Author: admin

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: 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.

On April 7, 2022, the Deputy Prime Minister and Finance Minister, the Honourable Chrystia Freeland, presented Budget 2022: A Plan to Grow Our Economy and Make Life More Affordable, to the House of Commons. No changes were made to personal or corporate tax rates, nor to the inclusion rate on taxable capital gains. Some highlights include: A. Personal Measures Several proposals target housing affordability. A Tax-Free First Home SavingsAccount and are fundable Multigenerational Home Renovation Tax Credit will be introduced. Existing home-related tax credits will also be enhanced. Residential real estate sales within a year of purchase will generally be fully taxable, not capital gains and not eligible for the principal residence exemption. B. Business Measures Access to the small business deduction will be enhanced for corporations with taxable capital between $10 million and $50 million. Anti-avoidance measures targeting private corporations attempting to avoid the refundable tax regime for investment income will be introduced. Tax benefits for flow-through shares will be enhanced for critical mineral exploration and removed for oil, gas and coal. C. International Measures Digital platform operators will be required to disclose details of the activities of Canadian participants in the digital economy. D. Sales and Excise Tax All new residential property assignment sales will be subject to GST/HST. An excise tax regime will be introduced for vaping products. E. Retirement Plans The fair market value of RRSP and RRIF assets will be provided to CRA annually. F. Charities Measures The disbursement quota will be increased for many charities. New rules will be introduced to allow charities to work with other organizations to fulfill their charitable objectives. G. Previously Announced Measures Intention to proceed with previously announced measures, such as the immediate expensing CCA provisions, the luxury tax, requirements for electronic interaction with CRA and a full review of the employment insurance system. THE NUMBERS The Government’s fiscal position includes the following projected surplus/deficit: Year Surplus/(Deficit) billions 2020–2021 ($327.7) 2021–2022 ($113.8) 2022–2023 ($52.8) 2023–2024 ($39.9) 2024–2025 ($27.8) 2025–2026 ($18.6) 2026–2027 ($8.4) A. Personal Measures Tax-Free First Home Savings Account (FHSA) Budget 2022 proposes to create the tax-free FHSA to help first-time home buyers save up to $40,000 for their first home. Contributions to an FHSA would be deductible (like an RRSP), and income earned in an FHSA and qualifying withdrawals from an FHSA made to purchase a first home would be non-taxable (like a TFSA). The lifetime limit on contributions would be $40,000, subject to an annual contribution limit of $8,000. Unused annual contribution room would not be carried forward. Individuals would also be allowed to transfer funds from an RRSP to an FHSA tax-free, subject to the $40,000 lifetime and $8,000 annual contribution limits. Withdrawals for purposes other than to purchase a first home would be taxable. However, an individual could transfer funds from an FHSA to an RRSP (at any time before the year they turn 71) or a RRIF on a non-taxable basis. Transfers would not reduce, or be limited by, the individual’s available RRSP room. Withdrawals and transfers would not replenish FHSA contribution limits. Individuals would not be permitted to make both an FHSA withdrawal and a home buyers’ plan withdrawal in respect of the same qualifying home purchase. If an individual has not used the funds in their FHSA for a qualifying first home purchase within 15 years of opening an FHSA, their FHSA would have to be closed. Any unused funds could be transferred into an RRSP or RRIF or would otherwise have to be withdrawn on a taxable basis. Eligibility Individuals eligible to open an FHSA must be at least 18 years of age and resident in Canada. In addition, they must not have lived in a home that they or their spouse owned at any time in the year the account was opened or the preceding four calendar years. Effective Date The government would work with financial institutions to allow individuals to open an FHSA and start contributing in 2023. Home Buyers’ Tax Credit First-time home buyers can obtain up to $750 in tax relief as a non-refundable tax credit by claiming this credit. Budget 2022 proposes to double the Home Buyers’ Tax Credit amount, such that tax relief of up to $1,500 can be accessed by eligible home buyers. This measure would apply to acquisitions of a qualifying home made on or after January 1, 2022. Home Accessibility Tax Credit The Home Accessibility Tax Credit is a non-refundable tax credit that provides relief of up to $1,500 on eligible home renovations (15% of expenses of up to $10,000) to make the dwelling more accessible to seniors or those eligible for the Disability Tax Credit that reside in the property. Budget 2022 proposes to double the annual expense limit to $20,000, such that the maximum non-refundable tax credit would be $3,000. This measure would apply to expenses