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Dear Clients and Friends, Given the recent rise in the use of cryptocurrencies, the Canada Revenue Agency (CRA) has implemented guidelines on the taxation of transactions involving cryptocurrencies. This helps ensure Canadians are aware of their tax obligations that result. What are the tax implications of disposing of cryptocurrencies? In general, possessing or holding a cryptocurrency is not taxable. However, there could be tax consequences when you have any of the following types of dispositions of cryptocurrency: sell or make a gift of cryptocurrency trade or exchange cryptocurrency, including disposing of one cryptocurrency for another convert cryptocurrency to government-issued currency, such as Canadian dollars use cryptocurrency to buy goods or services What income is generated when disposing of cryptocurrencies? The income you get from disposing of cryptocurrency may be considered business income or a capital gain. Most investors prefer capital gains treatment as only 50% of the income generated is subject to tax. Generally, if you are in the business of actively trading cryptocurrencies, the disposition would generate business income. Alternatively, if you are holding cryptocurrencies as a long-term investment, the disposition would normally generate a capital gain. If you are unsure how to classify income from your transactions, Clearhouse LLP can help determine this for you as it is a bit of a grey area. Trading Cryptocurrencies: When you dispose of one type of cryptocurrency to acquire another cryptocurrency (ex. trade Bitcoin for Ethereum), the barter transaction rules apply. This transaction is considered a disposition, and you must report either business income or a capital gain on your income tax return. How are cryptocurrencies valued? Valuing your cryptocurrencies depends on whether they are considered capital property or inventory. Clearhouse LLP can help determine this classification. What types of books and records should you maintain? If you acquire or dispose of cryptocurrency, the following should be kept for at least six years: the date of the transactions the receipts of purchase or transfer of cryptocurrency the value of the cryptocurrency in Canadian dollars at the time of the transaction (buy and sell) the digital wallet records and cryptocurrency addresses a description of the transaction and the other party (even if it is just their cryptocurrency address) the exchange records accounting and legal costs the software costs related to managing your tax affairs How does the GST/HST apply to cryptocurrency? For HST registrants and non-registrants who meet the $30,000 threshold, HST will apply when a taxable good or service is exchanged for cryptocurrency. The GST/HST that applies to the property or service is calculated based on the fair market value of the cryptocurrency at the time of the transaction. Please ensure you keep all records that show how you calculated the fair market value. What are the foreign property tax implications associated with owning cryptocurrencies? Entitlement to your cryptocurrency exists in the form of a digital ledger on the related blockchain, but because it’s stored on a blockchain, it can simultaneously exist in several geographic locations. Hot wallets are digital wallets connected to the internet, which is how nearly all cryptocurrency exchanges or online providers store your cryptocurrency. Cold wallets are not connected to the internet and are typically on a physical storage drive. The geographic location of a cold wallet is wherever the physical drive, computer or USB key with the private key on it is located. If the cold wallet is in Canada, then the associated crypto holdings associated with it are unlikely to be subject to the T1135 foreign property reporting requirements. On the other hand, when a hot wallet is used, “the primary server location used by the wallet provider should be strongly determinative of situs. If the server is located outside Canada, the associated holdings are more likely to be subject to foreign property reporting requirements. Canadian resident taxpayers must file Form T1135 with CRA if the total cost of all of their specified foreign property (including cryptocurrency) is more than $100,000 and a failure to do so could result in a tax assessment with significant penalties being issued to the taxpayer by CRA. What is specified foreign property? Specified foreign property does not include “property that is used or held exclusively in the course of carrying on an active business of the person or partnership”. Those who mine and/or trade in cryptocurrency, depending on their trading activities and other surrounding factors, may be determined to be mining and/or trading as an active business. For these cryptocurrency holders, who conduct active business, their crypto holdings used as part of that business are exempt from the T1135 reporting requirement. Please do not hesitate to contact us at info@clearhouse.ca or (647) 969 7382 if you have any questions. Kindest Regards, Your Clearhouse LLP Team

