Author Topic: Can"EH"dian Tax - You have questions, I have answers  (Read 161817 times)

SweetLife

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Re: Can"EH"dian Tax - You have questions, I have answers
« Reply #700 on: August 13, 2017, 04:56:41 PM »
CPA CB!

Just wanted to check in and say thank you again for your various advice on my inheritance issues...that are now resolved!
Spoke with a CPA and because my capital gains was $200,000  (so pay on $100,000) I am going to basically wipe it out using my RRSP room of $99,000 (as my pension will be under $25,000 when I retire I will be able to take it out at a low bracket so still pay taxes but much less than at $160000 that I would this year).
Had an assessment done on my half acre I own jointly with my brother came out $10,000 more than when my Mom passed so my brother agreed to pay me $30,000 .... and that one will fall under an exemption (farmland) so no capital gains to be paid.

All in all I'm still up after ALL outstanding bills paid off at $160000 (includes the $99,000 going into RRSP) the rest will go into TFSA's for myself and hubby. SOOOOO excited it is all over.

Thanks again!

Step37

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Re: Can"EH"dian Tax - You have questions, I have answers
« Reply #701 on: March 18, 2018, 10:20:26 PM »
Hi MMMers - I am looking for advice/clarification re: capital gains.

Facts:
I purchased 10 shares in a Canadian small business (for sure meets requirements of QSBCS) in May 2014 ($7500 per share).
In March 2017, I sold 2 of these shares shares for $25,000 each, resulting in a $35,000 gain.
Iíve put the info into TurboTax, and itís calculating tax owed on a $17,500 gain.

I am wondering about the lifetime capital gains exemption. My (perhaps incorrect) understanding is that this whole gain would fall under the LCGE and have no tax payable (as opposed to just 50% of it ó I have never had any capital gains or exemptions prior to 2017). I am googling and reading CRA docs (specifically T4037(E) Rev. 17) and Iím getting no closer to understanding.

If someone has a quick and simple answer, Iíd be so appreciative! And if I havenít given enough background info to give me an answer, ask away. This seems like it should be a straightforward enough situation to run through TurboTax; but, if the full exemption does apply, Iím unsure how to enter it. Thanks in advance for any insight.

Goldielocks

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Re: Can"EH"dian Tax - You have questions, I have answers
« Reply #702 on: March 19, 2018, 12:40:27 AM »
Hi MMMers - I am looking for advice/clarification re: capital gains.

Facts:
I purchased 10 shares in a Canadian small business (for sure meets requirements of QSBCS) in May 2014 ($7500 per share).
In March 2017, I sold 2 of these shares shares for $25,000 each, resulting in a $35,000 gain.
Iíve put the info into TurboTax, and itís calculating tax owed on a $17,500 gain.

I am wondering about the lifetime capital gains exemption. My (perhaps incorrect) understanding is that this whole gain would fall under the LCGE and have no tax payable (as opposed to just 50% of it ó I have never had any capital gains or exemptions prior to 2017). I am googling and reading CRA docs (specifically T4037(E) Rev. 17) and Iím getting no closer to understanding.

If someone has a quick and simple answer, Iíd be so appreciative! And if I havenít given enough background info to give me an answer, ask away. This seems like it should be a straightforward enough situation to run through TurboTax; but, if the full exemption does apply, Iím unsure how to enter it. Thanks in advance for any insight.

My notes state that Capital gains exemption only applies to the owner / manager of the qualified business, separate classification from investors.   I am not sure what form is filled out to declare yourself an owner/manager, if any, but maybe you can look for that?

ETA:  found it... you declare the owner and directors on the incorporation documents for the company.
« Last Edit: March 19, 2018, 12:42:38 AM by Goldielocks »

Step37

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Re: Can"EH"dian Tax - You have questions, I have answers
« Reply #703 on: March 19, 2018, 08:33:37 AM »
Hi MMMers - I am looking for advice/clarification re: capital gains.

Facts:
I purchased 10 shares in a Canadian small business (for sure meets requirements of QSBCS) in May 2014 ($7500 per share).
In March 2017, I sold 2 of these shares shares for $25,000 each, resulting in a $35,000 gain.
Iíve put the info into TurboTax, and itís calculating tax owed on a $17,500 gain.

I am wondering about the lifetime capital gains exemption. My (perhaps incorrect) understanding is that this whole gain would fall under the LCGE and have no tax payable (as opposed to just 50% of it ó I have never had any capital gains or exemptions prior to 2017). I am googling and reading CRA docs (specifically T4037(E) Rev. 17) and Iím getting no closer to understanding.

If someone has a quick and simple answer, Iíd be so appreciative! And if I havenít given enough background info to give me an answer, ask away. This seems like it should be a straightforward enough situation to run through TurboTax; but, if the full exemption does apply, Iím unsure how to enter it. Thanks in advance for any insight.

My notes state that Capital gains exemption only applies to the owner / manager of the qualified business, separate classification from investors.   I am not sure what form is filled out to declare yourself an owner/manager, if any, but maybe you can look for that?

ETA:  found it... you declare the owner and directors on the incorporation documents for the company.

Thank you, Goldielocks. I bought in for 10% initially, Iím listed as a director, and I work there in a management capacity. I will keep digging (and see if anyone else has insights). If I end up having to pay, it squarely falls under ďgood problems,Ē but of course I am hoping that my initial understanding was correct.

