Archives: FAQs

As a GST/HST registrant, when am I required to start collecting HST on sales?

You are required to collect HST when your taxable sales (over the last 4 quarters) exceeds the $30,000 threshold. As a voluntary registrant, you need to collect HST on sales starting on the earlier of: the effective registration date listed on your GST/HST account application, the day of the supply (sale) that made go over … Continue reading As a GST/HST registrant, when am I required to start collecting HST on sales?

I have a family trust owning assets and I’ve heard of something called the 21 Year rule. What does that mean?

After 21 years of the family trust’s formation, the trust is deemed to have disposed of and reacquired certain types of property at their fair market value. This can give rise to a capital gain since most property increases in value over time. The 21 year rule for Trusts and its impact on you, should … Continue reading I have a family trust owning assets and I’ve heard of something called the 21 Year rule. What does that mean?

When is manufacturing and processing equipment eligible for accelerated depreciation?

Eligible machinery and equipment, used in Canada for the manufacture and process of goods for sale or lease is normally included in Class 43 and depreciated at 30% per year. You can, however, make an election by attaching a letter to the income tax return for the tax year you bought the property indicating you … Continue reading When is manufacturing and processing equipment eligible for accelerated depreciation?

I’m a US business planning on selling products to Canadian customers. Do I need an extra-provincial license?

Americans, who are not incorporated, and who are carrying on business in a Canadian Province, must register their business in that province. To register, you must obtain an extra-provincial license. Failure to register can result in a penalty of $2,000 for individuals. Selling products to Canadian customers or providing services to Canadian customers is considered … Continue reading I’m a US business planning on selling products to Canadian customers. Do I need an extra-provincial license?

Why are Canadian dividends grossed-up for tax purposes?

Dividends are paid out of corporations from after-tax profits. As the company has already paid tax on the amount, taxing the shareholder on the full dividend income would not be reasonable. Hence, in order to prevent this, the gross-up and tax credit system has been created. Grossing up the dividend converts it to an amount … Continue reading Why are Canadian dividends grossed-up for tax purposes?

My company is a partner in a partnership. For tax purposes, how do I record the partnership interest?

Initially, the partnership interest will be treated as an asset for the amount of your company’s contribution to the partnership. Subsequently, your partnership interest amount will be increased (or decreased) by your portion of the Partnership’s net income/loss. Furthermore, any distribution made to your company as part of a draw from the partnership will directly … Continue reading My company is a partner in a partnership. For tax purposes, how do I record the partnership interest?

Is there a penalty for late filing a NR4 return or not withholding non-resident tax (Part XIII)?

Yes, there is a penalty for both. The minimum penalty for filing the NR4 after the deadline is $100 and the maximum penalty is $7,500. To learn more specific details about the penalty amount, check out the CRA website section. The penalty for failing to withhold and remit Part XIII is 10% of the amount … Continue reading Is there a penalty for late filing a NR4 return or not withholding non-resident tax (Part XIII)?

As an owner of a corporation, can I not simply pay my child a salary/dividend to avoid paying high taxes on it myself?

Paying children (minors – children under the age of 18) a salary and/or dividend is a useful strategy when income splitting. If you would like to pay a salary to the child, the amount paid must be reasonable. “Reasonableness” is determined based on what the typical/normal pay would be to anyone performing a similar duty. … Continue reading As an owner of a corporation, can I not simply pay my child a salary/dividend to avoid paying high taxes on it myself?

What happens if I borrow money from my corporation?

When you borrow money from your corporation (i.e. shareholder loan), the amount borrowed is included in your income for the year, unless you repay the loan within 1 year of the corporation’s year-end. For example, assume you borrowed money from your corporation on September 26, 2013, and your corporation’s year-end is December 31, 2013. In … Continue reading What happens if I borrow money from my corporation?

I was fully reimbursed by my client for meals I purchased while providing services to my client. Are my meals expenses 100% deductible in this case?

Yes. You will be able to fully deduct your meals expense against the reimbursement (which is treated as income). Therefore, the net effect on your income would be $0. The amount will be 50% deductible for your client.t be charged on shareholder loans to avoid a taxable benefit.  

How far back can the CRA audit an individual or business?

The CRA reserves the right to audit your prior year tax filings going back six years. Hence, you should keep receipts and documentation supporting your claims up to six years.  

If I operate my corporation in multiple provinces, is there a special way my taxable income gets allocated to the provinces?

The taxable income in the multiple provinces gets allocated based on a formula. The taxable income is prorated and allocated based on the salaries paid and the gross revenue earned in those provinces.  

Is there a quarterly remittance requirement for GST/HST similar to Income Tax?

Yes. Similar to income tax, if the net GST/HST payable exceeds $3,000 on a GST/HST return, your business will be required to pay quarterly instalments of GST/HST. The CRA often does not inform the business of the GST/HST remittance requirement and as such, this is an area that most businesses overlook.  

What are the methods of remitting non-resident withholding tax to the CRA?

There are 3 methods of remitting non-resident withhold tax to the CRA: Electronically: Online at My payment Using your financial institution’s phone or online banking At your financial institution: You will need to provide the completed non-resident tax remittance voucher with your payment. Mail cheque and the completed non-resident tax remittance voucher to the CRA … Continue reading What are the methods of remitting non-resident withholding tax to the CRA?

What are the consequences of issuing tax slips late?

If you fail to file tax slips by the due date you will be subject to late filing penalty based on the number of slips you file late. For 1-50 slips, the penalty is $10 per day up to a maximum of $1,000. For more information check out this section on the CRA website. However, … Continue reading What are the consequences of issuing tax slips late?
wpChatIcon

Pin It on Pinterest