Tax-News.com: Canada Could Also Face Trump Tariffs

Tax-News.com: Canada Could Also Face Trump Tariffs

by Scott Hamilton, Tax-News.com, Washington

17 January 2017

While there has been a concentration by President-elect Donald Trump on warnings of increased import tariffs on Mexican exports to the United States, his spokesman Sean Spicer has indicated that exports from Canada could also be subject to the same tax response.

Trump has frequently said that he would impose a 35 percent tariff on imports from US multinational companies – particularly motor companies in Mexico – that move their production facilities abroad at the cost of US jobs, and then sell products duty-free back into the United States.

He has also attacked US trading arrangements with Mexico under the North American Free Trade Agreement (NAFTA), and has confirmed that the trade treaty’s renegotiation would be one of his immediate priorities.

While, as the other party to NAFTA, Canada would be directly involved in any such future renegotiation, the close links between its motor industry and the United States could also be vulnerable. Any threat of a tariff on Canadian exports could trigger US multinationals (such as General Motors and Ford) to rethink their current manufacturing facilities in Canada.

Spicer is reported to have confirmed that, if a multinational moves its production facilities abroad “whether it’s [to] Canada or Mexico, or any other country,” to the detriment of its US employees, the new Trump Administration will take all possible action to prevent it.

(Why?)

Published at Tue, 17 Jan 2017 00:00:00 +0000

Essential tax numbers

Essential tax numbers

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You have a lot to remember as an advisor, so we’ve assembled this reference list of tax numbers. We’ll update it as things change.

Working clients

  • Maximum RRSP contribution: The maximum contribution for 2016 is $25,370; for 2017, $26,010.
  • TFSA limit: The annual limit for 2016 and 2017 is $5,500, for a total of $46,500 in room available in 2016 ($52,000 in 2017) for someone who has never contributed and has been eligible for the TFSA since its introduction in 2009. The annual TFSA limit will be indexed to inflation in future years.
  • Maximum pensionable earnings: For 2016, the maximum pensionable earnings is $54,900, and the basic exemption amount is $3,500. And, for 2017, maximum pensionable earnings under the Canada Pension Plan will be $55,300, while the basic exemption amount will remain the same.
  • Maximum EI insurable earnings: The maximum annual insurance earnings (federal) for 2016 is $50,800; for 2017, $51,300.
  • Lifetime capital gains exemption: The lifetime capital gains exemption is $824,176 in 2016 and $835,716 for 2017.
  • Low-interest loans: The current family loan rate is 1%.
  • Home buyers’ amount: Did your client buy a home? He or she may be able to claim up to $5,000 of the purchase cost, and get a non-refundable tax credit of up to $750.
  • Medical expenses threshold: For the 2016 tax year, the maximum is 3% of net income or $2,237, whichever is less.
  • Donation tax credits: After March 20, 2013, the first-time donor super credit is 25% for up to $1,000 in donations, for one tax year between 2013 and 2017.
  • Basic personal amount: For 2016, it’s $11,474, line 300.

Older clients

  • Age amount: Clients can claim this amount if they were 65 years of age or older on December 31 of the taxation year and have income less than $83,427 (2016). The maximum amount they can claim in 2016 is $7,125.
  • Pension income amount: Clients may be able to claim up to $2,000 if they reported eligible pension, superannuation or annuity payments.
  • OAS recovery threshold: If your client’s net world income exceeds $73,756 for 2016, he or she may have to repay part of or the entire OAS pension.

