Successfully reported this slideshow.
We use your LinkedIn profile and activity data to personalize ads and to show you more relevant ads. You can change your ad preferences anytime.

Canada tax system

1,462 views

Published on

canada tax system and tax relife

  • Be the first to like this

Canada tax system

  1. 1. Tomar Manish, PGD-FM Final Year, BVDU-Amplify ASSIGNMENT ON TAX SYSTEM OF CANADA Submitted To: Prof. N . Hariharan Submitted By: Tomar Manish PGD- FM Roll No. FM/10/022
  2. 2. Tomar Manish, PGD-FM Final Year, BVDU-Amplify INTRODUCTION Income taxes in Canada constitute the majority of the annual revenues of the Government of Canada, and of the governments of the Provinces of Canada. In the last fiscal year, the government collected roughly three times more personal income taxes than it did corporate income taxes. Tax collection agreements enable different governments to levy taxes through a single administration and collection agency. The federal government collects personal income taxes on behalf of all provinces and territories except Quebec and collects corporate income taxes on behalf of all provinces and territories except Alberta and Quebec. Canada's federal income tax system is administered by the Canada Revenue Agency (CRA). Canadian federal income taxes, both personal and corporate are levied under the provisions of the Income Tax Act. Provincial and territorial income taxes are levied under various provincial statutes. The Canadian income tax system is a self-assessment regime. Taxpayers assess their tax liability by filing a return with the CRA by the required filing deadline. CRA will then assess the return based on the return filed and on information it has obtained from employers and financial companies, correcting it for obvious errors. A taxpayer who disagrees with CRA's assessment of a particular return may appeal the assessment. The appeal process starts when a taxpayer formally objects to the CRA assessment. The objection must explain, in writing, the reasons for the appeal along with all the related facts. The objection is then reviewed by the appeals branch of CRA. An appealed assessment may either be confirmed, vacated or varied by the CRA. If the assessment is confirmed or varied, the taxpayer may appeal the decision to the Tax Court of Canada and then to the Federal Court of Appeal.
  3. 3. Tomar Manish, PGD-FM Final Year, BVDU-Amplify HISTORY Unlike the United Kingdom and the United States, Canada avoided charging an income tax prior to World War I. The lack of income tax was seen as a key component in Canada's efforts to attract immigrants as Canada offered a lower tax regime compared to almost every other country. Prior to the war Canadian federal governments relied on tariffs and customs income under the auspices of the National Policy for most of their revenue, while the provincial governments sustained themselves primarily through their management of natural resources (the Prairie provinces being paid subsidies by the federal government as Ottawa retained control of their natural resources for the time being). The federal Liberal Party considered the probable need to introduce an income tax should their negotiation of a free trade agreement with the United States in the early 20th century succeed, but the Conservatives defeated the Liberals in 1911 over their support of free trade. The Conservatives opposed income tax as they wanted to attract immigrants primarily from the United Kingdom and the United States, as opposed to Eastern Europe, and they wanted to give their preferred choice of newcomers some incentive to come to Canada. Wartime expenses forced the Tories to re-consider their options and in 1917 the wartime government under Robert Borden imposed a "temporary" income tax to cover expenses. Despite the new tax the Canadian government ran up considerable debts during the war and were unable to forego income tax revenue after the war ended. With the election of the Liberal government of Prime Minister William Lyon MacKenzie King, much of the National Policy was dismantled and income tax has remained in place ever since. CONSTITUTIONAL AUTHORITY The constitutional authority for the federal income tax is found in section 91 paragraph 3 of the Constitution Act, 1867, which assigns to the federal Parliament power over "The raising of Money by any Mode or System of Taxation". The constitutional authority for the various provincial income taxes is found in section 92 paragraph 2 of the Constitution Act, 1867, which assigns to the legislature of each province the power of "Direct Taxation within the Province in order to the raising of a
  4. 4. Tomar Manish, PGD-FM Final Year, BVDU-Amplify Revenue for Provincial Purposes". The courts have held that "an income tax is the most typical form of direct taxation". PERSONAL INCOME TAXES Canada levies personal income tax on the worldwide income of individuals resident in Canada and on certain types of Canadian-source income earned by non-resident individuals. After the calendar year, Canadian residents file a T1 Tax and Benefit Return[4] for individuals. It is due April 30, or June 15 for self-employed individuals and their spouses, or common-law partners. It is important to note, however, that any balance owing is due on or before April 30. Outstanding balances remitted after April 30 may be subject to interest charges, regardless of whether the taxpayer's filing due date is April 30 or June . The amount of income tax that an individual must pay is based on the amount of their taxable income (income earned less allowed expenses) for the tax year. Personal income tax may be collected through various means: 1. deduction at source - where income tax is deducted directly from an individual's pay and sent to the CRA. 2. installment payments - where an individual must pay his or her estimated taxes during the year instead of waiting to settle up at the end of the year. 3. payment on filing - payments made with the income tax return 4. arrears payments - payments made after the return is filed Employers may also deduct Canada Pension Plan/Quebec Pension Plan (CPP/QPP) contributions, Employment Insurance (EI) and Provincial Parental Insurance (PPIP) premiums from their employees' gross pay. Employers then send these deductions to the taxing authority. Individuals who have overpaid taxes or had excess tax deducted at source will receive a refund from the CRA upon filing their annual tax return. Generally, personal income tax returns for a particular year must be filed with CRA on or before April 30 of the following year.
