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year-end tax planning tips for 2024

Year-End Tax Planning Advice for Small Businesses in BC

As the year draws to a close, small business owners in British Columbia have a critical opportunity to engage in strategic year-end tax planning. This process not only helps in meeting tax deadlines but also positions businesses to retain more earnings.

Effective tax planning involves reducing liabilities, leveraging deductions, and gaining a clearer understanding of the company’s financial health. By preparing early, businesses can alleviate the stress of filing, improve cash flow, and potentially save thousands of dollars.

Table of Contents

Importance of Year-End Tax Planning

Key Areas for Effective Tax Planning

Employee-Related Tax Strategies

Common Year-End Tax Planning Mistakes to Avoid

Role of a Local Tax Accountant in Year-End Tax Planning

Next Steps

Importance of Year-End Tax Planning

Year-end tax planning is more than a requirement; it’s an opportunity to manage finances proactively. For small businesses in BC, this means not only reducing the tax bill but also optimizing the financial situation for the coming year. With Canadian tax laws constantly evolving, year-end planning allows businesses to:

  • Reduce Taxable Income: Through legitimate deductions and smart timing of expenses.
  • Maximize Deductions and Credits: Ensuring all allowable deductions are claimed.
  • Ensure Compliance: Staying updated with tax regulations to avoid penalties.
  • Improve Cash Flow: Providing a clearer view of upcoming financial obligations.
  • Create Long-Term Strategies: Analyzing current data to set up future success.

Planning ahead allows businesses to implement strategies like accelerating expenses or taking advantage of tax credits before the year ends.

Key Areas for Effective Tax Planning

When preparing for year-end taxes, small business owners should focus on several crucial areas:

Reviewing Income and Expenses

Accurate bookkeeping is essential. By comparing current financial performance with previous years, businesses can decide whether to defer income or accelerate deductions.

Taking Advantage of Deductions and Credits

Businesses can deduct ordinary expenses such as rent, travel, and supplies. In addition to standard deductions, businesses in BC should look into tax credits they may be eligible for.

For example, businesses engaged in scientific research or technology development may qualify for the Scientific Research and Experimental Development (SR&ED) tax credit. There are also tax incentives for businesses investing in clean energy or energy-efficient technologies, which can provide both tax benefits and long-term cost savings.

Consulting a local tax accountant ensures that businesses aren’t missing out on these and other valuable credits.

Maximizing Retirement Contributions

RRSP contributions are tax-deductible, meaning they can lower a business owner’s personal taxable income for the year, which in turn reduces the total tax owed while encouraging long-term savings.

Managing Inventory and Depreciation

For businesses that sell physical products, inventory management is a crucial part of year-end tax planning. Unsold inventory at the end of the year is considered a business asset. Evaluate inventory levels and consider sales promotions to clear out inventory and reduce tax impact.

Additionally, businesses should review their capital assets, such as machinery, vehicles, and office equipment, to ensure they’re taking advantage of depreciation deductions. You can claim depreciation on capital assets through the Capital Cost Allowance (CCA).

Considering Tax Deferral Strategies

Deferring income to the next tax year can be an effective strategy for reducing taxes, particularly if a business expects to have a lower income or tax rate in the future. This could involve postponing client billing or delaying bonus payments until the new year.

Before considering this, though, it’s important to assess the overall financial impact. While it may offer short-term tax relief, it could also push income into a higher tax bracket in the following year.

Accelerating Expenses

Consider prepaying certain expenses before year-end to increase deductions for the current tax year. This could include office supplies, subscriptions, or maintenance services.

Employee-Related Tax Strategies

Year-End Bonuses

Evaluate the tax implications of paying employee bonuses in December versus January. Timing can affect both the company’s deductions and employees’ tax situations.

Health Spending Accounts (HSAs)

Implement HSAs as a tax-effective way to provide health benefits to employees while creating a deductible expense for the business.

