Section 6 – Businesses
Business income is reported on an accrual basis, i.e. revenues have to be recorded in the taxation year they are earned, regardless of when the cash is received, and expenses are deducted in the year they are incurred, regardless of when they are actually paid.
In general, the fiscal period of an individual who carries on a business must end on December 31. This measure also applies to a partnership of which a professional corporation carrying on the practice of an accountant, dentist, lawyer, notary, medical doctor, veterinarian or chiropractor is a partner as well as to a partnership of which one member is an individual, a professional corporation or another partnership, itself subject to this measure.
An optional method makes it possible to elect to retain a year-end date other than December 31. This election has to be made at the end of the first fiscal year for taxpayers who are starting a business and has to be renewed each year. Taxpayers may elect to have a December 31 year-end in a subsequent year, in which case it becomes irreversible.
Taxpayers who choose the optional method must annually add to income the estimated business income that will be earned between the year-end date for the current year and December 31. This estimate is equal to the business income earned in the current fiscal year prorated based on the number of days during the rest of the calendar year.
Example: An individual’s year-end date is March 31, 2018. In his/her 2018 income tax return, he/she will have to include the net business income earned during the year ended March 31, 2018 plus an estimated amount equal to 9/12 of income for the same fiscal year. The additional amount that was added to income in 2017 has to be deducted.
Taxpayers whose business is registered in the enterprise register of Quebec have to update the information therein by filing an annual update declaration. If there is a change during the year, a current updating declaration is also required. These obligations may be fulfilled on-line on the Internet site of the Registraire des entreprises du Québec. 1
This document has been updated on August 31st, 2018 and reflects the state of the Law, including draft amendments, at that date.