Canadian Tax Glossary

Plain-English definitions for the Canadian tax terms that appear across TaxKiln guides and calculators -- with the Income Tax Act section or CRA reference in brackets where it load-bears.

Last reviewed: June 1, 2026

Guidance, not advice. We explain the rules, we don't assess your situation. Always seek financial or tax advice from your accountant, or contact CRA. Read our editorial scope →

ABIL-- Allowable Business Investment Loss: A special, more generous capital loss on shares or debt of a small business corporation that has failed: half the loss can be deducted against ALL income (not just capital gains), unlike an ordinary capital loss.
BN-- Business Number: The unique 9-digit identifier the CRA assigns to a business, with program-account suffixes for GST/HST (RT), payroll (RP), and corporate income tax (RC).
Capital gains inclusion rate: The portion of a capital gain that is added to taxable income. In Canada it is 50% -- half the gain is taxed at your marginal rate. (The 2024 proposal to raise it to 66.67% above $250,000 was deferred and then cancelled.)
CCA-- Capital Cost Allowance: Canada's version of depreciation: you deduct the cost of capital property (tools, vehicles, equipment, buildings) over several years rather than all at once, at a rate set by the property's CCA class. You can claim from zero up to the maximum each year.
CCPC-- Canadian-Controlled Private Corporation: A private corporation resident in Canada that is not controlled by non-residents or public companies. CCPC status unlocks the small business deduction, the lifetime capital gains exemption on its shares, and other preferences.
CPP-- Canada Pension Plan: Canada's contributory public pension. The self-employed pay BOTH the employee and employer halves (the full 11.9% base rate) on net self-employment income above $3,500, calculated on Schedule 8.
CPP2-- Second Additional CPP Contribution: A second tier of CPP introduced in 2024, charging an extra contribution on earnings between the first and second earnings ceilings. The self-employed pay the full 8% on that band.
Departure tax: When you emigrate from Canada you are deemed to have disposed of most property at fair market value, triggering tax on the accrued (unrealised) capital gains as if you had sold everything the day you left.
Dividend tax credit: A credit that offsets personal tax on dividends to account for the corporate tax already paid on those profits -- Canada's version of dividend imputation. Larger for eligible dividends than non-eligible.
EI-- Employment Insurance: Canada's unemployment-insurance program. The self-employed do not pay EI by default but can opt in to access special benefits (maternity, parental, sickness, caregiving).
Eligible dividends: Dividends paid out of corporate income that was taxed at the general (higher) corporate rate. They carry a larger gross-up and a larger dividend tax credit than non-eligible dividends, reflecting the higher corporate tax already paid.
FHSA-- First Home Savings Account: A registered account combining RRSP-style deductible contributions with TFSA-style tax-free withdrawals, used to save for a first home. Up to $8,000/year and $40,000 lifetime.
Gross-up: The amount a taxable Canadian dividend is increased by on your return before the dividend tax credit is applied. It approximates the pre-tax corporate income, so the integration math works (you get credit for tax the company already paid).
GST/HST-- Goods and Services Tax / Harmonized Sales Tax: Canada's value-added consumption tax. GST is 5% federally; in provinces that harmonized, it is combined with the provincial portion into a single HST of 13-15%. You must register once your taxable revenue exceeds $30,000 over four consecutive quarters.
Instalments: Quarterly pre-payments of tax required when your net tax owing exceeds $3,000 ($1,800 in Quebec) in the current and either of the two prior years. Due March 15, June 15, September 15, December 15.
ITC-- Input Tax Credit: The GST/HST you paid on business purchases, which a registrant can claim back against the GST/HST it collected. The mechanism that stops the tax cascading at each stage.
LCGE-- Lifetime Capital Gains Exemption: A once-in-a-lifetime exemption on capital gains from selling qualified small business corporation shares (or qualified farm/fishing property). $1,250,000 for 2025 dispositions.
NETFILE: The CRA's service for individuals to file their own T1 electronically using certified tax software. EFILE is the equivalent service used by tax preparers filing on a client's behalf.
NOA-- Notice of Assessment: The CRA's statement, issued after it processes your return, showing what it assessed, your refund or balance owing, and your updated RRSP room. A Notice of Reassessment is issued if the CRA later changes the assessment.
Non-capital loss: A business or property loss that exceeds your other income for the year. It can be carried back 3 years or forward 20 years to offset income in those years.
PSB-- Personal Services Business: An incorporated 'employee' -- where the worker would be an employee of the client but for the corporation. PSB income is denied the small business deduction and most expense deductions, and taxed at a punitive rate, so it is a major incorporation risk for solo contractors.
Quick Method: An optional simplified GST/HST accounting method for smaller businesses: you remit a reduced flat percentage of your GST/HST-included sales instead of tracking every input tax credit. Often produces a small net benefit for service businesses.
RRSP-- Registered Retirement Savings Plan: A registered account where contributions are deducted from income (pre-tax) and growth is deferred until withdrawal, when it is taxed as income. Contribution room is 18% of prior-year earned income up to an annual limit.
SBD-- Small Business Deduction: A reduced federal corporate tax rate on the first $500,000 of active business income earned by a CCPC. The reason many profitable sole proprietors consider incorporating.
T1-- Income Tax and Benefit Return: The personal income tax return individuals file each year for the calendar year, due April 30 (June 15 to file if you or your spouse are self-employed, though any balance owing is still due April 30).
T2-- Corporation Income Tax Return: The annual return a corporation files (separate from its owners' personal returns). Due six months after the corporation's fiscal year-end.
T2125-- Statement of Business or Professional Activities: The form a sole proprietor or partner files with the T1 to report self-employment income and expenses. This is where gross revenue, business expenses, and net business income are calculated.
Taxpayer relief: The CRA's discretion to cancel or waive penalties and interest in situations such as extraordinary circumstances, CRA delay, or inability to pay. Requested on Form RC4288, generally limited to the prior 10 years.
TFSA-- Tax-Free Savings Account: A registered account where contributions are after-tax but all growth and withdrawals are completely tax-free. Annual contribution room accumulates from age 18. Note: the US does not recognise the TFSA, so it is a trap for US citizens in Canada.
TOSI-- Tax on Split Income: Anti-income-splitting rules that apply the top marginal rate to certain income a business owner diverts to family members (e.g. dividends to a spouse who does not work in the business), unless an exclusion applies.
UCC-- Undepreciated Capital Cost: The remaining balance in a CCA class after subtracting the CCA already claimed. Next year's CCA is calculated on the UCC, so the deduction shrinks over time (for declining-balance classes).
VDP-- Voluntary Disclosures Program: A CRA program that lets taxpayers correct past non-compliance (unreported income, unfiled returns) before the CRA contacts them, with relief from penalties and possible relief from prosecution if the disclosure qualifies.