Tag Archive: Canada

1. Investment Tax Credits for the Clean Economy

   13 March 2024 2:26 pm Leave a Comment

   Investment Tax Credits for the Clean Economy – Introduction

   The Canadian government has taken bold steps toward fostering a clean economy with the proposal of five new refundable investment tax credits (ITCs).

   These measures, updated as of 6 March 2024, are intended to enhance Canada’s competitiveness in attracting clean energy investments.

   This article provides an overview of the proposed ITCs as they stand, following developments from their initial announcement on 4 December 2023.

   Overview of Proposed Tax Credits

   Clean Technology ITC

   Aimed at boosting clean technology adoption and operations within Canada, this ITC offers a 30% refundable credit on eligible investments made between 28 March 2023, and the end of 2033.

   Investments made in 2034 will receive a 15% credit, with no credit available for investments thereafter.

   This incentive targets taxable Canadian corporations and mutual fund trusts, including those part of a partnership investing in eligible property.

   Carbon Capture, Utilization, and Storage (CCUS) ITC

   This credit supports investments in carbon capture technology, offering up to 50% for direct carbon capture expenditures and 60% for capturing carbon from ambient air.

   A 37.5% credit is also available for qualified carbon transportation, storage, and use expenditures.

   These rates apply to expenses incurred from January 1, 2022, to December 31, 2030, halving for the following decade and expiring after 2040.

   Clean Hydrogen ITC

   Investments in clean hydrogen production projects will benefit from a credit up to 40%, depending on the carbon intensity of the produced hydrogen.

   This applies to projects available for use from 28 March 2023, to the end of 2033, with a reduced rate for 2034 and no credit thereafter.

   Clean Technology Manufacturing ITC

   A 30% credit is available for investments in clean technology manufacturing and critical mineral processing from 2024 to 2031, with a gradual reduction to 5% by 2034.

   This aims to encourage the manufacturing or processing of renewable energy equipment and other clean technologies.

   Clean Electricity ITC

   Offering a 15% refundable credit for investments in clean electricity generation, storage, and transmission, this ITC will be available following the 2024 federal budget delivery for projects not commenced before March 28, 2023.

   The initiative encompasses a wide range of clean energy sources, including wind, solar, and nuclear, and will conclude after 2034.

   Key Considerations and Limitations

   Each tax credit is specifically designed to support different segments of the clean energy sector, from technology adoption and carbon capture to clean hydrogen production and clean electricity generation.

   Taxpayers are generally restricted to claiming one credit per eligible investment, and none of these credits have yet become law.

   These ITCs are refundable, meaning they are treated as payments already made by the taxpayer, with refunds issued if no additional tax is due.

   The design of these credits involves specific labor and production requirements, with potential recapture for properties that change use, are exported, or disposed of within certain timeframes.

   Investment Tax Credits for the Clean Economy – Conclusion

   Canada’s proposed investment tax credits represent a significant push toward a sustainable, clean economy.

   By incentivizing investments in clean technology, carbon capture, clean hydrogen, and clean electricity, the government aims to position Canada as a leader in clean energy while fostering economic growth.

   As these credits move through the legislative process, businesses and investors should stay informed and consult with professionals to understand how these incentives could impact their operations and investment decisions.

   Final thoughts

   If you have any queries about the proposed Investment Tax Credits for the Clean Economy in Canada, or other Canadian tax matters, then please get in touch.

2. Ontario Vacant Home Tax – Key Tax Deadlines

   29 February 2024 5:02 am Leave a Comment

   Ontario Vacant Home Tax Key Tax Deadlines – Introduction

   Ontario property owners are gearing up for important tax-related deadlines today [29 February 2024] affecting a wide range of areas from the Vacant Home Tax in Toronto to tax relief applications and charity rebates.

   Being proactive and well-informed about these deadlines is crucial for managing property taxes effectively.

   Toronto’s Vacant Home Tax

   A notable deadline for Toronto homeowners is the requirement to declare the 2023 occupancy status of their residential properties by 29 February 2024.

   This declaration is mandatory for all residential property owners, including those whose properties are their primary residences, are tenanted, or qualify for an exemption.

   Failure to submit this declaration will result in the property being presumed vacant and subject to a Vacant Home Tax of 1% of its current assessed value, alongside a fee of $21.24.

   Owners who dispute their Vacant Home Tax assessment can file a complaint via the city’s online portal starting in early April.

   Cancellation, Reduction, or Refund of Taxes

   The deadline also looms for Ontario property owners seeking tax relief due to various circumstances such as changes in tax classification, land vacancy, exemption status, property damage, inability to pay taxes due to sickness or poverty, removal of a mobile unit, overcharging due to clerical errors, or due to renovations inhibiting property use.

   Applications for tax relief must be submitted to the relevant Ontario municipality by 29 February 2024.

   Charity Rebates

   Registered charities operating within commercial or industrial tax classes in Ontario may be eligible for a 40% rebate on their realty taxes if they apply by the February 29 deadline and meet all requirements.