Dear Clients and Friends, In an attempt to encourage the exploration of minerals essential to the development of environmentally friendly technologies, the government has introduced an enhanced tax credit on critical minerals. The 2022 Federal Budget has recognized that critical mineral mining projects are linked to various challenges, including volatile prices and extensive regulatory processes that place increased risk on carrying out mining procedures. Therefore, the new 30% Critical Mineral Exploration Credit provides greater incentive to invest in mining activity. How does the credit work? The credit would apply to expenditures renounced under eligible flow through share agreements entered into after April 7, 2022, and on or before March 31, 2027. Eligible expenditures would not benefit from both the Critical Mineral Exploration Tax Credit and the existing Mineral Exploration Tax Credit, which is equal to 15% of specified mineral exploration expenses incurred in Canada and renounced to flow-through share investors. What types of minerals apply? Only specified minerals are eligible for the 30% Critical Mineral Exploration Tax Credit, including copper, nickel, lithium, cobalt, graphite, rare earth elements, scandium, titanium, gallium, vanadium, tellurium, magnesium, zinc, platinum group metals and uranium. In order to qualify for the enhanced credit, the exploration expenses must be incurred as part of an exploration project in connection with these specified minerals. Clearhouse LLP continues to provide our clients with knowledge on tax incentives related to the Canadian mining industry. Please do not hesitate to contact us at info@clearhouse.ca or (647) 969 7382 if you have any questions. Kindest Regards, Your Clearhouse LLP Team

Dear Clients and Friends, With the Bank of Canada increasing the prescribed rate of interest to 3% on October 1, 2022, we would like to remind our clients of the opportunity to take advantage of Canada Revenue Agency’s (CRA) current prescribed rate of 2%. What does this mean for you? Up until September 30th, 2022, the prescribed rate will remain at 2%, providing a significant opportunity to split income with a spouse or common-law partner, (grand)children or other family members. You can use the prescribed rate to your advantage, either by making a loan directly to family members at the prescribed rate or, where minors are involved, using a family trust to do so. For loans put into place before the next prescribed rate increase, the 2% rate would be locked in for the duration of the loan (without being affected by any future increases). How does it work? An individual who is taxed at the top marginal tax bracket in Ontario sets up a family trust with specified beneficiaries. The beneficiaries are low-income earners and are not subject to high marginal tax rates in Ontario. The individual loans money to the family trust at the current prescribed rate of 2%. The trust pays interest at this rate and locks it in prior to Bank of Canada implementing rate increases. The prescribed rate is updated every quarter. The money loaned to the trust is invested, resulting in income generation that can then be distributed to the beneficiaries of the trust. Given that our tax system has graduated tax brackets, by having the income taxed in the lower-income earner’s hands, the overall tax paid by the family may be reduced. Additionally, the income generated that is distributed to the beneficiaries can be used to help fund the expenses of minor children, such as paying for schooling, extracurricular activities, and clothing. This is generally achieved by making a prescribed rate loan to a family trust which has the minor children as beneficiaries. How can we help you benefit? Clearhouse LLP will provide you with advice on income splitting opportunities, as well as setting up your family trust to allow you to lend money while locking in the current prescribed rate before the government implements rate increases. Please do not hesitate to contact us at info@clearhouse.ca or (647) 969 7382 if you have any questions. Kindest Regards, Your Clearhouse LLP Team

Deduction Dear Clients and Friends, The 2022 Federal Budget proposed a favourable tax change for Canadian-Controlled Private Corporations (CCPCs) that were previously restricted from claiming the small business deduction (SBD) because they were too large. What is the SBD? The SBD reduces the corporate income taxes that a corporation would pay in a taxation year, by providing CCPC’s with a reduced tax rate on the first $500,000 of active business profits. Profits qualifying for the SBD are taxed at a federal tax rate of 9%, compared to the general rate on business profits from active businesses of 15%. The $500,000 annual business limit can be claimed in a single corporation or shared amongst other CCPCs that are associated for income tax purposes. <strong What are the restrictions in claiming the SBD? Canada Revenue Agency (CRA) enforces two main restrictions for