Managing your taxes as an entrepreneur can be intimidating. The rules and instructions are often complex. And if you don’t pay your taxes properly, you can end up facing penalties. \nOne reason taxes can seem so complex is because the rules vary by province. But once you learn the rules that apply to you and your business, you’ll see it’s not as complicated as it seems. \nTo help take some of the confusion out of paying your taxes, here’s what you need to know about Ontario tax rates. This guide will look at sales tax, corporate tax, and personal income tax information for entrepreneurs in Ontario. \nSales tax in Ontario\n \n \nOntario uses the Harmonized Sales Tax (HST). The HST was introduced in 2010, and it combined the federal goods and services tax (GST) retail sales tax (RST). \nAs a result, there’s just one Ontario sales tax rate you have to collect and pay. The HST rate is 13%. \nDoes your business need to collect HST?\n \n \nYou need to collect the HST if: \nYou are not a small supplier.You make taxable sales.\n \n \nSmall suppliers\n \n \nSmall suppliers are businesses that do not earn more than $30,000 within a one year period. If you are near the threshold, you should read the rules for when you should register to collect HST. You may be required to register within a month of when you exceeded $30,000 in income. \nTaxable sales\n \n \nMost goods and services are subject to the HST, but there are exceptions. To help you find out if your business makes taxable sales, here are some examples of what’s exempt. \nTax-exempt goods and services\n \n \nSale of existing housingLong-term rentals of residential accommodation (over one month)Health servicesChild care servicesLegal aidMany educational servicesMusic lessons\n \n \nZero-rated supplies\n \n \nIn addition to tax-exempt goods and services, there are also some supplies that are “zero-rated,” meaning the Ontario tax rate is 0%. You don’t need to charge HST on these supplies, but you may be able to claim tax credits related to these sales. \nBasic groceries (milk, bread, vegetables)Agricultural products (grain, raw wool)Feminine hygiene productsExportsFarm livestockFishery productsPrescriptions and drug-dispensing servicesCertain medical devices (such as hearing aids and artificial teeth) \n \n \nRegister to collect HST\n \n \nIf your business sells taxable goods and is over the $30,000 small supplier limit, then you need to register to collect HST. You can register online, by mail, or by calling 1-800-959-5525. \nYou’ll just need to have some basic information ready such as a description of the business, the social insurance numbers of all the owners, and the annual revenue (or a reasonable estimate if it’s a new business). \nHST is handled by the CRA. So to pay your HST, you need to file a GST/HST return with the CRA. There are a number of methods for doing that, including the GST/HST NETFILE online service or using the My Business Account online portal on the CRA website. \nFor more help, check out this guide for filing your first GST/HST return. \nOut of province sales\n \n \nYou will need to charge a different sales tax rate if you sell to customers in different provinces. Typically will need to charge the applicable provincial tax rates for the province or territory in which the product is supplied to the customer. \nFor more details, take a look at Canada’s Place of Supply rules. \nOntario corporate tax rates\n \n \nIf your business is a corporation rather than a sole proprietorship, you’ll need to pay corporate tax. And there are two corporate tax rates you’ll need to know. \nThe Ontario tax rate for corporations is 11.5%. However, the Ontario Small Business Deduction (SBD) reduces that rate for the first $500,000 of income. The lower rate is currently 3.2%. \nIn addition, there’s a manufacturing and processing tax credit that lowers the Ontario corporate tax rate to 10%. Businesses can qualify for that credit if they are involved in manufacturing, processing, fishing, farming, mining, or logging. \nExample tax calculation\n \n \nFor example, a corporation that made $650,000 in 2020 would pay the following corporate tax. \n$500,000 taxed at 3.2% = $16,000 \n$150,000 taxed at 11.5% = $17,250 \nTotal: $33,250 \nOntario corporate tax credits\n \n \nThere are a number of tax credits for businesses in Ontario. These credits can help businesses lower costs, hire and train workers, and be more competitive. Here are some of the Ontario corporate tax credits you should know about. \nBook publishingComputer animation and special effectsFilm and televisionProduction servicesSound recordingResearch and innovationCommunity food program donation for farmersTraining: Employers who hire and train workers for certain skilled trades or get involved with a post-secondary co-operative education program may be eligible.Interactive digital media: Businesses can be eligible if they make products such as video games, simulators, and educational software.