Year End Tax Planning December 2015

As the holiday season approaches and many of us are looking forward to holiday festivities, we would like to remind you that this is also a good time to do some year end tax planning. Planning ahead over the entire year is ideal, but by considering specific tax planning matters now, you may be able to reduce your tax bite next April and save tax for you and your family for 2015. Planning now can also optimize taxes for 2015 and 2016, particularly given the likely expiry of the temporary top personal income tax bracket tax rate increase in B.C. Keep in mind that the planning points outlined below are not intended to serve as specific advice; you should always consult your D&H advisor before implementing any of the suggestions contained in this newsletter.

Owner-Manager Remuneration

The right mix of salaries and dividends to the owner-manager will ensure taxes are minimized while taking into consideration RRSP entitlements and Canada Pension Plan requirements. Income splitting may also be possible if a spouse or family member provides services for which the individual can be paid a reasonable salary. This works particularly well where your spouse or children have little or no income.

Lifetime Capital Gains Exemption

The lifetime capital gains exemption limit increased to $ 813,600 (from $ 800,000) effective for dispositions of qualified small business corporation shares by individuals occurring in 2015. The lifetime capital gains exemption limit on qualified small business corporation shares is indexed to inflation for future tax years.

The lifetime capital gains exemption limit for qualified farm and fishing property has been increased to $ 1,000,000 (from $ 813,600) for dispositions by individuals occurring on or after April 21, 2015.

Tax Rates for 2015 and 2016

The 2013 British Columbia budget introduced a new temporary top personal income tax bracket for 2014 and 2015, with a tax rate that is 2.1% higher than the prior highest top marginal tax rate. As a result, for individuals with income in the highest tax bracket (2015: income over $ 151,050), the top marginal B.C. income tax rate increased to 16.8% (from 14.7%). This temporary tax rate and tax bracket is scheduled to expire at the end of 2015. Assuming that the tax rate is reduced as proposed for 2016, the top marginal rate for B.C. will return to 14.7%. The combined federal and provincial top marginal tax rate will decrease from 45.8% (2015) to 43.7% (2016), but that does not take into account the Federal tax increase of 4% for income in excess of $ 200,000 which was part of the Federal Liberal election platform. While no details have been released yet, it seems that the 2016 federal tax rates will be changed to include that election promise. In that case, the top Federal and B.C. combined marginal tax rate for 2016 will be 47.7%, and will apply to income in excess of $200,000.

The maximum marginal tax rate for eligible dividends for 2015 is 28.68% (2016 – 25.78%), and for regular dividends is presently 37.98% (2016 – 35.93%). If the Federal income tax increase described in the Federal Liberal election platform is enacted in 2016, then the maximum marginal tax rate for eligible dividends will be 31.3% and for regular dividends the maximum marginal rate will be 40.61% (the actual rates might be lower if the dividend tax credit rates are also changed; there are no details in the Federal Liberal election platform on that matter so we cannot predict whether the dividend tax credit rates will change).

You should consider these tax rates when planning certain transactions. For example, it may be more tax-efficient for a corporation to limit its payout of dividends so that the shareholder’s taxable income remains under $ 151,050 in 2015.

Family Tax Cut

In 2014 the Family Tax Cut was enacted. This is a non-refundable tax credit of up to $ 2,000 for eligible couples with minor children based on the net reduction of federal tax that would be realized if up to $ 50,000 of an individual’s taxable income was transferred to the individual’s eligible spouse or common-law partner. This tax credit is effective for the 2014 and subsequent tax years. In order to be eligible, both spouses must file a personal income tax return.

The Liberal election platform proposed to repeal this measure. While no legislation has been proposed yet, it seems likely that this tax cut will be retained in 2015 and eliminated in 2016. However, it is possible that the elimination of this tax credit will be effective in 2015.

Trust Income Allocations

Income (e.g. dividends and other income) not allocated from an inter-vivos trust to an income beneficiary is taxed at the highest marginal personal tax rate (45.8% for 2015 in B.C.) in the trust. In order to allocate income from an inter-vivos trust to a beneficiary in 2015, the income must be paid or payable to the beneficiary on or before December 31st.

