We share a common view on tax: pay no more than is necessary. Most business decisions have tax implications, and tax legislation is complex and always a changing world. We offer a range of taxation services including corporate and personal income tax planning and preparation. In addition to these services, we also provide advice and guidance on estate planning, trusts and capital gains and loss calculations. Tax planning opportunities can arise for a number of different reasons. One of the most important aspects of tax planning is the ability to plan a way forward before transactions occur. Some tax planning methods are date sensitive and as such waiting too long after the transaction can eliminate choices that may have been available. A little planning goes a long way!
Corporate tax planning
Our objective is to structure your business to minimize or defer taxes paid now and in the future. When we prepare your corporation’s tax returns we consider the integration with your personal tax planning and the effect moving forward and with concerns toward valuation and succession planning. Among the strategies we can assist you with are:
- new incorporations and system selection
- considerations for restructure, freezes and
- business sales, amalgamations or wind-ups
- corporate tax minimization strategies
- guidance with forecasting, budgeting and cash flow management
Personal tax planning
We can help you get the most out of tax savings opportunities by developing integrated tax strategies that take you, your business and your family into account. Personal tax preparation involves an integrated approach particularly for business owner-managers and other corporate shareholders. We can assist you with minimizing your tax obligations such as:
- helping you design you compensation programs such as salary vs.dividends
- regular newsletters or other communications designed to enhance your understanding of deductions and changes
- potential pension or income splitting opportunities
When a non-resident of Canada sells (or transfers to a trust, corporation or relative) real estate located in Canada, it is necessary to obtain a certificate of compliance for the disposition of taxable Canadian property, commonly referred to as a clearance certificate.
The application for a clearance certificate must be filed with Canada Revenue Agency (CRA) within 10 days of the closing date to avoid penalty. The steps in completing the filing are as follows:
- There must be a binding contract of sale or statement of adjustments for a completed sale.
- The vendor must be able to document the purchase of the property and any improvements to the property to establish the adjusted cost base. It can sometimes be difficult for the vendor to establish an adjusted cost base without proper invoices or paid cheques in which case the capital gain calculation may be challenged by CRA.
- If the property was rented, the vendor must have filed all necessary Canadian tax returns to report rental income.
- Vendors who are individuals must have or apply for a Canadian social insurance number.
The process of obtaining a clearance certificate can take several weeks depending on the nature of the sale. Funds will be withheld by the vendor’s lawyer until clearance is received and withholding taxes submitted.
The initial withholding is 25% (occasionally 50%) of the selling price of the property which is held in trust by the vendor’s lawyer.
- Once the clearance certificate is received, the withholding tax of 25% of the capital gain is remitted to CRA and the balance held in trust by the lawyer is forwarded to the vendor.
- The vendor must file a Canadian tax return for the calendar year in which the sale completed to report the capital gain and determine the actual tax liability. As additional costs are allowed as deductions at this stage, refunds are common.
The lawyer and accountant will typically coordinate the flow of documents. The waiting time can be lengthy but the process is generally not difficult.
There will always be exceptions and complications to the general rules. If you have questions, please contact Michael Pinch, CPA,CA at firstname.lastname@example.org or call 1 (250) 338-1324.