US Citizens: Risks of Tax Non-Compliance

Commencing January 1, 2016, the US State Department was able to deny or revoke passports to US citizens having a “seriously delinquent tax debt” or no Social Security Number associated with their passport. A “seriously delinquent tax debt” is one where the taxpayer owed more than $51,000, after January 1, 2018 (indexed going forward), in tax, interest and penalties. An Alert on the IRS website recently noted that commencing January 2018 the IRS will begin…

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Reasonable Vehicle Allowances: GST/HST Claim

A travel allowance paid to an employee for the use of their personal vehicle for business purposes will be non-taxable if it is reasonable. Where such reasonable allowances are paid, an input tax credit (ITC) may be claimed by the employer. The ITC is computed as the imputed GST/HST in the allowance, without adjustment for the fact that some costs likely did not attract GST/HST. In non-harmonized provinces/territories (such as Alberta and BC), the ITC would be 5/105 of the allowance. The ITC in a harmonized province is different.…

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Corporate Passive Investment Income: Proposed Changes

A new passive investment tax regime for Canadian Controlled Private Corporations (CCPCs) is proposed to apply to taxation years commencing after 2018. Passive income may include interest, rental, royalties, dividends from portfolio investments and taxable capital gains. Two significant changes are proposed. First, a limit to the small business deduction for CCPCs generating significant income from passive assets, and second, a new regime to stream the recovery of refundable tax to the payment of specific…

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Family Members: Can I Pay Them a Salary?

For a small business, whether operated as a corporation, proprietorship or partnership, it is quite possible that relatives of the owners or partners may be engaged as employees. Due to the closer familial relationship between employer and employee, CRA pays particular attention to ensure that the salary is truly an eligible deduction to the business. According to CRA, salaries to children and spouses are deductible as long as all of these conditions are met: the…

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Digital Currency: Basics And Tax Implications

Digital Currency (DC) is essentially electronic money. It’s not available as bills or coins. Cryptocurrency is a type of DC created using computer algorithms with the most popular being bitcoin. No single organization, such as a central bank, creates DC. DC is based on a decentralized, peer-to-peer network. The “peers” in this network are the people that take part in DC transactions, and their computers make up the network. DC can be used to buy…

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Commission Paid to a Corporation: Any Issues?

Consider the successful real estate or insurance agent, the financial product vendor, the area sales representative, or any other person earning commission income. One day they are asked, if they ever considered running their activities through a corporation as opposed to providing the services personally. There are definitely some valuable possibilities, but there are dangers too. CRA Technical Interpretation In a July 11, 2017 Technical Interpretation, CRA opined that whether a corporation is actually carrying…

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Business Failure: Personal Liability for Corporate Tax Debt

There are special laws which hold a director personally liable for certain amounts that their corporation fails to deduct, withhold, remit, or pay. Most commonly, these amounts include federal sales tax (GST/HST) and payroll withholdings (income tax, EI and CPP). It does not generally include normal corporate income tax liabilities. In a June 22, 2017 Tax Court of Canada case, at issue was whether the director of a corporation could be held liable for $66,865…

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Loans to a Relative’s Business: What Happens When it Goes Bad?

You’ve loaned money to a family member’s corporation. Perhaps it was an investment, maybe it was a favor, or both. Or, perhaps, it was made for a completely separate reason. Regardless, sometimes the loan may go bad and you are not able to collect on the debt. What happens from a tax perspective when this occurs? If the loan was made to earn income and other conditions are met, you may be able to write-off…

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Marijuana: A Growing Industry

As the legislation to legalize marijuana for non-medical purposes works its way through parliament (Bill C-45 entered the Senate phase on November 27, 2017), producers, vendors, regulators, enforcement, and potential customers are seriously considering the implications. Although it has been expected legalization would occur by July, 2018, the timeline is not certain (as the Senate has recently been scrutinizing draft legislation and other stakeholders have noted concerns). Where are we at from a tax perspective?…

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