  5. 5. Tomar Manish, PGD-FM Final Year, BVDU-Amplify BASIC CALCULATION OF TAX An individual taxpayer must report his or her total income for the year. Certain deductions are allowed in determining "net income", such as deductions for contributions to Registered Retirement Savings Plans, union and professional dues, child care expenses, and business investment losses. Net income is used for determining several income-tested social benefits provided by the federal and provincial/territorial governments. Further deductions are allowed in determining "taxable income", such as capital losses, half of capital gains included in income, and a special deduction for residents of northern Canada. Deductions permit certain amounts to be excluded from taxation altogether. "Tax payable before credits" is determined using four tax brackets and tax rates. Non- refundable tax credits are then deducted from tax payable before credits for various items such as a basic personal amount, dependents, Canada/Quebec Pension Plan contributions, Employment Insurance premiums, disabilities, tuition and education and medical expenses. These credits are calculated by multiplying the credit amount (e.g., the basic personal amount of $10,382 in 2010) by the lowest tax rate. This mechanism is designed to provide equal benefit to taxpayers regardless of the rate at which they pay tax. A non-refundable tax credit for charitable donations is calculated at the lowest tax rate for the first $200 in a year, and at the highest tax rate for the portion in excess of $200. This tax credit is designed to encourage more generous charitable giving. Certain other tax credits are provided to recognize tax already paid so that the income is not taxed twice: • The dividend tax credit provides recognition of tax paid at the corporate level on income distributed from a Canadian corporation to individual shareholders; and • The foreign tax credit recognizes tax paid to a foreign government on income earned in a foreign country.
  6. 6. Tomar Manish, PGD-FM Final Year, BVDU-Amplify Provincial and territorial personal income taxes Provinces and territories that have entered into tax collection agreements with the federal government for collection of personal income taxes ("agreeing provinces", i.e., all provinces and territories except Quebec) must use the federal definition of "taxable income" as the basis for their taxation. This means that they are not allowed to provide or ignore federal deductions in calculating the income on which provincial tax is based. Provincial and territorial governments provide both non-refundable tax credits and refundable tax credits to taxpayers for certain expenses. They may also apply surtaxes and offer low-income tax reductions. Canada Revenue Agency collects personal income taxes for agreeing provinces/territories and remits the revenues to the respective governments. The provincial/territorial tax forms are distributed with the federal tax forms, and the taxpayer need make only one payment—to CRA—for both types of tax. Similarly, if a taxpayer is to receive a refund, he or she receives one cheque or bank transfer for the combined federal and provincial/territorial tax refund. Information on provincial rates can be found on the Canada Revenue Agency's website. Quebec Quebec administers its own personal income tax system, and therefore is free to determine its own definition of taxable income. To maintain simplicity for taxpayers, however, Quebec parallels many aspects of and uses many definitions found in the federal tax system. Income not taxed The following types of income are not taxed in Canada (this list is not exhaustive): • gifts and inheritances; • lottery winnings; • winnings from betting or gambling for simple recreation or enjoyment; • strike pay; • compensation paid by a province or territory to a victim of a criminal act or a motor vehicle accident*;
  7. 7. Tomar Manish, PGD-FM Final Year, BVDU-Amplify • certain civil and military service pensions; • income from certain international organizations of which Canada is a member, such as the United Nations and its agencies; • war disability pensions; • RCMP pensions or compensation paid in respect of injury, disability, or death*; • income of First Nations, if situated on a reserve; • capital gain on the sale of a taxpayer’s principal residence; • provincial child tax credits or benefits and Québec family allowances; • Working income tax benefit; • the Goods and Services Tax or Harmonized Sales Tax credit (GST/HST credit) or Quebec Sales Tax credit; and • the Canada Child Tax Benefit. Note that the method by which these forms of income are not taxed can vary significantly, which may have tax and other implications; some forms of income are not declared, while others are declared and then immediately deducted in full. Some of the tax exemptions are based on statutory enactments, others (like the non-taxability of lottery winnings) are based on the non-statutory common law concept of "income". In certain cases, the deduction may require off-setting income, while in other cases, the deduction may be used without corresponding income. Income which is declared and then deducted, for example, may create room for future Registered Retirement Savings Plan deductions. But then the RRSP contribution room may be reduced with a pension adjustment if you are part of another plan, reducing the ability to use RRSP contributions as a deduction. Deductions which are not directly linked to non-taxable income exist, which reduce overall taxable income. A key example is Registered Retirement Savings Plan (RRSP) contributions, which is a form of tax-deferred savings account (income tax is paid only at withdrawal, and no interim tax is payable on account earnings).