Missy B

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Re: Can"EH"dian Tax - You have questions, I have answers
« Reply #704 on: March 19, 2018, 08:24:51 PM »
Is there a simple formula or rule of thumb to help me figure out whether it's worth claiming medical expenses this year? We have a very unusual, for us, year tax wise with both very high household income and higher than normal medical expenses.

Going forward, we may have more eligible expense, but lower income so I'm interested in this from that angle too.

Gathering the million and one medical receipts and insurance statements from 2016 (some were covered and I think CRA will request proof that the claimed expenses weren't eligible for reimbursement) will be a PITA if it ends up not reducing our tax bill.


Yes. Medical expenses need to be more than 3% of the income of the lowest earning spouse to get any credit, so if your ballpark comes under that, probably isn't worth it.

Step37

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Re: Can"EH"dian Tax - You have questions, I have answers
« Reply #705 on: March 19, 2018, 08:34:16 PM »
Hi MMMers - I am looking for advice/clarification re: capital gains.

Facts:
I purchased 10 shares in a Canadian small business (for sure meets requirements of QSBCS) in May 2014 ($7500 per share).
In March 2017, I sold 2 of these shares shares for $25,000 each, resulting in a $35,000 gain.
Iíve put the info into TurboTax, and itís calculating tax owed on a $17,500 gain.

I am wondering about the lifetime capital gains exemption. My (perhaps incorrect) understanding is that this whole gain would fall under the LCGE and have no tax payable (as opposed to just 50% of it ó I have never had any capital gains or exemptions prior to 2017). I am googling and reading CRA docs (specifically T4037(E) Rev. 17) and Iím getting no closer to understanding.

If someone has a quick and simple answer, Iíd be so appreciative! And if I havenít given enough background info to give me an answer, ask away. This seems like it should be a straightforward enough situation to run through TurboTax; but, if the full exemption does apply, Iím unsure how to enter it. Thanks in advance for any insight.

My notes state that Capital gains exemption only applies to the owner / manager of the qualified business, separate classification from investors.   I am not sure what form is filled out to declare yourself an owner/manager, if any, but maybe you can look for that?

ETA:  found it... you declare the owner and directors on the incorporation documents for the company.

Thank you, Goldielocks. I bought in for 10% initially, Iím listed as a director, and I work there in a management capacity. I will keep digging (and see if anyone else has insights). If I end up having to pay, it squarely falls under ďgood problems,Ē but of course I am hoping that my initial understanding was correct.

It seems I was just not understanding how the info was being presented, so this question has resolved itself. Someone on TurboTax answered my query, and confirmed that Iíd ticked the correct boxes to obtain the LCGE deduction. It was throwing me off that the 17,500 was still showing under income (in hindsight, of course it was... it needs to be tracked). When I scrolled down to credits and deductions, it was also showing as a deduction. So, it was correct all along, I was just not looking at it properly. *facepalm*

Anyway, my taxes are now filed, I owe less than Iíd feared, and I learned more about capital gains and LCGE. :)

Prairie Gal

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Re: Can"EH"dian Tax - You have questions, I have answers
« Reply #706 on: March 31, 2018, 09:16:13 AM »
Hi CPA CB,

My son and his wife have been living in Mexico for the past three 1/2 years as freelance photographers. They earn their money from Canadian and U.S. newspapers and other publications. They have filed Canadian in previous years, but this year their tax person (not sure of her qualifications) has advised them that they don't need to file Canadian taxes. This doesn't sound right to me, and frankly sounds a little scary. They are both Canadian citizens, and use DIL's parents' address in Ontario as a Canadian address. They travel back to Canada a few times a year. They plan to move back to Canada some time in the next couple of years to hopefully buy a house and start a family.

If they don't pay Canadian taxes, is this going to cause them problems down the road? And if they don't file Canadian taxes, do they have to file Mexico taxes? They got visas based on the fact that they don't work for Mexican companies.

All very confusing to me. Hope you can shed some light.

Missy B

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Re: Can"EH"dian Tax - You have questions, I have answers
« Reply #707 on: April 01, 2018, 08:05:59 PM »
Okay. Not a tax expert, but I would suggest if they don't owe taxes, to file the canadian ones anyway and declare canadian residency.
Reason is it will affect their GIS/OAS down the road. You need (I think) 38 years cdn residency after 18 yrs of age to get maximum benefits - less, and they get reduced for every year you didn't live here. You don't even have to be paying taxes, just be part of the system. have a friend who screwed herself royally by spending 20 years out of the country - of course she doesn't get any pensions from the countries she paid into, because she wasn't there long enough.

Goldielocks

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Re: Can"EH"dian Tax - You have questions, I have answers
« Reply #708 on: April 01, 2018, 08:14:13 PM »
Missy is right about the OAS calculation, but to claim residency you need to show signifiant ties to canada, especially if you are not physically present for the minimum number of days each year.

It might be cheaper to not claim residency and just save the difference in taxes and create your own retirement plan.
..................
"A partial OAS pension is calculated at the rate of 1/40th of the full OAS pension for each complete year of residence in Canada after age 18.

The minimum period of residence in Canada you need to qualify for a partial OAS pension is 10 years after your 18th birthday (as long as you reside in Canada when you receive your OAS pension). For example, if you resided in Canada for 10 years after your 18th birthday, you may qualify to receive 10/40ths or one-quarter of the full OAS pension."