Care should be taken when allocating certain types of income, such as private company dividends, to beneficiaries under the age of 18 as the “Kiddie Tax” may apply to tax such income at the highest marginal personal tax rate.

Review your Will

You should review your will in light of new legislation to tax certain trusts at the top marginal tax rate, effective in 2016, especially if your estate plan includes creating a trust in your will. In addition, the new B.C. Wills and Estates Succession Act (WESA) recently came into force and you may want to review your estate plan in light of any changes contained in that Act, including new rules allowing for the use of multiple wills for probate fee planning purposes. You may also be affected by a tax change that will tax accrued gains in spousal trusts and alter ego trusts in the deceased’s beneficiary’s hands (and not in the trust itself). Also, if you plan to make gifts to charity through your will or estate, you may be able to benefit from new legislation coming into force in 2016 that creates more flexibility in the use of your estate’s donation tax credits.

Low-Interest Loans

The Canada Revenue Agency’s prescribed rate of interest remains at 1% for the final quarter of 2015. This low interest rate provides tax planning opportunities for individuals to split income with family members using related party loans.

Related party loans that bear interest at a rate equal to the prescribed rate in effect as of the date of the loan can provide significant tax savings. A properly structured loan avoids the attribution rules which would otherwise apply to funds that are lent to your spouse or minor children, whether through a trust or otherwise, on an interest free basis. Annual interest payments made to you from the loaned funds will be taxed as income in your hands; however, any income generated by the recipient of the loan will be taxed as income in the hands of the recipient. Consequently, significant income can be shifted from your hands into the hands of a family member with a lower marginal tax rate.

Interest charged on related party loans outstanding in 2015 must be paid before January 30, 2016 in order to avoid the attribution rules.

Contact your D&H adviser if you feel that you may benefit from such an arrangement.

Capital Losses

Capital losses may be used to offset capital gains realized during the year, reducing the income taxes that are payable for 2015. Therefore, it may make sense to sell investments that have dropped in value in order to realize a loss. To trigger capital losses before the end of the year, the transaction settlement date must be on or before December 31, 2015. The time it takes to settle a trade will vary depending on the nature of the security and the exchange on which it is listed. Check with your broker to determine the last date your trade can take place while still being settled by December 31, 2015.

Want to buy back the same investments? Wait until at least 30 days have elapsed after the settlement date – otherwise, your losses will be denied and added to the cost base of your re-purchased investments.

If your capital losses exceed your capital gains in 2015, the net capital losses may be carried back three years or carried forward indefinitely to offset taxable capital gains in other years.

RRSP Contributions

February 29, 2016 is the last day you can contribute to an RRSP and deduct the contribution on your 2015 personal tax return. However, the earlier you make the contribution, the more time you have to let your tax-sheltered retirement income funds grow.

Your 2015 RRSP “contribution limit” is equal to 18% of your 2014 “earned income” up to a maximum contribution limit of $ 24,930, plus any unused contribution room from prior years. Earned income generally consists of net employment, business, and rental income.

Your 2015 RRSP “contribution limit” can be found on your 2014 Notice of Assessment and on any subsequent 2014 Notice of Reassessment. Be sure to take into account any undeducted RRSP contributions you may already have when deciding how much to contribute to your RRSP for 2015. Unused RRSP contribution room can be carried forward indefinitely until fully utilized.

If you turned 71 during 2015 you must wind up your RRSP by the end of the year. Therefore, the last day you can contribute to your RRSP is December 31, 2015. However, if you have “earned income” in 2015, you will be entitled to additional contribution room for 2016. Since you must terminate your RRSP by December 31, 2015, you might consider making a contribution in December 2015 before your plan is wound up. Although you may be assessed a small over-contribution penalty for the month of December, you will be entitled to a tax deduction in 2015 for the contribution made. In addition, even if you are over the age of 71, you can still make contributions to a spousal RRSP up to the end of the year your spouse turns 71.

