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Taxation on intergenerational transfers of small business shares
The Department of Finance recently confirmed that Bill C-208 has been passed by Parliament, received Royal Assent and has become part of Canada’s Income Tax Act. Clarifications to this legislation were also released.
Unintended tax avoidance loopholes were created by Bill C-208 which is why the Government intends to make amendments to Bill C-208. One of the loopholes allowed the opportunity for “surplus stripping,” in which dividends are converted to capital gains to take advantage of the lower tax rate without any genuine transfer of the business actually taking place. Below is a list of issues the amendments to Bill C-208 will address:
- The requirement to transfer legal and factual control of the corporation carrying on the business from the parent to their child or grandchild;
- The level of ownership in the corporation carrying on the business that the parent can maintain for a reasonable time after the transfer;
- The requirements and timeline for the parent to transition their involvement in the business to the next generation and
- The level of involvement of the child or the grandchild in the business after the transfer.
The Government will release draft legislative amendments for consultation. After this, the government will publish final legislative proposals which would then be introduced in a bill and apply as of the later of either November 1, 2021 or the date of publication of the final draft legislation.
Some foreign-based businesses engaged in the digital economy have started charging GST
Most foreign-based businesses who sell mobile apps, online video streaming services and other digital platform-based products are now required to charge Canada’s sales tax, commonly known as GST/HST, when making sales in Canada. This requirement started this July 2021.
So starting July 1, 2021, you may see GST/HST charges when you make purchases from affected businesses. Affected businesses will include:
- Cross-border digital products and services, like video or music streaming services
- Platform-based short-term accommodation, like homestays or vacation rentals and
- Goods supplies through fulfillment warehouses in Canada.
These businesses will be required to register for, charge, collect and remit GST/HST on these products and services.
Do you need to call the CRA? Here’s what you need to know.
If you need to call the CRA, you will need to know the following:
- Call only the phone numbers listed on their website. For individuals and families enquiries, you can call 1-800-959-8281 to speak with a CRA agent. They also have automated phone services. Please visit the CRA website for more information.
- CRA has a new telephone platform that offers self-serve options. When you call, you will now receive an estimated wait time to speak with an agent. You will then have the option to wait in the queue to speak with an agent, call back later or use one of the self-serve options available.
- At this time until April 30th, the CRA is offering extended evening and weekend hours for individual tax enquiries. CRA agents will be available on weekdays from 9am to 9pm local time and on Saturdays from 9am to 5pm except Easter weekend.
- The automated phone service is available 24 hours a day, 7 days a week.
- When you call the CRA, be prepared to provide your SIN, name, complete address, date of birth and details from your most recently assessed return, notice of assessment or reassessment to verify your identity.
Source: https://www.canada.ca/en/services/taxes.html
Consultations on proposed Luxury Tax launched
A tax on select luxury goods was introduced in the recent budget. This proposed luxury tax aim help address the uneven impact of the COVID recession. Some sectors and some Canadians have flourished during the pandemic while some have lost jobs and businesses. Because of this, the government introduced the tax on some luxury items in an effort to ask Canadians who can afford to buy luxury items to contribute a little bit more.
This proposed Luxury Tax will apply on the sale of new luxury cars and aircraft with a retail sale price of over $100,000 and new boats over $250,000. The tax would be calculated at the lesser of 20% of the value above these thresholds or 10% of the full value of the luxury car, boat or aircraft. The tax is proposed to start on January 1, 2022.
Starting August 10th until September 30th, 2021, the Government of Canada will be open to receiving the views of stakeholders on the design of the proposed Luxury Tax.
For more details, please click on this link: https://www.canada.ca/en/department-finance/programs/consultations/2021/consultation-proposed-luxury-tax.html
Alberta Budget 2019: The New Alberta Child and Family Benefit
As we mentioned in previous blogs, Alberta’s Budget 2019 introduced the new Alberta Child and Family Benefit to replace both the Alberta Family Employment tax credit and the Alberta child benefit for the purpose of providing more benefits to lower income families and reducing administrative costs.
Here are a few more details you should now about this new program:
- The new Alberta Child and Family Benefit starting in July 2020 will provide eligible families as much as $4,995 annually.
- Under the new program, a family with 2 children can receive up to $593 more per year while families with 4 children can receive up to $889 more per year.
- The new program includes both a base component and a working component with combined benefits increasing to a maximum of $5,120.
- The maximum base component ranges from $1,330 to $3,325 depending on the number of children. This base component will begin to phase out once family net income exceeds $24,467 and will be fully phased out when the family net income exceeds about $41,000.
- Families will be eligible for the working component once their family employment income exceeds $2,760. The maximum working component will range from $681 to $1,795 depending on the number of children. This component will begin to phase out once family net income exceeds $41,000 and will be fully phased out once family net income reaches $61,000.
- This benefit will be paid quarterly (August, November, February and May)
- The benefit is non-taxable and will not affect eligibility for other benefit programs.
MyCRA: How to get started on CRA’s mobile app
MyCRA is CRA’s mobile app that can be very convenient for individual taxpayers to use. From this mobile app, you can access key portions of your tax information and you can also pay for your balance owing.
So how do you get started? To get started, you need a CRA user ID and password. If you have not registered for one, you will need to register on the login page.
Note that you will be asked personal tax information when registering for the app. So be ready with your social insurance number, birth date, your current postal code and the amount you entered on one of your income tax and benefit returns. Have a copy of your returns on hand when doing the registration.
You will also be asked to create security questions and answers during the registration process.
Once you have completed your registration, the CRA will issue a security code. You will need this security code to access MyCRA and use all of its features. Once you have your security code (sent by mail), enter the code when you log in so you can get started on using MyCRA.
Another alternative to signing in with a CRA user ID and password is logging in with a Sign-in Partner. This option will let you log in with a user ID and password that you may already have, such as for your online banking.
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