Capital Gains Tax Increase

Under the current rules, capital gains earned in a corporation are included in income at 50% and when you extract the cash out to yourself personally, the highest effective rate in Saskatchewan is 26.34% Saskatchewan.  With the proposed change announced in the 2024 federal budget, capital gains earned in a corporation will now be included in income at 66.67% and this increases the highest effective tax rate in Saskatchewan to 35.13%.  This change is anticipated to be effective for capital gains realized on or after June 25, 2024.

The 2024 federal budget also proposes changes to the taxation of capital gains for individuals.  They propose to increase the capital gains inclusion rate to 66.67% for individuals who realize capital gains in excess of $250,000 (in any calendar year) on or after June 25, 2024.  The first $250,000 continues to be included in income at 50% but anything above that $250,000 threshold would be included in income at the new 66.67% inclusion rate. 

Capital Gains Exemption Increase

They also propose to increase the lifetime Capital Gains Exemption (CGE) from $1,016,836 to $1,250,000, effective for gains realized on eligible property on or after June 25, 2024.

These changes may create situations where it may make sense to consider the timing of the realization of capital gains, either through the actual sale of assets or through a crystallization transaction.  Situations to consider would include, but are not limited to, the following:

• A planned sale within the next two to three years
• Significant accrued gains in situations where a deemed disposition would be triggered upon the passing of an individual
• The use of the capital gains exemption on a sale in 2024
• Anticipated emigration from Canada within the next two to three years

Inherent gains on property eligible for the CGE – qualified small business corporation shares or qualified farm property – creates a unique situation where accelerated realization of the gain would allow for the lower individual capital gain inclusion rate but not the increased CGE limit.

Capital Gains Scenarios to Consider

To illustrate this impact, we’ll provide a few scenarios showing the various taxable income calculations, assuming the full lifetime capital gains exemption is available and usable in each circumstance:

Scenario 1 – $1,250,000 capital gain

• If before June 25, 2024 – taxable income of $116,582.
• If after June 24, 2024 – taxable income of $0.

Scenario 2 – $1,600,000 capital gain

• If before June 25, 2024 – taxable income of $291,582.
• If after June 24, 2024 – taxable income of $191,667.

Scenario 3 – $3,000,000 capital gain

• If before June 25, 2024 – taxable income of $991,582.
• If after June 24, 2024 – taxable income of $1,125,000.

Capital gains eligible for the CGE greater than approximately $2,200,000 will pay less tax if realized prior to June 25, 2024. Capital gains eligible for the CGE between $1,016,836 and $2,200,000 will incur less tax by deferring the sale date until after June 25, 2024.

Crystallization transactions create taxable events to bump asset cost bases without any actual cash coming in.  Therefore the tax is owed but no cash is generated to cover it.  These types of transactions will be most useful when a sale is locked in or highly likely to occur shortly after the rule change date given the cash crunch involved and the cost of potentially accelerating the tax owing.

As the proposed changes to the taxation of capital gains don’t take effect until June 25, 2024, there is some, but limited, time for planning to efficiently minimize income tax.  If you have significant unrealized gains or are planning a sale in the short term, please reach out to your Virtus Group advisor to discuss what options are available.

The post Capital Gains Tax Changes: Do You Need to Take Action? appeared first on Virtus Group.

Major Changes in Tax Rules & Incentives

Capital gain inclusion rate increased

• Who is affected:
  • Corporations and trusts (all capital gains)
  • Individuals who realized capital gains over $250,000 annually
• What is changing: The inclusion rate is changing from 50% to 66.67%; capital gains up to the $250,000 threshold will remain at 50% inclusion rate for individuals
• Effective Date: Applies to capital gains realized June 25, 2024 and later (capital gains realized before June 25, 2024 remain at 50% inclusion rate regardless of amount)

Capital Gains Exemption maximum increased to $1,250,000

• What is changing: Maximum lifetime claim increases from $1,016,836 to $1,250,000
• Effective Date: Effective for gains realized June 25, 2024 and later
• Maximum will have indexed increases beginning in 2026

