies. Easier to apply.
An organized structure of all the accounts used to classify a business’s transactions: revenue, expenses, assets, liabilities, and equity. It is the backbone of accounting. Each software program (QBO, Sage, Acomba, Xero) comes with a basic chart of accounts that can be customized by industry.
In-depth article: What Is a Chart of Accounts?.
An accounting estimate of accounts receivable that are unlikely to be collected, based on collection history and the age of the receivables. It reduces the net value of accounts receivable on the balance sheet and creates an expense on the income statement. Tax-deductible only for actual or highly probable losses.
Verification that the transactions in the general ledger match the bank statement for the period. Detects data entry errors, duplicate entries, missing transactions, unrecorded bank fees, and potential fraud. To be performed monthly as a basic control.
Total debt (total liabilities or long-term debt) divided by total assets or equity. Measures a business’s financial leverage. A high ratio indicates greater risk but also the potential for a higher return on equity. Banks often set maximum thresholds (e.g., 2:1).
A measure of a business’s ability to meet its short-term obligations. Current ratio = current assets / current liabilities (ideally above 1.5). Quick ratio = (current assets - inventory) / current liabilities (more conservative). Ratios monitored by banks.
In-depth article: Understand Key Financial Ratios.
Money received in advance for services that have not yet been rendered. Recorded as a liability on the balance sheet until the service is delivered, at which point they are transferred to revenue on the income statement. Common examples include subscription fees, lump-sum payments, and customer down payments.
The sales level at which revenue exactly covers all expenses (fixed and variable). Below this level: a loss. Above this level: profit. An essential calculation for any entrepreneur starting a business, launching a new product, or making a major investment decision. Formula: fixed expenses / (unit price - variable unit cost).
The foundation of all accounting: without rigorous bookkeeping, no reliable financial statements are possible.
In-depth article: Bookkeeping for Entrepreneurs. Service: Bookkeeping.
Accounting (or professional services) engagements that have begun but have not yet been billed. These represent time and costs invested that have not yet generated realized revenue. Monitoring this is crucial for the profitability of an accounting firm. Recorded as an asset on the balance sheet, valued based on hours worked at the expected billing rate, less an allowance for losses.
| Level | Compilation | Review Engagement | Audit |
|---|---|---|---|
| Level of assurance | None | Moderate | High |
| CPA Procedures | Compilation of Figures | Analytics + Interviews | Tests, Confirmations, Controls |
| Relative Cost | $ | $$ | $$$$ |
| Requested by | Tax Filing, SMEs | Banks, certain lenders | Large NPOs, publicly traded companies, certain grants |
| Applicable Standard | Compilation Engagement Standard | CSRE 2400 | NCA |
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Mandatory federal employer-employee contributions to fund unemployment, sickness, caregiver, and compassionate care benefits. In Quebec, the employee contribution rate is lower (1.32% in 2026 vs. 1.64% in the rest of Canada) because the QPIP covers parental benefits. Self-employed individuals do not contribute to EI unless they voluntarily enrol.
Goods or services provided by the employer to the employee in addition to wages: company car, group insurance paid by the employer, free parking, allowances, meals. Must be valued, added to the employee’s income on the T4/RL-1 form, and subject to source deductions. Some benefits are entirely tax-free.
In-depth article: Management of Taxable Benefits.
An organization that manages labour relations, payroll, and employee benefits in the construction industry in Quebec. It operates a specific payroll system with its own forms, contractually agreed-upon rates, and reporting requirements. All employers in the industry are subject to this system: the CCQ collects union dues, employee benefits, and pension contributions.
Commission on Standards, Equity, Occupational Health, and Safety. Mandatory employer contribution to cover workplace accidents and occupational diseases. The rate varies depending on the industry (from less than 1% to more than 10% for construction) and the employer’s claims history.
A substantial unilateral change in working conditions by the employer (pay cut, significant demotion, unplanned relocation) that is equivalent to termination of employment without it being formally announced. The employee may resign and claim the same rights as in the case of a dismissal.
An employer’s contribution to an employee’s RRSP, often in the form of a matching plan or a percentage of salary. For the employee, this is a taxable benefit that reduces their personal RRSP contribution room. For the employer, it is immediately deductible as a payroll expense.