  8. 8. Tomar Manish, PGD-FM Final Year, BVDU-Amplify *Quebec has changed its rules in 2004 and, legally, this may be taxed or may not – Courts have yet to rule. CORPORATE INCOME TAXES Corporate taxes include taxes on corporate income in Canada and other taxes and levies paid by corporations to the various levels of government in Canada. These include capital and insurance premium taxes; payroll levies (e.g., employment insurance, Canada Pension Plan, Quebec Pension Plan and Workers' Compensation); property taxes; and indirect taxes, such as goods and services tax (GST), and sales and excise taxes, levied on business inputs. Corporations are subject to tax in Canada on their worldwide income if they are resident in Canada for Canadian tax purposes. Corporations not resident in Canada are subject to Canadian tax on certain types of Canadian source income (Section 115 of the Canadian Income Tax Act). The taxes payable by a Canadian resident corporation may be impacted by the type of corporation that it is:  A Canadian-controlled private corporation, which is defined as a corporation that is:  resident in Canada and either incorporated in Canada or resident in Canada from June 18, 1971, to the end of the taxation year;  not controlled directly or indirectly by one or more non-resident persons;  not controlled directly or indirectly by one or more public corporations (other than a prescribed venture capital corporation, as defined in Regulation 6700);  not controlled by a Canadian resident corporation that lists its shares on a prescribed stock exchange outside of Canada;  not controlled directly or indirectly by any combination of persons described in the three preceding conditions; if all of its shares that are owned by a non-resident person, by a public corporation (other than a prescribed venture capital corporation), or by a corporation with a class of shares listed on a prescribed stock
  9. 9. Tomar Manish, PGD-FM Final Year, BVDU-Amplify exchange, were owned by one person, that person would not own sufficient shares to control the corporation; and  No class of its shares of capital stock is listed on a prescribed stock exchange.  A private corporation, which is defined as a corporation that is:  resident in Canada;  not a public corporation;  not controlled by one or more public corporations (other than a prescribed venture capital corporation, as defined in Regulation 6700);  not controlled by one or more prescribed federal Crown corporations (as defined in Regulation 7100); and  not controlled by any combination of corporations described in the two preceding conditions.  A public corporation, defined as a corporation that is resident in Canada and meets either of the following requirements at the end of the taxation year:  it has a class of shares listed on a prescribed Canadian stock exchange; or  it has elected, or the Minister of National Revenue has designated it, to be a public corporation and the corporation has complied with prescribed conditions under Regulation 4800(1) on the number of its shareholders, the dispersing of the ownership of its shares, the public trading of its shares, and the size of the corporation. If a public corporation has complied with certain prescribed conditions under Regulation 4800(2), it can elect, or the Minister of National Revenue can designate it, not to be a public corporation. Other types of Canadian resident corporations include Canadian subsidiaries of public corporations (which do not qualify as public corporations), general insurers and Crown corporations.
  10. 10. Tomar Manish, PGD-FM Final Year, BVDU-Amplify Provincial/territorial corporate income taxes Corporate income taxes are collected by the CRA for all provinces and territories except Quebec and Alberta. Provinces and territories subject to a tax collection agreement must use the federal definition of "taxable income", i.e., they are not allowed to provide deductions in calculating taxable income. These provinces and territories may provide tax credits to companies, often in order to provide incentives for certain activities such as mining exploration, film production, and job creation. Quebec and Alberta collect their own corporate income taxes, and therefore may develop their own definitions of taxable income. In practice, these provinces rarely deviate from the federal tax base in order to maintain simplicity for taxpayers. Ontario negotiated a tax collection agreement with the federal government under which its corporate income taxes would be collected on its behalf by the CRA starting in 2009. Integration of corporate and personal income taxes In Canada, corporate income is subject to corporate income tax and, on distribution as dividends to individuals, personal income tax. The personal income tax system, through the gross-up and dividend tax credit (DTC) mechanisms, currently provides recognition for corporate taxes, based on a 20 per cent notional federal-provincial rate, to taxable individuals resident in Canada. Because of tax policy issues relating to the proliferation of publicly traded income trusts, the federal government has proposed to introduce an enhanced gross-up and DTC for eligible dividends received by eligible shareholders. An eligible dividend will be grossed- up by 45 per cent, meaning that the shareholder includes 145 per cent of the dividend amount in income. The DTC in respect of eligible dividends will be 19 per cent, based on the expected federal corporate tax rate in 2010. The existing gross-up and tax credit will continue to apply to other dividends. Eligible dividends will generally include dividends paid after 2005 by public corporations (and other corporations that are not Canadian-
