Estate Freeze – What it is and what it does? An estate freeze fixes the value of the asset that is frozen, such as shares of a corporation, in the hands of the owner until the time of death, allowing the freezor to calculate the expected tax liability that arises on death. In the usual course of business, the deceased will be deemed to have disposed of all capital assets immediately prior to death at their fair market value determined on that date. The tax, which is now imposed on one-half of the capital gain is based on the difference between the cost base of the relevant asset and its fair market value at the date of death. Without the estate freeze, the amount of the gain would be expected to increase over time. A further benefit of an estate freeze is the accrual of the post-freeze growth in value in the hands of other persons, usually the owner’s family. This makes the estate freeze an effective way of transferring value to the future generation, and hopefully, defer the tax that would accrue on the future growth to the time that the asset is sold by the persons who are to benefit from the future growth. Under certain circumstances, the receiving family member may be able to claim the lifetime capital gains exemption, so that the tax-saving based on that exemption can be multiplied among several family members when the shares the family member receives in the course of the estate freeze transaction qualify as shares of a “qualified small business corporation”. The estate freeze is also worth considering when the market is experiencing a low, as is the case during the ongoing Covid-19 pandemic. This would permit the owner/parent to fix the capital gain at a lower value, attracting less tax on death. A subsequent increase in value is passed on to the beneficiaries of the freeze. However, care needs to be taken that the value of the assets is not too low at the time of the freeze, as the current owner may wish to retain a reasonable amount of value. The balance that needs to be achieved will depend on the amount of the asset value to be frozen, the age of the freezor and a number of other factors that may be of importance to the person who is implementing the freeze. One size does not fit all. . The Author Frank’s practice covers a broad spectrum of general business law and taxation. Frank regularly counsels clients on transactions involving acquisitions, divestitures, mergers and joint ventures, the creation of tax structures to optimize consolidated tax burden on corporate groups, as well as corporate governance matters. If you have any questions related to tax or business law matters, please contact Frank Shostack at frank.shostack@devrylaw.ca or 416.446.5818. The Firm Devry Smith Frank LLP is the largest full-service firm outside of the Toronto downtown core with additional offices in Barry and Whitby. DSF offers its clients a wide range of legal services including litigation, business, real estate, employment, and family law-related services. The firm is comprised of over 175 lawyers with vast expertise and experience. “This article is intended to inform. Its content does not constitute legal advice and should not be relied upon by readers as such. If you require legal assistance, please contact a lawyer. Each case is unique and a lawyer with good training and sound judgment can provide you with advice tailored to your specific situation and needs.” By Justin DominicBlog, TaxNovember 4, 2020
Are You Still Eligible For The CERB? THE CERB & RETURNING TO WORK Amidst the economic challenges of COVID-19, a number of Canadians have relied on financial assistance in the form of the Canadian Emergency Response Benefit (the “CERB”). As businesses now slowly prepare to reopen in a phased approach, individuals must consider if they are still eligible to receive the CERB benefit if they are recalled to work. In doing so, they should keep in mind the potential consequences of receiving the CERB if no longer eligible. With continued relief being provided by both the Federal and Provincial governments, through measures such as the 75 percent Canada Emergency Wage Subsidy, employers have slowly begun to recall their workforces as they prepare to reopen. What this means for individuals receiving CERB is that, if re-employed, they may be ineligible for future CERB benefit payments. ARE YOU STILL ELIGIBLE? One cannot receive a salary in excess of $1,000 during a CERB payment period while also receiving the CERB benefit. Failure to comply with this can result in penalties and fines. As things begin to normalize, the CRA will begin reviewing all CERB applications and will flag any erroneous, ineligible and fraudulent claims. This will result in correcting and collecting any benefit payments paid out in error. While mistakes can happen, it is always better to err on the side of caution, and if applicable, individuals should self-disclose to the CRA in the event of their receipt of a benefit payment to which they were not entitled. THREE THINGS TO CONSIDER BEFORE REAPPLYING FOR THE CERB Things to consider in the coming days and weeks as it relates to reapplying for the CERB benefit: 1. Individuals who believe they will be recalled to work in the coming weeks may prefer to hold off on reapplying until the next CERB benefit period. If their employment salary exceeds the permitted $1,000.00 cap during the CERB benefit period, they will likely be deemed to have been ineligible for the CERB and will be obliged to repay the benefits received for the relevant period. 