Income splitting in the future may be achieved by contributing to a spousal RRSP. However, to ensure your spouse pays the income tax on any withdrawal from the plan (rather than you), your spouse must wait until the third calendar year after the year of your last spousal RRSP contribution before making the withdrawal. Making the spousal contribution before December 31st will effectively reduce the waiting period to just over two years.

Allowable Business Investment Losses

While capital losses can only be used to offset capital gains, allowable business investment losses (ABILs) can be used to reduce income from all sources. Therefore, if you are a shareholder or creditor of a financially unviable private small business corporation, consider selling your shares or debt to an unrelated person, or claiming a special write-down for the shares or debt, before December 31, 2015 to realize an ABIL for 2015. Keep in mind that if you have already claimed any capital gains deductions (CGD) in the past, the amount of the ABIL will be reduced by the CGD claimed. In addition, certain rules may disallow the ABIL claim if your investment is in the form of a non-interest bearing loan.

Year-end Planning for Certain Investments

As a planning point, you may want to delay certain investments made outside of your RRSP or TFSA until January 2016. Purchases of mutual funds that are expected to make taxable distributions near the end of 2015 can be delayed until 2016 to avoid paying tax sooner than necessary. Likewise, you might consider selling mutual funds before the end of the year to minimize your allocation of taxable income for 2015. When it comes to purchasing interest bearing securities (such as GICs) with a maturity date of one or more years, consider waiting until early 2016 so that you don’t have to pay tax on accrued interest income until 2017, the year of the investment’s first anniversary.

Tax-Free Savings Account (TFSA)

You can contribute up to $ 10,000 to a TFSA for 2015 if you are a Canadian resident age 18 or older (the Liberal election platform proposed to reduce this limit to $5,500 per year; no legislation has been released yet but we expect the reduction to $5,500 per year to apply to 2016 and subsequent years). Any unused contribution room can be carried forward indefinitely, so this limit may be higher if you did not contribute to a TFSA in a prior year. For example, if you have never contributed to a TFSA, you may be able to contribute a total of $ 41,000 before December 31, 2015. Contributions to a TFSA are not tax deductible, but investment income earned in the TFSA is tax-free, and you can make tax-free withdrawals from the TFSA at any time. When you make a withdrawal, the amount withdrawn will be added to your contribution room for the following year, so that it can be re-contributed in or after that following year.

One attractive feature of a TFSA is that if you have more money for investment than your spouse, you can give funds to your spouse to establish his or her own TFSA and the normal income attribution rules that would otherwise tax the investment income in your hands would not apply while the funds remain in the TFSA.

Unlike an RRSP, which has to be wound up when you reach age 71, you can maintain your TFSA for your entire lifetime.

TFSAs will generally be allowed to hold the same types of investments as RRSPs. This includes cash, mutual funds, publicly traded securities, GICs, bonds and in limited circumstances certain shares of small business corporations.

Registered Disability Savings Plan (RDSP)

You can set up an RDSP for a child if he or she qualifies for the disability tax credit. The maximum lifetime contribution limit is $ 200,000 per child, and contributions are not tax deductible. Income earned inside the plan is exempt from tax and withdrawals are taxable to the beneficiary. You will have to consider whether an RDSP might disqualify your child from receiving provincial or territorial income support amounts. Contributions may be supplemented to a maximum of $ 3,500 in matching grants in one year, and up to $ 70,000 over the beneficiary’s lifetime by payments from the Canada Disability Savings Grant Program depending on the beneficiary’s family income and contribution levels.

Registered Education Savings Plan (RESP) Contributions

December 31, 2015 is the last day you can contribute to an RESP and receive a Canada Education Savings Grant (CESG) for 2014. There is no longer a maximum annual RESP contribution limit and the lifetime maximum has increased to $ 50,000. CESG grants are calculated at 20% of your RESP contributions, subject to an annual limit of $ 500 ($ 1,000 in CESG if there is unused grant room from a previous year) per child under the age of 18 and a lifetime limit of $ 7,200. Additional age restrictions apply for RESP contributions and withdrawals.