Mandatory employer contribution in Quebec, calculated based on total payroll. Variable rate ranging from 1.65% to 4.26% in 2026, depending on the size of the payroll (with exemptions for the first few dollars depending on the sector). Not deducted from the employee’s pay, it is an employer cost. It funds the Quebec healthcare system.
Quebec’s Labour Standards Act, which establishes minimum working conditions: minimum wage, annual vacation (2-4 weeks depending on length of service), statutory holidays (8 per year), overtime (50% after 40 hours), notice of termination, parental leave, psychological harassment. Applies to the majority of Quebec employees.
calculating source deductions (income tax, QPP, EI, QPIP, FSS)… weekly, biweekly, semi-monthly, or monthly
In-depth article: Required Information on a Pay stub. Service: Payroll Management.
An electronic document issued by the employer to Service Canada when an employee leaves their job (layoff, resignation, parental leave, sick leave). Must be issued within 5 calendar days of the employee’s separation. Required for the employee to apply for Employment Insurance benefits.
A savings plan in which the employer makes contributions based on the business’s profits to the retirement accounts of eligible employees. The contributions are tax-deductible for the employer in the current year and are not taxable for the employee until withdrawal. The contribution limit is tied to the RRSP limit.
Mandatory employer-employee contributions fund maternity, paternity, parental, and adoption benefits in Quebec. This is distinct from the federal EI program for these specific benefits (which is why the EI rate is lower in Quebec). The QPIP offers more generous benefits than the federal program for new parents in Quebec.
Mandatory contributions split between employer and employee (or paid entirely by the self-employed individual, who pays both portions). Funds retirement, disability, and survivors’ pensions in Quebec. The combined rate and the maximum eligible earnings are adjusted annually (base rate of 12.8% combined + an additional 8% in 2026). Federal counterpart: CPP.
Quebec-based accounting software designed for small and medium-sized businesses, developed by ACCEO Solutions. Widely used by accounting firms in Quebec, particularly in traditional industries (construction, distribution, manufacturing). Offers accounting, payroll, business management, and inventory features. A local alternative to QBO and Sage. Available in on-premises and cloud-based versions (Acomba X).
Software page: Acomba on Bankeo.
Professional software used by CPAs to prepare year-end filings, produce financial statements, and perform compilation engagements, review engagements, and audit engagements. Automates calculations, cross-checks, and presentation in accordance with NCECF/IFRS standards. The industry standard in Canadian accounting firms.
An accounting model in which data is stored and processed on remote servers accessible via the Internet, rather than locally on the user’s computer. It allows simultaneous access by the business owner and their accountant, automatic bank integration, continuous backups, and mobility. Current standards: QBO, Xero, Sage Business Cloud, FreshBooks, Wave.
An app for automatically scanning and organizing invoices and receipts using OCR (optical character recognition) and artificial intelligence. Used by accounting firms to automate the collection of supporting documents from clients. Integrates natively with QBO, Xero, and Sage.
The most widely used cloud-based accounting software among small and medium-sized businesses in Canada, developed by Intuit. It enables bookkeeping, invoicing, expense tracking, integrated payroll (via QuickBooks Payroll), and financial reporting. Automatic bank integration with most Canadian financial institutions. Several subscription tiers (Simple Start, Essentials, Plus, Advanced).
Software page: QuickBooks on Bankeo.
Accounting software suite offering solutions for bookkeeping, payroll, and financial management. Sage 50 (formerly Simply Accounting) is still widely used by accounting firms and small and medium-sized businesses in Quebec due to its on-premises installation and robustness. Sage 100 and Sage Intacct are geared toward medium-sized businesses. Sage Business Cloud is the modern cloud-based solution.
Software page: Sage on Bankeo.
Professional tax return preparation software used by CPAs and accounting technicians in accounting firms. Taxprep (by Wolters Kluwer / Cantax) is the industry standard in Quebec for T1, T2, CO-17, and complex forms. ProFile (by Intuit) is also widely used. These programs enable automated calculations and electronic filing with the tax authorities.
A cloud-based accounting software originally from New Zealand and a direct competitor to QBO. Less widespread in Quebec but present in the English-speaking Canadian market and among modern accountants. Modern interface with strong third-party integrations (over 1,000 connected applications). Particularly popular among e-commerce businesses and tech companies.
