Oliver Xing
Chartered Accountant
203-255 Duncan Mill Rd.
Toronto, ON Canada M3B 3H9
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CORPORATE TAXES

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Corporate Income Tax

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Partnership Income Tax

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Goods & Services Tax (GST)

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Provincial Sales Tax (PST)

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Federal Deductions

PERSONAL TAX

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Personal Income Tax

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RRSP

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Home Buyers Plan

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Child Tax Benefit

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GST Credit

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Foreign Property Reporting

TAX RETURN CALENDAR

 



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Taxation
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PERSONAL TAXES

As a Canadian resident, you have to report your income from all sources, both inside and outside Canada.

Federal and Provincial Personal Income Tax 

Residents of Canada are subject to Canadian income tax on their world
income.  "World income" includes employment income, income from self-employment, income from investments (including rental income), taxable capital gains and a number of additional miscellaneous sources of income.

Ontario residents submit his or her federal and provincial taxes together, on the same income tax return, which is due April 30 (June 15 if self-employed or the spouse of a self-employed) following each calendar year. Quarterly installments of income tax are required in some circumstances. Canada Customs and Revenue Agency will advise on these circumstances on an individual basis.

To file your income tax, you have to gather all the documents needed to
complete your return. This includes your information slips (such as T3, T4, T4A, and T5 slips) and receipts for any deductions or credits you plan to claim. If you make a claim without the required receipt, certificate, schedule or form, your claim may be disallowed. 

You should also keep a copy of your previous year's return, the related Notice of Assessment, and any Notice of Reassessment. These can help you complete your current year's return with information including:

your current year's RRSP deduction limit;

your unused RRSP contributions for the current year;

your non-capital loss carry-forward balance; and 

your tuition and education amounts carry-forward balance

The federal personal income tax rates for 2003 is:

Taxable Income Federal Tax Rate
$1 -  $32,183.00 16%
$32,183.01 -  $64,368    22%
$64,368.01 -  $104,648 26%
Over $104,648  29%

The Ontario personal income tax rates for 2003 is:

Taxable Income Ontario Tax Rate
$1 -  $32,435 6.05%
$32,435.01 -  $64,871    9.15%
$64,871.01 and over 11.16%

The federal/Ontario personal income tax rates for 2002 is:  

Taxable Income  Federal Tax Rate Ontario Tax Rate Total
$1 -  $31,676 16% 6.05% 22.05%
$31,677 -  $63,353     22%   9.15% 31.15%
$63,354 -  $102,999  26%   11.16% 37.16%
$103,000 and over   29%    11.16% 40.16%

The personal tax credits for 2003 is:

Federal Ontario
Basic personal amount $7,756 7,817
Spousal/equivalent to spouse amount $6,586 6,637
Age amount $3,787 3,817
Disability amount $6,279 6,316
Caregiver and infirm dependent amounts $3,663 3,684


Registered Retirement Savings Plan (RRSP) 

RRSPs are an important component of an overall financial plan for most
Canadians. As we struggle with high personal taxes and a fear that our
government will not be able to provide adequate pensions for us in retirement, RRSPs offer a great opportunity to save taxes currently, and provide for our retirement needs.

An RRSP is simply a plan between you and usually a financial institution. You make contributions to the plan over a period of years; these contributions are invested and earn income, providing you with savings to live on in your retirement.

RRSPs provide several benefits: 

You get a tax deduction for the amounts contributed (up to certain limits). 

Earnings on the assets in your RRSP accumulate tax-free.

RRSP funds are only taxed when withdrawn. This can mean real savings if you withdraw the funds in years when your income (and marginal tax rate) is lower, such as when you retire. 

There are many different RRSP investment alternatives available to you. You
may put your money in interest-bearing investments such as guaranteed
investment certificates (GICs) and daily interest savings accounts, or invest in mutual funds through most financial institutions and mutual fund companies.

The amount you can deduct for 2001 RRSP contributions is based on your 2001 RRSP deduction limit, which appears on your latest Notice of Assessment or Notice of Reassessment for your 2000 return.  

Home Buyers Plan (HBP)

The HBP is a program that allows you to withdraw up to $20,000 from your registered retirement savings plans (RRSPs) to buy or build a qualifying home for yourself or a related disable person.   If you buy the qualifying home together with your spouse or other individuals, each of you can withdraw up to $20,000.  If you withdraw an amount from a RRSP,  you may not be able to deduct all or part of the contributions made during the 89-day period just before your withdrawal under the HBP.

You have to repay all withdrawals to your RRSPs within a period of no more than 15 years. Generally, you will have to repay an amount to your RRSPs each year until you have repaid all the amount you withdrew. If you do not repay the amount due for a year, it will be included in your income for that year.

Some RRSPs, such as locked-in or group RRSPs, do not allow you to withdraw funds from them.  You can only withdraw funds from an RRSP under which you (the participant) are the annuitant.  If you contributed to your spouse's RRSP, your spouse is the annuitant of the RRSP, even if you have
deducted the contributions from your income.

