UPDATES FOR QUEBEC RESIDENTS

ELIMINATION OF THE HEALTH CONTRIBUTION FOR LOW-AND MIDDLE-INCOME INDIVIDUALS AS OF 2016

Québec's Finance Minister announced on March 28, 2017, that the health contribution would be eliminated retroactively for low- and middle-income taxpayers. As a result, individuals whose net income (line 275 of the income tax return) is $134,095 or less no longer have to pay the health contribution. Individuals whose net income is greater than $134,095 must pay a health contribution equal to 4% of the portion of their net income that exceeds that amount—the $175 minimum contribution has been eliminated, while the $1,000 maximum contribution remains unchanged.

Revenu Québec will correct the 2016 income tax returns of individuals affected by the change by adjusting the refund or balance due and, where necessary, will issue new notices of assessment. If you have already filed your income tax return.





*information source: Revenue Quebec

LIMITS AND RATES RELATED TO THE USE OF AN AUTOMOBILE FOR 2017

LIMITS AND RATES RELATED TO THE USE OF AN AUTOMOBILE FOR 2017

The limits and rates for the deduction of automobile expenses and the calculation of the taxable benefits related to the use of an automobile for 2017 are as follows: 

• For purposes of capital cost allowance (CCA), the maximum capital cost of passenger vehicles remains unchanged at $30,000 (plus GST and QST) for vehicles purchased after 2016. 
• The limit on the deduction of leasing costs remains unchanged at $800 per month (plus GST and QST) for leases entered into after 2016. Under a separate restriction, deductible leasing costs are prorated where the value of the passenger vehicle exceeds the maximum capital cost. 
• The limit on the deduction of tax-exempt allowances paid by employers to employees using their personal vehicle for business purposes remains unchanged at 54 cents per kilometre for the first 5,000 kilometres and 48 cents for each additional kilometre. 
• The limit on the deduction of interest paid on amounts borrowed to purchase a passenger vehicle remains unchanged at $300 per month for loans related to vehicles acquired after 2016. 
• The prescribed rate used to determine the taxable benefit respecting the portion of operating expenses which relates to an employee's personal use of an automobile provided by the employer has been reduced to 25 cents per kilometre. For taxpayers employed principally in selling or leasing automobiles, the prescribed rate has been reduced to 22 cents per kilometre.

Disclaimer: None of the content is or should be construed as tax advice. We disclaim any liability to anyone arising from reliance on any content of this. Pauls & Associates can review your unique situation and determine appropriate plan to minimize your tax liabilities.

Non Taxable Income

Client frequently asks us what type of income is Non-taxable. Generally, all types of income are taxable, the following are exceptions:

-          Allowance received under the shelter allowance program
-          Property or money received as inheritance
-          Amount received under a life insurance policy
-          Amount received from province or territory if you were a victim of a criminal act or motor vehicle accident
-          Any tax credits such as (solidarity, GST, Working income tax benefits, work premium, child tax benefits)
-          Lottery winning
-          Strike pay
-          Benefits received under a wage loss replacement plan or income from insurance plan, other than a plan to which your employer made a contribution to
-          Income from TFSA account
-          Elementary and secondary school scholarships and bursaries
-          Certain post-secondary scholarships, fellowships, and bursaries 


Disclaimer: None of the content is or should be construed as tax advice. We disclaim any liability to anyone arising from reliance on any content of this. Pauls & Associates can review your unique situation and determine appropriate plan to minimize your tax liabilities.

TAXPAYER BILL OF RIGHTS:

Did you know that as a tax payer you are entitled to following rights?

TAXPAYER BILL OF RIGHTS:

1. You have the right to receive entitlements and to pay no more and no less than what is required by law.

2. You have the right to service in both official languages.

3. You have the right to privacy and confidentiality.

4. You have the right to a formal review and a subsequent appeal.

 5. You have the right to be treated professionally, courteously, and fairly.

6. You have the right to complete, accurate, clear, and timely information.

7. You have the right, unless otherwise provided by law, not to pay income tax amounts in dispute before you have had an impartial review.

