Thank you for following our Canadian Tax Law Blog. Please note this blog will be shut down by June 1, 2012. You may continue to access our tax resources by visiting www.lawsonlundell.com/resources.html.
For information on our Tax Group visit http://www.lawsonlundell.com/expertise-Business-Taxation.html.
The relatively recent introduction of Employee Life and Health Trusts (“ELHT”) resulted in significant uncertainty in the pension benefits industry in Canada. After commentary from the pension benefits community, legislation from the Department of Finance and interpretive positions being released by the Canada Revenue Agency, the dust has mostly settled and many concerns have subsided. Accordingly, it is a suitable time to revisit the basic features of an ELHT and a Health and Welfare Trust (“HWT”), consider the most recent statements of the CRA and compare the tax and other advantages and disadvantages of using an ELHT versus a HWT.
To continue reading, click here.
Canada has not historically been known for its favourable levels of taxation. However, in the course of the past decade, corporate tax rates have been steadily reduced with the result that favourable rates of taxation are incurred by corporations with business income in Canada. Indeed, it is likely that significantly lower corporate tax rates will remain in place in Canada as compared with the United States in the near to medium term. Moreover, a favourable tax treaty (the “Treaty”) provides both certainty and a variety of methods for efficiently repatriating profits to the United States. For these reasons, this may be the most attractive time in decades to consider expansion and business opportunities in Canada.
This update will provide a brief overview of the taxes incurred by a corporation subject to tax in Canada.
Taxes are levied at the Federal and Provincial level in Canada, with administration handled by the Federal government (other than in the provinces of Alberta and Quebec which separately manage their provincial taxes). For this reason, United States businesses often find that compliance obligations are more streamlined in Canada than in some US states, in which complex parallel state taxation systems can often be as time-consuming as federal compliance.
To continue reading, click here.
This blog post was written by Parveen Karsan, previously an Associate with Lawson Lundell LLP.
Broadly speaking, subsections 85(1) and 51(1) of the Income Tax Act (the Act) provide for a tax-deferred rollover on the transfer of certain property in exchange for consideration that, in the case of subsection 85(1) includes or, in the case of subsection 51(1) is comprised of, shares in the capital stock of the corporation receiving the property. This post looks at recent discussions on the issue of whether unauthorized shares may be used as consideration for a rollover transaction under subsection 85(1) or 51(1).
Subsection 85(1) applies where a taxpayer has, in a taxation year, disposed of any of the taxpayer’s property for consideration that includes shares of the capital stock of the corporation. Subsection 51(1) applies where a share of the capital stock of a corporation is acquired by a taxpayer from the corporation in exchange for certain property, and where no consideration other than the share is received by the taxpayer for the property in question. Continue Reading
This blog post was written by Parveen Karsan, previously an Associate with Lawson Lundell LLP.
On wrongful termination of employment, employees are often in a position to receive payments from their employers. How these amounts are to be taxed is, however, not always clear.
Subparagraph 56(1)(a)(ii) of the Income Tax Act (the “Act”) requires that employees include retiring allowances (other than amounts received under an employee benefit plan, retirement compensation arrangement or salary deferral arrangement) in their incomes. A “retiring allowance”, in the context of a wrongful dismissal, is defined as an amount in respect of the employment loss, whether or not received as, on account or in lieu of payment of, damages or pursuant to an order or judgement of a competent tribunal. Continue Reading
The IRS has released proposed amendments to the Code Section 892 regulations. Code Section 892 is the provision within the Internal Revenue Code that exempts foreign sovereigns from taxation in respect of investment income earned in the U.S.
For more information on the primary amendments, click here.
This blog post was written by Parveen Karsan, previously an Associate with Lawson Lundell LLP.
In prior years, the Canada Revenue Agency (CRA) permitted joint venturers to establish fiscal periods for their joint ventures differing from the fiscal periods of the joint venturers themselves (where the stipulated conditions were met, as further discussed below). This allowed joint venture participants to benefit from a tax deferral similar to the deferral then available to members of a partnership. The 2011 Budget Proposals seek to severely limit the tax deferral available in respect of partnerships. Predictably, the CRA has now indicated that its administrative position permitting joint ventures to establish separate fiscal periods will no longer apply. In this post, we review the administrative position that previously permitted joint ventures to establish separate fiscal periods and examine the implications of the recent revocation of this administrative position by the CRA. Continue Reading
Entity classification refers to a set of rules used in the U.S. tax system to classify entities for the purposes of the Internal Revenue Code. Once classified, the entity will either be subject to the Code rules for corporations or the Code rules for partnerships.
The Canadian tax system, on the other hand, does not have entity classification rules. Instead, the Canadian tax system simply categorizes entities for tax purposes based on their classification under commercial law. Commercial law recognizes corporations, partnerships and trusts, and the tax system has separate regimes that apply to each. Where these rules apply to human beings, the tax system refers to them as “individuals”.
There are two primary reasons why the Canadian tax system has not developed entity classification rules. The first reason is conceptual. The Canadian tax system defers to form over economic substance much more than the U.S. system. As a result, the system views the form of the entity as being determinative. The second reason is that one of the fundamental policies informing the Canadian tax system is that of “integration”.
To continue reading, click here.
This blog post was written by Parveen Karsan, previously an Associate with Lawson Lundell LLP.
In a recent technical interpretation indexed as document number 2010-0391541E5, the Canada Revenue Agency (CRA) commented on the issue of whether Article V(9)(b) of the Canada – United States Income Tax Convention (the Treaty) would apply to deem two US corporations to have a permanent establishment in Canada in respect of services provided by one of the US corporations (USCo 2) to a Canadian corporation (Canco) on behalf of another US corporation (USCo 1). USCo 1 had entered into a contract to provide consulting services to Canco. It engaged USCo2 to provide the services, which were provided over a period exceeding 183 days. Continue Reading
The Department of Finance recently released a broad set of changes to the Income Tax Act (Canada)(the Tax Act). The proposed legislation will, upon passage, implement changes first announced on March 22, 2011 and subsequently updated in June of 2011.
One of the changes is in respect of registered retirement savings plans (RRSPs). Specifically, the penalties imposed upon those uses of RRSPs that are viewed as abusive have been expanded significantly. Continue Reading
Subscribe to blog via RSS
Join Us on Facebook
View Our Linkedin Profile
Follow Us on Twitter