Clients with children

  • Children’s fitness tax credit: This credit is being phased out, and will be gone as of 2017. If your client’s children played baseball, soccer, or participated in some other program of physical activity, clients may be able to claim up to $500 in 2016 ($0 in 2017), per child, of the cost of these programs. Until 2017, clients can claim an additional $500 for each eligible child who qualifies for the disability amount and for whom they’ve paid at least $100 in registration or membership fees for an eligible program. As of 2015, this is a refundable credit.
  • Children’s arts tax credit: This credit is being phased out, and will be gone as of 2017. If clients’ children participated in a program of artistic, cultural, recreational, or developmental activity such as tutoring, clients may be able to claim up to $250 of the fees paid, per child, on these programs in 2016 ($0 in 2017). Until 2017, clients can claim an additional $500 for each eligible child who qualifies for the disability amount and for whom they’ve paid at least $100 in registration or membership fees for an eligible program.
  • Family caregiver amount: For 2016, if you have a dependant who’s physically or mentally impaired, you may be able to claim up to an additional $2,121 in calculating certain non-refundable tax credits.
  • Disability amount: The amount for 2016 is $8,001 (non-refundable credit), with a supplement up to $4,667 for those under 18 (the amount is reduced if child care expenses are claimed). Canadians claiming the disability tax credit (DTC) can file their T1 return online regardless of whether or not their Form T2201, Disability Tax Credit Certificate has been submitted to CRA for that tax year.
  • Child disability benefit: The child disability benefit is a tax-free benefit of up to $2,730 (2016) for families who care for a child under age 18 with a severe and prolonged impairment in physical or mental functions.
  • Canada Child Benefit: This non-taxable benefit is effective as of July 1, 2016. The maximum CCB benefit is $6,400 per child under age six and up to $5,400 per child aged six through 17. More here.
  • Universal child care benefit (UCCB): This benefit was replaced with the Canada Child Benefit as of July 1, 2016. However, Canadian residents can still apply for previous years if they meet certain conditions, including living with the child and being primarily responsible for the child’s care and upbringing.
  • Child care expense deduction limits: The maximum amounts that can be claimed are $8,000 for children under age seven, $5,000 for children aged seven through 16, and $11,000 for children who are eligible for the disability tax credit.

(Why?)

Published at Mon, 16 Jan 2017 16:30:36 +0000

Tax-News.com: Property Taxes To Dampen British Columbia Housing Market

Tax-News.com: Property Taxes To Dampen British Columbia Housing Market

by Mike Godfrey, Tax-news.com, Washington

13 January 2017

Foreign investment in the Greater Vancouver property market is expected to drop off in 2017 following the introduction of a new property tax, according to research by Royal LePage.

Royal LePage has forecast that property prices across Greater Vancouver fall by 8.5 percent year-on-year. It also predicted that “foreign investment will wane further within the region due to the recent Land Transfer Tax on Foreign Nationals and China’s State Administration of Foreign Exchange imposing new, stricter requirements on currency conversions.”

In August 2016, British Columbia introduced an additional property transfer tax on residential property transfers to foreign entities in the Greater Vancouver Regional District. The tax is applied at 15 percent of the fair market value of the foreign entity’s proportionate share of a residential property located in whole or in part of the Greater Vancouver Regional District, excluding Tsawwassen First Nation lands. It applies in addition to the general property transfer tax.

Royal LePage said that for the Canadian real estate market, 2016 had been marked by a slew of public policy initiatives at national, provincial, and municipal levels.

President and CEO Phil Soper said: “While efforts to address deteriorating affordability in Ontario and British Columbia’s largest metropolitan areas are well-intentioned, too many new taxes and regulations, by too many levels of government, introduced within such a short timeline and with perceivably little research and consultation, have caused confusion and triggered drops in consumer confidence, risking the long-term health of Canada’s housing market.”

(Why?)

Published at Fri, 13 Jan 2017 00:00:00 +0000

Tax-News.com: British Columbia Increases Property Tax Break

Tax-News.com: British Columbia Increases Property Tax Break

by Mike Godfrey, Tax-news.com, Washington

12 January 2017

The British Columbia Government is to increase the home owner grant threshold to CAD1.6m (USD1.2m), in a bid to “keep property taxes affordable for families.”

Finance Minister Michael de Jong said: “This is a 33 percent increase over last year. We are doing our part to help keep housing costs affordable for families.”

He added: “The threshold increase to CAD1.6m helps ensure virtually everyone who received the grant last year will also receive it in 2017. The strength of the province’s economy and sound fiscal management have put us in a position to raise the threshold by such a large amount this year to help home owners.”

The home owner grant reduces the amount of property tax paid each year by a property owner on a principal residence. Grant amounts are based on the value and location of the property and the property taxes owed. The grant is reduced by CAD5 for each CAD1,000 of assessed value over the threshold.

The British Columbia Government said that most homeowners must pay at least CAD350 in property taxes before claiming the grant, to help fund services such as road maintenance and the police. Homeowners must apply each year to claim the grant.