8. You have the right to have the law applied consistently.

9. You have the right to lodge a service complaint and to be provided with an explanation of our findings.

10. You have the right to have the costs of compliance taken into account when administering tax legislation.

11. You have the right to expect us to be accountable.

 12. You have the right to relief from penalties and interest under tax legislation because of extraordinary circumstances.

13. You have the right to expect revenue agencies to publish our service standards and report annually.

14. You have the right to expect revenue agencies to warn you about questionable tax schemes in a timely manner.

15. You have the right to be represented by a person of

Family Income Splitting | Pension Income Splitting

One of the tax breaks that Liberal government would not change that only benefit the rich higher income pension recipients is called “Pension Income Splitting”. This allows the rich pensioner to split up to half of their pension income with their lower-earning spouse. Even though, the lower-earning spouse will pay the taxes but will fall in lower tax brackets. This tax break cost Canadians about $2.2 billion per year as per parliamentary budget. Therefore, if canceling Family Income splitting makes the Canadian tax system fair, then why should the rich pensioners get a pass?


Disclaimer: None of the content is or should be construed as tax advice. We disclaim any liability to anyone arising from reliance on any content of this. Pauls & Associates can review your unique situation and determine appropriate plan to minimize your tax liabilities.

Death of a taxpayer: Transfer of property to a spouse

Section 70(6)

This section of Income tax Act(ITA) allows a deceased taxpayer to transfer certain property at Cost for non-depreciable or at UCC for depreciable property.

Implications:

When your spouse dies, and you have a rental property, this section could apply to you. You can rollover (transfer) your property at cost, therefore, your spouse defers the capital gain tax on his death.  Often time, you need to let your notary know that you want the transfers to be done at cost or UCC. We have seen more than one situation where notary/financial institution did not know about the tax laws and transfer the property at $0(as a gift) without electing FMV for transferee. This action could have adverse tax implication for the dead spouse and the surviving spouse.  The dead spouse deems to dispose it at Fair market value; therefore, pay taxes on Capital gain upon death and surviving spouse’s cost for the property become $0. Therefore, when the surviving spouse sales the property, he/she will incur capital gain, and taxed on whole disposition amount.  On the other hand, if the transfer was done at cost or UCC, on death the transfer would not generate any capital gain or loss, recapture, terminal loss, and the surviving spouse would assume the same property value as those carried by the deceased spouse.  This section of ITA is to allow deferring the capital gains or recapture until the surviving spouse dispose of the property or dies.  

Disclaimer: None of the content is or should be construed as tax advice. We disclaim any liability to anyone arising from reliance on any content of this. Pauls & Associates can review your unique situation and determine appropriate plan to minimize your tax liabilities.

Property Owners: RL-31 slips

If you are a rental property owner and would like to issue RL-31 tax slips to your tenants, Pauls & Associates can assist you. You must issue RL-31 slips for any dwelling such as a house, a room or an apartment in a duplex, apartment building or condominium building that you rent out in Quebec.

Quebec Tax Administration Act requires you to file the RL-31 slip on time. If you fail to complete the required information regarding RL-31 slip you may liable for a minimum penalty of $100 per lease. 

Tuition Fees and Charitable Donations Paid to Privately Supported Secular and Religious Schools

1. Tuition fees paid to an educational institution in Canada are deductible by the student in accordance with subsection 60(f) of the Income Tax Act. Such fees are not considered charitable donations and official receipts designed for charitable donations may not be issued for such tuition fees even though the educational institution may be a registered Canadian charitable organization as defined in paragraph 110(8)(c) of the Act.

2. The purpose of this circular is to explain two exceptions to the above rule where a portion or all of an amount paid to a school, other than a post-secondary institution or a designated educational institution (see Appendix A), may be considered as a donation. The two types of such schools which give rise to these special circumstances are:


(a) those which teach exclusively religion, and

(b) those which operate in a dual capacity providing both secular (academic) and religious education.