CanuckExpat

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Re: Can"EH"dian Tax - You have questions, I have answers
« Reply #709 on: April 13, 2018, 09:02:50 AM »
@Prairie Gal , Canadian tax residency, (or lack there of) can be tricky, and not clear cut. It is possible to get incorrect advice from a tax preparer. The CRA has a semi-decent website with details on when they may consider you a tax resident. There is also a form you can fill out with all your details and send to CRA to get their interpretation on whether you are a resident or not. It is iffy, and involves judgement calls.

Some of the things that will come into play also include exact visa and tax status in Mexico, and the appropriate sections of the Mexico/Canada tax treaty and how it considers residency questions. From what you wrote, it seemed that Mexico did not consider them tax residents? Are they paying Mexican taxes on their world wide income? The main difference in tax obligations with being considered a Canadian tax resident is having to pay Canadian taxes on world wide income. My understanding is that the CRA's position is that you have to be paying taxes on worldwide income to someone; if you are a Canadian citizen, and not considered a tax resident anywhere else, CRA will use that as evidence to say that you should be considered a Canadian tax resident.

Be aware, if you are eligible to stop being a Canadian tax resident, it is not simply a matter of stopping to file Canadian taxes. You are also supposed to file your taxes on the year you stopped being a resident and select "ceased to be a resident" (or whatever exact wording). One consequence is that on the date you stop being a Canadian tax resident, you may owe a so called departure tax. It's not an extra tax, but it's any capital gains you haven't paid yet catching up with you. If you have significant appreciated assets, that could be a problem.

Prairie Gal

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Re: Can"EH"dian Tax - You have questions, I have answers
« Reply #710 on: April 13, 2018, 08:58:34 PM »
Thank you all for your help. I have advised them to research more about it, and maybe talk to an accountant.

lifejoy

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Re: Can"EH"dian Tax - You have questions, I have answers
« Reply #711 on: July 16, 2018, 11:37:41 AM »
Random q: deciding between sole prop and incorporating - is it always a case of just looking at home much money you expect to make, and if it's not going to be over the threshold, don't incorporate?

Retire-Canada

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Re: Can"EH"dian Tax - You have questions, I have answers
« Reply #712 on: July 16, 2018, 11:44:46 AM »
Random q: deciding between sole prop and incorporating - is it always a case of just looking at home much money you expect to make, and if it's not going to be over the threshold, don't incorporate?

Incorporating also protects your personal assets from business liability.

Goldielocks

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Re: Can"EH"dian Tax - You have questions, I have answers
« Reply #713 on: July 16, 2018, 03:09:33 PM »
You also have the ability to retain earnings and pay them out over time with incorporating...   balancing taxes, so different people's income set points for incorporating will be different.   You need to look at your total income, too, annually, not just from the business.

Stasher

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Re: Can"EH"dian Tax - You have questions, I have answers
« Reply #714 on: July 28, 2018, 09:36:34 AM »
Started our business as a sole p and didn't switch to a Corp early enough way back in the day. Cost us extra money and a taxation hit that would have been avoided by just doing a corporation right off the start.

Goldielocks

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Re: Can"EH"dian Tax - You have questions, I have answers
« Reply #715 on: July 31, 2018, 03:47:38 PM »
Oh?  What was the tax hit?  I thought sole P had you paying all your taxes as you go...  did you buy property or assets that apprecitated and then you had a deemed disposition when you converted to a corp?

MoneyMouse

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Re: Can"EH"dian Tax - You have questions, I have answers
« Reply #716 on: July 31, 2018, 04:19:25 PM »
This discussion on incorporation is interesting to me.

I'm hoping to start a business in the next little while through Patreon and also a blog selling digital DnD resources (PDFs and eventually ebooks). Nothing up yet, but would it be worth incorporating before I even start making money?

K-ice

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Re: Can"EH"dian Tax - You have questions, I have answers
« Reply #717 on: August 01, 2018, 11:07:26 AM »
At what age can your small business, restaurant, rental properties etc. pay your children or grandchildren for work?

What would be a fair wage?

We have some seriously helpful 7-9 year olds in the family and I see no reason why they can't start helping with snow removal, dishes, and basic maintenance.   

I think 2h per week, 50 weeks a year at $15 an hour would be reasonable and the money could go to them and then they could help self fund their RESPs.

Is anyone paying their kids for work, what age did you start?

Are their labor laws to watch out for as well?


 

Retire-Canada

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Re: Can"EH"dian Tax - You have questions, I have answers
« Reply #718 on: August 01, 2018, 11:16:01 AM »
Are their labor laws to watch out for as well?

Definitely. Here is the info for BC. You'll have to look up the rules for your province if you live somewhere else.

https://www2.gov.bc.ca/gov/content/employment-business/employment-standards-advice/employment-standards/specific-industries/employment-of-young-people

RichMoose

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Re: Can"EH"dian Tax - You have questions, I have answers
« Reply #719 on: August 01, 2018, 11:24:55 AM »
At what age can your small business, restaurant, rental properties etc. pay your children or grandchildren for work?

What would be a fair wage?

We have some seriously helpful 7-9 year olds in the family and I see no reason why they can't start helping with snow removal, dishes, and basic maintenance.   

I think 2h per week, 50 weeks a year at $15 an hour would be reasonable and the money could go to them and then they could help self fund their RESPs.

Is anyone paying their kids for work, what age did you start?