2. Remember that the CERB is repayable by a recipient who failed to meet the eligibility requirements for the relevant four-week period. 3. Individuals who received a benefit payment to which they were not entitled should repay the funds. • The CRA’s website sets out steps to help individuals repay benefits received in error. Those who fail to do so will be flagged, and risk the imposition of fines and penalties. If you have additional questions about returning to work and/or about receiving the CERB, feel free to contact the lawyers at Devry Smith Frank LLP to discuss your rights and options. “This article is intended to inform. Its content does not constitute legal advice and should not be relied upon by readers as such. If you require legal assistance, please see a lawyer. Each case is unique and a lawyer with good training and sound judgment can provide you with advice tailored to your specific situation and needs.” By Justin DominicBlog, COVID-19, TaxJuly 7, 2020September 29, 2020
Postal Code Project – CRA Targets Wealthy Canadians Canada’s wealthiest individuals have been put under a microscope. The Canada Revenue Agency (CRA) has launched a project dubbed the “Postal Code Project” that is targeting taxpayers residing in affluent neighbourhoods across Canada. The Postal Code Project will be an in-depth analysis, using postal-codes in high-priced neighbourhoods, as an indicator of a taxpayer’s lifestyle. The goal of this Project is to conduct taxpayer reviews based on an indication that a taxpayer may be richer than is disclosed through his or her income tax filings; with the intention of discovering evidence of undeclared wealth. Details of this initiative were obtained by CBC News under an Access to Information request and reveal that the “residence focused approach to audit” is intended to further the Government’s stated priority of ensuring “that those who are wealthy pay the tax they owe”. As part of the Project the CRA will: Conduct a targeted audit of income tax filings address by address Conduct in-person assessments Conduct in-person interviews with taxpayers Look into lifestyle (such as boats, cars, houses) Send letters and notices Not only is this an innovative approach on the part of the CRA, this initiative is intended to indicate to the Canadian public that the CRA is committed to its fairness objective, especially after such leaks such as the Panama Papers and Paradise Papers, targeting those who shelter income in offshore accounts and entities. The briefing memo obtained by the CBC states that the Project is intended to serve “demonstrate to the public that the CRA is actively working towards its fairness objective, which speaks to our integrity as an organization”. According to the CRA, it has initiated a review of 1,150 households in 5 targeted neighbourhoods across Canada and have directly contacted 33 taxpayers. The Federal Government, the Minister of Finance and the CRA have come under recent scrutiny as a consequence of the controversial proposed tax changes targeting small businesses , the Minister of Finance’s conflict of interest woes, as well as the recent report from the Auditor General regarding CRA’s abysmal service standards and bad advice. It is a well-established principle of tax law that taxpayers are entitled to arrange their affairs to minimize tax. There are many valid and legal strategies which can be implemented by Canadian taxpayers through effective tax planning. If you have a tax or estate planning question, please contact tax lawyer to arrange a consultation. Devry Smith Frank LLP is a full service law firm with many experienced lawyers in every area of practice. If you are in need of a Tax lawyer, please take a look at our tax law practice page or contact. For more information, please contact us directly at 416-449-1400. “This article is intended to inform. Its content does not constitute legal advice and should not be relied upon by readers as such. If you require legal assistance, please see a lawyer. Each case is unique and a lawyer with good training and sound judgment can provide you with advice tailored to your specific situation and needs.” By G63tEGnX1EBlog, TaxDecember 5, 2017June 17, 2020 No comments yet
CRA Targeting Tax Avoiders Through Online & Mobile Payment Companies Two online payment companies that operate within Canada have been ordered to turn over information about their account holders to the Canada Revenue Agency (CRA). On November 10, 2017, PayPal received a Federal Court Order requiring them to disclose information relating to Canadian users that hold a business account and have received or sent a payment through their account between January 1, 2014 and November 10, 2017. PayPal Canada says that it has more than 6.4 million active users, although those users with personal accounts are not affected by the CRA Order. This Order follows a similar Order issued in 2016 to online payment processor Square, Inc., requiring it to disclose information to the CRA about its Canadian sellers. Each company has been given specific instructions on what information they must