Families with a total income of less than $ 89,401 may qualify for increased CESG benefits on the first $ 500 of RESP contributions.

All B.C. children born on or after January 1, 2007 who have an RESP are entitled to receive the $ 1,200 BC Training and Education Savings Grant. To access the grant, families must open an RESP and apply for the grant before the child turns nine years old. A family may only apply for the grant once the child has turned six years old. As the program is new, an extension is available for children who had their sixth birthday in 2013, 2014 or 2015 – the application deadline is the later of August 14, 2018 or the day before their ninth birthday.

Defer a Bonus

If you are going to receive a bonus for 2015, you may want to talk to your employer about deferring the bonus until January of 2016. That way, you can defer paying income taxes on the bonus for a full year, although a certain level of payroll withholdings may still be required.

To avoid the income tax withholdings entirely, if you have RRSP contribution room available, you can have your employer transfer the bonus directly into your RRSP in January 2016. This will enable your employer to avoid the income tax withholdings on the bonus, and will enable you to take an RRSP deduction in 2015 despite the bonus being included in your 2016 income for tax purposes.

Interest Deductibility

In order to deduct loan interest on your income tax return, the loan must have been borrowed for the purpose of earning income from a business or property. If you are currently paying interest that is not deductible (for example, on a home mortgage loan), contact your D&H advisor to discuss the possibility of reorganizing your affairs to make the interest deductible.

As already mentioned, interest charged on related party loans structured to avoid the attribution rules must be paid before January 30, 2016 in order to be effective.

Finally, keep in mind that a deduction for your life insurance premiums is permitted where the life insurance policy is assigned as collateral for a loan, provided the assignment is required by the lender, the lender is a Canadian or Quebec licensed financial institution, and the interest payable on the loan is deductible.

Review Your Personal Use of Employer-Provided Automobiles

A taxable benefit called a “standby charge” applies to an individual who uses a company owned automobile for personal purposes. If your total personal driving is less than 20,004 kilometers and represents less than 50% of the total use, you may qualify for a reduction of the standby charge. Also, if your business driving exceeds 50% of your total use, then you have the option to calculate your operating cost benefit as one-half of the standby charge (rather than the default 27 cents per km of personal use) less reimbursements, should this prove beneficial.

Review your automobile log to see if you fall within these thresholds. If you intend to use the alternate 50% method for calculating the operating cost benefit, you must advise your employer in writing by December 31, 2015.

Purchasing Assets

If you own a business and are planning to buy certain assets for your business, you may want to consider purchasing them before year-end. Doing so will enable you to claim capital cost allowance on the assets a full year sooner than if you wait until the New Year. In addition, if you are registered for GST, you can claim a full GST credit in the year of purchase, which will allow you to reduce the GST you owe for 2015.

Moving Expenses

If you moved within Canada during the year, your moving expenses may be deductible. In order to qualify, you must start working or operating a business at a new location, and your new home must be at least 40 km closer to the new location than your old home. The moving expenses are limited to the income earned at the new location, and may be deducted in either the year of the move or the immediately following year. Moving expenses include out-of-pocket costs for moving, realtor’s commissions and legal fees on the sale of your old home, and the property transfer tax and legal fees paid on the purchase of your new home.

If you moved into or out of Canada during the year, but remained a Canadian resident for income tax purposes while you were abroad, you may also be able to deduct your moving expenses.

Charitable Donations

Charitable donations must be made on or before December 31, 2015 to qualify for a tax credit in 2015. Donations may be claimed up to an amount not exceeding 75% of net income. Donations in excess of 75% of net income can be carried forward up to 5 years. For deceased taxpayers, this limit is increased to 100% of net income in both the year of death and the preceding year (taking into account bequests or legacies in the deceased’s will).

To encourage charitable giving by new donors, the 2013 Federal Budget introduced a temporary “first-time donor’s super credit”. This is an increased federal tax credit for a first-time donor on up to $ 1,000 of cash donations. The increased tax credit will add 25% to the current credit and may only be claimed once in 2013 or subsequent taxation years before 2018. An individual will be considered a first-time donor if neither the individual nor the individual’s spouse or common-law partner has claimed the charitable donations tax credit or the first-time donor’s super credit in any taxation year after 2007.