Canadian Entrepreneurs’ Incentive introduced to reduce tax rate on qualifying sale of shares

• What is the benefit:
  • Reduces applicable capital gain inclusion rate by half on eligible sales
  • Applies to sales of qualifying active corporation shares that have been held by the seller since the corporation was founded, held for at least five years, and represent at least 10% of total corporate votes and value
• Effective Date: Initial $200,000 limit available on January 1, 2025, increasing $200,000 per year until 2034
• Qualifications: Maximum lifetime claim of $2,000,000 of qualifying gain per individual, in addition to their lifetime capital gains exemption
• Not available for professional corporations and in certain industries

Housing Affordability & Construction

Home Buyers’ Plan expanded

• What is changing: Maximum individual withdrawal increased to $60,000 from $35,000
• Repayment period: 15 year repayment period begins 5 years after initial withdrawal for withdrawals made January 1, 2022 to December 31, 2025, extended from traditional 2 years

Purpose-built rental housing incentives

• What is changing:
  • Increased capital cost allowance depreciation rate to 10% from 4%
  • Property must have minimum of 4 private apartments or 10 private rooms/suites per building, and minimum of 90% of units held for long-term (12+ months) rental
• What qualifies: Conversion of non-residential buildings, or addition to existing buildings could qualify, but renovation of existing buildings would not
• Effective date: Applies to new construction beginning on or after April 16, 2024 and before January 1, 2031, and available for use before January 1, 2036
• Other details:
  • Expanded ability to deduct interest and financing expenses for arm’s length borrowing to build or acquire qualifying properties
  • Applies to corporate year ends starting October 1, 2023 and later

Supporting Small Businesses

Immediate expensing of “productivity enhancing” assets

• What is changing:
  • Broad categories of assets – patents and use of patented information, data network infrastructure and related softwares, and general-purpose electronic data processing equipment and related softwares – will be deductible at 100% rate in year of purchase
  • New and used assets can qualify, unless acquired from a non-arm’s length party, or on a tax-deferred “rollover” basis
• Effective date: Applies to acquisitions on or after April 16, 2024, and available for use before Jan 1, 2027

Canada Carbon Rebate for Small Business introduced

• What is it:
  • Provides rebate to Canadian Controlled Private Corporations based on number of employees in prior calendar year
  • Rate per employee based on location of employees and provincial fuel charge collected
  • 2019 – 2024 fuel charge year rebates will be available to CCPCs who have filed their 2023 corporate tax return by July 15, 2024
• Who receives it: Not available to corporations with more than 499 employees

Crackdown on Non-Compliant Taxpayers

New tool and expanded penalties available to CRA to combat non-compliance

• What is changing: A new “Notice of Non-Compliance” communication introduced that the CRA can issue that would extend the maximum time period the CRA has to reassess a taxpayer, or an individual non-arm’s length with the taxpayer, on issues related to the non-compliance notice
• What are the penalties:
  • Provides a penalty of $50/day that the Notice of Non-Compliance is outstanding, to a maximum of $25,000
  • New penalty on taxpayers where a Compliance Order is obtained by CRA, equal to 10% of the taxes owing for year(s) subject to the Compliance Order, if taxes owing was in excess of $50,000

Other Notable Announcements

• Mineral Exploration Investment Tax Credit – 15% ITC program extended to eligible agreements entered into on or before March 31, 2025
• Expansion of eligible expenses for Disability Support Deduction program
• Doubling Volunteer Firefighters and Volunteer Search and Rescue Tax Credits to $6,000
• Modernized and simplify Charity communications and donation receipt requirements
• Certain crypto-related businesses will be required to provide information similar to mainstream banking/financial institutions starting in 2026
• Consideration is being given to a new tax on vacant residentially-zoned land, with consultations to be launched later this year

Additional clarification and details of previously announced initiatives

• Changes to revamped Alternative Minimum Tax calculation
• Clean Electricity ITC and Clean Manufacturing Technology ITC criteria and eligibility
• Employee Ownership Trust qualifying conditions and expansion of similar rules to worker cooperative corporations

Conclusion

Many of the provisions announced in the Budget are not fully formed, and further details and legislation wording will become available in the future. Much like the additional information provided now for initiatives previously announced, future Department of Finance communication will be necessary before the full scope of these changes will be known.