Are their labor laws to watch out for as well?
As far as the CRA is concerned, all you need is a SIN and they need to be properly accounted for on payroll like any other employee (or contractor). However, this is definitely a labour code issue and you need to check with your provincial legislation on that. Things like age, the definition of family (your kids only vs. grandkids, cousins, etc.), hours of work, and type of business (agriculture is often the most lax) matters. IF you can hire them, they are likely entitled to a 3 hr minimum like anyone else.
Also, they need to be covered under WCB, so check the requirements on that in your province.
You're right though that its a great opportunity for them. In addition to pocket money and funding their RESP, they can build their RRSP room for more contributions later.
Personally I was able to work as a legal employee in my family's agriculture business when I was 12. I think I generally worked about 10-12 hrs per week and sometimes more in the summer.

Prairie Stash

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Re: Can"EH"dian Tax - You have questions, I have answers
« Reply #720 on: August 01, 2018, 11:32:13 AM »
At what age can your small business, restaurant, rental properties etc. pay your children or grandchildren for work?

What would be a fair wage?

We have some seriously helpful 7-9 year olds in the family and I see no reason why they can't start helping with snow removal, dishes, and basic maintenance.   

I think 2h per week, 50 weeks a year at $15 an hour would be reasonable and the money could go to them and then they could help self fund their RESPs.

Is anyone paying their kids for work, what age did you start?

Are their labor laws to watch out for as well?
I started my first job at 13, kids can be very useful.

General rules are it has to be an actual job, something you would hire myself to do. This also precludes paying your kids to do household chores, or giving them money to watch TV while you close up the restaurant.

$15 might be high, again it has to be a job that you would pay me (internet stranger) the same rate. If you aren't sure what to pay, what would a competing restaurant pay your kid? Treat it like any other hire and you'll be fine.

So as long as you would hire me for the same role, you can hire your kids (it has to family, otherwise they need to be 14 here). Just remember the rule; if you wouldn't hire Prairie Stash, you can't hire your kid.

K-ice

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Re: Can"EH"dian Tax - You have questions, I have answers
« Reply #721 on: August 01, 2018, 11:36:18 AM »
Are their labor laws to watch out for as well?

Definitely. Here is the info for BC. You'll have to look up the rules for your province if you live somewhere else.

https://www2.gov.bc.ca/gov/content/employment-business/employment-standards-advice/employment-standards/specific-industries/employment-of-young-people

Thanks it looks like 12 is the age that they can be hired buy restaurants and retail for doing not dangerous work outside of school hours. 

But I thought there were some exceptions for your own children.  Like at 8y old you can start stuffing envelopes at month's end or something. (Now it's mainly e-mail bills but that was the most benign example I could think of.)

$15 might be a bit high but minimum wage is getting close to that.

And, I would certainly be making them do real work!

RichMoose

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Re: Can"EH"dian Tax - You have questions, I have answers
« Reply #722 on: August 01, 2018, 11:38:01 AM »
This discussion on incorporation is interesting to me.

I'm hoping to start a business in the next little while through Patreon and also a blog selling digital DnD resources (PDFs and eventually ebooks). Nothing up yet, but would it be worth incorporating before I even start making money?
Probably not worthwhile. Most accountants would tell you to run it as a sole proprietorship at least until you earn more money than you spend, including the additional costs of running a corporation.
Most lawyers would give you the caveat to that which is if your products/services are likely to carry a significant liability risk, incorporate right away to try add protection for personal assets. Either way, investigate your need for business liability insurance.

I know members of my family that have run their businesses as a sole p for decades. Generally they are either marginally profitable businesses, or they don't save any money personally so they don't really need the legal protection beyond liability insurance. Others just put most family assets (house etc) into their spouses name for additional protection.

Also, the legal protection aspect of incorporating is not nearly as good as many people make it out to be. If your corporation is getting sued, count on the directors also being sued personally. If those directors are actively involved in the daily operation of the corporation, their personally liability exposure can be little better than them operating a sole p.

The nice part about incorporating is you can make things really complex with OpCo and HoldCo structures, trusts, etc. which make suing more costly and reduce the likelihood of success. You can push many financial assets into the HoldCos.

daverobev

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Re: Can"EH"dian Tax - You have questions, I have answers
« Reply #723 on: August 01, 2018, 11:54:42 AM »
Can I just confirm with the clever people here:

I'm moving to the UK at the start of January, to take up a job. I'll be UK resident immediately under a split year.

People are telling me that I will remain Canadian resident while my wife and children are still in Canada. They will be following me as my wife's visa and the school year permits, some variation of that anyway. Oh, and our house here selling; they will come even if the house hasn't sold, I assume that an empty house on the market doesn't force us all into being residents.

I had it in my head that I would cease being Canadian resident because 'you can't' be both UK and Canadian resident, but I think I now understand that that is incorrect.

There is no ambiguity about what is happening; we're moving to the UK, for an undefined period of time (forever, in my case, almost certainly... of course, things happen, but my plan is definitely not to come back to stay here). I'm getting a job (offer not yet in hand, if it doesn't materialise then we won't go but I have no reason to believe it won't), etc.

So the date *my wife and family* lands in the UK (with family visa for my wife, not just for a visit, obviously) is the date *we all* cease to be Canadian resident, and that is the date on which I calculate as if I'd sold everything and pay cap gains on.

Right? I think I need to fill some form in declaring I've left, which again I'll do on that same date, NOT the date in January? Anything else I need to worry about?