  11. 11. Tomar Manish, PGD-FM Final Year, BVDU-Amplify controlled private corporations) that are resident in Canada and subject to the general corporate income tax rate. How is income tax calculated in Canada? Canadian federal income tax is calculated separately from provincial/territorial income tax. However, both are calculated on the same tax return, except for Québec. Federally, there are 4 tax brackets. Each province has multiple tax brackets, except Alberta, which has only one tax rate for all taxable income. The federal and provincial/territorial income tax rates are combined in our tax rate tables so that taxpayers can see the total tax rate being paid, including any provincial surtaxes. The tax rates increase as taxable income increases. Everyone pays the lowest tax rate for the amount of their taxable income within the lowest tax bracket. Taxable income in excess of this is taxed at the next higher rate. After income tax amounts are calculated, non-refundable tax credits are deducted from the tax payable. Non-refundable tax credits include the basic personal amount, which is available to every taxpayer. A list of most of the non-refundable tax credits can be seen in the tables on the personal tax credits page. The actual tax amount of the credits is calculated by multiplying by the tax rate for the lowest tax bracket, except for Québec. The basic personal amount for each province and territory is listed in their tax rate table, as well as the tax rate that is applied to calculate the tax credit. The basic personal amount is the amount that can be earned before any provincial/territorial tax is paid. Some provinces also have a low-income tax reduction which increases the amount that can be earned before any tax is paid. The provincial/territorial tax rates before being combined with the federal rates are shown above the table of combined rates for each province/territory. Canada Revenue Agency (CRA) also has an article What are the income tax rates in Canada? The CRA tables do
  12. 12. Tomar Manish, PGD-FM Final Year, BVDU-Amplify not include any provincial/territorial surtaxes. The surtaxes are included in our combined tax rate tables. Who has to pay tax in Canada, and on what income? Canadian residents A person who is a resident of Canada is subject to Canadian income tax on their world wide income. Are you a resident? Whether or not a person is a resident of Canada is determined by many factors. The amount of time spent in Canada is not the only factor considered. Other factors include maintaining a residence in Canada relatives in Canada bank accounts in Canada, and other social and economic ties. A person who is a resident of Canada, and moves to another country, could still be considered to be a resident of Canada for tax purposes. If you left Canada in the year to travel or live abroad, see the Canada Revenue Agency (CRA) guide T4131 Canadian Residents Abroad. For newcomers to Canada, you have to report your world income for the part of the year that you were a resident of Canada. Some personal tax credits will be prorated based on the day you immigrated to Canada. If you are a non-resident of or newcomer to Canada, see the following information on the CRA web site:
  13. 13. Tomar Manish, PGD-FM Final Year, BVDU-Amplify Individuals - International and Non-Resident Taxes T4058 Non-Residents and Income Tax Newcomers to Canada T4055 Newcomers to Canada Non-residents and deemed residents A person who is not a resident of Canada for any part of the year, and visits Canada for less than 183 days in a year, will pay Canadian income tax only on income earned from Canadian sources. A person who is not a resident of Canada for any part of the year, but who visits Canada for a total of 183 days or more in a year, may be deemed to be a resident of Canada, and subject to Canadian income tax on their world wide income for the entire year. Non-residents and deemed residents may or may not have to file a Canadian tax return. Much Canadian source income will have had Canadian tax withheld when it was paid, and in many cases there is no requirement to file a Canadian tax return. The most common types of income earned in Canada which are required to be reported on a Canadian tax return are:  income from employment in Canada  income from a business carried on in Canada  taxable part of Canadian scholarships, fellowships, bursaries, and research grants, and
  14. 14. Tomar Manish, PGD-FM Final Year, BVDU-Amplify  taxable capital gains from the disposal of taxable Canadian property When a non-resident or deemed resident files a Canadian tax return, they are taxed at the current federal tax rates, plus a surtax of 48% of the federal tax, unless income was earned from a business with a permanent establishment in Canada. In this case, provincial or territorial tax is paid on that income. Deemed residents and non-residents can claim the federal basic personal tax credit plus other applicable tax credits. For non-residents, the non-refundable tax credits total is pro- rated, using a calculation based on income from Canadian sources divided by total world income. For more information, see the CRA Income Tax and Benefit Package for non-residents and deemed residents of Canada. When a non-resident disposes of certain taxable Canadian property, such as real estate, there are certain procedures to be followed, which include paying a tax of 25% of the gain on the property. If this tax is not paid, the purchaser of the property will be liable for the tax, and thus may withhold 25% (50% in some cases) of the selling price of the property. See disposing of certain types of property in the Canada Revenue Agency (CRA) guideT4058 Non-Residents and Income Tax for more information. If a tax treaty exists between Canada and your country of residence, the terms of the treaty may reduce or eliminate the tax on some types of income. You may be a deemed non-resident of Canada for tax purposes if you were a resident of Canada in the year, and, under a tax treaty, you were considered to be a resident of another country. In this case, you will be treated as a non-resident for tax purposes. Part-time residents A person who is a resident of Canada for any part of the year is subject to Canadian income tax on their world wide income during the time that they are a resident of Canada.