Donations of publicly-traded marketable securities that have appreciated in value can offer even greater income tax benefits than cash donations. The inclusion rate for capital gains realized on the disposition of securities by way of donation is reduced to 0% (compare this to the normal capital gains inclusion rate of 50%). The 0% inclusion rate is also available for donations made to private foundations. Therefore, instead of selling securities with accrued gains to make a cash donation, consider donating the securities instead. Keep in mind that most charities require more time to process and receipt donations of securities, in comparison to donations of cash. Donating publicly-traded marketable securities that are in a loss position can also be effective as you will receive a donation receipt for the fair market value of the securities at the date of the donation, and you will also be able to use the capital loss.

For donations of shares issued pursuant to a flow through share agreement entered into after March 21, 2011, the exemption from capital gains tax is only available to the extent that cumulative capital gains in respect of dispositions of shares of that class exceed the original cost of the flow through shares. This essentially eliminates the additional tax benefits of donating flow-through shares.

The 2015 federal budget include a proposal effective in 2017 and later years to include in the exemption from capital gains tax some donations resulting from the sale of private company shares and real estate. Unlike a donation of public company shares, private company shares and real estate would be sold and the proceeds would be donated to a registered charity (or other qualified done) in order to obtain the exemption from capital gains tax. Several other conditions will apply.

Political Donations

Political donations must be made on or before December 31, 2015 to qualify for a tax credit in 2015. The maximum credit available for federal political donations is $ 650 on $ 1,275 of donations. The maximum credit available for provincial political donations is $ 500 on $ 1,150 of donations. For political donations in excess of these amounts, no additional tax credits are available.

Medical Expenses

Medical expenses you wish to claim in 2015 must be paid within any twelve month period ending in 2015 to obtain a tax credit. The credit is equal to the medical expenses incurred, minus the lesser of 3% of net income or $ 2,208, multiplied by 15.0%. A similar calculation applies for B.C. provincial tax purposes, albeit at a credit rate of 5.06%. Calculations are required to establish whether it is more beneficial to claim medical expenses in the current year or to defer them to the following year.

Expenses for medical or dental services (including related expenses such as travel) which are purely for cosmetic purposes do not qualify for the medical expense credit.

If you are a self-employed person, you may be allowed to deduct from your income certain premiums paid to a private hospital or medical expense insurance plan. There are limitations and specific requirements, so contact your D&H advisor to discuss your individual situation.

Adoption Costs

Individuals who successfully adopt a child will be entitled to claim a tax credit for the year in which the adoption is finalized based on the adoption related expenses paid, less reimbursements, up to a maximum of $ 15,000. Parents may each claim a portion of the credit per adopted child.

Child Care Expenses

Subject to certain limitations, child care expenses incurred during the year may be claimed as a deduction from income. In two parent families, child care expenses must generally be claimed by the lower income spouse. The maximum deductible amounts are $ 8,000 for each child under the age of seven at the end of the year, and $ 5,000 for each child between the ages of seven and sixteen at the end of the year.

If your child is eligible for the disability tax credit, the limit for child care expenses is increased to $ 11,000.

The total deduction for child care expenses cannot exceed 2/3 of the earned income of the individual claiming the deduction.

Remember that boarding school and camp fees can qualify for the child care deduction (limits apply), and that you’ll need to keep receipts for all child care expenses.

Children’s Fitness and Arts Expenses

Parents can claim up to $ 1,000 per year for eligible fitness expenses paid for each child who is under 16 years of age at the beginning of the year. Where a child qualifies for the disability tax credit, eligible fitness expenses may be claimed if the child was less than 18 years of age at the beginning of the year.

Parents can also claim up to $ 500 per year for eligible arts expenses paid for each child who is under 16 years of age at the beginning of the year. Where a child qualifies for the disability tax credit, eligible arts expenses of up to $ 1,000 may be claimed for each such child that was less than 18 years of age at the beginning of the year.