The increase in the grant threshold will mean that 91 percent of properties remain below the threshold. If eligible, their owners will receive the full grant amount.

The basic grant can reduce residential property taxes by up to CAD570. If the property is located in a northern or rural area, the grant can reduce property taxes by up to CAD770. An additional grant is available to home owners aged 65 and over, those with disabilities, and certain war veterans.

The Government estimates that the province will spend CAD821m on home owner grants in 2017-18, compared to an estimated spend of CAD809m in 2016-17. The provincial Government reimburses municipalities for the full cost of the homeowner grant to ensure municipal revenues are not affected.

(Why?)

Published at Thu, 12 Jan 2017 00:00:00 +0000

Wealthsimple to offer personalized advice, tax help

Wealthsimple to offer personalized advice, tax help

new-idea-concept-progress-innovation

Wealthsimple has launched a new pricing structure called Wealthsimple Black for clients who invest $100,000 or more.

For those with less than $100,000 invested, Wealthsimple Basic will continue to provide services like a 0.5% management fee, personalized portfolio and on-demand financial advice.

Meanwhile, Wealthsimple Black will provide both basic and added services, including personalized financial planning, tax-loss harvesting and tax-efficient accounts. It also offers a 0.4% management fee.

In other news, robo-advisor Wealthbar says it has hit its $100-million milestone. The digital wealth manager, which has been in business for two years, now oversees more $100 million in discretionary assets for clients across Canada and is one of the top players in the space.

Also read:

Custom portfolios now offered by robo ModernAdvisor

Guess who’s switching to robo-advisors?

OSC creating Fintech Advisory Committee

(Why?)

Published at Tue, 10 Jan 2017 14:34:53 +0000

CRA tweaks process for accessing online tax info of businesses

CRA tweaks process for accessing online tax info of businesses

small-business-tax-cuts-credits

Do you help business owners clients with their taxes? If so, note that the CRA has changed how you’re able to gain access to a business’ online tax information.

The CRA has announced that, as of May 15, Form RC59 will no longer be used to authorize online access to such information. Instead, you need to complete and submit an authorization request. The upside is you’ll have the information in five days or less, compared to 15 days, says the CRA. 

Even after May 15, Form RC59 can still be used for regular mail and phone requests.

(Why?)

Published at Tue, 10 Jan 2017 20:53:47 +0000

Tax-News.com: US Continues Probe Into Canadian Lumber Imports

Tax-News.com: US Continues Probe Into Canadian Lumber Imports

by Glen Shapiro, Tax-News.com, New York

09 January 2017

On January 6, the US International Trade Commission (ITC) decided that there is a reasonable indication that the US domestic industry is being materially injured by imports of softwood lumber products from Canada that are allegedly subsidized and sold in the United States at less than fair value.

As a result of the ITC’s affirmative determinations, the Department of Commerce (Commerce) will continue to conduct its antidumping (AD) and anti-subsidy countervailing duty (CVD) investigations on the imports, with its CVD decision due on February 20, 2017, and its preliminary AD margin determination due on May 4, 2017.

On December 16, Commerce announced that it had initiated AD and CVD investigations concerning Canadian softwood lumber product imports on December 16, 2016. AD margins on these imports, which were valued at USD4.5bn in 2015, are alleged at between 20.12 and 53.08 percent.

A petition to Commerce from the US lumber industry has alleged that Canadian provincial governments, which own the vast bulk of Canada’s timberlands, provide standing trees to Canadian softwood lumber producers for a fee that is far below the market value of the timber, as well as a number of other subsidies and tax incentives.

Under the expired 2006-2015 US-Canada Softwood Lumber Agreement (SLA), Canada agreed to impose certain export measures on softwood lumber products. Negotiation of a replacement trade agreement proved impossible during the one-year “standstill period” that was added on to the SLA after its expiry. The one-year “standstill period” expired in October last year.

(Why?)

Published at Mon, 09 Jan 2017 00:00:00 +0000

Will 2017 bring changes to the capital gains rate?

Will 2017 bring changes to the capital gains rate?

ARCH-business-man-crystal-ball

What does Budget 2017 have in store? Kim Moody, director, Canadian Tax Advisory at Moodys Gartner Tax Law in Calgary, makes six predictions on his blog — and several will disappoint people who dislike paying tax.

