Archives: FAQs

Are there any pitfalls I should be aware of when selling a stock in a loss position?

This is a good strategy if you have capital gains in the current year or the past 3 years. However, you should be aware of the ‘Superficial loss’ rule. This rule states that if you sell your stock at a loss, and subsequently you or someone ‘affiliated’ to you (eg. Your spouse, etc) repurchases the … Continue reading Are there any pitfalls I should be aware of when selling a stock in a loss position?

My current employer asked me to become an independent contractor. What’s the benefit for them?

The employer won’t have to deduct CPP and EI because those are employment withholding requirements. They also will not have to pay for employment benefits and vacation pay. The cost of CPP and EI per employee could be higher than $3,000, so you can imagine the savings.  

Can my corporation pay for my for my cell-phone bill if I use it for business purposes?

A corporation can only deduct expenses that it incurs.  If your cell-phone is registered to you (and not your corporation) and you use your cell phone partially for business purposes, then you can ‘charge-back’ the business use portion of your cell phone bill to your corporation. It’s a best practice to first pay for the bill yourself. … Continue reading Can my corporation pay for my for my cell-phone bill if I use it for business purposes?

I am a non-resident with retirement funds in Canada. What are my tax consequences if I start withdrawing?

As a non-resident, the withholding agent (plan issuer) will be required to withhold 25% of the payment (unless the tax treaty between Canada and your home country reduces the rate). The 25% withholding tax will be your final tax obligation to the CRA for the year so you will not be required to file a … Continue reading I am a non-resident with retirement funds in Canada. What are my tax consequences if I start withdrawing?

Is there any way of waiving my fees for not filing my income taxes?

Question: I did not file my prior year tax return. This was my first year of operations and I was not aware of my filing responsibilities. As I understand, the CRA will charge interest and penalties for late filing and payment. Is there any way I can get these charges waived? Answer: Yes, we would … Continue reading Is there any way of waiving my fees for not filing my income taxes?

Are there special rules for the principal residence exemption for non-residents?

Yes, the principal residence exemption will be adjusted based on the amount of time one is a non-resident. If an individual is a non-resident for the entire year, the individual will not be entitled to the principal residence exemption.  

Can you make quarterly instalments to CRA instead of monthly?

In order to be eligible to make quarterly corporate tax instalments, you must meet several criteria including being in perfect compliance history and having taxable income of $500,000 or less in current or previous years. For exact eligibility criteria, please click here.  

What happens if I did not file form T2057 when converting my sole proprietorship to a corporation?

When changing from a sole proprietorship to a corporation, you must file form T2057. Otherwise, capital gains tax will apply on the assets transferred by you (i.e. sole proprietor) to your newly created corporation. Also, a penalty is levied by the Canada Revenue Agency for filing form T2057 late.  The penalty is calculated as $100 … Continue reading What happens if I did not file form T2057 when converting my sole proprietorship to a corporation?

What is the difference between a GST/HST rulings and interpretations?

An interpretation is an anonymous rulings request to the GST/HST rulings department. You will supply the case facts to the CRA who will then provide a ruling of whether you have GST/HST responsibilities based on these facts. If it is determined that you have HST responsibilities, you have the choice to ignore the interpretation as … Continue reading What is the difference between a GST/HST rulings and interpretations?

Can I pay a dividend to myself from my company in excess of the company’s retained earnings?

Generally, a company cannot declare a dividend above and beyond the retained earnings of the company on the dividend declaration date. You must wait until the company generates additional earnings before declaring additional dividends.  

As a non-resident with rental property in Canada, am I required to remit 25% to the CRA?

I am a non-resident of Canada and I have a rental property in Canada. I have recently found out that I am required to remit 25% of the gross rent to the CRA as a withholding tax on a monthly basis. Can I make this payment myself? As per the CRA ruling, an individual who … Continue reading As a non-resident with rental property in Canada, am I required to remit 25% to the CRA?

Can I make payments to the CRA for non-resident withholding taxes from my rental income?

I am a non-resident of Canada and I have a rental property in Canada. I have recently found out that I am required to remit 25% of the gross rent to the CRA as a withholding tax on a monthly basis. Can I make this payment myself? As per the CRA ruling, an individual who … Continue reading Can I make payments to the CRA for non-resident withholding taxes from my rental income?

I purchased a computer for employment purposes. As an employee, can I deduct this as employment expense?

In order to claim employment expenses incurred to earn employment income, you need to request a signed T2200 from your employer. However, the CRA has specifically mentioned that if you buy a computer or other capital assets, you cannot deduct this cost. Further, you cannot capitalize and depreciate (claim CCA) on capital purchases.  

If I sell services to clients outside Canada, do I have to collect GST/HST?

In determining whether you are responsible for collecting sales tax, you need to determine whether the services you provide occur in Canada or outside Canada. If the service is being performed outside Canada, your taxable supplies are considered export services and you do not have to charge GST/HST. However, if the recipient of the service … Continue reading If I sell services to clients outside Canada, do I have to collect GST/HST?

What are the different variations in which I can claim the vehicle expenses if I have a corporation?

Either you, or your corporation can claim the vehicle expenses directly or indirectly, depending on which name the vehicle is registered under. If the vehicle is under the corporation, the corporation can claim the vehicle expenses, including fuel, maintenance, repairs, insurance, interest, etc. If the vehicle is under your name, and you are employed by … Continue reading What are the different variations in which I can claim the vehicle expenses if I have a corporation?
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