Software page: Xero on Bankeo.
| Software | Target | Main strength | Deployment |
|---|---|---|---|
| QuickBooks Online (QBO) | Versatile SMEs | Most widely used in Canada, bank integrations | Cloud |
| Sage 50 / Sage Business Cloud | SMEs, firms | Robustness, On-Premises or Cloud Accounting | On-Premises + Cloud |
| Acomba | Traditional Quebec SMEs | Local, Business Management, Payroll | On-Premises + Cloud |
| Xero | E-commerce, Technology | Over 1,000 integrations | Cloud |
| Wave | Self-Employed Individuals | Free for basic features | Cloud |
For more information: The Most Popular Accounting Software Programs Used by Entrepreneurs in Quebec.
Bankeo is the first player to build a structured practice around this professional role
selection from a network of vetted partner CPAs
An accountant or accounting firm that specializes in a specific sector (construction, real estate, restaurant, technology, NPO, healthcare, e-commerce). Provides in-depth knowledge of specialized deductions, sector-specific tax rules (CCQ for construction, SR&ED for technology, NPO rules, and handling tips in the restaurant industry), and industry-specific software.
A federal financial institution that provides financing, venture capital, and advisory services to Canadian small and medium-sized enterprises (SMEs). Its mandate complements that of commercial banks: it finances projects that traditional banks refuse to fund (patient capital, unsecured loans, equity financing). Specific programs for technology, the green transition, the next generation of entrepreneurs, and exports.
An executive role that oversees a business’s overall financial strategy: financing, growth, risk management, investor relations, and M&A. Differs from an accountant: does not prepare bookkeeping records or financial statements personally. May or may not be a CPA, depending on the size of the business. In an SME, this role is often filled by the founder or by a part-time external CFO consultant.
A broad term referring to a professional who performs accounting work: bookkeeping, payroll, financial reporting, taxation, and financial statements. May be a CPA, accounting technician, or accounting clerk, depending on their qualifications. In an accounting firm, they are often the primary point of contact for small and medium-sized business (SME) clients. In Quebec, only CPAs can legally certify financial statements.
In-depth article: Accountant: What Do They Really Do for Entrepreneurs?.
Conditions imposed by the lender in a financing agreement: financial ratios that must be maintained (debt-to-equity ratio, liquidity ratio, debt service coverage ratio), dividend restrictions, quarterly reporting requirements, and investment limits. Failure to comply triggers a technical default, which may result in the loan being called in.
An official designation awarded by CPA Canada and the Ordre des CPA du Québec following university education (bachelor’s degree in accounting or equivalent), a 24- to 30-month internship, and successful completion of the Common Final Examination (CFE). Only CPAs may sign vetted financial statements, conduct audits, or legally certify financial information. They are regulated members subject to continuing education requirements.
A loan secured by a commercial, industrial, or multi-unit residential property (minimum of 5 units). Interest rates are generally more favourable than those for unsecured loans, with a repayment term of 15 to 25 years. The property serves as collateral for the lender, in the event of default, the lender may take possession of and sell the asset.
A Quebec government-owned corporation that provides financing, loans, and loan guarantees to Quebec businesses. Sector-specific programs (technology, manufacturing, agriculture, succession planning), export support, and capitalization assistance. Often partners with commercial banks to share the risk on strategic projects.
Act to Modernize Legislative Provisions Regarding the Protection of Personal Information in Quebec, in effect since 2022 with compliance phases extending through 2024. Imposes obligations on businesses of all sizes: appointment of a data protection officer, record of processing activities, explicit consent, right to data portability, and mandatory incident reporting. Penalties of up to $25 million or 4% of global revenue.
A revolving line of credit offered by a bank or credit union. The business borrows as needed up to a pre-approved limit, repays, and borrows again based on its cash flow. Variable interest rate (often the prime rate plus a margin based on risk). An essential tool for managing working capital and covering seasonal fluctuations.
A bank loan with a fixed lump-sum amount, a fixed or variable interest rate, and a defined repayment schedule over a specific period (5, 10, or 15 years). Used to finance asset acquisitions, business expansion, or specific projects. Monthly payments include both principal and interest, similar to a residential mortgage.
EBITDA divided by total annual debt service (principal + interest on all loans). Measures the business’s ability to repay its loans with its operating cash flow. Canadian banks often require a minimum ratio of 1.2x to keep the loan in good standing.
A pre-seed and seed funding instrument created by Y Combinator. The investor provides funds in exchange for the right to receive shares during a future funding round, at a predefined valuation cap or at a discount. No debt, no interest, no maturity date. Widely used in Quebec’s tech ecosystem.