1. The capital gains inclusion rate may rise

Prior to Budget 2016, several experts (including Moody) had predicted the new Liberal government would increase the capital gains inclusion rate from 50% to 66.67%, or even as high as 75%. While that didn’t happen, it doesn’t mean the inclusion rate can’t change this year. “I really hope the government will not tinker with capital gains inclusion rates, but I’m afraid they might,” writes Moody.

Read: Prepare for a possible increase in capital gains taxes

2. Small business taxation could be reviewed

Moody points out that changes to taxation for Canadian-controlled private corporations (CCPCs) in the 2016 budget were quite controversial. “As the tax community woke up to the breadth, depth, and complexity of the changes, one thing became clear: the taxation of business income earned by CCPCs needs to be re-thought,” writes Moody. “In my view, the time is ripe to take a fresh look at the taxation of business income earned by CCPCs and it wouldn’t surprise me if the Department of Finance agrees.”

Read: Changes to corporation taxation: what you need to know

3. Finance will keep eliminating advantages for aggressive or artificial transactions

The last several budgets have gone after any transactions that produce artificial and produce inappropriate tax results, notes Moody. Examples include 10/8s, character conversion rules and linked notes. “My prediction is similar shutdowns will continue,” writes Moody. “The smart people at the Department [of Finance] appear to be constantly scouring the marketplace for inappropriate or artificial types of transactions.”

Read: CRA to tax registered investment fees paid from open accounts

4. The Voluntary Disclosure Program may change

Moody says a government report has recommended that full relief from penalties should not be available under certain circumstances, including when someone avoids large dollar amounts of tax, when someone has failed to comply for many years, and “repeated use of the VDP by a taxpayer who meets clarified requirements for repeated use.”

“If you’re one of Canada’s taxpayers who can relate to the […] list of circumstances outlined by the Committee, you might want to take action now.” (Read the full list on Moody’s blog.)

5. Personal tax credits will continue to change

Moody points out that as the political winds change, more niche tax credits are likely to emerge.

Read: Teachers would get school supply tax break under Trudeau

6. Changes to U.S. taxation will impact cross-border planning

Given president-elect Trump’s proposals, “U.S. citizens residing in Canada, Canadian businesses wishing to expand to the U.S., American businesses wishing to expand into Canada, and many estate plans for Canadians who have U.S. interests and Americans who hold Canadian interests will need to be significantly rethought,” says Moody. But there’s a potential silver lining: “If some of the U.S. tax changes are as dramatic as proposed, Canada would be foolish to not react in some way.”

Read Moody’s full post here.

(Why?)

Published at Mon, 09 Jan 2017 11:00:23 +0000

Tips for teams working with family enterprise clients

Tips for teams working with family enterprise clients

busness-team

When advisors work in arranged teams with complementary skills, they may have developed a charter to define their roles and common goals, a code of conduct for communications, and a method for conflict resolution. They can then draw on these pre-existing structures to deal with any disagreements that arise.

But more often, independent advisors are brought in at different times and aren’t aware of the other advisors who are providing services.

This can happen with family-controlled enterprises, which often work with a variety of advisors to manage the complex interplay of operating a business and maintaining healthy relationships with family members. When advisors don’t know each other and what their roles and responsibilities are, this can create expensive service duplication – and even conflicting advice for clients.

Read: Lessons from family offices

Lack of awareness of the work that other advisors do often leads to confusion. Worse, advisors may be angling for better positioning with the client and may criticize or minimize the work of others. When this happens, the client can end up caught in the middle of dysfunctional relationships from the very people hired to fix problems within their firm.

For multi-disciplinary teams to work, advisors must leave their ego and self-interest at the door, but this is often easier said than done.

A model that has proven highly effective at team management is Collaborative Law, a Harvard-inspired negotiation system for separating families. Not many situations can rival the intensity of a divorce. Yet routinely the advisors in collaborative divorce negotiations must set aside their personal preferences and seek alignment to support their respective clients towards a resolution.

Read: Aging real estate titans face oversized tax bill

Various other useful features of Collaborative Law can be imported into the field of family enterprise advising.