Beginning in the 2015 taxation year, the province of B.C. has introduced the Child Fitness Equipment Tax Credit, providing a non-refundable tax credit equal to 50% of the B.C. Child Fitness Tax Credit.

Universal Child Care Benefit

The Universal Child Care Benefit (UCCB) is $ 160 per month for each child under the age of six, and $ 60 per month for each child in their care aged six through seventeen. In a two-parent family, the UCCB is subject to income tax in the hands of the parent with the lowest income. A single parent receiving the UCCB will have the option of including the UCCB for all children in the income of the child for whom the eligible dependant (equivalent-to-married) credit is claimed. If no eligible dependant claim can be made, the parent will have the option of including the UCCB for all children in the income of any one of the children.

Effective April 1, 2015 the province of B.C. introduced the B.C. Early Childhood Tax Benefit (BCECTB). The BCECTB is $ 55 per month for each child under the age of six. The Canada Revenue Agency (CRA) will administer the BCETB program for the province, and will use information from the CCTB registry to determine eligibility for the program.

Alimony and Maintenance

Alimony and maintenance payments made during the year are generally deductible for income tax purposes. There is an exception for child support payments made pursuant to an agreement, court order, or an amendment to an agreement or court order, dated after April 30, 1997. Such payments are not deductible by the payer, and are not includible in the recipient’s income. Certain payments made to third parties may also qualify as alimony and maintenance payments, provided this is specified in the related agreement or court order.

Home Accessibility Tax Credit

Budget 2015 introduced a new non-refundable Home Accessibility Tax Credit. Qualifying individuals, their spouses or common-law partners, or those for whom the qualifying individual is an eligible or infirm dependent, may claim up to $ 10,000 of eligible expenditures per calendar year per eligible dwelling.

Qualifying individuals include seniors (individuals who are sixty-five years of age or older at the end of the taxation year) and persons eligible for the Disability Tax Credit at any time in the taxation year.

An expense will be eligible for the Home Accessibility Tax Credit if it is made or incurred in relation to a renovation or alteration of an eligible dwelling to provide the qualifying individual with access to the dwelling, improved mobility or function within the dwelling, or to reduce the risk of harm to the qualifying individual within the dwelling. The expenses must be of an enduring nature and be integral to the dwelling (i.e. permanent fixtures).

B.C. Education Coaching Credit

The B.C. Budget for 2015 introduced a new non-refundable B.C. Education Coaching Credit effective for the 2015, 2016 and 2017 taxation years.

The credit of $ 500 is available to paid teachers and teaching assistants who carry out at least ten hours of hours unpaid work in the year to coach or supervise students of a qualifying school engaged in extracurricular activities.

Public Transit Passes

This credit applies to the cost of public transit passes that have a duration of at least one month. The credit may be claimed by an individual in respect of such costs incurred by the individual, the individual’s spouse or common-law partner, and dependent children under the age of 19 for passes purchased before December 31, 2015. Public transit includes transit by bus, streetcar, subway, commuter bus, commuter train and local ferry. Expired transit passes should be retained to support any claims. The costs of certain electronic payment cards and certain weekly public transit passes may also be claimed.

Students

Scholarships and Other Prizes

– all scholarship, fellowship, bursary or prize income received from a program that entitles the student to the education tax credit is tax exempt. Where the student is enrolled in a part-time program, the exemption applies only to the extent the award covers tuition fees and costs incurred for program-related materials. For other scholarships, fellowships, bursaries or prizes, the first $ 500 is tax exempt.

Tuition Credits

– Tuition fees and student loan interest must be paid on or before December 31, 2015 to qualify for a tax credit in 2015. Unclaimed tuition, education, and textbook credits can be carried forward indefinitely (or transferred to a supporting parent, grandparent, or spouse up to certain limits), while unclaimed credits for student loan interest can be carried forward for five years.