We will endeavour to provide more detailed analysis when possible. Please contact your Virtus advisor with specific questions or to discuss your particular situation.

The post 2024-2025 Canadian Federal Budget Highlights and Analysis appeared first on Virtus Group.

The medical expense tax credit is a non-refundable tax credit that allows you to reduce the income tax you owe. It covers a wide range of medical expenses for you, your spouse or common-law partner, and your dependent children under 18.

Eligible Expenses

• Medical Expenses: Includes costs not covered by insurance such as dental services, prescription drugs, and vision care.
• Disability-Related Expenses: Expenses for those who need therapy, including devices and certain renovations made to your home to make it more accessible.
• Travel Expenses: If you had to travel at least 40 kilometers (one way) to receive medical treatment, you might be able to claim travel expenses.

How to Claim

• Gather Documentation: Keep all receipts for medical expenses paid for any 12-month period ending in 2023. Documentation should clearly show the service date and the payment made.
• Calculate Your Credit: The medical expense tax credit is calculated as 15% of your eligible medical expenses that exceed the lesser of $2,635 or 3% of your net income. 
• Claim the Credit:  Total medical expenses for you, your spouse or common-law partner and your dependents can be entered onto line 33099 of your tax return.  Using the formula above, you will calculate the medical expense tax credit to be included in line 33200.

Considerations

• Review Eligibility: The list of eligible expenses is extensive and updated regularly. Check the Canada Revenue Agency (CRA) website for the most current information. 
• Forgetting to Claim Travel Expenses: If you travel more than 40 km (one way) for medical treatments, these expenses can add up. Keep a detailed log of your trips, including parking, and accommodation.
• Overlooking Supporting Documents: The CRA may request documentation to support your claim. Keep all receipts and prescriptions in a safe place for at least six years.

Conclusion

Leveraging the medical expense tax credit can reduce your tax burden, especially if you or your family have had substantial medical expenses throughout the year. By keeping thorough records and understanding the eligible expenses, you can maximize your benefits. Always consider consulting with a tax professional to ensure you’re taking full advantage of this and other tax credits.

The post Understanding the Medical Expense Tax Credit appeared first on Virtus Group.

Minimal tax changes, emphasis on spending

There were no new taxes or increased tax rates announced in the budget. The following details are related to corporate taxes, consumption taxes and tax incentives within the province:

Corporate tax

• Saskatchewan corporate tax rate for Small Business Deduction eligible income will remain at 1% until June 30, 2025, extended from June 30, 2024

Consumption taxes

• Additional resources have been added to identify taxpayers not complying with filing required returns and remitting required taxes
• Additional and increased penalties for non-compliance, late-filed returns and overdue payments
• Click here for full consumption taxes details

Tax incentives

• New Saskatchewan Critical Mineral Innovation Incentive (SCMII) – provides tax credits for 25% of eligible program costs deploying novel technologies in the critical mineral sector. Applicable to pilot projects and commercial scaling projects in the aluminum, cobalt, copper, gallium, helium, lithium, magnesium, nickel, rare earth elements and zinc industries. Shares $100M total funding cap with Petroleum Innovation Incentive. Full details here
  
  
• New Critical Mineral Processing Investment Incentive (CMPII) – provides tax credits for 15% of eligible program costs for eligible projects. Projects must create value in new or existing aluminum, cobalt, copper, gallium, helium, lithium, magnesium, nickel, rare earth elements and zinc projects.  Shares $500M total funding limit with Oil and Gas Processing Investment Incentive. Full details here
  