CCPCs claiming the SBD. The first restriction is based on size, which is triggered when the taxable capital of a CCPC, together with the taxable capital of associated corporations, exceeds $10 million at the end of the previous taxation year. Taxable capital is generally defined as the sum of the carrying values of shareholders’ equity, surpluses, debt, and reserves, reduced by investments in shares and debt held in other companies. The second restriction exists where certain investment income, within an associated group of corporations, exceeds $50,000 in the preceding taxation year. Under this provision, the small business limit will be reduced by $5 for every $1 of investment income that is above the $50,000 threshold. The deduction is fully eliminated when investment income for the preceding year reaches $150,000. What has improved? Previously, the SBD was reduced when taxable capital employed in Canada within the associated group exceeded $10 million and was fully eliminated when taxable capital reaches $15 million. The proposed change raises the upper limit of taxable capital from $15 million to $50 million, phasing out the SBD at $50 million in taxable capital and increasing the number of CCPCs eligible for the deduction. The increase is effective for tax years that start on or after April 7, 2022. For companies with a calendar year end, the change will be effective starting with the 2023 tax year. No changes have been proposed to the investment income reduction of the SBD. As a result, not all taxpayers will be able to take advantage of the increased limit to phase out the SBD based on taxable capital. Clearhouse LLP can assist in determining whether your corporation is eligible for the SBD and can benefit from the changes implemented. Please do not hesitate to contact us at info@clearhouse.ca or (647) 969 7382 if you have any questions. Kindest Regards, Your Clearhouse LLP Team

the Capital Gains Surplus Strip Dear Clients and Friends, On April 7, 2022, the Canadian Government introduced the 2022 Federal Budget. The budget allowed for capital gains inclusion rates and certain existing tax planning strategies to remain in effect. Despite this advantage, there is considerable concern amongst the tax community and academics that this type of planning will no longer be available, or may become less advantageous, in the near future. One of the strategies that may no longer be available is the Capital Gains Surplus Strip (CGSS). The CGSS allows business owners to distribute earnings from their corporation as a capital gain instead of pulling the cash out as dividends, which are taxed at a higher rate. Instead of the taxpayer pulling out the excess funds as a salary or dividend, which could be taxed at the highest marginal tax rate (close to 54%), it is withdrawn as a capital gain, in which is only taxed at 26.76% (at highest bracket). This substantially reduces the tax burden on this distribution. On every $1M of funds extracted, the tax savings would amount to approximately $210K. The taxpayer can then use these savings to pay off their personal mortgage, invest for their retirement, put a down payment on an investment property, or just for spending. How does it work? Through a series of transactions, the share capital of the corporation is amended and a new corporation is created. The proceeds generated as a result of these transactions represent income that is subject to a lower tax rate. Overall, this process, if done properly by experienced tax professionals, can result in significant tax savings. The government has communicated that they will be looking further into this type of planning within the short-term and may decide to close off this strategy or seek to increase the capital gains inclusion rate to more than 50%, which would make this process less beneficial. Please do not hesitate to contact us at info@clearhouse.ca or (647) 969 7382 if you have any questions. Kindest Regards, Your Clearhouse LLP Team

Provincial COVID-19 Support Programs Ontario COVID-19 Small Business Relief Grant Dear Clients and Friends, The provincial government is announcing an Ontario COVID-19 Small Business Relief Grant for small businesses that are subject to closure under the modified Step Two of Roadmap to Reopen. What will you receive? Eligible businesses subject to closures as a result of the province’s move to the modified Step Two of the Roadmap to Reopen will receive a grant of $10,000. Eligibility To receive the grant, a small business must: 1. be required to close due to public health orders that took effect 12:01 a.m. on January 5, 2022 2. have fewer than 100 employees Eligible businesses that previously qualified for the Ontario Small Business Support Grant will be pre-screened to verify eligibility and will not need to apply for the new program. Newly established and newly eligible small businesses will need to apply once the application portal opens in the coming weeks. Small businesses that qualify can expect to receive their payment in the coming weeks. What are eligible small