  15. 15. Tomar Manish, PGD-FM Final Year, BVDU-Amplify During the time that they are not a resident of Canada, they will pay Canadian income tax only on income earned from Canadian sources. See also Non-taxable Amounts. Leaving in canada If a resident of Canada moves to another country, and severs residential ties with Canada, he/she is deemed to be an emigrant of Canada for tax purposes. When this happens, the person is deemed to have disposed of almost all their property and re-acquired it at fair market value. Tax will be payable on any capital gains arising from the deemed dispositions. Emigrants are not eligible for: Canada Child Tax Benefit (CCTB) Child Disability Benefit (CDB) Universal Child Care Benefit (UCCB) GST/HST credit It is important that you report your date of emigration to Canada Revenue Agency (CRA) as soon as possible. If you are participating in the Home Buyers' Plan (HBP) or Lifelong Learning Plan (LLP), you have to pay the balance of the funds you withdrew by whichever date is earlier: 60 days after you become a non-resident; or the date you file your tax return for the year. If you continue to receive Canadian-source income after you emigrate, tax of 25% will be withheld from certain types of income. The most common types of income subject to withholding tax are: non-arm's length interest
  16. 16. Tomar Manish, PGD-FM Final Year, BVDU-Amplify Dividends rental payments pension payments Old Age Security (OAS) pension Canada Pension Plan (CPP) or Québec Pension Plan (QPP) benefits retiring allowances registered retirement savings plan (RRSP) payments registered retirement income fund (RRIF) payments annuity payments The tax treaty between Canada and your new country of residence may reduce the rate of non-resident withholding tax on some types of income. For more detailed information, see the following information on the CRA web site: Leaving Canada (emigrants) T4056 Emigrants and Income Tax Gifts or Are inheritances taxable? There is no "gift tax" in Canada. Any resident of Canada who receives a gift or inheritance of any amount from any source (except from an employer) will not have to include this in their income. However, if capital property (real estate, other than a principal residence, or investments) is given as a gift, the person who has given the gift will be deemed to have sold the capital property at fair market value, and will have to pay tax on any resulting capital gain. The fair market value is deemed to be the "cost" to the person to whom the shares were given. If income producing property is gifted to a child who is under 18 years old, the income from the property will normally be attributed back to the person giving the gift.(Income Tax Act s 74.1(2)) The above does not include gifts from an employer to an employee, which will likely be considered a taxable benefit to the employee. CRA has a series of questions that an
  17. 17. Tomar Manish, PGD-FM Final Year, BVDU-Amplify employer can answer to determine if there is a taxable benefit. This is found on their web page Rules for Gifts and Awards. For more information on gifts or awards for employees, see the Canada Revenue Agency ( CRA) guide T4130 Employers' Guide Taxable Benefits, at page 14 under the topic "Gifts, awards and social events". There are tax consequences to the estate of a deceased taxpayer when capital property is owned at death. See How can you minimize taxes of a deceased taxpayer? from the Wills & Estates page. Claim your medical expenses on the tax return of the spouse with lower net income. You should claim the total medical expenses for both you and your spouse or common- law partner on one tax return. You can claim the medical expenses on either spouse's tax return. If both spouses have taxable income, it is usually better to claim the medical expenses on the return with the lower net income. This is because the lesser of $2,011 (federal, for 2009 - see the tables of non-refundable tax credits for provincial/territorial amounts) or 3% of net income is deducted from the medical expenses to determine the amount to be used for the tax credit. However, if the lower income spouse does not have enough tax payable to offset the medical expense tax credit, it may be beneficial to move the expenses to the higher income spouse. If you are a business owner, consider setting up a private health services plan to have your business pay your family medical expenses. See the private health services plan article on our Small Business page. See also the article on the medical expense tax credit on our Filing Your Return page. Tax-free (or reduced tax) Employee Benefits Personal tax -> Tax free benefits for employees Business -> Tax free benefits for employees Allowances for motor vehicle use See the tax-free motor vehicle allowances article on the Small Business page.
  18. 18. Tomar Manish, PGD-FM Final Year, BVDU-Amplify Allowances for transportation, board and lodging when you are employed at a special work site or remote work location You are not allowed to write off the expenses of transportation, board or lodging which relate to your employment, but allowances that you receive from your employer for these costs may not be taxable to you. If you have received allowances from your employer for board, lodging, or transportation in relation to working temporarily at a special work site or remote work location, these allowances may not be taxable to you, under certain conditions. These conditions include:  You maintained a principal place of residence at another location, and this residence was available to you throughout the time you were away at the work site, and due to the distance of your principal place of residence from the work site, you could not reasonably have been expected to commute daily to the work site, or  The work site is at a location which is so remote from any established community that you could not reasonably be expected to establish and maintain a self- contained domestic establishment; and  To perform your duties of employment you were required to be away from your principal place of residence, or at the special work site or location for not less than 36 hours.  For more information on this, see the Canada Revenue Agency (CRA) Interpretation Bulletin IT-91 Employment at Special Work Sites or Remote Locations.