  
• Expanded Saskatchewan Petroleum Innovation Incentive (SPII) – provides tax credits for 25% of eligible program costs and has been extended 5 years to March 31, 2029. Applicable to pilot projects and commercial scaling projects that demonstrate innovation or significant advancement in the Saskatchewan Oil & Gas industry.  Total funding is also increased to $100M from $30M. Full details here
  
  
• Expanded Oil and Gas Processing Investment Incentive (OGPII) – provides tax credits for 15% of eligible project costs and has been extended 5 years to March 31, 2029. Projects must create value in new or existing oil, gas, helium, lithium or chemical fertilizer projects.  Total funding is also increased to $500M from $370M. Full details here
  
  
• Expanded Saskatchewan Technology Start-up Incentive (STSI) – 45% tax credit program for eligible investors has been extended 1 year to March 31, 2027. Eligible start-ups expanded to include the cleantech sector, in addition to existing eligible agtech and digital sectors, and the annual total credits available is doubled to $7M. Full details here
  
  
• Extended Saskatchewan Commercial Innovation Incentive (SCII) – reduces corporate tax rate for 10-15 years on qualifying intellectual property commercialized in Sask. The program application peiod has been extended for 1 year to June 30, 2025. Full details here
  
  
• New Multi-Lateral Well Program – provides tax incentives to encourage new drilling of multi-later oil wells to increase oil recovery rates. The program applies to new wells drilled from April 1, 2024 to March 31, 2028. Full details here

Conclusion

View the Saskatchewan Finance press release and full budget details can be found here.

Please contact your Virtus Advisor to discuss any specific questions about the Budget or fill out the form below.

The post Saskatchewan Provincial Budget 2024-2025 Commentary appeared first on Virtus Group.

Authored by RSM Canada

Executive summary

To simplify your tax-filing experience, we have compiled the key tax filing and payment deadlines for the middle-market taxpayers. This article will serve as a one-stop solution for keeping track of the key tax deadlines approaching. By filing the tax return(s) and paying the taxes due on time, taxpayers can avoid delays to any refund, benefit, or credit payments they may be entitled to. In addition, complying with the due dates will help to avoid late-filing and/or late-payment penalties and interest.

Canadian tax filing and payment deadlines for middle-market taxpayers for 2024

With the approaching tax season, a taxpayer may have to file numerous returns to ensure tax compliance. In addition, with the fast-paced tax developments happening, keeping track of the annual tax filing and payment deadlines could be difficult. This article is a one-stop solution for middle-market taxpayers as it summarizes key tax filing and payment deadlines for the year 2024. The table below is not exhaustive but caters to the most common compliance relevant for middle market taxpayers.

Where the taxpayer omits filing and payment, late files and remits, additional penalties and/or interest kicks in leading to an additional cost burden on the taxpayer.

* As per the Canada Revenue Agency (CRA) guidance, when a due date falls on a Saturday, Sunday or public holiday recognized by the CRA, the return is considered filed and the payment is considered to be made on time if the CRA receives the filing, or if the payment or filing is postmarked, on or before the next business day. Therefore, in these instances, as the due date falls on a weekend or a federal holiday, the filing or payment deadline is the first working day following.

This article was written by Farryn Cohn, Chetna Thapar, Mamtha Shree and originally appeared on 2024-02-27 RSM Canada, and is available online at https://rsmcanada.com/insights/tax-alerts/2024/canadian-tax-filing-and-payment-deadlines-for-middle-market-taxpayers-for-2024.html.

The information contained herein is general in nature and based on authorities that are subject to change. RSM Canada guarantees neither the accuracy nor completeness of any information and is not responsible for any errors or omissions, or for results obtained by others as a result of reliance upon such information. RSM Canada assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect information contained herein. This publication does not, and is not intended to, provide legal, tax or accounting advice, and readers should consult their tax advisors concerning the application of tax laws to their particular situations. This analysis is not tax advice and is not intended or written to be used, and cannot be used, for purposes of avoiding tax penalties that may be imposed on any taxpayer.