Religious Schools

3. If such a school teaches exclusively religion and thereby operates solely for the advancement of religion, payments for students attending that school are not considered to be tuition fees but will be considered as valid donations and, providing the school is a registered Canadian charitable organization, official receipts for charitable donations may be issued for such payments.

Secular Schools

4. The provisions of the Income Tax Act do not permit a deduction, as a charitable donation, of an mount paid to a school for academic tuition, whether the amount was paid for set fees or was a voluntary contribution. A gift, to be allowable within the concept of paragraph 110(1)(a) of the Act, must be a voluntary transference of property without consideration. The consideration here is the academic training received by the children attending the school. On the other hand religious training is not viewed as consideration for purposes of the definition of a gift.

5. School fees are normally based on the costs of operation. However, there are some schools in Canada, usually connected with a church, which do not levy set fees and operate solely through contributions of parents or guardians and other members of the church. These schools, which are subject to the inspection of provincial educational authorities, operate in a dual capacity providing both secular and religious education.

6. Under certain circumstances receipts for charitable donations may be issued for a portion of an amount paid to attend schools, other than post-secondary institutions or designated educational institutions, which operate in this dual capacity. There are two methods of calculating the donation portion of amounts paid, depending on how the school maintains its accounting records.

7. The most favourable treatment will be received where the school can and does segregate the cost of operating the secular portion of the school and the cost of providing religious training. Under this method, the net cost of operating the secular portion of the school is to be pro-rated over the number of pupils enrolled during the school year to determine a "cost per pupil" for the secular training. An official donation receipt can be issued for that portion of a payment which is in excess of the pro-rated "cost per pupil" for academic training. If a taxpayer has more than one child in attendance at the school, the amount to be deducted from his total payment, to determine the donation portion, is the "cost per pupil" for academic training multiplied by the number of his children enrolled during the school year.

8. The net cost of operating the secular portion of the school will be determined to be the total operating costs of that portion of the school for a school year (excluding capital expenditures and depreciation) less miscellaneous income, grants received and donations received from persons with no children in attendance, unless such grants or donations were designated for a capital purpose. "Cost per pupil" would be the above described cost divided by the number of students enrolled during the school year.

9. Where such a school which operates in a dual capacity does not or cannot segregate the cost of operating the secular portion of the school and the cost of providing religious training, a donation receipt can be issued only for that part of the payment which is in excess of the net operating "cost per pupil" of the whole school for a school year. The net operating cost of the whole school in this case will be the total operating costs of the school including both secular and religious education (excluding capital expenditures and depreciation) less miscellaneous income, grants and donations from persons with no children in attendance, unless such grants or donations were designated for capital purposes. "Cost per pupil" will be the above described cost divided by the number of students enrolled during the school year. For taxpayers with more than one child in attendance, the rule in the last sentence of paragraph 7 above will apply using the "cost per pupil" of the whole school.

10. For purposes of either of the above methods, where a payment has been made to a school before December 31st of a school year and the school must issue an official donation receipt for taxation purposes before the "cost per pupil" for the school year can be determined, the school may use the "cost per pupil" of the previous school year, if the school operated in that previous year.

11. The school must be prepared to substantiate that the "cost per pupil" for a school year has been determined from the books and records of the school in accordance with the above policy.

12. A payment to such a school by a person who is neither the parents or guardian of a pupil who attends such a school and for which no benefit is derived qualifies in full as a donation.