incurred in the 2022 and subsequent taxation years. Multigenerational Home Renovation Tax Credit Budget 2022 proposes a new refundable tax credit to support constructing a secondary suite for an eligible person to live with a qualifying relation. An eligible person would be a senior (65+ years of age at the end of the tax year when the renovation was completed) or an adult (18+ years of age) eligible for the disability tax credit. A qualifying relation would be 18+ years of age and a parent, grandparent, child, grandchild, brother, sister, aunt, uncle, niece or nephew of the eligible person (which includes the spouse or common-law partner of one of those individuals). This tax credit would provide tax relief of 15% on up to $50,000 of eligible expenditures, providing a maximum benefit of $7,500. Qualifying Renovation The renovation must allow the eligible person to live with the qualifying relation by establishing a secondary unit (which must have a private entrance, kitchen, bathroom facilities and sleeping area). The secondary unit could be newly constructed or created from an existing living space that did not already meet the requirements to be a secondary unit. Relevant

On March 28, 2023, the Deputy Prime Minister and Finance Minister, the Honourable Chrystia Freeland, presented Budget 2023 – A Made-in-Canada Plan: Strong Middle Class, Affordable Economy, Healthy Future, to the House of Commons. No changes were made to personal or corporate tax rates or to the inclusion rate on taxable capital gains. Some highlights include the following: A. Personal Measures Modifications to the alternative minimum tax regime focused on high-income individuals. A one-time grocery rebate equal to two quarterly GST/HST credit payments. Additional flexibility and possibilities with Registered Disability and Registered Education Savings Plans were introduced. B. Business Measures Modifications to the intergenerational business transfer rules to set requirements for activity by the children in the business and the transfer of control, equity ownership and management from the parents to the children. Introduction of the employee ownership trust structure to provide a mechanism for business owners to transfer ownership in their private corporations to employee groups. Several investment tax credits and other incentives were introduced or modified to encourage investment in clean energy. C. International Measures Confirmation of the government’s intention to introduce legislation implementing the income allocation rule and a domestic minimum top-up tax applicable to Canadian entities of multinational enterprises consistent with the OECD’s BEPS initiatives. D. Sales and Excise Tax Increasing the air travellers security charge, limiting increases to alcohol excise duties for one year and adjusting the cannabis excise duty remittance frequency. E. Other Measures New income-tested dental care program for uninsured Canadians. F. Previously Announced Measures Intention to proceed with previously announced measures, including those related to excessive interest and financing expenses limitations; reporting rules for digital platform operators; extension of the residential property flipping rule to assignment sales; substantive Canadian-controlled private corporations; the mandatory disclosure rules; the electronic filing and certification of tax and information returns; and GST/HST changes in respect of cryptoasset mining. THE NUMBERS The Government’s fiscal position includes the following projected surplus (deficit): Year Surplus/(Deficit) billions 2022–2023 ($43.0) 2023–2024 ($40.1) 2024–2025 ($35.0) 2025–2026 ($26.8) 2026–2027 ($15.8) 2027–2028 ($14.0) A. Personal Measures Alternative Minimum Tax (AMT) for High-Income Individuals Individuals will owe AMT if the tax amount calculated under the AMT regime is greater than the tax calculated under the ordinary progressive tax rate regime. Under the current rules, the calculation of AMT allows fewer deductions, exemptions and tax credits than under the ordinary income tax rules and applies a flat 15% tax on income over a standard $40,000 exemption. Budget 2023 proposes several changes to the AMT calculation. First, the AMT rate is proposed to increase from 15% to 20.5%. Second, the exemption would increase from $40,000 to the start of the fourth tax bracket (for 2024 this is approximately $173,000). Third, the AMT base would be broadened by further limiting tax preferences (i.e., exemptions, deductions and credits) as follows: The capital gains inclusion rate would increase from 80% to 100%. 30% of capital gains eligible for the lifetime capital gains exemption would be included. Deductions of capital loss carry forwards and allowable business investment losses would apply at a 50% rate. 100% of employee stock options benefits would be included. 