RSM Canada Alliance provides its members with access to resources of RSM Canada Operations ULC, RSM Canada LLP and certain of their affiliates (“RSM Canada”). RSM Canada Alliance member firms are separate and independent businesses and legal entities that are responsible for their own acts and omissions, and each are separate and independent from RSM Canada. RSM Canada LLP is the Canadian member firm of RSM International, a global network of independent audit, tax and consulting firms. Members of RSM Canada Alliance have access to RSM International resources through RSM Canada but are not member firms of RSM International. Visit rsmcanada.com/aboutus for more information regarding RSM Canada and RSM International. The RSM trademark is used under license by RSM Canada. RSM Canada Alliance products and services are proprietary to RSM Canada.

Virtus Group is a proud member of the RSM Canada Alliance, a premier affiliation of independent accounting and consulting firms across North America. RSM Canada Alliance provides our firm with access to resources of RSM, the leading provider of audit, tax and consulting services focused on the middle market. RSM Canada LLP is a licensed CPA firm and the Canadian member of RSM International, a global network of independent audit, tax and consulting firms with more than 43,000 people in over 120 countries. Our membership in RSM Canada Alliance has elevated our capabilities in the marketplace, helping to differentiate our firm from the competition while allowing us to maintain our independence and entrepreneurial culture. We have access to a valuable peer network of like-sized firms as well as a broad range of tools, expertise, and technical resources. For more information on how the Virtus Group can assist you, please call us at 855-206-5697.

The post Canadian tax filing and payment deadlines for middle-market taxpayers for 2024 appeared first on Virtus Group.

Authored by RSM Canada

Executive summary

The CBSA Assessment and Revenue Management (CARM) system will enter into use on May 13th, 2024. CARM will be the system of record to interact with the CBSA for commercial import shipments into Canada. Proactively ensuring necessary registrations and other requirements are met before May 13th will prevent interruptions in importing and doing business with the CBSA.

New mandatory system for Canadian importation

The Canada Border Services Agency (CBSA) has announced that the CBSA Assessment and Revenue Management (CARM) system will enter into use on May 13th, 2024. CARM will be the system of record to interact with the CBSA for commercial import shipments into Canada.

The CARM system introduces material procedural changes for importers. Proactively ensuring necessary registrations and other requirements are met before May 13th will prevent interruptions in importing and doing business with the CBSA. The CBSA has advised that importers trying to import commercial goods on May 13th without a CARM Client Portal (CCP) account will be ineligible to import. It is likely that some importers will not have registered for the CCP causing border congestion and potential supply chain disruptions. Importers should therefore consider increasing critical imports into Canada prior to May 13th to plan for this potential disruption.

Registration

Importers will need to register for a CCP account to continue importing activities. To complete the CCP registration process, the business will need the following information:

• A GCKey or the ability to use a sign-on partner (financial institution linked to the CBSA systems)
• Business Number (BN 9)
• Import/Export Program account (RM)
• Statement of Account and/or Daily Notice

Individuals at the business that require CPP access will need their own personal CARM profile. The level of access and authorization each individual will have to the business’ account can be controlled. The individual who initially registers the business will normally be the business account manager and have the highest level of access and authorization.

Delegation of authority

Importers can delegate their customs broker the authority to act on their behalf in the CCP. To ensure a smooth transition with the new system, importers should ensure this authority is delegated in CARM well before May 13th.

Release prior to payment privileges

Importers that participate in the Release Prior to Payment (RPP) program can have their imported goods released by the CBSA before payment of duties and taxes if sufficient security is posted. Importers may currently be utilizing the RPP security of their custom broker for the expedited release of their imported goods. However, once CARM becomes mandatory on May 13th, commercial importers will need to post their own financial security to participate in RPP. The CBSA has advised as long as importers have registered in the CCP, they will have 180 days to transition to meet the required financial security obligations to continue to enjoy RPP benefits.