RichMoose

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Re: Can"EH"dian Tax - You have questions, I have answers
« Reply #724 on: August 01, 2018, 12:18:58 PM »
Can I just confirm with the clever people here:

I'm moving to the UK at the start of January, to take up a job. I'll be UK resident immediately under a split year.

People are telling me that I will remain Canadian resident while my wife and children are still in Canada. They will be following me as my wife's visa and the school year permits, some variation of that anyway. Oh, and our house here selling; they will come even if the house hasn't sold, I assume that an empty house on the market doesn't force us all into being residents.

I had it in my head that I would cease being Canadian resident because 'you can't' be both UK and Canadian resident, but I think I now understand that that is incorrect.

There is no ambiguity about what is happening; we're moving to the UK, for an undefined period of time (forever, in my case, almost certainly... of course, things happen, but my plan is definitely not to come back to stay here). I'm getting a job (offer not yet in hand, if it doesn't materialise then we won't go but I have no reason to believe it won't), etc.

So the date *my wife and family* lands in the UK (with family visa for my wife, not just for a visit, obviously) is the date *we all* cease to be Canadian resident, and that is the date on which I calculate as if I'd sold everything and pay cap gains on.

Right? I think I need to fill some form in declaring I've left, which again I'll do on that same date, NOT the date in January? Anything else I need to worry about?
You will need to file taxes in Canada as long as you carry "significant ties" to this country, or a few "secondary ties". It's vague (probably intentionally so), but can even include things like active bank accounts, credit cards, clothing, a Canadian passport, etc. This means that until you sever the significant ties and most of the secondary ties, you are likely require to file taxes in the UK and Canada. However, the foreign taxes paid (in the UK) will be deducted from any taxes owing in Canada.

The date that your wife and kids are in the UK with the intent of that being more than just a visit is likely the earliest date you will even be able to sever ties and that is the date the fair market value of your property will be determined.

Make sure you also tick the other boxes on or before that date though. Some assets are exempt, like RRSPs, TFSAs, etc. and the tax treaty with the UK may allow for some benefits in transferring them to a comparable UK account without triggering taxes, or even withdrawing money from a RRSP with very beneficial tax rates. Even though it's exempt from required sales for tax purposes, there are some very negative consequences tax-wise for holding personal dwellings after becoming a non-resident.

You are not required to fill out any applications for tax status other than indicating on your final tax return that you will no longer be a Canadian tax resident (by doing a T1161 for taxes on required property dispositions). Some people may optionally fill out a form NR73 to ask the CRA to determine your residency status, but it isn't necessary. This is usually done by people who still have a few secondary ties, or people moving to a country that could be considered a tax haven.

If you haven't already, take a read: https://www.canada.ca/en/revenue-agency/services/tax/technical-information/income-tax/income-tax-folios-index/series-5-international-residency/folio-1-residency/income-tax-folio-s5-f1-c1-determining-individual-s-residence-status.html

Also read the Canada-UK tax treaty to figure out your best course of action on exempted assets.

daverobev

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Re: Can"EH"dian Tax - You have questions, I have answers
« Reply #725 on: August 01, 2018, 01:05:25 PM »
Can I just confirm with the clever people here:

I'm moving to the UK at the start of January, to take up a job. I'll be UK resident immediately under a split year.

People are telling me that I will remain Canadian resident while my wife and children are still in Canada. They will be following me as my wife's visa and the school year permits, some variation of that anyway. Oh, and our house here selling; they will come even if the house hasn't sold, I assume that an empty house on the market doesn't force us all into being residents.

I had it in my head that I would cease being Canadian resident because 'you can't' be both UK and Canadian resident, but I think I now understand that that is incorrect.

There is no ambiguity about what is happening; we're moving to the UK, for an undefined period of time (forever, in my case, almost certainly... of course, things happen, but my plan is definitely not to come back to stay here). I'm getting a job (offer not yet in hand, if it doesn't materialise then we won't go but I have no reason to believe it won't), etc.

So the date *my wife and family* lands in the UK (with family visa for my wife, not just for a visit, obviously) is the date *we all* cease to be Canadian resident, and that is the date on which I calculate as if I'd sold everything and pay cap gains on.

Right? I think I need to fill some form in declaring I've left, which again I'll do on that same date, NOT the date in January? Anything else I need to worry about?
You will need to file taxes in Canada as long as you carry "significant ties" to this country, or a few "secondary ties". It's vague (probably intentionally so), but can even include things like active bank accounts, credit cards, clothing, a Canadian passport, etc. This means that until you sever the significant ties and most of the secondary ties, you are likely require to file taxes in the UK and Canada. However, the foreign taxes paid (in the UK) will be deducted from any taxes owing in Canada.

The date that your wife and kids are in the UK with the intent of that being more than just a visit is likely the earliest date you will even be able to sever ties and that is the date the fair market value of your property will be determined.

Make sure you also tick the other boxes on or before that date though. Some assets are exempt, like RRSPs, TFSAs, etc. and the tax treaty with the UK may allow for some benefits in transferring them to a comparable UK account without triggering taxes, or even withdrawing money from a RRSP with very beneficial tax rates. Even though it's exempt from required sales for tax purposes, there are some very negative consequences tax-wise for holding personal dwellings after becoming a non-resident.

You are not required to fill out any applications for tax status other than indicating on your final tax return that you will no longer be a Canadian tax resident (by doing a T1161 for taxes on required property dispositions). Some people may optionally fill out a form NR73 to ask the CRA to determine your residency status, but it isn't necessary. This is usually done by people who still have a few secondary ties, or people moving to a country that could be considered a tax haven.