30% of capital gains on donations of publicly listed securities would be included. Only 50% of many deductions would be allowed, including the following: employment expenses (other than those incurred to earn commission income); moving expenses; child care expenses; interest and carrying charges incurred to earn income from property; northern residents deduction; and non-capital and limited partnership losses of other years. Only 50% of non-refundable tax credits historically allowed for AMT purposes would be allowed. The ability to recover AMT in the seven subsequent years, to the extent that tax computed under the ordinary progressive tax rate regime exceeds AMT, is not proposed to change. The proposed changes would come into force for the 2024 personal tax year. Grocery Rebate Individuals and families with modest incomes receive the Goods and Services Tax Credit (GSTC). The maximum 2022/2023 GSTC is $467 for a single person, and $612 plus $161 per child for a married or common-law couple. Budget 2023 proposes a one-time payment called the Grocery Rebate which will equal half of the annual maximum (twice the quarterly payment received in January, 2023) to be paid as soon as possible after the legislation is passed. Deduction for Tradespeople’s Tool Expenses Under the current law, a tradesperson can claim a deduction of up to $500 of eligible new tools acquired in a taxation year as a condition of employment. Budget 2023 proposes to double the maximum employment deduction for tradespeople’s tools from $500 to $1,000, effective for 2023 and subsequent taxation years. As a consequence of this change, extraordinary tool costs that are eligible to be deducted under the apprentice vehicle mechanics’ tools deduction would be those costs that exceed the combined amount of the increased deduction for tradespeople’s tool expenses ($1,000) and the Canada employment credit ($1,368 in 2023) or 5% of the taxpayer’s income earned as an apprentice mechanic, whichever is greater. Registered Education Savings Plans (RESPs) Government grants and investment income can be withdrawn from RESPs as an education assistance payment (EAP) when a beneficiary is enrolled in an eligible post-secondary program. These withdrawals are taxable. Under the current law, beneficiaries that are full-time students cannot withdraw more than $5,000 in EAPs in respect of the first 13 consecutive weeks of enrollment in a 12-month period. For part-time students, the limit is $2,500 per 13-week period. Budget 2023 proposes to increase these limits to $8,000 for full-time students and $4,000 for part-time students. Budget 2023 also proposes to enable divorced or separated parents to open joint RESPs for one or more of their children or to move an existing joint RESP to another promoter. Under the current law, only spouses or common-law partners can jointly enter into an agreement with an RESP promoter to open an RESP. These changes would come into force on Budget Day. Registered Disability Savings Plans (RDSPs) Where the contractual competence of a

Dear Clients and Friends, The landscape of trust returns is going through significant changes as the Canadian government is altering its rules around the filing of trust returns. Are you prepared to navigate through the complexities of the new changes? What’s Changed? Under the previous rules you may have been exempt from filing a trust return. Trust returns were typically required to be filed only if the trust had tax due or if the trust had disposed of capital property in the tax year. However, under the new rules all trusts are required to file a trust return regardless of activity. The new rules will also require bare trusts to file trust returns annually. Another new requirement that has been included is that all trusts are now required to provide information on reporting entities. Trusts will provide this information to the CRA through the newly introduced schedule 15. The new rules affect all trusts with a year ending on December 31, 2023 or after, except for a few exemptions. More About Schedule 15 The intended purpose of schedule 15 is to increase transparency and prevent financial crimes. Typically, every trust that is filing a trust return is required to complete schedule 15. Schedule 15 will be completed alongside the trust return on an annual basis. The filing due date for trust returns and schedule 15 is 90 days after the year end of the trust. What is a Reporting Entity? Reporting entities can include beneficiaries, trustees, controllers of a trust or settlors. Trusts will be required to provide information on any reportable entities even if during the tax year they ceased to be a reportable entity. What is a Bare Trust? A bare trust has a trust arrangement where the beneficiary has complete ownership and control over all assets that are held in the trust. The trustee’s role is to have legal title to the assets, but they do not have the authority to make decisions concerning the assets held in the trust. Affects of this change is that if one entity is holding property on behalf of another entity, the CRA is now requiring a trust return to be filed with schedule 15 to report this bare trust agreement. What Happens if a Trust Return is not Filed? Trusts that do not file a trust return could be faced with a penalty of: • 5% of balance owing + 1% of balance owing for each month late If there is no balance owing: • $25 per each day late (minimum of $100 to a max of $2,500) Bare trusts are given some leniency on late filing penalties from the CRA for the 2023 tax year as this will be the first year that trust returns are required for bare trusts. If there is false information or information willfully left out on a filed return, there will be another penalty. The penalty is the greater of: • $2,500 • 5% of the highest FMV of all property held in the trust during the tax year The information provided was a brief overview on the new rules regarding Trust Returns. If you have any questions, concerns, or would like more details, please feel free to reach out to the Clearhouse Tax Team at 647‐969‐7382 or info@clearhouse.ca. Best Regards, Your Clearhouse LLP Team

