Archive for Grant Gilmour

Formula For Success: Tax = Money X Politics

The Income Tax Act (ITA) is a lot like those word problems we all remember from grade school math. The word problem is a story told in numbers. Tax is a story told in numbers but the characters in the story are real life politicians and voters.

Let us take a humorous approach and give a real life example. Imagine you are a politician looking to get re-elected. You have the power to change the ITA because you currently hold office. You decide to change the ITA to encourage voters to vote for you. Let’s say you want to get young families to vote for you. You introduce a new tax credit that only young families can use. The tax credit gives a tax refund to families with children in registered sports activities. The formula in your head is: Read More

Written by | Posted in Income Tax • Income Tax Act

Real Estate Expenses During Pre-Acquisition

Grant Gilmour, Tax Advisor, Tax Blog, Vancouver, Canada, TaxConnections

There are various real estate expenditures that are deductible to the corporation and others that are capitalized or allocated to inventory. In this FAQ, we will discuss the real estate expenses that are deductible during the pre-acquisition phase as an operating expense to the corporation in the fiscal year that expenditures were incurred.

There are many “soft” costs in real estate such as representation costs, site investigation costs and financing expenses.

Representation costs are eligible for a deduction for amounts paid in the year. Examples of these costs are rezoning applications, project planning and preliminary design costs. Read More

Written by | Posted in Canada • International • Real Estate

Passive Investment Income Proposed Tax Changes

The Canadian tax system is built on the concept of tax integration. Based on the view of principles of fairness and neutrality, tax integration aims to ensure that an individual is indifferent between earning income through a corporation or directly as the after tax results should be the same.

Currently corporate tax rates are lower than personal tax rates; however, when after tax profits earned in a corporation flow out to an individual the net result is comparable to the net result had the individual earned it directly. The difference occurs when a corporation’s after tax profits are saved inside the corporation as a passive investment to be flowed out to the individual at a later date. Read More

Written by | Posted in Canada • Tax Changes

How Does Part XIII of Income Tax Affect Non-Resident Corporations?

Part XIII income tax is a tax withheld by a payer when they pay a non-resident. Not all income is subject to this tax. Generally passive income is subject to Part XIII tax.

Discussion:

The most common types of Canadian income subject to Part XIII tax are:

1. Pensions

2. Annuities

3. Management fees

4. Interest

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Written by | Posted in Canada

Canada Revenue Agency – Important Dates for 2018

Canada Revenue Agency (CRA) has a number of dates and deadlines of importance to corporations. Failure to comply with these deadlines may raise a red flag with CRA, which in turn may trigger an audit.

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Written by | Posted in Canada • Corporate • Small Business

Petty Cash Management: A Good Practice System

Petty cash is a float that gets replenished monthly and is a convenient way to reimburse staff for company purchases or to cover minor expenses. Petty cash is considered a current asset on the balance sheet.

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Written by | Posted in Canada • International

Small Business Tax Rule Changes & Risk Assessment Tools for Canadians in 2018

The proposed small business tax rule changes are expected to be in place January 1, 2018 and will impact incorporated small businesses in Canada. These laws will hit those splitting income in families and saving assets inside corporations. To help our clients assess their exposure we have developed a Risk Assessment Tool (RAT). We hope you find the name amusing.

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Written by | Posted in Canada • Small Business • Tax Changes

Declaration of Tax Residence for Entities in Canada

In December 2016, an additional section was added to the Income Tax Act (ITA) that requires Canadian financial institutions to collect certain information about your company. The information is not automatically sent to the Canada Revenue Agency (CRA); however, if the financial institution determines the information needs to be reported to the CRA they will. CRA will then determine if the information needs to be sent to the foreign government related to the company’s residence or the company’s controlling person’s residence. Exchanging information is a new international standard of tax cooperation.

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Written by | Posted in Canada • International

Passive Investment Income Proposed Tax Changes

Grant Gilmour, Canada,

What are the proposed tax changes on passive investment portfolios held inside a private corporation?

The Canadian government is proposing changes on tax treatment of passive income on investment portfolios held inside a private corporation to neutralize the financial advantages of such holdings. This targets private corporations being used as investment vehicles for retirement. Read More

Written by | Posted in International

Canada Tax Help – Learn About A Schedule 20

What is a schedule 20 as part of a T2 corporate tax return?

Schedule 20 is used to calculate an additional tax on non-resident corporations. This tax is called Part 14 or ‘branch’ tax and relates to non-resident corporations that earn income from a business carried on in Canada (see International FAQ #24) and have a permanent establishment in Canada (see FAQ #127). Read More

Written by | Posted in International

Converting Surplus Income Proposed Tax Changes (Canada)

 

The Canadian government is proposing tax changes to prevent private corporations from converting surplus income to a lower-taxed capital gain and stripping it from the corporation. This targets larger private corporations.

The Canadian tax system is built on the concept of tax integration. Based on the view of principles of fairness and neutrality, tax integration aims to ensure that an individual is indifferent between earning income through a corporation or directly as the after tax results should be the same.

Read More

Written by | Posted in Canada • International • Tax Changes

Canadian Tax Help – Income Sprinkling Proposed Tax Changes

What are the proposed tax changes on sprinkling income using private corporations?

The Canadian government is proposing restrictions on income sprinkling to family members through dividends and capital gains. This targets private companies using shareholdings or a trust to split income among family members. Read More

Written by | Posted in International
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