If you haven't already, take a read: https://www.canada.ca/en/revenue-agency/services/tax/technical-information/income-tax/income-tax-folios-index/series-5-international-residency/folio-1-residency/income-tax-folio-s5-f1-c1-determining-individual-s-residence-status.html

Also read the Canada-UK tax treaty to figure out your best course of action on exempted assets.

Ah! Ahhh! Fuckity fuck!

1.23 An exception to this will occur where the individual was resident in another country prior to entering Canada and is leaving to re-establish his or her residence in that country. In this case, the individual will generally become a non-resident on the date he or she leaves Canada, even if, for example, the individual's spouse or common law partner remains temporarily behind in Canada to dispose of their dwelling place in Canada or so that their dependants may complete a school year already in progress.

That's me! I'm British, going back to the UK; family will be remaining exactly for those reasons!! Does that mean I'm out the second I leave?!

nkt0

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Re: Can"EH"dian Tax - You have questions, I have answers
« Reply #726 on: August 02, 2018, 07:02:03 AM »
CPA,

Apologies if this has been covered before, but this is a super-long (but excellent and generous) thread!

I am an American looking at immigrating to Canada ASAP. I would keep my job at an American company, working remotely. My SO is a self-employed author; we have a limited-liability partnership for publishing her work. I own a house in the US and have about $150k in retirement assets and no debt (other than a mortgage). We haven't decided where we're going to move yet (Montreal or one of many places in Ontario are tops on the list).

Can you give some general advice on what to expect the tax implications of moving to Canada from the US might be?

MoneyMouse

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Re: Can"EH"dian Tax - You have questions, I have answers
« Reply #727 on: August 02, 2018, 09:48:45 AM »
Probably not worthwhile. Most accountants would tell you to run it as a sole proprietorship at least until you earn more money than you spend, including the additional costs of running a corporation.
Most lawyers would give you the caveat to that which is if your products/services are likely to carry a significant liability risk, incorporate right away to try add protection for personal assets. Either way, investigate your need for business liability insurance.

I know members of my family that have run their businesses as a sole p for decades. Generally they are either marginally profitable businesses, or they don't save any money personally so they don't really need the legal protection beyond liability insurance. Others just put most family assets (house etc) into their spouses name for additional protection.

Also, the legal protection aspect of incorporating is not nearly as good as many people make it out to be. If your corporation is getting sued, count on the directors also being sued personally. If those directors are actively involved in the daily operation of the corporation, their personally liability exposure can be little better than them operating a sole p.

The nice part about incorporating is you can make things really complex with OpCo and HoldCo structures, trusts, etc. which make suing more costly and reduce the likelihood of success. You can push many financial assets into the HoldCos.

Thank you for the insights!

The products I'm looking to provide wouldn't be very risky in themselves. Someone'd have to be pretty dedicated to hurt themselves with a paper print out or a PDF.

I'll keep it Sole Prop for a while, then, and incorporate if it grows big enough. But that simplifies things for me for sure.

K-ice

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Re: Can"EH"dian Tax - You have questions, I have answers
« Reply #728 on: August 02, 2018, 11:41:37 AM »

But I thought there were some exceptions for your own children.  Like at 8y old you can start stuffing envelopes at month's end or something. (Now it's mainly e-mail bills but that was the most benign example I could think of.)

I still have a question about what age you can hire your own children to work for you?


I found this example where an 11y old was hired...
https://www.fbc.ca/knowledge-centre/pay-family-work-done-help-your-farm-or-small-business

Are any MMMers employing their own kids?
 

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Re: Can"EH"dian Tax - You have questions, I have answers
« Reply #729 on: August 02, 2018, 12:17:51 PM »
We have always employed our kids at our retail store, they did actual work though and were paid what the other staff are. Started at roughly 13 for both of them, my son is an adult now and has his own job but our daughter still works for us.

Goldielocks

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Re: Can"EH"dian Tax - You have questions, I have answers
« Reply #730 on: August 02, 2018, 09:18:58 PM »
CPA,

Apologies if this has been covered before, but this is a super-long (but excellent and generous) thread!

I am an American looking at immigrating to Canada ASAP. I would keep my job at an American company, working remotely. My SO is a self-employed author; we have a limited-liability partnership for publishing her work. I own a house in the US and have about $150k in retirement assets and no debt (other than a mortgage). We haven't decided where we're going to move yet (Montreal or one of many places in Ontario are tops on the list).

Can you give some general advice on what to expect the tax implications of moving to Canada from the US might be?

I know I am not the one you are referring to,  BUT, when we did the reverse, DH required a US work visa to continue to run his business (mainly drop shipments, out of Canada  / China to Canada), now from our home in the USA, which is why he was required to wind it up before becoming a USA resident... because it took 6 months to get the US work visa authorization, a process that could not start until he was already in the USA....

I imagine Canada is the same, so if you are working and resident in canada, even if for your own business or US employer, you need a valid Canadian work permit to do so.

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Re: Can"EH"dian Tax - You have questions, I have answers
« Reply #731 on: August 02, 2018, 09:21:59 PM »
You can hire kids, but need the letter (permit) approving the work arrangement when your kids are younger than a certain age., here it is 12.   The regulator looks at the proposed work and conditions and gives the letter.

