CRA Compliance

July 3, 2013

Charging HST by Province

HST is to be charged by province. If a business is resident in Ontario, and sells to another province, the level of HST that is charged depends on the transaction. If a business in Ontario sells to a business in Alberta, and the Ontario business pays for shipping, the Alberta business is deemed to receive the goods in Alberta. Alberta HST (at 5%) applies. If, however, the Alberta company has a shipping contract and takes responsibility for picking up the goods in Ontario and shipping them, Ontario HST must be charged. In conclusion, HST charged largely depends upon where the […]
June 21, 2013

Complicated Income Tax Act

The Income Tax Act(ITA), as mentioned in previous posts, requires adding back amortization to calculate Net Income for tax purposes. After that, the capital assets are put into a special pool, and a unique form of amortization deductions called Capital Cost Allowance (CCA) is used to calculate amortization for tax purposes. Then it gets complicated. If one has a land and building, and one sells the two, it may lead to little capital gains on one and a great deal of (taxable!) capital gains on the other. Section 44(6) and 13(4) of the ITA help to spread proceeds from one […]
June 12, 2013

Business Income or Capital Gains?

A number of stories are coming out of people who sell an asset (condos for example), then sell and think they pay capital gains. Instead, the CRA challenges that, and states that the sale is business income. The stakes are high. Let’s say there is a profit of $50,000. If the person did not intend to buy and sell the condo for profit (i.e. bought the condo then got married and moved to a house), they should pay capital gains. The $50,000 profit is included in income at a 50% rate, or $25,000, and taxed at the highest marginal rate […]
February 28, 2013

The Three “R”s of Taxes

The Three “R”s of Taxes 1.Records. One must keep good records. Some like to keep receipts by month, some like to keep receipts by project ,others by supplier or client. It is up to you, but should be kept neatly. They are evidence that supports your financial statement assertions. Receipts could also be electronic, but one must back them up periodically. By back up, that means burn the file on a CD (separate from a computer that could crash), or on a RAID system (series of hard drives with redundant copies), or in the Cloud. Contracts should have a paper […]
February 27, 2013

How Bartering is Treated by Tax Law

In the normal course of business, bartering occurs. It is important to carefully approach this as the tax laws are strict. Basically, one should include the regular normal income as revenue and the cost of the barter as an expense. For example, let’s say John rents a basement apartment for $600 a month to Stuart. John and Stuart agree to cut the rent by $100 a month for snow removal, and lawn maintenance. It is a net of $500 income for John. The CRA wants to see the $600 and $100 figures in the income and expense areas, respectively. For […]