turn over to the CRA including sales transaction data, names, social insurance numbers, and business numbers of affected sellers, bank account details, payroll data and other information. In 2009, the CRA had obtained a similar Order against EBay Canada, targeting its “power sellers”. Both inquiries are related to the ongoing enforcement efforts by the CRA with respect to tax evasion, which we have discussed previously. The Globe and Mail reports that in an emailed statement, CRA spokesman Patrick Samson stated, “To better detect activity in the underground economy, the CRA has increased its use of information from third parties, especially in sectors where cash operations are frequent. The CRA has considerably stepped up efforts to identify individuals and businesses that do not file tax returns and to settle their files”. Affected individuals may face audit and may be required to pay additional tax, penalties and/or interest on any previously unreported income that is subsequently discovered in the course of the audit. Affected individuals or businesses may wish to utilize the CRA’s Voluntary Disclosure Program to make a disclosure of such unreported income, before the commencement of any CRA enforcement action. If a Voluntary Disclosure is made and accepted by the CRA, then the taxpayer can benefit from no penalties, reduced interest, and no criminal prosecution in connection with the disclosure. There is a risk, however, the CRA will not accept that the disclosure is voluntary by virtue of the PayPal Order and as such, the benefits available under this Program will be denied to the taxpayer. If you are concerned that you may be impacted by the PayPal Order, if you wish to make a Voluntary Disclosure to the CRA, or if you have questions on any other tax matter, please contact any member of our Tax Group. “This article is intended to inform. Its content does not constitute legal advice and should not be relied upon by readers as such. If you require legal assistance, please see a lawyer. Each case is unique and a lawyer with good training and sound judgment can provide you with advice tailored to your specific situation and needs.” By Fauzan SiddiquiBlog, TaxNovember 20, 2017June 17, 2020 No comments yet
The Paradise Papers: The Risks of Offshore Tax Havens On November 5, 2017, another leak of offshore tax haven information, dubbed the “Paradise Papers”, was disclosed by the International Consortium of Investigative Journalists (ICIJ). As a result of the leak of confidential records comprising the Paradise Papers, a number of the world’s elite have been identified as having offshore accounts and connections including, Queen Elizabeth II, Stephen Bronfman, (Prime Minister Justin Trudeau’s chief fundraiser), Wilbur Ross (U.S. President Donald Trump’s Commerce Secretary), Russian oligarchs and former Canadian Prime Ministers Brian Mulroney, Paul Martin, and Jean Chretien. Last year, the ICIJ released the Panama Papers, for which they won the Pulitzer Prize. The Panama Papers was a leak of more than 11.5 million records and for many, was the first indication of the extent and scope of offshore tax sheltering activity. In a previous blog, we identified some aspects of the Canadian connection to the Panama Papers. The Paradise Papers reveal the names of more than 3,000 Canadian companies, trusts, foundations and individuals who use offshore accounts in tax haven jurisdictions. In the 2017 Federal Budget, the Canada Revenue Agency (CRA) was allocated an additional billion dollars in funding to assist with its tax compliance and enforcement activities. The release of the Paradise Papers will only add to the 990 ongoing CRA audits and 42 criminal investigations that are underway and will likely result in an intensification of CRA’s enforcement efforts. Offshore activities in and of themselves are not illegal. When assets are held offshore, whether in bank or investment accounts, partnerships, trusts or corporations, and income from those assets is not declared in Canada or is underreported, this can constitute tax evasion. The consequences of tax evasion can include the following: Assessed penalties and interest on unpaid amounts Interest on the penalties incurred Administrative penalty of 50% of the income tax avoided Criminal penalties (an additional penalty of up to 200% of the taxes evaded and possible jail time) Third party civil penalties can also apply to any persons, including tax advisers and tax promoters, found to have intentionally engaged in or counselled tax evasion The CRA has a number of measures to crack down on international tax evasion and avoidance, including domestic and international partnerships with entities such as the Organisation for Economic Co-operation and Development and the Joint International Taskforce on Shared Intelligence and Collaboration (JITSIC), a collaboration of 37 tax administrations which exchange information for the purpose of developing more effective and efficient ways to deal with tax avoidance. As a consequence of the CRA’s enforcement activities, approximately $25 billion in tax revenue representing unpaid taxes, interest, and penalties have been recovered to date. Notwithstanding the CRA’s enforcement efforts, the CBC reports that the CRA does not have a mechanism to track the billions in