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Employer-Sponsored Social Events: After the Party

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Subsidized Meals: Are They a Taxable Benefit?

Do you have an employee dining room or cafeteria? In a March 21, 2018 Technical Interpretation, CRA stated that they do not consider meals subsidized by the employer to be a taxable benefit provided the employee pays a reasonable charge. This charge should be sufficient to cover the cost of the food, its preparation and service.
Where the charge is less than the cost, the difference would be considered a taxable benefit and should be included on the employee’s T4. It is also important to note that the taxable benefit would be pensionable (CPP remittance required), but not insurable (no EI remittance required).
Action Item: Due to the tax cost to the employee, in addition to the administrative tracking costs, one should consider having employees pay at least a reasonable amount for meals provided.

Donation Receipts: How Complete Is Complete?

Charities should ensure that any donation receipts issued are fully compliant with the tax rules. Failure to do so may result in the donor being denied a charitable donation if reviewed by CRA. This could cause operational and goodwill problems for the charity. Receipts for cash gifts must have the following: a statement that it is an official receipt for income tax purposes;the name and address of the charity as on file with CRA;a unique serial number;the registration number issued by CRA;the location (city, town, municipality) where the receipt was issued;the date or year the gift was received and the date the receipt was issued;the full name, including middle initial, and address of the donor;the amount of the gift;the amount and description of any advantage received by the donor;the eligible amount of the gift;the signature of an individual authorized by the charity to acknowledge gifts; andthe name and website address of CRA. Receipts for non-cash gifts must also include: the date…

Home Buyers Need To Check Residency Of Home Sellers If They Suspect The Seller Is Not Canadian

When Canadians purchase a home, they are required to withhold part of the purchase price should the seller be a non-resident of Canada. A recent Tax Court of Canada decision (Kau v. the Queen [2018 TCC 156]) should serve as a warning to clients and professionals alike, to watch for any red flags in the purchase process. As a result, the home buyer has to pay 25% of the purchase price to CRA on top of the original purchase price. While hindsight is 20/20, the judge suggests that red flags should have lead to further inquiry by the home buyer as well as the buyer’s lawyer. The following technical overview from of  the court case, outlines that a purchaser and his lawyer failed to adequately ensure the seller of a home was a Canadian resident. “At issue was whether the taxpayer was liable for the withholding tax on the purchase of a condominium as assessed under s. 116(5) of the ITA for the 2011 taxation year, on the basis that he as the purchaser had, after reasonable inquiry…

Construction Activities: Reporting Obligations For Subcontractors

A July 17, 2017 Technical Interpretation examined the conditions which would require the filing of a T5018, Statement of Contract Payments.

Where a person or partnership primarily derives their business income from construction activities for a reporting period, a T5018 should be filed for any subcontractor payment or credit made relating to goods or services received in the course of construction activities. The reporting period may be a calendar or fiscal year but cannot be changed once selected (unless authorized by CRA). The term “construction activities” is broadly defined. It includes, for example, the erection, excavation, installation, alteration, modification, repair, improvement, demolition, destruction, dismantling or removal of all or any part of a building, structure, surface or sub-surface construction, or any similar property. Such activities are considered to be those normally associated with the on-site fabrication and erection of buildings, roads, bridges, parking lots…

USA Citizens: Risks of Tax Non-Compliance

Photo by Aaron Kittredge from Pexels

Since January 1, 2016, the US State Department was able to deny or revoke passports to US citizens having a “seriously delinquent tax debt” or no Social Security Number associated with their passport. A “seriously delinquent tax debt” is one where the taxpayer owed more than $51,000, after January 1, 2018 (indexed going forward), in tax, interest, and penalties. 
An Alert on the IRS website recently noted that beginning January 2018 the IRS will begin certifying tax debts to the State Department. After receiving certification from the IRS, the State Department will not generally issue a passport.
In addition to passport denial and revocation, several states impose non-monetary, non-criminal sanctions for certain taxpayers who are sufficiently delinquent on their taxes. For example, New York, California, Louisiana, and Massachusetts may revoke driving privileges. 
Action Item: If you have an outstanding U.S. tax liability, or are concerned you may not b…

Reasonable Automobile Allowances: GST/HST Claim

A travel allowance paid to an employee for the use of their personal vehicle for business purposes will be non-taxable if it is reasonable. Where such reasonable allowances are paid, an input tax credit (ITC) may be claimed by the employer.The ITC is computed as the imputed GST/HST in the allowance, without adjustment for the fact that some costs likely did not attract GST/HST. In non-harmonized provinces/territories (such as Alberta and B.C.), the ITC would be 5/105 of the allowance.The ITC in a harmonized province is different.For example, in Ontario, with 13% HST, the ITC would be 13/113 of the allowance.Other HST provinces would apply this formula to their respective rate.
In a November 10, 2017 Tax Court of Canada case, CRA denied ITCs of $4,935 related to motor vehicle allowances paid to employees that were also shareholders. CRA argued that the allowances were not reasonable.
Taxpayer wins The allowances were based on the maximum per kilometre rates that the employer could deduct…