APPENDIX A

Section 110(9)

"For the purposes of paragraphs 1(g) and (h),


(a) "designated educational institution" means


(i) an educational institution in Canada that is


(A) a university, college or other educational institution designated by the Lieutenant Governor in Council of a province as a specified educational institution under the Canada Student Loans Act or recognized by the Minister of Education of the Province of Quebec for the purposes of the Students Loans and Scholarships Act of the Province of Quebec, or

(B) certified by the Minister of Manpower and Immigration to be an educational institution by which courses are conducted that provide or improve the qualifications of a person for employment or for the carrying on of a business or profession,

(ii) a university outside Canada at which the student referred to in paragraph (1)(g) or (h), as the case may be, was enrolled in a course, of not less than 13 consecutive weeks duration, leading to a degree, or

(iii) if the student referred to in paragraph (1)(g) or (h), as the case may be, resided, during the whole of the year referred to therein, in Canada near the boundary between Canada and the United States, an educational institution in the United States to which he commuted that is a university, college or other educational institution providing courses at a post-secondary school level;"


Disclaimer: This abstract are taken from CRA interpretation Bulatin and should not be considered as tax advice. 

TFSA Implications:

If you are a Canadian Resident (for income tax purpose) who has been 18 years or older since 2009, you'd have a TFSA limit of $46,500 today.  TFSA is an important tool for your long term savings. There are a few things you must keep in mind while operating a TFSA account.

1)      Over-contribution: Over-contribution could be very costly, any amount that you over-contribute is subject to 1% tax every month until you withdraw the over-contribution. To put this into perspective, if you have over-contributed $10,000 in January of a given year, and you have not withdrawn the over-contribution throughout the year, you will have a TFSA tax of $1,200. And it does not end here, if you do not file the TFSA return and pay the taxes, you may become subject to other fines, penalties and interests.  There are several reason for this mistake:

a.       You simply over contribute without calculating your TFSA limit

b.      You calculated an amount in your limit where in that year you were not eligible to get TFSA limit:

                                                         b.i.      If you are under age of 18, you do not accumulate TFSA limit

                                                       b.ii.      If you are non-resident of Canada in any given year, you do not accumulate TFSA limit.

c.       You withdraw an amount from your TFSA in the year that only gets restored in the next calendar year. Therefore, if you re-contribute that same amount in the same year and you have already reached your contribution limit, it will be considered as over-contribution.

2)      Naming beneficiary instead of successor holder: As a successor holder that person becomes the new holder of your TFSA and its tax free status is automatically preserved, on the other hand as a beneficiary there will be no tax implication in case of death but there will be extra paper work and any income earned after the death and increase in FMV or income will be subject to tax.

3)      Foreign Income:  Foreign dividend paid to a TFSA is subject to withholding tax, a non-registered account is a better choice for foreign dividend paying investment.  A non-registered account will enable taxpayer to claim foreign tax credit to offset the withholding tax deducted.

4)      Market loss: Market losses can impact your contribution room. If there is a change in the value of your entire TFSA account, it will impact your withholding, and you can recontribute only what you withhold excluding the new limits. Fortunately, the opposite is true for gains; therefore, if you close all your accounts, and open a new one, ensure that you are only contributing up to your limit. You should contact your tax specialist to ensure the proper limit.

5)      TFSA investment must be eligible: You need to make sure the investment you are putting in your TFSA is eligible for TFSA investment.  The securities that are not traded through recognized stock exchange will not be eligible for TFSA investment. This may result in tax implications.

Update From Revenue Quebec: Child Care Expenses

The Québec Minister of Finance announced in his budget speech on March 17, 2016, the additional contribution in respect of the second child is reduced by 50% for child care expenses.

This measure is retroactive to 2015. There will be no change in the calculation in Appendix I or the tax return for 2015 to reflect the announced reduction.

However, Revenue Québec will correct all 2015 tax returns so that parents affected by this change will quickly benefit from the reduction.

Furthermore, childcare costs, including the additional contribution, qualify for the deduction for child care expenses in the federal tax return. Following this announcement, the Canada Revenue Agency will also provide patches to all tax returns in 2015.

Are you an Employee of International Tax Exempt Organization?