Dear Clients and Friends, The transfer pricing regulations are an important component of Canadian Income Tax Laws. These regulations can significantly impact the overall tax burden of taxpayers and may trigger penalties, if the appropriate amount of attention is not given. The overview of the Canadian transfer pricing regulation is discussed below. Overview of Transfer Pricing Transfer pricing refers to the pricing of goods or services transferred between a Canadian company and its foreign non-arm’s length party, such a as relative, subsidiary or affiliate. Transfer pricing ensures that transactions between such non-arm’s length parties occur under an arm’s length basis. This means the goods and services should be priced as if they were to be transferred between unrelated parties. As a result of these regulations, the taxpayers cannot minimize their tax liability by manipulating the pricing of the transactions between these non-arm’s length parties and shifting profits to jurisdictions with minimal or no income taxes resulting in a loss of tax base in Canada. Transfer Pricing regulations Transfer pricing regulations were introduced in 1998 and they affect all Canadian taxpayers who have transactions with foreign non-arm’s length parties. Canada’s transfer pricing rules apply if: 2 or more entities are involved at least 1 of the entities is a Canadian taxpayer it is a cross-border transaction the Canadian taxpayer and at least 1 of the offshore parties are not dealing at arm’s length and the parties enter into a transaction or series of transactions To help determination an arm’s length price, the Canadian regulations refer to the principles expressed in the Organization for Economic Cooperation and Development (“OECD”) guidelines. The various methods recommended by the OECD consist of: 1. Traditional Methods a. The Comparable Uncontrolled Price (CUP) – Compares prices of comparable property or services with those that an Arm’s Length Party would charge. b. The resale price – Begins with the resale price to arm’s length parties (of a product purchased from a non-arm’s length enterprise), reduced by a comparable gross margin. c. The cost plus price – Begins with the costs incurred by supplier of product or service provided to an non-arm’s length party, and a comparable gross mark-up is then added to those costs. The resale price and cost-plus methods help establish a markup or margin a taxpayer might expect as a reward for the functions performed, assets used, and risks assumed in each entity. 2. Transactional profit methods a. The profit split – Determine the total profit earned by the parties from a controlled transaction and split the profit between the parties based on the relative value of their contributions. b. The transactional net margin (TNM) – Compares the net profit margin of a taxpayer arising from a non-arm’s length transaction with the net profit margins realized by arm’s length parties from similar transaction. Taxpayers are expected to select the method based on availability of the data and consider the degree of accuracy with which any necessary adjustments can be made to achieve comparability. Also, the Canadian Revenue Agency (“CRA”) is of the view that there is a natural hierarchy in the method that is selected. Applicable compliances, timelines and penalties When transfer pricing is applicable, taxpayers are required to: S. No. Compliances Timeline 1 Make reasonable efforts to calculate transfer prices Tied with return filing date 2 Maintain contemporaneous documentation Within 90 days of a CRA request 3 File T106, if the absolute transaction value during the year exceeds $1M at entity level Tied with return filing date 4 File T1134, for each foreign affiliate of the taxpayer Within 10 months of end of tax year 5 File a Country by Country (“CbC”) Report, applicable for the multinational enterprise groups with more than €750 million in consolidated group revenue in the immediately preceding fiscal year Within 12 months of end of fiscal year Please be aware that there are significant penalties for non-compliances with the filing obligations listed above. As a result, it is in the best interest of taxpayers to be mindful of the filing requirements. The information provided in this publication is a brief overview of transfer pricing. Any multinational corporation that is affected by the above changes should plan for the above. If you would like additional details, including the applicability of these rules to business, please feel free to contact us at 647-969- 7382 or at info@clearhouse.ca Kindest Regards, Your Clearhouse LLP Team