   Heritage Property Tax Relief

   Ontario municipalities have the discretion to offer property tax relief ranging from 10% to 40% to owners of eligible heritage properties, as per section 365.2 of the Municipal Act, 2001.

   The adoption of this program requires a municipal bylaw, and program details, including application deadlines, may vary by municipality.

   Conclusion – Ontario’s Vacant Home Tax

   For most people, the 29 February 2024 is an extra day in the calendar. For those with vacant properties in Ontario, it is also the deadline for them to sort out a number of property tax issues.

   Final thoughts

   If you have any queries about this article on Ontario’s Vacant Home Tax then please get in touch

    

3. Canadian Crypto Tax Insights from CRA’s Recent Roundtable

   28 November 2023 9:18 am Leave a Comment

   Canada Crypto Tax – Introduction

   In the rapidly evolving landscape of cryptocurrencies, clarity on taxation remains a crucial concern for both users and intermediaries.

   In a recent roundtable discussion between the Canada Revenue Agency (CRA) and the Association de planification fiscale et financière (APFF), the CRA offered insights and guidelines on several critical issues related to the taxation of cryptocurrencies.

   Transferring crypto to platform

   A scenario presented to the CRA involved a taxpayer holding bitcoins in a cryptocurrency wallet, transferring these bitcoins to a centralized platform for exchanging and lending crypto assets.

   The platform offered a variable return of approximately 4% per year in bitcoin in exchange for the deposit.

   The platform’s terms included rights to pledge, sell, or lend the bitcoins, with profits from these actions belonging to the platform.

   The depositor had withdrawal rights, and withdrawals were paid from a pooled wallet containing bitcoins from various clients.

   The crucial query posed was whether this transfer constituted a “disposition” for tax purposes, potentially leading to the realization of a gain, loss, capital gain, or capital loss upon the transfer.

   The CRA’s opinion leaned towards considering the taxpayer’s deposit as a disposition, as the platform effectively acquired rights to use, profit from, and dispose of the assets, transferring ownership away from the taxpayer.

   This stance by the CRA highlights the necessity for tax advisors to scrutinize the terms and conditions of platforms for both the platform operators and their customers.

   The determination of whether a disposition has occurred relies on assessing possession and economic risk linked to the property, rather than accepting a platform’s terms stating otherwise.

   The discussion also shed light on the changing landscape of crypto asset lending platforms. Over the past 24 months, these platforms offering returns on cryptocurrency deposits have seen a decline.

   Regulatory bodies such as the U.S. SEC and the Autorité des marchés financiers du Quebec clarified that crypto asset deposit accounts fall under securities, requiring compliance with securities laws. Notably, prominent U.S.-based lending platforms faced insolvency protection in 2022.

   In Canada, custodial crypto asset trading platforms (CTPs) are regulated as dealers under applicable securities law.

   They must explicitly state in their terms that crypto assets are held separately for clients. Unlike the terms of crypto asset lending platforms, transfers to CTPs might not generally constitute a disposition, subject to specific circumstances.

   Other scenarios discussed

   Moreover, the CRA addressed two other cryptocurrency taxation scenarios during the roundtable:

   1. Loss due to exchange fraud or theft: The CRA suggested that losses due to centralized exchange fraud or theft should be eligible for tax realization.
   2. Proving business loss upon platform bankruptcy: The CRA outlined evidence, including documentation of fraud/bankruptcy, account activation, contracts, claims filed, recovery proceedings, and evidence of unsold cryptocurrency.

   Canada Crypto Tax – Conclusion

   The insights from the CRA’s discussion offer valuable guidance, emphasizing the need for a nuanced understanding of terms and conditions within crypto platforms.

   Further, it highlights the need to maintain meticulous records for taxation purposes in the evolving cryptocurrency landscape.

    

   If you have any queries on Canada Crypto Tax, or other Canadian tax matters, then please get in touch.

4. Employers and Remote Work in Canada

   18 July 2023 11:01 am Leave a Comment

   Introduction

   As remote work becomes the new norm in many industries, employers face a maze of tax obligations when their employees operate from Canada. 

   Whether intentional or a result of Covid-19 travel restrictions, these arrangements can spark a range of tax issues for non-Canadian employers. 

   In this blog, we shed light on some key considerations and obligations that employers must navigate when their employees work remotely in Canada.

   Payroll Tax Obligations

   Having an employee in Canada triggers payroll tax obligations for the employer.

   These include deductions for income tax, Canada Pension Plan (CPP) contributions, employment insurance (EI) premiums, and any applicable provincial payroll taxes. 

   While resident and non-resident employers share similar obligations, non-resident employers without a presence in Canada may not be required to withhold CPP contributions. 

   Similarly, they may not withhold EI premiums if they are payable under the employment insurance laws of the employee’s home country. 

   However, when CPP contributions and/or EI premiums are due, the employer becomes liable for these on its own account.