businesses? restaurants and bars facilities for indoor sports and recreational fitness activities (including fitness centres and gyms) performing arts and cinemas museums, galleries, aquariums, zoos, science centres, landmarks, historic sites, botanical gardens and similar attractions performing arts venues and cinemas, museums, galleries, aquariums, zoos, science centres, landmarks, historic sites, botanical gardens and similar attractions meeting or event spaces tour and guide services conference centres and convention centres driving instruction for individuals before- and after- school programs When can you apply? Applications for the Ontario COVID-19 Small Business Relief Grant will be open in the coming weeks. Ontario Business Costs Rebate Program The government is also introducing the new Ontario Business Costs Rebate Program to support businesses that are most impacted by public health measures in response to the Omicron variant. What will you receive? Eligible businesses that are required to close, or reduce capacity, will receive rebate payments for a portion of the property tax and energy costs they incur while subject to these measures. Eligible businesses required to reduce capacity to 50 per cent, such as smaller retail stores, will receive a rebate payment equivalent to 50 per cent of their costs, while businesses required to close for indoor activities, such as restaurants and gyms, will receive a rebate payment equivalent to 100 per cent of their costs. Eligibility A full list of eligible business types will be available through a program guide in mid-January 2022. When can you apply? Online applications for this program will open in the coming days. Payments to eligible businesses will be retroactive to December 19, 2021. Businesses will be required to submit property tax and energy bills as part of the application process. Federal COVID-19 Support Programs Effective October 23, 2021, the Canadian Emergency Wage Subsidy (CEWS) and the Canada Emergency Rent Subsidy (CERS) have ended. Beginning October 24, 2021, taxpayers may apply for support through the following programs until May 7, 2022: 1. The Canada Recovery Hiring Program (CRHP), or 2. The Tourism and Hospitality Recovery Program (THRP), or 3. The Hardest-Hit Business Recovery Program (HHBRP) The Canada Recovery Hiring Program (CRHP) As an employer in Canada who continues to be impacted by the COVID-19 pandemic, you may be eligible for a subsidy to cover part of your wages as you hire new employees and increase existing employees’ wages or hours. Each claim period, eligible employers can claim either the higher of the CRHP, or the wage portion of the THRP or HHBRP Eligibility Criteria Eligibility criteria for CRHP is the same as CEWS. To be eligible, your business must: Have a CRA Business Number or a third-party payroll provider who submits your payroll to CRA; Have employees on payroll who receive a T4 slip (includes new hires); and Have a revenue loss within a claim period. For-profit corporations are eligible only if they are a Canadian-controlled private corporation, are eligible for the small business deduction, or are a partnership where at least 50% of interests are held by employers eligible for the CRHP. What will you receive? To calculate your CRHP amount, you can use the following link: https://www.canada.ca/en/revenue-agency/services/wage-rent-subsidies/covid-wage-hiring-support-businesses/wage-calculate-amount/calculate-crhp-base-period-remuneration.html Tourism and Hospitality Recovery Program (THRP) As a business, charity, or non-profit in Canada who has been affected by the COVID-19 pandemic, you may be eligible for a wage subsidy, a rent subsidy, or both through the THRP. Eligibility Criteria You may qualify if you are either: part of the tourism, hospitality, arts, entertainment, or recreation sectors, or affected by a qualifying public health restriction For companies in the tourism, hospitality, arts, entertainment, and recreation sectors, you must meet the following 3 conditions to qualify: 1. More than 50% of your eligible revenue comes from one or more of the tourism, hospitality, arts, entertainment, or recreation activities this program supports 2. You have a 12-month average revenue drop from March 2020 to February 2021 of at least 40% 3. You have a claim period revenue drop of at least 40% For companies affected by a qualifying public health restriction, you must meet the following 2 conditions to qualify: 1. You were affected by a qualifying public health restriction 2. You have a claim period revenue drop of at least 40% for the current claim period when compared to the corresponding reference period (you do not need to calculate a 12-month average revenue drop) What is a qualifying public health restriction? 1. You had one or more qualifying properties that was affected by a public health restriction for at least 7 days in the claim period 2. The activities that were stopped due to a public health restriction accounted for at least approximately 25% of your total eligible revenue during the prior reference period for the claim period A public health restriction is one that meets all of the following conditions: 1. It is based on an order or decision issued by a federal, provincial, or municipal government, or a local health authority in response to the