potentially lost tax revenues. In reply to a request submitted by Parliamentary Budget Officer Kevin Page for an estimate of uncollected tax revenue, CRA Commissioner Andrew Treusch sent a letter admitting that the CRA “does not generate information or data on the tax gap”. What does this mean for the future of tax in Canada? The Canadian tax system has recently been at the forefront of the news. From the proposed tax measures targeting privately held corporations released on July 18, 2017, which were the subject of intense public debate and resulted in subsequent announcements from the Minister of Finance, to the ethics controversy surrounding the Minister of Finance’s conflict of interest in his failure to divest himself of his personally held assets, to the release of the Panama Papers and the Paradise Papers, there appears to be the perception that the tax system is designed to benefit the most wealthy members of society. Given the Liberal Government’s stated plan to grow and strengthen the middle class, and given the tone of the discourse surrounding the proposed tax changes released earlier this year, the Paradise Papers will likely only strengthen the resolve of the Minister of Finance to increase scrutiny on the tax system with the aim of closing loopholes and tightening tax compliance measures. The full effect of these measures will likely not be known until the Federal Government releases its Budget in the spring. It is a well-established principle of tax law that taxpayers are entitled to arrange their affairs to minimize tax. There are many valid and legal strategies which can be implemented by Canadian taxpayers through effective tax planning. If you have a tax or estate planning question, please contact a tax lawyer to arrange a consultation. “This article is intended to inform. Its content does not constitute legal advice and should not be relied upon by readers as such. If you require legal assistance, please see a lawyer. Each case is unique and a lawyer with good training and sound judgment can provide you with advice tailored to your specific situation and needs.” By Fauzan SiddiquiBlog, TaxNovember 13, 2017June 17, 2020 No comments yet
CRA Investigating “Shadow Flipping” of Toronto Condos Due to the booming real estate market in Canada over the past year, the Canada Revenue Agency (“CRA”) is scrutinizing the practice of “shadow flipping” or “assignment sales”. This is a sales technique which involves the purchase of pre-built condos from a developer and subsequent sale to other buyers at higher prices before possession of the condo has been taken. By relying on an “assignment clause” in the agreement of purchase and sale, the potential purchaser can transfer or sell his interest in the property to another purchaser before the closing date at a profit. This practice is very controversial and has drastically affected the housing market, contributing to the increase in home prices, particularly in Toronto and Vancouver, with the original sellers receiving less for their property, and the final purchaser potentially paying an inflated price for the same property. Transactions in both Toronto and Vancouver have seen the greatest incidence of these types of transactions, and are under the most scrutiny by the CRA. Vancouver also seeing another form of shadow flipping, which involves realtors finding multiple investors to be involved in the sale of a property in order for multiple buyers to profit while the realtor takes advantage of commission on each of the sales. The CRA has gained interest in tax avoidance in real estate and is analyzing approximately 3,000 cases of shadow flipping transactions in Toronto to determine whether profits from such sales should be taxed as business income or as a capital gain. Generally speaking, any gain arising on the sale of real property are taxed as capital gains, with an effective tax rate of approximately 25%, significantly lower than the tax rate for business income. We can help. Tax planning opportunities are available to assist Canadian taxpayers in optimizing their affairs to obtain a favourable tax outcome. Contact DSF’s Tax Planning Group for advice and assistance. “This article is intended to inform. Its content does not constitute legal advice and should not be relied upon by readers as such. If you require legal assistance, please see a lawyer. Each case is unique and a lawyer with good training and sound judgment can provide you with advice tailored to your specific situation and needs.” By Fauzan SiddiquiBlog, TaxNovember 6, 2017June 17, 2020 No comments yet