   Non-Resident Employer Certification

   Under a non-resident employer certificate regime, certified employers resident in a treaty country may be exempt from deducting and remitting Canadian income tax on remuneration paid to qualified non-resident employees. 

   To qualify, employees must be residents of a country with which Canada has a tax treaty, and they must be exempt from Canadian income tax on the remuneration due to the treaty. 

   Additionally, the employees must not be present in Canada for 90 or more days in any 12-month period, or not in Canada for 45 or more days in the calendar year that includes the payment time. 

   While this certification offers relief, employers should ensure ongoing reporting and compliance to maintain eligibility.

   Regulation 102 Waiver

   For employers without non-resident certification or non-qualifying employees, a Regulation 102 waiver may be sought if the remuneration is exempt from Canadian income tax due to a tax treaty.

   Income Tax Obligations

   Having an employee in Canada may expose the employer to the risk of being considered to be “carrying on business” in Canada. 

   A non-resident carrying on business in Canada is generally liable for tax on profits from such activities, subject to any treaty exemptions. 

   Certain activities of the employee, such as soliciting orders or offering sales in Canada, may cause the employer to be deemed to be carrying on business in the country. 

   Employers entitled to treaty benefits are exempt from Canadian income tax on business profits if they do not have a permanent establishment (PE) in Canada. 

   However, certain scenarios, like employees having the authority to conclude contracts, may trigger PE status and tax obligations.

   Regulation 105 Obligations and Waiver

   When employees provide services in Canada, the employer’s customer may need to deduct and remit 15% of the payment for those services to the CRA unless a waiver is obtained. 

   Employers can apply for waivers to reduce or eliminate withholding taxes, depending on treaty provisions and income projections.

   Indirect Value-Added Taxes

   Value-added taxes (GST/HST) apply on the supply of goods and services in Canada, requiring non-resident employers to register and comply with the GST/HST regime if they make taxable supplies in the country.

   Conclusion

   In sum, remote work arrangements in Canada can create complex tax implications for non-Canadian employers. 

   Understanding and fulfilling these obligations is essential to avoid potential pitfalls and ensure compliance with Canadian tax laws. 

   Seeking professional advice can illuminate the path forward and help employers navigate the tax terrain with confidence.

   If you have any queries about this or other Canadian tax matters then please do not hesitate to get in touch.

   The content of this article is provided for educational and information purposes only. It is not intended, and should not be construed, as tax or legal advice. We recommend you seek formal tax and legal advice before taking, or refraining from, any action based on the contents of this article.

5. Canada: Federal Fall Update

   18 May 2022 8:22 am Leave a Comment

   Canada Federal Fall Update – Introduction

   Measures announced in the 2021 Federal Fall Economic Update will be implemented by Bill C-8. On 4 May 2022, this Bill passed its third reading in the House of Commons on 4 May 2022.

   Its contents will enact measures including:

   • the temporary Small Businesses Air Quality Improvement Tax Credit;
   • the new refundable tax credit for farming businesses; and
   • the Underused Housing Tax Act

   Other measures are also included.

   The first reading of the Bill took place on December 15, 2021.

   The temporary Small Businesses Air Quality Improvement Tax Credit

   The new Bill will include a refundable 25% tax credit for qualifying entities, which have qualifying expenditures for air quality improvements. This expenditure must have been incurred between 1 September 2021 and 31 December 2022.

   Qualifying entities will include both unincorporated sole proprietors and Canadian-controlled private corporations with taxable capital employed in Canada of less than $15 million in the tax year directly preceding it.

   A maximum of $10,000 is available in qualifying expenditures per qualifying location. The credit is capped at a maximum of $50,000 across all qualifying locations. It should be noted that these two ‘caps’ are shared amongst affiliated businesses.

   Refundable tax credit for farming businesses

   The contents of the bill also includes the new refundable tax credit to return fuel charge proceeds from pollution pricing directly to farming businesses in certain provinces.

   These provinces include Ontario, Manitoba, Saskatchewan and Alberta. The scheme started in 2021.

   The refundable tax credit is available to taxpayers who are actively engaged in either the management or day-to-day activities of farming. This includes farming enterprises that are carried out through a partnership.

   A qualifying farming business must incur total farming expenses of $25,000 and those expenses must be at least partly attributable to the provinces mentioned above.

   Underused Housing Tax Act

   The bill also includes the proposed legislation behind the Underused Housing Tax Act. This legislation will result in an annual tax of 1% on the value of vacant or underused Canadian residential real property.

   The property must be owned either directly or indirectly owned by non-resident non-Canadians.

   The new annual tax applies beginning in the 2022 calendar year.

   If you have any queries about this article, the Canada Federal Fall Update, or the matters discussed more generally, then please do not hesitate to get in touch.

   The content of this article is provided for educational and information purposes only. It is not intended, and should not be construed, as tax or legal advice. We recommend you seek formal tax and legal advice before taking, or refraining from, any action based on the contents of this article.