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