If you work for an International organization (Ex: UN, NATO, etc), your income may generally be exempt from taxation on any income earned from such organizations. You should check your eligibility ensuring the compliance under ITA sub-paragraph 110(1) (F) (III). As a Canadian Resident you may still require to file your tax return.  If you require to file your income tax, you will have to add this revenue to the total income for the competition of net income. However, to arrive to the taxable income you will be able to subtract it under the above mentioned ITA.

NATO

UN

Childcare & Tax Credit

Did you know the limits on certain amounts of the tax credit for childcare expenses and tax credit for children’s activities have been increased for taxation year 2015 in Quebec.

• The limit on childcare expenses paid for a child with a severe and prolonged impairment in mental or physical functions has been increased from $10,000 to $11,000. The limit for such a child born after December 31, 1998, but before January 1, 2009, has been increased from $4,000 to $5,000. 
• The maximum amount of childcare expenses paid to a boarding school or camp has been increased from $175 to $200 per week for an eligible child born after December 31, 2008, from $100 to $125 per week for any other eligible child, and from $250 to $275 per week for a child of any age with a severe and prolonged impairment in mental or physical functions. 

The maximum eligible registration or membership fees have been increased from $200 to $300 per child, for a maximum tax credit of $60 per child, or $120 if the child has a severe and prolonged impairment in mental or physical functions.

RRSP scheme

Beware Alert!!!

Recently Canada Revenue Agency issued an alert for RRSP scheme that could put you in trouble. Investing in schemes that promise you tax free withdrawals from RRSPs (Registered Retirement Saving Plan) and RRIFs (Registered Retirement Income Fund) could result in the loss of your full retirement savings.

What is an RRSP scheme and some example of it:

RRSP scheme is usually a type of investment promotion offering a “tax-free” withdrawal to access your RRSP funds directly or indirectly. Some examples of observed RRSP schemes by CRA (Canada Revenue Agency) have included:

-          Withdrawal of funds from an RRSP or RRIF without paying tax , where promoters often promise to return part of individual’s investment using offshore debit, credit card, offshore bank accounts, or loan-back arrangements.

-          Income tax receipts providing deduction of three or more amount contributed to an
RRSP and unrealistic returns on investments.

Promoters of these types of schemes direct the owners of RRSP or RRIF to purchase a particular investment through a specific trustee. The investment could be share in a company, a part in a co-operative, a mortgage, or other type of investments.

CRA is highly recommending people not to invest in such schemes that could result in losing your entire saving to fraudulent promoters. By doing so, not only you lose your savings also your tax return get reassessed. Over the past years to now, CRA has reassessed over 5,000 investors who participated in these schemes resulting in additional taxable income roughly $250million.


Are you thinking of investing your money? It is very important that you get independent legal and tax advice from a tax professional that is not connected to investment organization or promoters. If you are approached with such offer and not sure it is one of such scheme that revenue agencies are already issued alert, give us a call to book a consulting session with us, it will save you lots of money in tax, interest and gross negligence penalty.

Dividends Vs Salary

 

 

 

Salary Vs Dividend:

Most of my clients who set up a corporation have asked me how to take out money either by dividend or salary. Dividend and salary, both have their advantage and disadvantages.

 

Salary Advantages and Disadvantages:

-          Possible to contribute to RRSP

-          Require to contribute to CPP/QPP

-          Salary or Bonus expenses are deductible for Corporation

-          Income splitting is available by paying salary to related employees such as wife or children

Dividend Advantages and Disadvantages:

-          Dividends are taxed at a lower rate than salary which may result in paying less personal tax

-          No required to contribute to CPP/QPP, therefore saving money
 

o   Downside of only receiving dividend is  even if corporation owner  would like to contribute to CPP/QPP it is not possible

o   Receiving only dividend omit possibility to contribute to RRSP to reduce income or defer taxes

o   Receiving only divided can destroy possibility of other personal deduction such as child care expenses
 

-        Paying divided is simpler compare to paying salary as do not require calculating or remitting Deduction at sources.