  19. 19. Tomar Manish, PGD-FM Final Year, BVDU-Amplify Disability insurance income Payments received from a disability insurance plan are not taxable when the employee has either paid the premiums, or the premium amounts paid by the employer have been included in the employee's income as a taxable benefit. See thedisability insurance article for more information. Employee profit sharing plans Tax is payable when distributions are made from an employee profit sharing plan to employees, but these payments are not subject to Canada Pension Plan or Employment Insurance premiums. Private Health Services Plan benefits Private health services plan (PHSP) payments made on behalf of employees and their dependents are not taxable to the employees, and there are no CPP or EI premiums charged on these payments. If employees pay a portion of the PHSP premiums, this qualifies as a medical expense for purposes of the medical expense tax credit. See the private health services plans article on the Business page. Workers' compensation payments Workers' compensation payments received are not taxable income. They are, however, added into total income when filing the tax return, then deducted again to get to taxable income. Total income is used for calculating many income-tested benefits.
  20. 20. Tomar Manish, PGD-FM Final Year, BVDU-Amplify Employee Home Relocation Loans When a home relocation loan to an employee results in a taxable benefit being included in the employee's income, a home relocation loan benefitdeduction is available to the employee, which would partially offset the taxable benefit. See our article on Employee Loans and Employee Loan Subsidies Tables of Personal Income Tax Rates. Alberta (AB) Personal Income Tax Brackets and Rates All 2011 Taxable Income 10.00% All 2010 Taxable Income 10.00% Alberta (AB) Combined Federal & Provincial Tax Rates 2011 Taxable Income 2011 Marginal Tax Rates 2010 Taxable Income 2010 Marginal Tax Rates Other Income Capital Gains Canadian Dividends Other Income Capital Gains Canadian Dividends Eligible Dividends Non- Eligible Dividends Eligible Dividends Non- Eligible Dividends first $41,544 25.00% 12.50% -2.02% 10.21% first $40,970 25.00% 12.50% -4.28% 10.21% over $41,544 up to $83,088 32.00% 16.00% 7.85% 18.96% over $40,970 up to $81,941 32.00% 16.00% 5.80% 18.96% over $83,088 up to $128,800 36.00% 18.00% 13.49% 23.96% over $81,941 up to $127,021 36.00% 18.00% 11.56% 23.96% over $128,800 39.00% 19.50% 17.72% 27.71% over $127,021 39.00% 19.50% 15.88% 27.71% Marginal tax rate for dividends is a % of actual dividends received (not grossed-up amount). AB Basic Personal Amount 2011 Tax Rate 2010 Tax Rate $16,977 10.00% $16,825 10.00% Federal Basic Personal Amount 2011 Tax Rate 2010 Tax Rate $10,527 15.00% $10,382 15.00% Northwest Territories (NT) Personal Income Tax Brackets and Rates 2011 Taxable Income 2011 Tax Rates 2010 Taxable Income 2010 Tax Rates
  21. 21. Tomar Manish, PGD-FM Final Year, BVDU-Amplify first $37,626 5.90% first $37,106 5.90% over $37,626 up to $75,253 8.60% over $37,106 up to $74,214 8.60% over $75,253 up to $122,345 12.20% over $74,214 up to $120,656 12.20% over $122,345 14.05% over $120,656 14.05% Northwest Territories (NT) Combined Federal & Territorial Tax Rates 2011 Taxable Income 2011 Marginal Tax Rates 2010 Taxable Income 2010 Marginal Tax Rates Other Income Capital Gains Canadian Dividends Other Income Capital Gains Canadian Dividends Eligible Dividends Non- Eligible Dividends Eligible Dividends Non- Eligible Dividends first $37,626 20.90% 10.45% -9.92% 1.96% first $37,106 20.90% 10.45% -12.09% 1.96% over $37,626 up to $41,544 23.60% 11.80% -6.11% 5.33% over $37,106 up to $40,970 23.60% 11.80% -8.20% 5.33% over $41,544 up to $75,253 30.60% 15.30% 3.76% 14.08% over $40,970 up to $74,214 30.60% 15.30% 1.88% 14.08% over $75,253 up to $83,088 34.20% 17.10% 8.83% 18.58% over $74,214 up to $81,941 34.20% 17.10% 7.06% 18.58% over $83,088 up to $122,345 38.20% 19.10% 14.47% 23.58% over $81,941 up to $120,656 38.20% 19.10% 12.82% 23.58% over $122,345 up to $128,800 40.05% 20.03% 17.08% 25.90% over $120,656 up to $127,021 40.05% 20.03% 15.49% 25.90% over $128,800 43.05% 21.53% 21.31% 29.65% over $127,021 43.05% 21.53% 19.81% 29.65% Marginal tax rate for dividends is a % of actual dividends received (not grossed-up amount). Eligible dividend rates for 2011 revised