1. Clearly define the roles and responsibilities of the advisors involved.

In the field of family enterprises, more than one advisor may focus on the same problem. Ask the client that hired you who else might be working on some of these issues and get his or her permission to personally meet the other advisors, explaining why it may be highly beneficial. This is a well-established technique in team building and establishing trust.

2. Plan joint meetings or working sessions with a well-defined agenda, clear objectives and expectations.

Such meetings will help ensure team members are ready to contribute and tackle the issues that will be addressed in an efficient and well-coordinated manner. Clearly defining the problem and sharing information contribute to successful teamwork. It is helpful if the advisors agree in advance who will do what during the multi-party meeting: who will lead the conversations, who will keep track of time, who will record the action items and who will ensure that there is follow up as agreed during the meeting. Advisors could even discuss and agree on how to manage high emotions or difficult conversations if they think this is likely to arise.

Read: Three myths about IPPs

3. Learn how to give and receive constructive feedback.

This ensures any hurt feelings are cleared and that disagreements can be put to rest to avoid negatively influencing the future work together. An easy way to remember how to give feedback is referred to as the “sandwich feedback method.” This is where the person gives praise, followed by the constructive or corrective feedback, and followed by more praise.

Knowing what others are doing, being open to receiving constructive feedback, and making efforts to avoid redundancy will establish an environment where a family firm’s advisors routinely exchange clear, concise and accurate information leading to fiscally smart and emotionally sound decision making.

(Why?)

Published at Mon, 09 Jan 2017 14:30:09 +0000

Don’t miss these 2017 tax deadlines

Don’t miss these 2017 tax deadlines

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When it comes to tax season, many people think of March or April.

Listen to the full podcast on AdvisorToGo.

But good tax planning should happen year-round – and there’s no time like January, says Jamie Golombek, managing director, Tax and Estate Planning with CIBC Wealth Advisory Services.

“When we file our returns, that’s backwards-looking,” he says, adding there are a few strategies that can be applied retroactively, such as sharing donations and choosing medical expense periods.

Read: It’s Giving Tuesday! Here’s how to help clients

“But when it comes to 2017, there is so much you could be doing” during the year, Golombek points out. This includes:

  • income splitting with family members or a family trust;
  • maximizing RESPs for children and grandchildren;
  • maximizing RDSPs for disabled family members in order to optimize government grants and government bonds; and
  • choosing between TFSA or RRSP contributions, or deciding to pay down debt.

“These are all issues that can be talked about knowledgably throughout the year,” he says, “[and] what better time than the beginning of 2017 […] to set yourself up for an entire year of tax optimization.”

Key dates

The new year brings with it two early deadlines.

“The first one is January 30,” says Golombek, noting, “that’s the deadline for paying interest on prescribed-rate loans.”

Such loans typically involve a higher-income family member loaning money to his or her lower-income spouse; then, the money is invested and any income is taxed at the spouse’s marginal rate. The prescribed interest rate for these loans has been 1% since April 2009 (except for Q4 2013), making them quite attractive for wealthy families.

Read: Urge clients to consider spousal loans

If clients miss the interest payment deadline, “the [spousal loan] strategy not only falls apart for last year, 2016, but it actually falls apart for all future years. You have to sell the investments, pay off the loan, and do a brand-new prescribed-rate loan in 2017 for the strategy to work if you miss that 30-day deadline.”

Clients should also heed the RRSP deadline, which is March 1, 2017. Golombek offers this advice to taxpayers: “Be sure to sit down and look at your RRSP contribution limits, and look at that opportunity to be able to put money away for your retirement. Or, would you forgo that altogether and consider the TFSA? It all depends on your tax rate now versus your tax rate in retirement.”

Last chance

This year is the last time clients can claim the First-Time Donor’s Super Credit, which was introduced in 2013.

“It allows an individual to claim an additional 25% federal credit if they are a first-time donor,” says Golombek. “That means neither the individual nor their spouse or partner has claimed a charitable donation for any year after 2007.”

Up to $1,000 in donations are eligible for the additional 25% First-Time Donor’s Super Credit. Plus, your client can share the claim for the credit with a spouse or common-law partner, but the total combined donations claimed cannot exceed $1,000.

Read: 

Important year-end tax deadlines

Take care when deducting employment expenses

CRA in hot seat over buildup of tax assessment disputes

(Why?)

Published at Tue, 10 Jan 2017 05:00:52 +0000