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On April 7, 2022, the Canadian government released the federal budget for 2022.
This budget was widely anticipated to have increased tax rates and additional new taxes as well as rules that would stop some tax planning that had been going on.
The good news is that there were no changes to income tax rates. More specifically, there was no change to capital gains rates. A lot of planning had been going on before the budget in anticipation of an increased capital gains tax rate. Fortunately, that did not happen.
There was a change to the taxation of the sale of principal residences. If a taxpayer buys and sells a property within 12 months, the capital gain would not be sheltered by the principal residence exemption subject to some allowances that allow for unexpected personal situations. The sale of the property, will be treated as business income and will be fully taxable (not at the 50% inclusion rate).
The most substantial change is the new rules on how non-CCPC’s will be taxed.
Please download our budget commentary and a more detailed listing of the budget highlights.
If you have any questions, please do not hesitate to contact your Segal tax advisor.
Best regards,
Segal GCSE Tax Team
On April 7, 2022, the Canadian government released the federal budget for 2022.
This budget was widely anticipated to have increased tax rates and additional new taxes as well as rules that would stop some tax planning that had been going on.
The good news is that there were no changes to income tax rates. More specifically, there was no change to capital gains rates. A lot of planning had been going on before the budget in anticipation of an increased capital gains tax rate. Fortunately, that did not happen.
There was a change to the taxation of the sale of principal residences. If a taxpayer buys and sells a property within 12 months, the capital gain would not be sheltered by the principal residence exemption subject to some allowances that allow for unexpected personal situations. The sale of the property, will be treated as business income and will be fully taxable (not at the 50% inclusion rate).
The most substantial change is the new rules on how non-CCPC’s will be taxed.
Please download our budget commentary and a more detailed listing of the budget highlights.
If you have any questions, please do not hesitate to contact your Segal GCSE tax advisor.
Best regards,
Segal GCSE Tax Team
On April 7, 2022, the Canadian government released the federal budget for 2022.
This budget was widely anticipated to have increased tax rates and additional new taxes as well as rules that would stop some tax planning that had been going on.
The good news is that there were no changes to income tax rates. More specifically, there was no change to capital gains rates. A lot of planning had been going on before the budget in anticipation of an increased capital gains tax rate. Fortunately, that did not happen.
There was a change to the taxation of the sale of principal residences. If a taxpayer buys and sells a property within 12 months, the capital gain would not be sheltered by the principal residence exemption subject to some allowances that allow for unexpected personal situations. The sale of the property, will be treated as business income and will be fully taxable (not at the 50% inclusion rate).
The most substantial change is the new rules on how non-CCPC’s will be taxed.
Please download our budget commentary and a more detailed listing of the budget highlights.
If you have any questions, please do not hesitate to contact your Segal GCSE tax advisor.
Best regards,
Segal GCSE Tax Team
This issue includes contributions from Segal GCSE LLP, Mowbrey Gil LLP, and DMCL. These pieces were produced as a part of the quarterly Canadian Overview, a newsletter produced by the Canadian member firms of Moore North America.
Segal GCSE LLP is a rapidly growing mid-size accounting, tax and business advisory firm headquartered in midtown Toronto. Segal GCSE is committed to growth by investing in our team, providing continuous learning and a positive, supportive entrepreneurial work environment all with a focus on providing clients best in class client service.
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The Canada Revenue Agency (CRA) yesterday issued a revised version of the Form T106 to be used by taxpayers for tax years or fiscal periods beginning after 2021. A new question has been added to Part IV of the 2022 version of Form T106 to determine if a Pertinent Loan or Indebtedness (PLOI) election was made. If yes, the corporation resident in Canada is required to provide the amount of deemed interest related to the election. Reporting persons or partnerships are also required to provide additional information in Part IV about investments in the reporting entity by the non-resident (paid-up capital (PUC)). More information on the revised versions of the Form T106 can be found on the CRA website HERE.
Specifically, if debt is a PLOI, it will be subject to the new deemed interest income rule under section 17.1 of the Act instead of potentially being treated as a deemed dividend.
Where a reporting person or partnership’s total amount of the transactions with a particular non-resident during the tax year or fiscal period is below the threshold, there is no need to report these transactions in Part III of the T106 Slip. In other words, taxpayers must still file a T106 information return to report other information, but they do not need to report detailed information in Part III of the information return where their total transactions with a particular non-resident are below:
Additional guidance on the individual di minis threshold is available on the CRA website HERE.
Contact our Transfer Pricing Principal & Practice Leader Avinash S. Tukrel for more information.
CRA recently sent some clarification on the new 2021 reporting requirements for Trusts which would normally be due by March 31, 2022. The reporting only applies to Express Trusts.
1. What is an express trust?
An express trust is generally a trust created with the settlor’s express intent, usually made in writing (as opposed to a resulting or constructive trust, or certain trusts deemed to arise under the provision of a statute).
The Exceptions are:
2. What additional information will have to be provided?
For 2021 and subsequent taxation years, Budget 2018 proposes that all non-resident trusts that currently have to file a T3 return and all express trusts that are resident in Canada, with some exceptions, report the identity, address, birth date and identification number (SIN or Foreign ID) of :
3. How will the trust provide the additional information?
A trust will have to file a new schedule with its T3 return to report the additional information regarding its beneficial owners, that is, the identity of all trustees, beneficiaries and the settlors of the trust, along with each person who has the ability (through the trust terms or a related agreement), to exert control or override trustee decisions over the appointment of income or capital of the trust (e.g., a protector).
Further information about the new schedule will be posted on Canada.ca when it is available.
4. If the trust has no income to report, can the trust just report the additional beneficial ownership information by filing the new schedule?
No, for 2021 and subsequent taxation years, the trust will have to report the additional information by filing the new schedule along with the T3 return.
5. What happens if a trust fails to file the T3 return or forgets to provide the additional information?
For 2021 and subsequent taxation years, Budget 2018 proposes that a penalty will apply if a trust that has to file a T3 return fails to do so or fails to provide the additional information about the beneficial ownership.
The penalty will be equal to $25 for each day of delinquency, with a minimum penalty of $100 and a maximum penalty of $2,500. If a failure to file the return was made knowingly, or due to gross negligence, an additional penalty will apply. The additional penalty will be equal to 5% of the maximum value of property held during the relevant year by the trust, with a minimum penalty of $2,500. As well, existing penalties in respect of the T3 return will continue to apply.
Please contact a Segal representative if you have any questions.