There are certain conditions for participating the HBP:

You have to be a resident of Canada

You must first have entered into a written agreement to buy or
build a qualifying home. 

You have to buy or build the qualifying home before October 1 of the year after the year of withdrawal

You have to intend to occupy the qualifying home as your principal place of  residence no later than one year after buying or building it.

You have to be considered a first-time home buyer

You have to receive all withdrawals in the same year

Canada Child Tax Benefit 

The Canada Child Tax Benefit (CCTB) is a tax-free monthly payment made to eligible families to help them with the cost of raising children under age 18. To be eligible for the CCTB, you have to live with the child and be a resident of Canada for income tax purposes. You also have to be the person who is primarily responsible for the care and upbringing of the child. 

The CCTB combines a basic benefit with the National Child Benefit Supplement (NCBS) for lower-income families. 

Basic benefit (July 2001 - June 2002):

$93.08 per month for each child under age 18; plus

$6.50 per month for your third and each additional child; plus

$18.41 per month for each child under the age of seven. This amount is reduced by 25% of any amount you or your spouse or common-law partner claimed for child care expenses

The benefit will be reduced if your family net income is more than $32,000.  The reduction is 2.5% of the amount of family net income that is more than $32,000 for a one-child family, and 5% for families with two or more children.

National Child Benefit Supplement (NCBS) (July 2001 - June 2002):

$104.58 per month for the first child;

$87.91 per month for the second child; and

$81.66 per month for each additional child.

The NCBS will be reduced if your family net income is more than $21,744. The reduction is 12.2% of the amount of family net income that is more than $21,744 for a one-child family; 22.5% for a family with two children; and 32.1% for families with three or more children.

Benefits are paid over a 12-month period from July of one year to June of the next year. To continue receiving the CCTB, you and your spouse both have to file income tax returns each year, even if you have no income to report. 

If you are eligible, you should apply for the benefit even if you think you will not be entitled to receive it based on your current family net income.  CCRA automatically recalculates your entitlement every July after it receives your tax information. If your family net income changes and you have already applied for the benefit, you will not need to remember to apply again.

To apply for the CCTB, you have to complete Form RC66, Canada Child Tax Benefit Application.  In addition, depending on your immigration and residency status, you may have to complete the schedule called Status in Canada

To continue to be eligible for the CCTB, you have to continue to be a resident of Canada for income tax purposes. If, after you apply, your spouse or common-law partner stays outside Canada or becomes a non-resident of Canada, he or she will have to complete Form CTB9, Canada Child Tax Benefit - Statement of World Income.

Payment of CCTB stops automatically when the child turns age 18. The last payment will be for the month of his or her birthday.


Goods and Services Tax (GST) Credit 

You can receive the GST credit only if you apply for it each year, even if you received it in the previous year.  The credit is based on the information
provided on your return and, if applicable, your spouse's return.  

You can apply for the GST credit if, at the end of the taxation year:

you were resident in Canada ;and

you were 19 years of age or older; had a spouse; or were a parent.

If you qualify, GST payments will be made four times a year, in July and October of the current year, and January and April of the next year.  However, if your total credit for the year is less than $100,  all of it will be paid in July of the current year.  If you apply, Canada Customs and Revenue Agency (CCRA) will let you know in July of the current year  the amount to which you are entitled, if any, and how the credit was calculated. If you move, you should tell CCRA, or your payments may be interrupted.


Foreign Property Reporting

 In the 1995 federal budget, the federal government announced a new foreign property reporting requirement. Canadian resident individuals, corporations, trusts and certain partnerships who own specified foreign property, with an aggregate cost in excess of C$100,000, at any time in the year, will be required to report information about these properties to Revenue Canada

Specified foreign property includes any interest in tangible or intangible property situated outside Canada, (including real estate, bank accounts, shares and debt) and any right to acquire such property. Specifically excluded, however, are personal-use properties, such as cottages, houses, condominiums and yachts; property that is used exclusively in carrying on an active business; certain retirement plans.

As a result of various concerns raised by the private sector, there have been a number of delays and modifications to this reporting requirement.  The first reporting date for interests in foreign property with a cost in excess of $100,000 was extended to April 30, 1999, and this foreign information would only be required for 1998 and subsequent years.

The new reporting form (T1135, Foreign Income Verification) uses a "check-the-box" format for foreign asset disclosure, and simply requires affected taxpayers to check the boxes that accurately correspond to type, location and range of investment levels and indicate the amount of income from the reported property.

Transactions with foreign trusts ( Form T1141E/T11412) and interests in foreign affiliates (Form T1134A/T1134B) also have to be reported.

The penalty for failure to file or for late filing is generally $500 per month for up to 24 months.  It was planned that more severe penalties apply in the case of intentional non-filing for more than 24 months or where there has been willful omission or misrepresentation of information, amounting to gross negligence. In such cases, the penalty is computed as 5% of the cost amount of the assets not reported or misrepresented, with a minimum penalty of $24,000 for omissions and misrepresentations.  But such plan will be frozen for further consultation.

Contact us to see how our tax and accounting services can work for you.