Potential opportunity for rationalization

Given this system change, it is suggested that importers review all of their RM accounts and consider consolidating and/or eliminating any unnecessary RM accounts. Financial security requirements will need to be met for all RM accounts.

Recommended practices for use of CARM

There may be unexpected issues with CARM uncovered as it becomes available and used by a wider audience. To ensure a smooth transition, those who import commercial goods into Canada should register their businesses in the CCP and delegate necessary authorities prior to May 13th. Entities which are not registered in time will, according to the CBSA, be ineligible to import until CCP registration is complete. Importers looking to use the RPP should also ensure they are positioned to post the necessary security being mindful of the transition timelines for doing so. For additional assistance with navigating the transition to CARM, please see the CBSA’s resources¹ and contact your RSM Canada trade advisory team.

[1] “CARM: The new way to assess and pay duties and taxes on imported commercial goods”, accessible at: https://www.cbsa-asfc.gc.ca/services/carm-gcra/menu-eng.html.

This article was written by Jaime Seidner, Cassandra Knapman and originally appeared on 2024-02-20 RSM Canada, and is available online at https://rsmcanada.com/insights/tax-alerts/2024/new-mandatory-system-for-canadian-importation.html.

The information contained herein is general in nature and based on authorities that are subject to change. RSM Canada guarantees neither the accuracy nor completeness of any information and is not responsible for any errors or omissions, or for results obtained by others as a result of reliance upon such information. RSM Canada assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect information contained herein. This publication does not, and is not intended to, provide legal, tax or accounting advice, and readers should consult their tax advisors concerning the application of tax laws to their particular situations. This analysis is not tax advice and is not intended or written to be used, and cannot be used, for purposes of avoiding tax penalties that may be imposed on any taxpayer.

RSM Canada Alliance provides its members with access to resources of RSM Canada Operations ULC, RSM Canada LLP and certain of their affiliates (“RSM Canada”). RSM Canada Alliance member firms are separate and independent businesses and legal entities that are responsible for their own acts and omissions, and each are separate and independent from RSM Canada. RSM Canada LLP is the Canadian member firm of RSM International, a global network of independent audit, tax and consulting firms. Members of RSM Canada Alliance have access to RSM International resources through RSM Canada but are not member firms of RSM International. Visit rsmcanada.com/aboutus for more information regarding RSM Canada and RSM International. The RSM trademark is used under license by RSM Canada. RSM Canada Alliance products and services are proprietary to RSM Canada.

Virtus Group is a proud member of the RSM Canada Alliance, a premier affiliation of independent accounting and consulting firms across North America. RSM Canada Alliance provides our firm with access to resources of RSM, the leading provider of audit, tax and consulting services focused on the middle market. RSM Canada LLP is a licensed CPA firm and the Canadian member of RSM International, a global network of independent audit, tax and consulting firms with more than 43,000 people in over 120 countries. Our membership in RSM Canada Alliance has elevated our capabilities in the marketplace, helping to differentiate our firm from the competition while allowing us to maintain our independence and entrepreneurial culture. We have access to a valuable peer network of like-sized firms as well as a broad range of tools, expertise, and technical resources. For more information on how the Virtus Group can assist you, please call us at 855-206-5697.

The post New mandatory system for Canadian importation appeared first on Virtus Group.

As we have written about in the past, the CRA has expanded the tax reporting regime for Trusts. The rules are in effect for Trusts with years ending December 31^st, 2023 or later, so the initial Trust returns under the new requirements are due to be filed April 2^nd, 2024.

Do you need to file a Trust tax return

First, we need to identify all the Trusts that need to file a tax return. Prior to the expanded rules coming into effect, Trusts did not have to file a tax return if they:

• Had no tax payable
• Had income from all sources of less than $500
• Allocated no more than $100 to any Canadian resident beneficiary, and nothing to a non-resident beneficiary
• Made no distributions of capital
• Had no dispositions of capital property and realized no taxable capital gains
• Were not a deemed resident trust

Based on these criteria, many Trusts, whether due to the low value of the assets held, or the fact that the assets did not earn income, have not been filing in the past.