UPDATE – Tax Measures Targeting Privately Held Corporations On July 18, 2017, the Department of Finance released a set of proposals to amend the Income Tax Act (the “July 18 Proposals”). The position taken by the Department of Finance and the rhetoric surrounding the July 18 Proposals were that the proposed tax measures were designed to “improve the fairness of Canada’s tax system by closing tax loopholes and amending existing rules to ensure that the richest Canadians pay their fair share of taxes and that people in similar circumstances pay similar amounts of tax”. The July 18 Proposals were roundly criticized by the tax and business communities, with town hall meetings, conferences and consultations held across the country. In addition, over 21,000 written submissions were made to the Federal Government during the consultation period, which ended October 2, 2017. The key elements of the July 18 Proposals were based on changes to the following 4 key areas: Lifetime Capital Gains Exemption (“LCGE”) The LCGE exempts holders of qualified small business corporation shares and holders of qualified farm or fishing property from tax on capital gains of up to $1 million arising from a sale or disposition. The Federal Government was concerned that methods to multiply the LCGE, using family trusts, for example, unfairly permit more than one taxpayer to claim the LCGE and thereby reduce the tax payable on the disposition of private company shares, or qualified farm or fishing property. The July 19 proposals sought to significantly restrict the availability of the LCGE. Income Splitting Income splitting refers to the practice through which income earned through a corporation is “sprinkled” among family members, rather then all paid to one individual. This practice allows a taxpayer to reduce his family’s overall tax bill by shifting income from higher-income taxpayers to lower-income taxpayers. Passive Investment Income Active business income earned in a corporation is taxed at a much lower rate than employment income earned by an individual. Because of the tax deferral available when retained earnings are kept in a corporation, there is more after-tax income available to invest in a corporation than if that same amount of income was earned personally. As such, Finance perceives this to be an inherent unfair “advantage” to private company shareholders. Converting Income into Capital Gains The Government’s proposals seek to address certain transactions that they consider to be abusive, specifically certain post-mortem transactions, which convert income which would otherwise be taxable at higher corporate tax rates to capital gains, which are taxed at significantly lower rates. On October 3, 2017, the Department of Finance issued a Press Release, in which Finance Minister Bill Morneau acknowledged the concerns regarding the July 18 Proposals raised by the public, the tax community, and business owners, and suggesting that the Government may take steps to make amendments to the proposed legislation based on feedback Finance had received. On October 16, 2017, the Department of Finance issued an announcement of changes to the July 18 Proposals in light of the consultations and further to its October 3rd announcement. The highlights of the proposed changes are: 1. Reduction in the federal small business tax rate from 11% to 10% effective January 1, 2018 and to 9% effective January 1, 2019. 2. No changes to the LCGE. Finance stated that “the Government will not be moving forward with the measures that would limit access to the Lifetime Capital Gains Exemption”. 3. Income Shifting. Finance confirmed that it will continue with its proposals to terminate income shifting to lower-income family members who do not contribute to the business. However, Finance stated that it will introduce “reasonableness tests” for adult family members who will be asked to demonstrate their contribution to the business. On October 18, 2017, the Department of Finance issued a further announcement targeting passive income earned within private corporations. In this Press Release, the Government stated that it will continue with its intended measures to limit the tax-deferral opportunities related to passive investments; however, it will provide some relief by allowing business owners to build savings for business purposes or for retirement. The Government has announced that businesses can continue to save for contingencies or future investments based on a threshold of $50,000 of passive income per year. Any income above this threshold will presumably be subject to higher rate of taxation as set out in the July 18 Proposals. Draft legislation implementing these proposed changes will be released as later this fall or as part of Budget 2018. We can help. Tax planning opportunities are available to assist Canadian taxpayers in optimizing their affairs to obtain a favourable tax outcome. Contact DSF’s Tax Planning Group for advice and assistance. “This article is intended to inform. Its content does not constitute legal advice and should not be relied upon by readers as such. If you require legal assistance, please see a lawyer. Each case is unique and a lawyer with good training and sound judgment can provide you with advice tailored to your specific situation and needs.” By Fauzan SiddiquiBlog, TaxOctober 19, 2017June 18, 2020 No comments yet