Dear Clients and Friends, The Canada Emergency Business Account (CEBA) program was created to provide funds to small businesses that had lost income as a result of the COVID-19 pandemic. Initially, eligible applicants were able to receive a loan of $40,000. In December 2020, approved CEBA borrowers were able to receive a $60,000 loan. Borrowers that had received the initial $40,000 CEBA loan were able to apply for the CEBA expansion, which offered eligible businesses an additional $20,000 of financing. The application period for the CEBA Program closed on June 30, 2021 and the funding period has now ended. The CEBA forgiveness repayment date has been extended to December 31, 2023 for eligible CEBA loan holders in good standing. Borrowers that qualified for the extended term have been contacted by their financial institution with details regarding the new repayment date. All applicants that meet CEBA eligibility criteria will have the following terms of forgiveness: For borrowers that received $40,000 or less – Repaying the outstanding balance of the loan (other than the amount available to be forgiven) on or before December 31, 2023 will result in loan forgiveness of 25%, up to $10,000. For borrowers that received a $40,000 loan and subsequently received the $20,000 expansion – Repaying the outstanding balance of the loan (other than the amount available to be forgiven) on or before December 31, 2023 will result in a single portion of loan forgiveness up to $20,000, based on a blended rate of 25% on the first $40,000, plus 50% on amounts above $40,000 and up to $60,000. For borrowers that repaid their original $40,000 loan, claimed forgiveness, and thereafter received the $20,000 expansion – Repaying the outstanding balance of the $20,000 expansion (other than the amount available to be forgiven) on or before December 31, 2023 will result in loan forgiveness of 50%, up to $10,000. Overall, depending on the amount of your CEBA loan, the amount that is eligible for forgiveness will vary. The forgiveness benefit allows a portion of your loan to not require repayment: If you received a $40,000 CEBA loan, you can repay 75% of the total amount ($30,000) by December 31, 2023 and the remaining 25% ($10,000) is eligible for a loan forgiveness benefit. This will require monthly repayments of $2,500, beginning January, 2023. If you received a $60,000 CEBA loan, you can repay 66% of the total amount ($40,000) by December 31, 2023 and the remaining 34% ($20,000) is eligible for a loan forgiveness benefit. This will require monthly payments of $3,333.33, beginning January, 2023. The forgivable portion of the CEBA loan, $10,000 or $20,000, is taxable in the year in which the loan is received. For more details, please visit the following link: https://ceba-cuec.ca/ Please do not hesitate to contact us at info@clearhouse.ca or (647) 969 7382 if you have any questions. Kindest Regards, Your Clearhouse LLP Team

Dear Clients and Friends, The Employer Health Tax (EHT) is a payroll tax on remuneration, such as salaries, wages, bonuses, taxable benefits, or stock options, that employers in Ontario provide to current and former employees. The purpose of this tax is to assist in providing the government with revenue to fund health care in Ontario. Who is liable for EHT? You must pay EHT if you have employees who either: physically report for work at your permanent establishment in Ontario, or are attached to your permanent establishment in Ontario, or do not report to work at any of your permanent establishments (for example, they work from home) but are paid from or through your Ontario permanent establishment EHT tax rates vary depending on payroll totals. The most recent rates per the Ontario Ministry of Finance are as follows: Total Ontario Remuneration Rate % Up to $200,000.00 $200,000.01 to $230,000.00 $230,000.01 to $260,000.00 $260,000.01 to $290,000.00 $290,000.01 to $320,000.00 $350,000.01 to $350,000.00 $380,000.01 to $400,000 Over $400,000 0.980 1.101 1.223 1.344 1.465 1.586 1.708 1.829 1.950 If your Ontario payroll exceeds your allowable exemption amount, you will have to pay EHT. What is the EHT exemption? The Ontario government has increased the EHT exemption amount to $1,000,000. You can claim the tax exemption if the following are met: you are an eligible employer as defined under the EHT Act you pay income taxes your Ontario payroll for the year (including the payroll of any associated employers) is less than $5,000,000 or you are a registered charity you are not under the control of any level of government your board of directors does not include any municipal representatives For example, if you are an eligible employer with a total Ontario payroll of $1,800,000 per year, you would claim the EHT tax exemption on the