The new criteria to avoid having to file a Trust tax return are more restrictive. In addition to the above criteria, a Trust is not required to file a tax return if:

• it was in existence for less than 3 months before Dec 31^st,
• the total value of Trust assets held at any time in the year is less than $50,000, and those assets consisted solely of cash, publicly listed shares/debts, mutual fund units/shares and non-foreign government guaranteed debts
• it is testamentary Trusts that has been designated as a Graduated Rate Estates
• it is a certain type of special purpose Trusts – charities, non-profit organizations, cemetery/funeral trusts, general law firm trust accounts, registered savings/education/disability plans, etc

Regardless of the criteria above, “bare Trusts” are specifically required to file an annual tax return.

Bare Trusts

The inclusion of bare Trusts is of particular importance because they can come to exist without deliberate action and could exist without the parties involved even knowing a Trust exists. The CRA has not defined what they consider to be a bare Trust, but have indicated that any “arrangement where a trustee can reasonably be considered to act as agent for all the beneficiaries under a trust with respect to all dealings with all of the trust’s property” would be included. This description would very likely include:

• a non-beneficial owner of real estate being added to the legal title (see UHT below)
• bank/investment accounts of children with their parents’ name on the account
• Real estate owners who have transferred ownership of their property to another entity but not transferred legal title
• Real estate developers that hold legal title in a separate entity from the development operations
• Family members holding title to other assets on behalf of other family members

Such arrangements could be in place for many reasons – avoid probate fees or land transfer taxes, enhanced privacy, worry about creditors or marital property claims – that are not related to tax. But it is the CRA position that all could be considered to be bare trusts and should file an annual tax return.

Common situations where an aging parent would add their adult child to the Title for the family cabin or farmland, or a new parent open an investment account for their minor child, are considered to be a bare Trust, and require a filing.

What information needs to be included

Second, we need to ensure that the required information is being included in those Trust tax returns. As in the past, income and expenses, significant foreign assets, certain transactions with beneficiaries and ownership of private corporations all needs to be included in the annual tax return.

Starting for 2023 tax returns and going forward, there is additional information that is required reporting:

• Name, address, date of birth, tax residence jurisdiction as well as Tax Identification Number (SIN, BN, TN or foreign equivalent) for the Settlor, all Trustees and all beneficiaries of the Trust, as well as anyone who could exert influence over the Trust
• Information on beneficiaries of the Trust that cannot provide the above (ie. unborn children or grandchildren that would be beneficiaries once born)
• New trusts must include a Trust number prior to filing

This information may be easy to obtain for Trusts with only close family members involved or in the case of bare trusts, but situations will exist where it is more difficult to obtain this important, generally private, information about the required parties. If the information is not available, it is important to document the unsuccessful efforts made to obtain it in case the CRA enquires about the missing information. The CRA has indicated that they require “reasonable effort” be made to obtain the information, but have not specified what that entails.

Potential penalties

Failure to file the required Trust tax return, including this additional information, can be subject to penalties from the CRA. Technically, the returns are due 90 days after December 31^st, or March 30^th in 2024, but the practical filing deadline is April 2^nd, 2024 due to the weekend and the statutory holiday on April 1^st. The penalties start at $25/day for late filing, with a minimum of $100 and maximum of $2,500 per Trust tax return with no taxes owing. If there are taxes owing, the penalties will start at 5% of the taxes owing, plus an additional 1% for each additional month late, up to a maximum of 17%. Repeated failures to file can result in higher penalties.

A new penalty has also been put in place if the failure to file is determined to be done knowingly or due to gross negligence. These penalties include the greater of $2,500 or 5% of the highest fair  market value of the Trust property during the year, plus $100 or 50% of the tax avoided if omissions or false statements are found.