It is recommended to get this "permit" if your kids are young, because it adds legitimacy to the family business using the kids income as a deduction, too.

Missy B

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Re: Can"EH"dian Tax - You have questions, I have answers
« Reply #732 on: August 03, 2018, 11:26:51 AM »
You also have the ability to retain earnings and pay them out over time with incorporating...   balancing taxes, so different people's income set points for incorporating will be different.   You need to look at your total income, too, annually, not just from the business.

Yes. You can build up savings in the corp and use it as a kind of retirement account, pay yourself dividends over years until the corp is drained or, if the savings are large enough, leave the corp to your heirs.

you need to look at your tax rates in each scenario to see if it's worth it. Remember that accounting and taxes are substantially more costly for corps than personal, so it makes a big difference if you learn to do them yourself.

The other important factor is CPP. It is not a good deal for self-employed people, and if you do the math on what your accumulated CPP contributions would have made you had they been invested in an index ETF, you will be horrified at the difference. Incorporating allows you to choose ineligible dividends instead of salary, and avoid the 10% (new increases coming soon!) CPP tax.


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Re: Can"EH"dian Tax - You have questions, I have answers
« Reply #733 on: August 19, 2018, 10:07:38 PM »
Hi,
Somewhere I read that RRSP over-contributions totalling up to $2,000 at any time in the year are allowed without penalty. How long can this condition be maintained?
This leads me to a follow-up question: which tax software is capable of calculating and reporting the earned income for a given/current taxyear as 18% of this is the contribution limit?
Thanks,
TDO

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Re: Can"EH"dian Tax - You have questions, I have answers
« Reply #734 on: August 26, 2018, 04:01:17 PM »
Hi,
Somewhere I read that RRSP over-contributions totalling up to $2,000 at any time in the year are allowed without penalty. How long can this condition be maintained?
This leads me to a follow-up question: which tax software is capable of calculating and reporting the earned income for a given/current taxyear as 18% of this is the contribution limit?
Thanks,
TDO
A total of $2k over contribution can be carried every year.  But you don't get the tax rebate on that portion, it just sits in the tax-deferred account growing for you until you can claim it.   There is really not a big $$ win by doing this, just a convenience of not having to extract it if you slightly over contributed one year.   Make certain you are maxing out your TFSA, or an RESP (if you have kids) before deliberately doing the RRSP over-contribution, as both are better places for the $2k in money.

All tax software can calculate the 18%, except, that like people, they can only guess or project what your actual end of year income will be, before the actual end of the year.  Even with a steady 26x per year paycheque, I have found that that calculating the precise income is hard, because of when the company chooses to pay out your last 1-4 days of the year (in this year or next year?)

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Re: Can"EH"dian Tax - You have questions, I have answers
« Reply #735 on: October 05, 2018, 04:09:24 PM »
Hey guys,

Am looking for some critique and optimization on my current plans.  Any advice would be very recommended. Here goes:

Married, (30y.o./28y.o.) 2 kids (1 y.o./3 y.o), living in Alberta

Our target is to retire in 10 years with house paid off and living on $50,000/yr.  Current savings target is $1.25M between RRSP, TFSA and eventually non-registered.

My Income: $200,000 / year
My RRSP (Work): $140,000 - Mix of low income ETFs (Bonds, Foreign and Canadian Capital)
My RRSP (Personal): $90,000
My TFSA: $70,000
Principal Residence: $150,000 of capital (Value $450,000, Remaining Mortgage $300,000) -Variable rate (now 3.15%)
Rental Property: ~$10,000 of capital (Purchased at $420,000, now valued at $300,000, remaining mortgage of $290,000) - Fixed Rate (2.95%)

Spousal Income: Currently $0 as she is staying with kids but in future will be $70,000 once back in workforce
RRSP (Work): $30,000
TFSA: Not eligible as dual US citizen

The savings plan is:

1. Start using my remaining yearly RRSP contribution room to fill my wife's RRSP (I have only 6% remaining after work match each year)
2. Wife to begin contributing to her RRSP once making a salary until its full - target to balance out values or our two RRSPs by the 10 year mark (might be tough)
3. With remaining savings each year, fill both RRSPs, my TFSA, RESPs and pay off principal residence mortgage until gone
4. Sell Rental property for a capital loss (it's been cashflow negative for a while) and save credits for future withdrawals from non-registered accounts
5. Once Wife's RRSP is full, she opens a non-registered account and invests in Canadian dividend paying stocks
6. If I run out of places to put money after mortgage, open a non-registered account with swap based ETFs.

Once we reach our $1.25M target between all accounts we begin withdrawing at 4% rate:

1. Take out equal amounts from each RRSP as low as possible to not trigger major income tax
2. Supplement any spending with withdrawals from our non-registered accounts (Canadian dividends + capital gains).  Deferred capital loss should offset most capital gains.
3. Eventually tap TFSA last if needed - continue to transfer money into it each year to maximize contribution room

Final notes:

I follow Canadian Couch Potato model portfolio.  Keep all bonds (20% allocation now) in my RRSP and most aggressive Foreign / Canadian Capital ETFs in TFSA.

I hope that's thorough enough.  Please let me know if there's anything in my plan that you'd recommend optimizing!

Brad

Goldielocks

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Re: Can"EH"dian Tax - You have questions, I have answers
« Reply #736 on: October 05, 2018, 07:14:36 PM »
One note.  I am a big fan of TFSA's... After a company match, they are usually the place where I recommend that you max out first.