June 25, 2011 re NT legislation changes. NT Basic Personal Amount 2011 Tax Rate 2010 Tax Rate $12,919 5.90% $12,740 5.90% Federal Basic Personal Amount 2011 Tax Rate 2010 Tax Rate $10,527 15.00% $10,382 15.00% Nunavut (NU) Personal Income Tax Brackets and Rates 2011 Taxable Income 2011 Tax Rates 2010 Taxable Income 2010 Tax Rates first $39,612 4.00% first $39,065 4.00% over $39,612 up to $79,224 7.00% over $39,065 up to $78,130 7.00% over $79,224 up to $128,800 9.00% over $78,130 up to $127,021 9.00% over $128,800 11.50% over $127,021 11.50% Nunavut (NU) Combined Federal & Territorial Tax Rates 2011 Taxable Income 2011 Marginal Tax Rates 2010 Taxable Income 2010 Marginal Tax Rates Other Income Capital Gains Canadian Dividends Other Income Capital Gains Canadian Dividends Eligible Dividends Small Business Dividends Eligible Dividends Small Business Dividends
  22. 22. Tomar Manish, PGD-FM Final Year, BVDU-Amplify first $39,612 19.00% 9.50% -4.58% 2.08% first $39,065 19.00% 9.50% -7.32% 2.08% over $39,612 up to $41,544 22.00% 11.00% -0.35% 5.83% over $39,065 up to $40,970 22.00% 11.00% -3.00% 5.83% over $41,544 up to $79,224 29.00% 14.50% 9.52% 14.58% over $40,970 up to $78,130 29.00% 14.50% 7.08% 14.58% over $79,224 up to $83,088 31.00% 15.50% 12.34% 17.08% over $78,130 up to $81,941 31.00% 15.50% 9.96% 17.08% over $83,088 up to $128,800 35.00% 17.50% 17.98% 22.08% over $81,941 up to $127,021 35.00% 17.50% 15.72% 22.08% over $128,800 40.50% 20.25% 25.73% 28.96% over $127,021 40.50% 20.25% 23.64% 28.96% Marginal tax rate for dividends is a % of actual dividends received (not grossed-up amount). NU Basic Personal Amount 2011 Tax Rate 2010 Tax Rate $11,878 4.00% $11,714 4.00% Federal Basic Personal Amount 2011 Tax Rate 2010 Tax Rate $10,527 15.00% $10,382 15.00% Yukon (YT) Personal Income Tax Brackets and Rates Before Surtax 2011 Taxable Income 2011 Tax Rates 2010 Taxable Income 2010 Tax Rates first $41,544 7.04% first $40,970 7.04% over $41,544 up to $83,088 9.68% over $40,970 up to $81,941 9.68% over $83,088 up to $128,800 11.44% over $81,941 up to $127,021 11.44% over $128,800 12.76% over $127,021 12.76% Yukon (YT) Combined Federal & Territorial Tax Rates 2011 Taxable Income 2011 Marginal Tax Rates 2010 Taxable Income 2010 Marginal Tax Rates Other Income Capital Gains Canadian Dividends Other Income Capital Gains Canadian Dividends Eligible Dividends Non- Eligible Dividends Eligible Dividends Non- Eligible Dividends first $41,544 22.04% 11.02% -13.36% 5.25% first $40,970 22.04% 11.02% -9.74% 5.32% over $41,544 up to $80,966 31.68% 15.84% 0.23% 17.30% over $40,970 up to $80,708 31.68% 15.84% 4.14% 17.37% over $80,966 up to $83,088 32.16% 16.08% -0.15% 17.62% over $80,708 up to $81,941 32.16% 16.08% 4.06% 17.70% over $83,088 up to $128,800 38.01% 19.01% 8.10% 24.93% over $81,941 up to $127,021 38.01% 19.01% 12.48% 25.01% over $128,800 42.40% 21.20% 14.28% 30.41% over $127,021 42.40% 21.20% 18.80% 30.49% Marginal tax rate for dividends is a % of actual dividends received (not grossed-up amount). Rates for eligible and non-eligible dividends as per Yukon Bill 92 passed December 10, 2010. YT Surtax 2011 2010 YT surtax rate (included in all above rates) 5% YT surtax rate (included in all above rates) 5%
  23. 23. Tomar Manish, PGD-FM Final Year, BVDU-Amplify Surtax is on YT tax greater than $ 6,000 Surtax is on YT tax greater than $ 6,000 Person with only basic personal amount - surtax starts at taxable income of $ 80,966 Person with only basic personal amount - surtax starts at taxable income of $ 80,708 YT Basic Personal Amount 2011 Tax Rate 2010 Tax Rate $10,527 7.04% $10,382 7.04% Federal Basic Personal Amount 2011 Tax Rate 2010 Tax Rate $10,527 15.00% $10,382 15.00% Revised: August 04, 2011 Québec (QC) Personal Income Tax Brackets and Rates Before Federal Tax Abatement 2011 Taxable Income 2011 Tax Rates 2010 Taxable Income 2010 Tax Rates first $39,060 16.00% first $38,570 16.00% over $39,060 up to $78,120 20.00% over $38,570 up to $77,140 20.00% over $78,120 24.00% over $77,140 24.00% Québec (QC) Combined Federal & Provincial Tax Rates Net of Federal Tax Abatement 2011 Taxable Income 2011 Marginal Tax Rates 2010 Taxable Income 2010 Marginal Tax Rates Other Income Capital Gains Canadian Dividends Other Income Capital Gains Canadian Dividends Eligible Dividends Non- Eligible Dividends Eligible Dividends