Some good news is that the CRA has announced that they will not charge the late-filing penalties for the 2023 tax year on bare Trusts, unless the late-filing was done knowingly or due to gross negligence. At the time of writing, they have indicated this is a single year policy and the regular penalty provisions will apply going forward.

For most Trusts that have not been required to file in the past, these new rules will result in some additional paperwork and compliance work, but the potential penalties warrant serious consideration.

Underused Housing Tax – The UHT

On a related note, the Underused Housing Tax returns that were introduced in 2023 required a similar type of reporting in situations where the legal title to residential property included the names of non-beneficial owners. These situations required a UHT return to be filed, and will also require a Trust tax return to be filed as a bare Trust. While a UHT return did not have to be filed where the property did not contain a residential property, such as farmland or bare land, this would still be considered a bare Trust and a Trust tax return should be filed. If a UHT return for 2022 has not already been filed, no penalties will be assessed if it is filed by April 30, 2024 so there is still time to ensure the filing requirements are met.

Next steps

It is important to determine if your situation meets the criteria to require a Trust tax return filing and gather the necessary information to meet the April 2^nd, 2024 deadline. Including as much information as possible on time is the best way to avoid incurring penalties. Planning may also be desired for minimizing reporting requirements going forward. Your Virtus professional is available to discuss your particular situation and advise on the best course forward.

The post Expanded Trust Reporting Rules appeared first on Virtus Group.

2024 CPP Contributions:

• 2024 CPP1 max earnings – $68,500
• 2024 CPP2 max earnings – $73,200
• Exemption – $3,500
• Max contribution – $3,867.50 CPP1, $4,055.50 CPP2 included
• CPP Rate – 5.95% on CPP1; 4.00% on CPP2; employer’s portion matches dollar for dollar

(Source)

2024 EI Contributions:

• Max earnings – $63,200
• Max contribution – $1,049.12
• EI Rate – 1.66%
• Employer’s portion – 1.4 times employee portion

(Source)

The post 2024 CPP & EI Rates – Changes For The New Year appeared first on Virtus Group.

With only hours to spare, the Minister of National Revenue today announced a further extension of filing deadline for 2022 Underused Housing Tax returns – filing by April 30, 2024 will avoid interest and penalties. The filing deadline had been extended to October 31, 2023 from an original deadline of May 1, 2023.

“The Underused Housing Tax is one part of our plan to combat the housing shortage,” says the Honourable Marie-Claude Bibeau, Minister of National Revenue. “We understand that many homeowners may not be aware that they are subject to this new law. This is why I want to ensure that every effort has been made to inform homeowners and help them meet their obligations.” 

To read the whole press release issued by the Government of Canada, visit: https://www.canada.ca/en/revenue-agency/news/2023/10/underused-housing-tax-transitional-relief-period-extended-until-april-30-2024.html

The post Underused Housing Tax Transitional Relief Period Extended appeared first on Virtus Group.

On Wednesday April 19, 2023 the Public Service Alliance of Canada declared a general strike. Bargaining groups including the 39,000 represented employees of the Canada Revenue Agency (CRA), are on strike. The federal government is still in negotiations with the groups.

What a CRA strike means

At this point, there has been no indication this strike by the CRA employees would result in an extension of the T1 filing deadline to later than May 1^st. Certain CRA services will be delayed or disrupted. There will likely be delays in processing returns and issuing refunds. It is still important to have your personal tax return filed this month. Please provide your personal tax information at your earliest opportunity so that your returns can be prepared.

Read the Government of Canada statement here.

Upload your tax documents

You can submit your personal tax documents by visiting our secure portal by clicking the button below.

Questions? Get in touch.

We will continue to provide information as it become available. Please contact your Virtus representative with any questions.

Recommended

• 
  Implementation delayed for mandatory system for Canadian importation24 April 2024
• 
  Capital Gains Tax Changes: Do You Need to Take Action?17 April 2024
• 
  2024-2025 Canadian Federal Budget Highlights and Analysis17 April 2024

The post Canada Revenue Agency (CRA) Strike appeared first on Virtus Group.