I highly recommend that your wife max out the TFSA before her RRSP's when she starts work.  The tax difference between $70k and $40k (retirement income) is small,   The advantage of an account you can pull large sums from without spiking single year taxes (or OAS clawbacks) is huge in flexibility.

The only exceptions to investing in TFSA first, will be if you are a currently high income, and expect to drop in future (you = yes, wife = maybe).
OR, if you are trying to reduce income for some reason (taxes to a lower bracket?, get another Child benefit? have lots of dividend income in non registered?) then RRSP come first.

RESPs -- definitely fund these before retiring, although you won't need gigantic amounts for the kids, the excess can be returned to you.   I recommend that most people plan to max them out in the final 7 years before your child is 18 for the CESG money...  then move the excess into your RRSP once your kid starts college and you can withdraw your original contributions without penalty.

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Re: Can"EH"dian Tax - You have questions, I have answers
« Reply #737 on: October 08, 2018, 03:59:36 PM »
Get on the kids RESP asap, does AB not have a education grant on top of the CESG? I recommend a monthly deposit account with $100 into each account at a minimum per month. You can most likely get a low MER index or mutual fund setup for this for the kids at

Your work RRSP, maximize the crap out of that but recommend only deducting the max amount to get the company match %. Use your remaining yearly RRSP limit to fund your personal RRSP. Also dig into the work RRSP funds available and the MER you are paying on that, I suspect they are high. I let my work RRSP build up and completely withdrew my employee portions once per year and put into my Vanguard index funds as that had a higher ROR. I was with sunlife and they allowed me to withdraw all employee contributions whenever I wanted.

Max that TFSA immediately every year, I agree with this 100%

On the rental property, I have one in a simple boat in a depressed economy oil town. Can you ride out the lost income rental potential each year in hopes you can ride out a return on real estate value. Much like the stock market, a loss isnt an actual loss until you "cash out".

I am in the camp of never paying off Mortgages, interest rates right now are still so ridiculously low that any money is best suited to go into savings first and foremost. You make more money with your cash working in investments than they do decreasing your mortgage payment.

You speak nothing of your debt @Brett S , are you carrying any debt from vehicles and/or consumer loans, credit lines etc?


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Re: Can"EH"dian Tax - You have questions, I have answers
« Reply #738 on: October 10, 2018, 10:48:13 AM »
Thanks for the responses.  A few follow up answers to the questions:

My wife is a dual citizen with the USA who doesn't recognize TFSAs so we have no opportunity to utilize her TFSA space.

We have no debts other than our two mortgages.  And yes, my other mortgage is also in a depressed oil town but given the state of the oil industry in the country right now, it's by no means a sure bet that the price will come back up... hence why I'm considering cutting my losses.  Right now the rent covers all expenses plus half the principal, leaving me on the hook for ~$600/month on the principal.

Great point on the work RRSP.  Fortunately our RRSP provider offers both an active (the default of course) and passive ETF option.  I've switched a while back to the passive option which as expected is outperforming their active fund by more or less the difference in MER.  Who would have guessed...

I'll need to look into the Alberta education grant.  I wasn't aware there was a program.  I'm currently planning to put in the maximum $2500/year into each RESP to get the full government CESG match.

@Stasher - I also share the sentiment of not paying off the mortgage but I'm still conflicted as to where the better place to put my money is right now.  Considering my RRSP and TFSA contribution is full I'd need to begin opening a taxable investment account.  Does anyone have further recommendations on this?  I'm worried the taxes won't make the benefit much better than what I'm currently getting on my mortgage.

Stasher

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Re: Can"EH"dian Tax - You have questions, I have answers
« Reply #739 on: October 10, 2018, 11:02:31 AM »
@Stasher - I also share the sentiment of not paying off the mortgage but I'm still conflicted as to where the better place to put my money is right now.  Considering my RRSP and TFSA contribution is full I'd need to begin opening a taxable investment account.  Does anyone have further recommendations on this?  I'm worried the taxes won't make the benefit much better than what I'm currently getting on my mortgage.

Hands down start reading @Retire-Canada journal for how to maximize your TFSA RRSP and then plan your Non-Reg investments.

Here is the link and keep in mind this is his new journal as he closed the one that worked through the initial path of FIRE
https://forum.mrmoneymustache.com/journals/retire-canada-downshifting-like-a-boss!/

Lews Therin

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Re: Can"EH"dian Tax - You have questions, I have answers
« Reply #740 on: October 10, 2018, 11:23:55 AM »
Or read the Rich Moose blog. quite helpful for details and different options for investments.

Smith maneuver for double effectiveness (Mortgage, tax deductions + investment.)

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Re: Can"EH"dian Tax - You have questions, I have answers
« Reply #741 on: October 10, 2018, 04:59:41 PM »
No, there's no RESP grant for Alberta.

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Re: Can"EH"dian Tax - You have questions, I have answers
« Reply #742 on: October 10, 2018, 07:43:58 PM »
No, there's no RESP grant for Alberta.

Just found this with a google search, it looked like an awesome program but the Government cancelled it, thats too bad. This was probably the program I was thinking of.

Alberta Centennial Education Savings Program (ACES) ... With the ACES program families in Alberta are eligible to receive $500 when they first open an RESP for their child, then $100 more when the child turns 8, 11 and 14 years old. You qualify for ACES if: your child was born after December 31, 2004.