The best solution depends on individual need of each of the business owners. Often time corporations pay out salary and bonuses to ensure that its Net Income do not exceed small business dedication limit ($500K for 2013-2014 tax year). In summary, salary or divided depends on business owners personal financial circumstances, such as income level, cash flow needs, corporate income, personal income tax deduction, net personal assets, net personal other income etc.

Pauls & Associates

Spousal Tax Credit for Non-Resident Spouse

Did you know, if you are sponsoring your spouse to Canada and your spouse is not here, you still can claim the spousal amount. As per Income Tax guide IT513R, it is necessary that the non-resident person be supported by or be dependent on you for support. I the non-resident spouse has enough income or assistance for a reasonable standard of living in the country in which they live, they are not considered to be supported by you.

Following are stated in IT513R

"In order for an individual to claim the spousal tax credit for a non-resident individual's spouse, it is necessary that such non-resident person be supported by or be dependent for support on the individual. The question of support or dependency is determined on the facts of each case. If the non-resident spouse have enough income or assistance for a reasonable

standard of living in the country in which they live, they are not considered to be supported by or be dependent for support on the individual. It is to be noted that gift which merely enhance or supplement the already adequate lifestyle of the non-resident person do not constitute support. In determining if the non-resident spouse is supported by the individual, the CRA will consider such factors as:

1) The income of the spouse
2) Any support provided to the spouse by government agencies of the country in which such spouse reside, such as pension, medicare, housing etc.
3) The cost of living in the particular country and the ability of the spouse, child or grandchild to provide self-support; and
4) Any support provided to the spouse by other persons. 

2014 St-Patrick Day Parade by Pauls & Associates

Ruhin the Cinderella 

Pauls & Associate with Little Angels

The white Horses

Corporate Fiasco

After finishing the undergraduate program, I had opportunity to work for a forensic accounting firm. I worked on more then few high profile court cases. One of the cases, that I was required to obtain and maintain knowledge was litigation against Castor Holding.

Castor Holding was a Montreal based financial intermediary company for real-estate financing that declared bankruptcy in 1992. As a private company, Castor Holding was able to operate as an unregulated Financial Investment bank like organization. Auditor of Castor Holding Coopers & Lybrand (C&L currently known as as PWC ) was sued by the investors. In 2011, judge ruled in the favour of the investors seeking more then 1-billion in damages resulting from claims of professional negligence by the auditors Coopers & Lybrand.

Unethical Practices: 

Castor presented itself as a spread lender, placing deposits and loans from private & institutional investors, bank into high-yield mortgage and equity loans. Castor makes its profit from the difference between cost of borrowing and rate of lending. But in reality, castor was acting more like an equity partner. It continued lending money to most of its borrowers with very few exceptions, when it was obvious that the borrower would not be able to meet their financial obligations. As any other Ponzi scheme Castor Holding continue to raise increasing amount of money from her lenders and investors to satisfy its outstanding and exponentially increasing financial obligation as well as to support her borrowers insatiable cash needs.

Poor Internal Control: 

At that time, in general, the concept of internal control was almost non-existent and any time higher management can override any internal control. The owners of Castorl Holding Mr. Stolzenberg and Mr. Warsebe were very diligent to convene there steps. They put tremendous amount of pressure on their employee to falsify the reports. The management of castor was able to get away for so long with this fraud because of the regulatory slack that was existed at that time.  Sarbanes-Oxley Act (SOX) may have prevented this corporate Fiasco.  SOX is a good benchmark for public companies to ensure proper internal control but still it is far from perfect.

Dysfunctional Behaviors of Corporate managers: 

The fraud was committed by the owners of Castors. They were vary diligent hiding the truth. Even though, many argues that GAAS were not followed by C&L, however according to many other independent expert witness express their opinion which stated: there were plenty of evidence that GAAS were followed and there were many red flags that were caught by C&L. However they closed their eyes consciously and purposefully and allowed a massive fraud to be perpetrated.  There were many more events that I could name that are similar to this corporate fiasco like: Worldcom, Enron, Bernard Madoff, Earl Zones. This kind of dysfunctional behaviors will continue until people's morel and ethical sense is raised to a level that prevents this.