Non-repayable financial assistance provided by a government level (federal, provincial, regional, municipal) to support a specific project: hiring, R&D, training, exports, green equipment. Strict eligibility criteria; accountability required. Examples: PAMT, Mitacs, NRC-IRAP, Prime-Vert, MEIE programs. The grant received is generally taxable.
Technical and operational role: recording journal entries, bank reconciliation, accounts payable and receivable, preparing T4/RL-1 and TP-4 forms, payroll records, and pre-billing. Typically works under the supervision of an accountant or a CPA. College diploma in accounting and management (3 years). Not authorized to certify financial statements.
In-depth article: Clerk, Technician, or CPA?
Good to Know, RDTOH and Passive Income in 2026
If your corporation (CCPC) generates more than $50,000 in passive income (rental income, portfolio dividends, interest), the SBD threshold is reduced by $5 for every $1 exceeding that threshold. At $150,000 in passive income, the SBD threshold drops to zero, and your entire business is taxed at the general corporate rate. Well-coordinated RDTOH planning by your accountant is key.
Accountants handle bookkeeping, financial statements, and routine tax returns (T1, T2, GST/QST). Tax specialists focus on strategic tax planning: optimizing business structures (estate freeze, Gesco), tax disputes, business sales, and complex regulations (TOSI, RDTOH). In Quebec, a tax specialist is often a CPA with a specialization in taxation (e.g., M. Fisc.).
The RDTOH (refundable tax on dividends) is a federal mechanism that taxes a CCPC’s passive income at a high rate and then refunds a portion of that tax when the corporation pays taxable dividends to shareholders. It is designed to eliminate the tax deferral benefit on investment income.
The TOSI (Tax on Split Income) rules tax dividends or interest paid by a private corporation to a family member who does not actively contribute to the business at the highest marginal tax rate. Several exceptions apply, including being 25 years of age or older with a 10% ownership stake, the owner’s retirement, and certain spousal situations.
An estate freeze is a tax strategy that transfers a business’s future growth to heirs or a family trust, while freezing the current value of the shares in the founder’s name. It generally involves a share exchange (Section 86) or a rollover (Section 85). When combined with the LCGE, it multiplies the tax exemption among family members.
Registration is mandatory once taxable sales exceed $30,000
A corporation files the T2 and CO-17. A self-employed individual files the T1 and TP1 with Schedule T2125.
A CCPC eligible for the SBD pays approximately 12.2% combined
The small business deduction (SBD) allows a CCPC to be taxed
At least 6 years after the end of the relevant tax year, in accordance with the requirements of the CRA and Revenu Québec. Documents include invoices, receipts, bank statements, contracts, accounting records, and notices of assessment. For certain documents (e.g., legal documents, permanent records), the retention period may be unlimited until the end of the corporation’s existence plus 2 years.
Incorporating becomes worthwhile once annual profits reach $80,000-$100,000, thanks to tax deferral (the SBD rate)
The main warning signs are: lack of communication or responsiveness, repeated errors in tax returns, lack of strategic advice, unjustified fee increases, insufficient expertise in your industry, and your business growing beyond the capabilities of your current firm. The transition is carried out via a transfer letter and the retrieval of tax and accounting records.
A Gesco is a corporation (société par actions) owned by a professional
Our team analyzes your needs (industry, company size, required services, budget, language, location) during an initial consultation call, then selects the ideal accountant from our network of over 1,500 accountants throughout Quebec. You’ll receive complete information about the selected accountants, including the contract and service catalogue, so you can make your choice with full transparency.
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Find my accountantCe Quebec Accounting Glossary 2026 covers the 170+ essential terms that every Quebec entrepreneur will encounter throughout their relationship with an accountant, a tax specialist, or a financial institution. From the RDTOH to the TOSI, from estate freeze to the CCA, including structures (SPA, SENC, Gesco), taxation, and software, you now have a go-to resource to help you understand your accountant and make informed financial decisions. Bookmark this page: the six follow-up articles to be published in Q3 2026 (RDTOH, TOSI, estate freeze, LCGE, Gesco, Article 87) will delve deeper into the most complex topics.
General information provided for informational purposes only, based on known 2026 tax rules. It is not a substitute for the advice of a Chartered Professional Accountant (CPA): always consult a professional regarding your specific situation.
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