first $1,000,000 and pay EHT on the remaining $800,000 of your payroll for the year. How does the EHT exemption impact associated employers? If you are a member of an associated group of employers at any time during the year, and are eligible for the exemption, you must have an agreement to allocate the $1,000,000 exemption amount among the group. You must not claim more than your allocated portion of the exemption amount for the year. If the combined total Ontario payrolls of the members of the associated group exceed $5,000,000, none of the members of the associated group are entitled to an EHT exemption. Associated employers are connected by ownership or by a combination of ownership and relationships between individuals. The rules for associated corporations under the Income Tax Act are used to determine whether or not employers are associated for EHT purposes. Although these rules refer to corporations, their application is extended under the EHT Act to include individuals, partnerships, and trusts. Clearhouse LLP can assist in determining whether you as an employer are required to pay EHT, eligble for the EHT exemption, and associated with other entities for EHT purposes. Please do not hesitate to contact us at info@clearhouse.ca or (647) 969 7382 if you have any questions. Kindest Regards, Your Clearhouse LLP Team

Dear Clients and Friends, As the deadline for 2022 UHT filing fast approaches, below is a high level overview of the UHT and the information that is needed for its filing. What is it – It is a 1% annual tax on the value of residential real estate that is owned by certain non-Canadian owners (and, in certain circumstances, some Canadian owners) in Canada when the property is considered vacant (or underused). This tax applies on properties owned on or after December 31, 2022. An owner of residential property that is an excluded owner is not required to file a UHT Return and is not liable to pay the UHT. An excluded owner includes (but is not limited to): An individual who is a Canadian citizen or a permanent resident of Canada A publicly traded Canadian corporation A person with title to the property in their capacity as trustees of various widely held trusts A registered charity A cooperative housing corporation A municipal organization or other public institutions and government bodies. Exemptions – An owner who is not an excluded owner must file a UHT return but may not be liable to pay the tax if they qualify for an exemption. These exemptions may apply depending on the type of owner, the occupant of the property, the availability of the property, or the location and use of the property. Below are some of the examples, please note that the list is not exhaustive – Where the property is the primary place of residence of the individual owner, their spouse or common-law partner, or their child while the child is a student. The property was occupied for at least 180 days in the year, made up of one or more periods that are at least one month by: o A third party under a written rental agreement o A related person paying fair rent to the owner o The owner’s spouse or common-law partner in Canada under a work permit o The owner’s spouse, common-law partner, parent, or child who is a Canadian citizen or permanent resident. Where the property is owned by “specified Canadian corporations,” meaning Canadian corporations where less than 10% of the voting shares and equity value are owned by non-Canadian individuals or corporations. Where the property is owned by a “specified Canadian partnership,” meaning a partnership each member of which is an excluded owner or a specified Canadian corporation. In the case of newly constructed properties, the UHT is not payable if construction of the property is not substantially completed before April of the calendar year, or if the property is constructed in the first quarter of the year and it is offered for sale to the public during the year. Where the property is under renovations for a period of at least 120 consecutive days in the calendar year, or where a natural disaster or hazardous condition renders the property uninhabitable for a period of at least 60 consecutive days in the calendar year. If the property is not suitable for year-round use as a place of residence or where it is seasonably inaccessible because public access is not maintained year-round. Type of properties subject to UHT – It applies to residential properties located in Canada. A residential property includes Detached houses (containing up to three dwelling units) Semi-detached houses Rowhouse units Residential condominium units Any other similar premises intended to be owned as a separate unit or parcel. Calculation of the UHT – The UHT is calculated at the rate of 1% on the taxable value of the property, which is generally the greater of (a) its value as assessed by a government agency (such as the Municipal Property Assessment Corporation in Ontario); and (b) the property’s most recent sale price on or before December 31 of the calendar year. Alternatively, a