Disclaimer: All the facts of this story is publicly available information. Therefore, author can't be responsible for expressing his/her opinion.

Visit us: www.paulsandassociates.com

Self Employed Vs Employee

If your worker is an independent contractor (self-employed) or an employee?

Recently a new client that came to me and complain that his previous accountant did not advised him whether to pay his workers as self-employed individuals or employees. If Canadian Revenue Agency determines that your worker is an employee rather than self-employed, it can be very expensive both you and your employee. It is true, that it is more attractive to hire or to be hired as self-employed person then an employee because employer don’t get to pay the CPP or QPP or other benefits, on the other hand there are many deduction available to self-employer individuals.

So, the big tax advantage for the self-employed workers, of course, is the potential for tax deductions. A self-employed person can deduct all reasonable business expenses. That sounds great! But be aware! But if a business hires a self-employed worker who is later deemed to be an employee, both parties lose big as unpaid taxes, penalties, interest, CPP and EI premiums will all have to be paid.

Distinction between employee vs. self-employed:

Your worker will be considered to be self-employed if that person is free to choose the means of carrying out a contract and no relationship of subordination exists between you and that person. Conversely, your worker will be considered to be an employee if, under a written or verbal contract, that person undertake for a limited time to do work for remuneration under the direction or control of you. In order to determine whether a worker is an employee or a self-employed person, government will assess the degree of subordination existing between the worker and the person who provides the work according to six basic criteria. These criteria are interrelated and must be considered as a whole.

The six criteria are as follows:

• Subordination in the Performance of Work
• Financial or Economic Criterion:
• Ownership of Tools
• Integration of the Tasks Carried Out by the Worker
• Specific Result of the Work
• The Parties' Attitude Regarding Their Relationship

If you need to determine your workers are self-employed of employee please give us a call at 514-585-6848 or you can also visit us at http://paulsandassociates.com/

Please note: This article is not a substitute for professional advice. We recommend that you seek professional advice before making or considering or making important decision.

Employee loans & Home Relocation

If you have an employee and you provide the employee with a loan at little or no interest, the employee must include them as a table income in their annual income tax return. This benefit is calculated on the loan at a government provided prescribed rate minus the interest actually paid on the loan within the year or 30 days after year end.

However, there's special rule applies when  you provide your employee with low or no interest loan to a purchase a home to work in a new location. The table portion of the benefit could be eliminate partially or even totally by the special rule.  In general, this special deduction will entirely offset the taxable benefit arising from low-interest or interest free loans of $25,000 or less. This deduction applies on a 5 years period starting on the date of the loan is made.


Special rules also apply in you provide any of  your employees with a loan to purchase a new home. It is not necessary for the employee to move to a new work location to qualify under this rule. This borrowed money has to be used to either purchase or refinance the debt on the employee's home. The benefit from such loans is calculated by applying either the prescribed rate at the time the loan is granted or the prescribed rate for the particular quarter, whichever is lower. A new base rate on the loan will be established every five year.

For more information call: 514-585-6848 or visit us at http://paulsandassociates.com/

Note: This article is not a substitute for professional advice, which  you should seek when you are considering important action.

Author: Saurav Paul

Car Expense & Benefit:

When your employers provide automobiles to you (as an employee) to help perform the employment duties, or instead give you allowances or expense reimbursements, the tax implications can easily become very complex.

Company automobiles, expense allowances and reimbursements may increase productivity, provide job satisfaction and improve the benefit package-things that both employees and employers care about.

With automobile expenses revenue agencies want to ensure that you do not receive receive tax free benefit. It is important to keep in mind that there's a difference between allowance and benefit. The benefit is taxable where as long allowance are reasonable it is not.


Please note, this article is not a substitute for professional advice. For more information call us at 514-585-6848 or visit us at www.paulsandassociates.com