Foreign University Tuition Fees

– If you attended a foreign university, your tuition fees may be eligible for a tuition credit in Canada. To support such fees, you must have the foreign university complete a Form TL11A certificate of tuition fees paid outside Canada.

File Tax Returns for all Family Members who Receive Income or are Eligible for TFSA Contribution Room

All family members who receive income or have a capital gain or loss in a year should file income tax returns even if they do not have to pay any tax. Filing an income tax return generally prevents taxpayers from further assessments after a period of three years. In addition, if your child or spouse earns income from employment or business, filing a tax return will allow them to accumulate RRSP contribution room for use in future years.

Family members who don’t have any income should still file income tax returns if they are 18 or older, because the Canada Revenue Agency tracks TFSA contribution room only for individuals who file tax returns. In addition, some benefits (such as the GST credit, Canada Child Tax Benefit, Universal Child Care Benefit, and Guaranteed Income Supplement) are dependent on the assessed total income of a taxpayer and any spouse. For post-secondary students, you may be able to claim or carry forward the interest paid on your student loans, and transfer or carry forward your tuition, education, and textbook amounts. The Family Tax Cut Credit also requires both spouses file a personal income tax return.

Offshore Investments

If you hold specified foreign property costing in total more than $ 100,000 in 2015, you need to file the required Form T1135. Shares of foreign corporations, rental properties outside Canada, and debts owing from non-residents can all be specified foreign property that is required to be reported. Shares of foreign companies held in a non-registered Canadian investment account are specified foreign property and must be reported; some Canadian financial institutions can give you a report showing the foreign property and the relevant cost amounts.

The due date for filing the form is the same as the filing deadline for personal tax return, and there are penalties for not filing the form on time. The form was repeatedly revised for 2014 and 2015 to include far more detailed information than previously required. You should gather the details of the cost (maximum cost during the year, as well as cost at year-end), location, income, gain and losses in respect of each specific foreign investment so that you will be able to file the revised form accurately and on time. Taxpayers may choose to report the aggregate value of securities held in a Canadian registered broker account on a country-by-country basis. The highest fair market value at the end of any month during the year and the fair market value at year-end will be required to be reported. If the form is filed late or if the CRA finds any errors on the form, it can extend the period during which it can reassess your tax return by three years (to six years in total).

The 2015 Budget introduced a new streamlined reporting option for taxpayer’s holding specified foreign property with a total cost of less than $ 250,000 throughout the year. The streamlined filing method is currently in development, with further details scheduled to be released by the end of 2015.

U.S. Citizens Living in Canada

U.S. citizens or green card holders are subject to U.S. taxation on their worldwide income even if they live in Canada. Tax credit mechanisms exist to prevent double taxation, but certain information reporting forms carry non-filing penalties even where there is no U.S. tax payable. U.S. personal income tax returns for citizens or green card holders living outside of the U.S. are generally due June 15, 2016, but payment of any outstanding income taxes must be made by April 15, 2016 to avoid arrears interest.

The “Nil Consideration” Election for GST Purposes

The “nil consideration” election is an election that allows certain corporations and partnerships to elect to make supplies for nil consideration for GST purposes. The advantage to the election is that “closely related” corporations and partnerships can treat supplies of goods and services as being made for nil consideration; this avoids the need for one party to collect and remit GST while the other party makes an ITC claim and waits for the refund.

The election is only available to “closely related” corporations and partnerships. Eligibility for the nil consideration election is complex; if you are relying on such an election, please contact us to discuss the eligibility requirements and the method of filing the election.

In the past, the election for nil consideration did not need to be filed with CRA. It was sufficient to simply keep the election in your records, and to show the election only if CRA asked to see it.

However, starting in 2015, registrants who are relying on the nil consideration election must file form RC4616, Election or Revocation of an Election for Closely Related Corporations and/or Canadian Partnerships to Treat Certain Taxable Supplies as Having Been Made for Nil Consideration for GST/HST Purposes, if they are relying on the nil consideration election.

For elections that were in effect before 2015, an election will have to be filed after 2014 and before January 1, 2016 (unless the deadline is extended).

Please contact us for assistance with this election.

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