Non- Eligible Dividends first $39,060 28.53% 14.26% 4.09% 11.74% first $38,570 28.53% 14.26% 2.33% 11.74% over $39,060 up to $41,544 32.53% 16.26% 9.73% 16.74% over $38,570 up to $40,970 32.53% 16.26% 8.09% 16.74% over $41,544 up to $78,120 38.37% 19.19% 17.97% 24.05% over $40,970 up to $77,140 38.37% 19.19% 16.51% 24.05% over $78,120 up to $83,088 42.37% 21.19% 23.61% 29.05% over $77,140 up to $81,941 42.37% 21.19% 22.27% 29.05% over $83,088 up to $128,800 45.71% 22.85% 28.32% 33.22% over $81,941 up to $127,021 45.71% 22.85% 27.07% 33.22% over $128,800 48.22% 24.11% 31.85% 36.35% over $127,021 48.22% 24.11% 30.68% 36.35% Marginal tax rate for dividends is a % of actual dividends received (not grossed-up amount). QC Basic Personal Amount 2011 Tax Rate 2010 Tax Rate $10,640 20.00% $10,505 20.00% Federal Basic Personal Amount 2011 Tax Rate 2010 Tax Rate $10,527 15.00% $10,382 15.00%
  24. 24. Tomar Manish, PGD-FM Final Year, BVDU-Amplify Tax Prosecution In the British Columbia Provincial Court income tax evasion case of case The Queen v Loosdrecht convictions had been entered against the appellant in respect to four counts under s. 239(1)(d) of the Income Tax Act. The total tax evaded during the 4-year period in issue was $98,211.36. The total undeclared income earned before deductions was $758,228.18. He was sentenced to new custodial time of 14 months and fines were set at 100 percent of the amount of tax evaded. Charitable Donations The federal tax credit for donations is available in two stages. A low-rate credit is available on the first $200 of donations made in the year and a high-rate credit is available on the remainder. Spouses and common-law partners can claim donations with respect to one another—therefore, it makes sense for only one spouse to claim all of the family donations. A tax saving results because the low-rate credit is only used once. Swiss Bank Accounts Canadian Revenue Minister Jean-Pierre Blackburn recently announced 36 Canadian clients of UBS AG had contacted the Canada Revenue Agency to voluntarily disclose income they previously failed to report. Revenue Canada, eager to clamp down on tax evasion by offshore Swiss bank account holders, has met with UBS lawyers to try to compel the bank to reveal its Canadian account holders who may have failed to report offshore income to the CRA. GST/HST Claims in Bankruptcy In the case of Quebec (Revenue) v. Caisse populaire Desjardins de Montmagny the Supreme Court of Canada held that in the case of a bankruptcy GST/QST debts rank as ordinary unsecured creditor claims General Anti-Avoidance Rule (GAAR) The Federal Court of Appeal has unanimously reversed the Tax Court of Canada's General Anti-Avoidance Rule decision inLehigh Cement Limited (2010 FCA 124). The FCA stressed that the burden of proof is on the Canada Revenue Agency (CRA) to establish the exemption's purpose and to establish that allowing the exemption to the taxpayer would be a misuse of that provision because it would achieve an outcome that the provision is intended to prevent or is not intended to permit. The Appeal Court noted that the taxpayer was entitled to the benefit of any doubt as to whether the transaction resulted in a misuse of the particular provision. The court concluded that the CRA cannot discharge its burden merely by asserting that the transaction was not foreseen or that it exploited a previously unnoticed legislative gap: the CRA must establish through
  25. 25. Tomar Manish, PGD-FM Final Year, BVDU-Amplify evidence and reasoned argument that the impugned transaction's result was inconsistent with the exemption's purpose. New Voluntary Disclosure (VD or Tax Amnesty) Rules It appears that the Canadian tax department, CRA, is set to announce new rules limiting income inclusions for taxpayers file a VDP application to 10 years. Note that this new policy has not yet been formally announced. The tax amnesty program applies to Canadian taxpayers who come forward on a voluntary basis for unreported income (including offshore or internet income) or unfilled income tax returns. Tax-free savings account (TFSA) The government recently issued a statement confirming that, for the 2009 taxation year, it will consider waiving tax on excess contributions to a tax-free savings account (TFSA) in any case where a taxpayer genuinely misunderstood the operation of the TFSA rules.

×