person may elect to use the fair market value of the property at any time on or after January 1 of the calendar year and on or before April 30 of the following calendar year. The fair market value must be supported by a written appraisal and provided to the Canada Revenue Agency upon request. Filing Deadline – April 30th Penalties – A person who fails to file the UHT Return as required under the UHT Act is subject to a minimum penalty of CA$5,000 if the person is an individual or CA$10,000 in all other cases, and a maximum penalty equal to the total of 5% of the UHT payable plus 3% of the UHT payable for each complete month that the UHT Return is not filed. Please do not hesitate to contact us at info@clearhouse.ca or 647-969-7382 if you have any questions. If we are not reached out, we will assume that the residential property is owned by an excluded owner and don’t have to file the UHT return. Kindest regards, Your Clearhouse Team

Dear Clients and Friends, There have been significant developments in the international taxation domain in recent years. These changes will impact the way multinationals are taxed and also impact a multinational’s effective tax rate, worldwide. Some of these developments have been captured through the Base Erosion and Profit Shifting (BEPS) initiative, which is discussed below. Overview of BEPS action plan and Pillar 1 & Pillar 2 BEPS 1.0 When it comes to international taxation, there are many working pieces with differing legislations in each country along with bilateral tax treaties amongst the various countries around the world. As a result, there have been widely used techniques that are exploited worldwide in order to evade/ minimize the taxes amongst many multinational corporations throughout the world. Many of these strategies exploit any mismatches in the tax rules to artificially shift profits to low or no-tax jurisdictions even if there is little to no economic activity in that jurisdiction To provide an illustration, the above diagram provides an example whereby A Co. (Country A) lends money to C Co. (a related company in Country C) through a branch located in Country B. Country C permits C Co. to claim a deduction for the interest payment. Meanwhile, Country A exempts or excludes the interest payment from taxation on the grounds that it is attributable to a foreign branch. The interest income is not, however, taxed in Country B because A Co does not have a sufficient presence in Country B, resulting in double non-taxation. As a result of these types of situations, the BEPS project was launched in 2015 by The Organization of Economic Cooperation and Development (OECD). The OECD has issued 15 action plans under this project. This was a collaborative effort of over 135 countries/jurisdictions to tackle the tax avoidance issue, improve the coherence of international tax rules, and to ensure a more transparent international tax environment. The BEPS project has also provided a mechanism to amend certain tax treaties, in order to plug the loopholes by way of a multilateral instrument (MLI). Canada has also entered into an MLI which has been in effect since December 1, 2019. This allows it to amend its tax treaties with different countries BEPS 2.0 Subsequent to BEPS 1.0, the OECD has come up with another set of action plans which is referred as “BEPS 2.0”. The purpose of BEPS 2.0 is to reduce the effective tax rate (ETR) differential across jurisdictions, reducing the scope for tax-induced distortions resulting from investment decisions. In BEPS 2.0, the OECD has provided 2 key measures, called the “Pillars”, which consist of: Pillar 1: The purpose is to reallocate certain amounts of taxable income to jurisdictions wherein consumers or users are located, subject to prescribed rules. The focus is on changing the jurisdiction where taxes are paid by multinationals. Pillar 1 rules are applicable on multinationals having a global turnover above €20 Billion, profitability above 10%, and in jurisdictions that a multinational derives at least €1 Million in revenue from. As per the OCED’s recent update, in July 2023, Pillar 1 is expected to be in force in the year 2025. Pillar 2: Provides for a global minimum tax of 15% for large corporations that have a turnover of over €750 Million. The OECD has issued a complex set of rules (called GloBE rules) for these calculations. These GloBE rules are expected to take effect in the year 2024. The Canadian government has been bracing itself for these changes and they have released the draft Global Minimum Tax Act Legislation, in August 2023, for consultation. Also, the government has indicated its intention in adopting a Digital Service Tax which would be in effect in the year 2024. The information provided in this publication is a brief overview of the BEPS action plans. Any multinational corporation that is affected by the above changes should plan for the above. If you would like additional details, including applicability to your situation, please feel free to contact us at 647-969-7382 or at info@clearhouse.ca.