\n \n \nPersonal income tax in Ontario\n \n \nPersonal income tax can be a little more complex than corporate tax because there are five different Ontario tax rates that govern what you pay. The income you earn up to a specific threshold gets taxed at one rate, and income above that threshold gets taxed at a higher rate. \nKeep in mind that if your business is a sole proprietorship, your business income is considered part of your personal income and is taxed the same way. \nOntario tax brackets for 2020\n \n \nHere are the personal income tax brackets for Ontario in 2020:\nTaxable Income - 2020 BracketsTax Rate$0 to $44,7405.05%over $44,740 up to $89,4829.15%over $89,482 up to $150,00011.16%over $150,000 up to $220,00012.16%over $220,00013.16%\n\n \nExample income tax calculation\n \n \nAn individual or sole proprietorship that earns $80,000 would pay the following Ontario tax rates: \nThe first $44,740 taxed at 5.05% = $2,259.37 \nThe remaining $35,260 taxed at 9.15% = $3,226.29 \nTotal: $5485.66 \nDeductions for entrepreneurs\n \n \nDon’t forget that if you’re an entrepreneur, there are probably many expenses you can claim as deductions. These deductions can be used to reduce your taxable income, which can lower the Ontario tax rates you pay. \nSome of the things you can deduct include: \nHome office expensesVehicle expensesEmployee wagesAdvertisingInsuranceContract labourMeals and Entertainment\n \n \nBut remember, to be deductible, these expenses need to be related to generating business. In addition, for expenses like your vehicle or home, you can typically only deduct a portion of the expenses. For example, if you use your car for both work and personal use, you’ll likely only be able to deduct half of your vehicle expenses. \nIncome tax credits and benefits\n \n \nThere are many tax credits and benefits you can claim to reduce the taxes you pay. There are two types of tax credits: non-refundable and refundable. Non-refundable tax credits can be used to reduce the amount of taxes you owe, but any excess credits are not given to you. Refundable tax credits can be available even when you don’t owe tax. Here are some examples of each. \nNon-refundable tax credits\n \n \nLow-income Individuals and Families Tax Credit — This credit can help low-income workers get tax relief. To be eligible, your individual income must be below $38,500, or your net family income must be below $68,500. \nCommunity Food Program Donation Tax Credit — This credit is for individuals or businesses that donate agricultural products to an eligible food program. It can be claimed in addition to the charitable donation tax credit. \nRefundable tax credits\n \n \nOntario Child Benefit — This benefit is for low to moderate-income families and is aimed at helping with the costs of raising children. It can provide up to $1,434 per child per year. \nOntario Trillium Benefit — This benefit combines three different tax credits that can help you pay for energy costs as well as sales and property tax. \nOntario Sales Tax Credit — This credit can help with the sales tax you pay. You can receive up to $313 and an additional $313 for your spouse or partner and each dependent child. \nOntario Energy and Property Tax Credit — This credit can help you with property tax and the sales tax on energy costs. You may be eligible if you pay property tax, lived on a reserve, or lived in a public long-term care home. \nNorthern Ontario Energy Credit — This credit can help with paying the higher energy costs if you live in Northern Ontario, including Algoma, Cochrane, Kenora, Manitoulin, Nipissing, Parry Sound, Rainy River, Sudbury, Thunder Bay, Timiskaming. \nThere are tax credit calculators that make it simple to help you find out which Ontario tax credits you may be eligible for. \nWhen to pay your taxes\n \n \nIf you still have a debt owing for the 2019 tax year, the deadline to pay is September 30, 2020. For your 2020 taxes, you’ll need to file your return by April 30, 2021. \nIf you register for a CRA online account, it can make it easier to manage your taxes and deadlines. It will let you manage your tax information, see the amounts you owe, and make payments quickly and easily. \nNow you should have a better understanding of Ontario tax rates and how to pay them. You should be able to figure out which taxes and credits apply to your business, and how to avoid any penalties.