The Panama Papers: Canadian Bank Begins Closing Client Accounts Toronto Tax Lawyer discusses a CBC/Toronto Star investigation that looks into Canada’s tax system, specifically the use of Canadian corporations and limited partnerships as part of a complex offshore money laundering and tax evasion scheme. Known as The Panama Papers, this leak exposed 11.5 million documents detailing global tax avoidance and evasion and identified customers of Canadian banks that are connected to this scheme. Recently, the Royal Bank of Canada jumped into action, recently closing a number of accounts. They are the first Canadian bank to publicly confirm it has severed ties with customers who were named in the leak. They closed “about 40” customer accounts. Making matters worse, they also found out from the leak that they had registered at least 429 offshore companies with the Panamanian law firm Mossack Fonseca. Other financial institutions such as TD, BMO, and CIBC have not provided any information regarding their customers, while National Bank and Scotiabank have investigated and found no links to the Papers, and did not close any accounts. In total, 85 Canadians are being investigated by the CRA, with 60 being audited. To learn more about the Panama Papers leak and its connection to Canada, read The Canada Papers series here: Part 1: Snow Washing Part 2: 9203-9619 Quebec Inc. Part 3: Signatures for sale Part 4: Lessons for Canada Also read our previous blog here: Oh Canada, Our Home and “Snow-washed” Tax Haven?? RBC provided The Star with parts of a letter that was sent to one of their clients named in the Panama Papers database, which read: “Due to the operation of your accounts, we feel that we cannot achieve the requisite level of comfort with you. Therefore, after careful consideration, we must advise you that we are not in a position to continue our banking relationship.” Additional communication in the letter advised the client that he had 30 days to close his accounts and repay loans, one of which is a mortgage close to one million dollars. Letters were also sent to the children of the client, stating that their “risk profile has changed substantially” and the bank would not maintain their accounts. The children are under the age of 19. RBC’s spokesperson issued a response to this action, stating that their “decision that an account is outside of their risk parameters or does not meet our own standards does not mean the clients have engaged in inappropriate activity.” If you are in need of a tax lawyer in Toronto, please contact any of our tax lawyers. For any other legal services, please visit our website for more information or call (416) 449-1400. “This article is intended to inform and entertain. Its content does not constitute legal advice and should not be relied upon by readers as such. If you require legal assistance, please see a lawyer. Each case is unique and a lawyer with good training and sound judgment can provide you with advice tailored to your specific situation and needs.” By Justin DominicBlog, TaxMarch 10, 2017June 18, 2020 No comments yet
Oh Canada, Our Home and “Snow-washed” Tax Haven?? The release of a joint CBC / Toronto Star investigation has made headlines across the world and calls Canada’s tax system into question. Most Canadians would argue that Canada’s tax rates are among the highest in the world and that the Canadian tax system is designed to ensure that income earned in Canada is subject to Canadian income tax, whether that income is earned by an individual, a corporation, a partnership, joint venture, or any other form of organization. In the normal course, a Canadian entity earning income in Canada from a business or property is required to report, calculate, and remit income taxes on such income to the Canada Revenue Agency. The CBC and the Toronto Star used the term “snow washing” to refer to the use of Canadian corporations and limited partnerships as part of complex offshore money laundering and tax evasion schemes, due to the perception of the legitimacy of such Canadian entities and Canada’s reputation as a “whitelisted, respectable jurisdiction”. The Toronto Star / CBC investigation identifies the practice, advocated by some other offshore jurisdictions, of non-residents incorporating companies or setting up other entities (such as Canadian limited partnerships) and installing Canadian “nominee directors”. The Toronto Star article reports as follows: “Canada is a new player in the world of offshore companies,” claims the website of a Swiss firm. “Canada is the most preferable destination for compliant tax planning since it has no negative offshore reputation and no association with tax avoidance or evasion. It is by far one of the best neutral jurisdictions, providing offshore benefits without any of the traditional offshore drawbacks.” In another article in the series, the Toronto Star states the following: Nominee directors are not illegal in Canada, but the secrecy they provide facilitates abuse. The tax haven industry relies on nominee directors to put a legitimate face on companies, masking their real owners and allowing them to evade tax, launder ill-gotten money or bribe corrupt officials. Corporate statutes, both provincial and federal, impose duties and liabilities on directors of Canadian corporations. Directors are regarded as fiduciaries of their corporation, and as such, are required to exercise a duty of care, to act honestly and in good faith, and to ensure that they protect the corporation’s interests. Other statutes (such as the Income Tax Act), impose other responsibilities on corporate directors. The key premise of the Toronto Star / CBC joint investigation is that the opacity of our corporate registry system, whereby it is almost impossible to identify the real owners of companies, creates an environment of secrecy that encourages money laundering and tax evasion. The Toronto Star articles make the assertion that “[t]he use of nominee directors is a key channel of tax evasion”, and that “[s]ecrecy is at the heart of financial crime”. The conclusions reached in the series of Toronto Star and CBC investigative articles, are that, to curb abuse of the system, Canada needs to adopt a more transparent corporate registry system, such as one recently adopted in the U.K., which provides that individuals holding more than 25% of the shares or voting rights in a company are listed on a public database. In addition, the articles conclude that some structures, such as Canadian limited partnerships, help avoid tax because non-resident owners are not required to file a Canadian tax return. This is not entirely correct. Limited partnerships are required to file annual information returns setting out details of their income and the names of the partners who are entitled to such income. Tax evasion, avoidance and abuse of our financial, corporate, and legal system are deplorable and certainly have negative repercussions for all Canadian taxpayers. It is commendable that the CBC and the Toronto Star have undertaken this investigation, exposing the deficiencies in the system and the opportunities for exploitation that such deficiencies create. We can hope that as a consequence of these articles, the Federal and Provincial governments will act to close loopholes in reporting and accountability and minimize opportunities for abuse. That being said, it is a maxim of Canadian tax law that taxpayers are entitled to arrange their affairs to minimize tax. There are many valid and legal strategies that can be implemented by Canadian taxpayers through effective tax planning. If you have a tax question or concern, please contact one of our tax lawyers, for a consultation. If you have any other legal issues, please contact one of our lawyers at Devry Smith Frank LLP. By Justin DominicBlog, TaxJanuary 16, 2017June 16, 2020 No comments yet
Canada Revenue Agency (CRA) Offers Advice for Settling Tax Dispute Claims, Part 1 On June 19, 2014, the Canadian Tax Foundation (“CTF”) held an event titled “Tax Dispute Resolution: an Inside Look from the Government’s Perspective.” Devry Smith Frank LLP (“DSF”)’s tax litigation team attended the event to better assist its corporate and personal clients to resolve their disputes with the Canada Revenue Agency (“CRA”). Part one of this three-part article series begins with Ms. Anne-Marie Lésvesque, Assistant Commissioner of Appeals for the CRA: CRA has a two-year backlog of ongoing donation tax credit disputes Ms. Lésvesque, speaking for the CRA, explained that the timely resolution of disputes is made more difficult by an imbalance between resources dedicated to the CRA’s appeals unit and the number of ongoing disputes. As an example, Ms. Lésvesque explained that the CRA is currently dealing with a glut of 175,000 donation tax credit disputes. In a regular year, the number is closer to 50,000 to 60,000. Ms. Lésvesque estimated that it would take one to two years to eliminate this backlog. In the meantime, tax litigation lawyers like those at DSF can work with you to protect your rights while moving your tax dispute closer to resolution with the CRA. Avoid commonly used arguments that are commonly unsuccessful Speaking from the CRA’s perspective, Ms. Lésvesque also suggested that repetitive appeals such as the “natural persons argument” have increased in popularity but are not succeeding at the appeal level or in tax court. Toronto tax lawyers like DSF’s own save their clients time and money by refusing to put forward “fad” arguments that are unlikely to be successful. Cases of legal interpretation are more likely to go to trial Ms. Lésvesque also shared that while the CRA appeals process must be viewed as impartial, it is legally bound to follow the CRA’s published interpretation of the Income Tax Act(the “Act”). Settlement in cases where the CRA’s and taxpayer’s interpretation of the Act are different are more likely to go to trial. In contrast, the CRA is far less likely to go to trial where the facts are in dispute. Ms. Lésvesque explained that where there are issues of credibility, the taxpayer should have the benefit of the doubt, at least in his or her first dispute with the CRA. Tax lawyers at DSF can help taxpayers put forward their best case when explaining why the CRA has made errors in its tax reassessments or enforcement measures. Ms. Lésvesque suggested that the CRA’s success rate at trial is currently 80%. Having a great lawyer on your side can increase the odds both for early settlement and success at trial in your tax law case. Stay tuned to the Devry Smith Frank LLP tax litigation blog for part two of this series that discusses what the Department of Justice’s former Senior Counsel had to say about settling tax dispute claims at this event. As always, for any tax law related matters in Toronto, Ontario Canada, contact Devry Smith Frank LLP at 1-416-446-1400. “This article is intended to inform. Its content does not constitute legal advice and should not be relied upon by readers as such. If you require legal assistance, please see a lawyer. Each case is unique and a lawyer with good training and sound judgment can provide you with advice tailored to your specific situation and needs.” By Justin DominicBlog, TaxJuly 31, 2014June 10, 2020 No comments yet