Common Year-End Tax Planning Mistakes to Avoid

Even with the best intentions, mistakes can occur during year-end tax planning. Here are some common pitfalls to avoid:

  • Procrastination: Start planning early to maximize options and avoid the stress of looming deadlines.
  • Missing Deductions: Many businesses fail to claim all the deductions they’re entitled to. This often happens because they don’t keep detailed records or aren’t aware of specific tax breaks
  • Mixing Personal and Business Expenses: Maintain clear separation to avoid penalties.
  • Incorrect GST/HST Calculations: Regularly review returns to prevent errors and avoid underpayment.

Role of a Local Tax Accountant in Year-End Tax Planning

Managing year-end tax planning complexities can be daunting. A professional tax accountant can provide essential support by ensuring compliance with CRA requirements and helping reduce overall tax liabilities. Here are some of the ways they can help:

  • Staying Up-to-Date with Tax Laws: A BC-based accountant stays current on federal and provincial regulations.
  • Customizing Tax Strategies: Develop personalized strategies based on your unique business needs.
  • Accurate Record-Keeping: A tax accountant can assist with organizing and reviewing these records, ensuring that all necessary documents are in order for tax filing.
  • Reducing Tax Liabilities: Identify tax strategies that significantly lower taxes.

Next Steps

Proactively engage in year-end tax planning by reviewing your financials and consulting with a professional accountant. This approach will help minimize stress, avoid mistakes, and optimize your tax savings.

Get a jump on your year-end tax planning and schedule a free consultation or a free review of your financial statements today.

Disclaimer: Avisar Chartered Professional Accountant’s blog deals with a number of complex issues in a concise manner; it is recommended that accounting, legal or other appropriate professional advice should be sought before acting upon any of the information contained therein. Although every reasonable effort has been made to ensure the accuracy of the information contained in this post, no individual or organization involved in either the preparation or distribution of this post accepts any contractual, tortious, or any other form of liability for its contents or for any consequences arising from its use.

Avisar Charter Professionals - Pay The CRA

How Do I Make a Payment to the CRA 2026?

One of the most common questions we hear from our clients is “how do I make a payment to the CRA?”

The Canada Revenue Agency (CRA) offers a number of options for making payments, allowing you to choose the payment method that best suits your immediate needs. In the past, the only options available to taxpayers (individuals or businesses) would have been to use a remittance form provided by CRA to pay at the bank teller or by mail through Canada Post.

These old-school remittance forms are still provided by CRA but only by special request as they are intentionally moving toward more electronic options. Even though we all know change can be hard, we believe these new options are actually easier for taxpayers.

Electronic Payment Options for The CRA

The two most common electronic options are making payments using your financial institution’s online banking bill payment service or via CRA’s My Payment service.

Payment using online banking is as simple as setting up a new payee, like a utility bill or credit card. For individuals, you simply enter your SIN for your account number and select the payment option (e.g., payment on filing, arrears balance or installment).

Businesses typically have to select “Business Tax Payment” or a similar option within bill payments to get to the CRA payments. Once there, you select the type of payment (GST, corporate tax or payroll).

Most banks also allow you to file your GST or payroll remittance at the same time as payment.

CRA’s My Payment service has been around for a number of years and accepts Interac Debit, Visa Debit or Debit Mastercard payments. It uses the same login information as your online banking account (so you don’t have to remember another dreaded password). Unlike online banking which can 1-3 days to process, with My Payment you get an immediate confirmation, great for those last-minute tax payments. Important note: credit card payments are not accepted through the My Payment service.

The steps for My Payment are very similar to online banking: first, select your payment type, account number, payment period and amount. Once you are happy with the payment to be made, confirm and click “Pay Now” to proceed to select the bank to pay from.

Did you know that you can set up pre-authorized debit (PAD) payments to CRA? PAD payment agreements can be set up for a one-time payment or for a series of payments (like installments). You can create a PAD payment agreement in your CRA My Account or My Business Account, or your authorized representative can set this up through Represent a Client.

Of course, we would be remiss if we left out credit card payments, we all love the points! The option is available, but it’s not free. Two third-party providers, PaySimply accept credit cards for a fee of about 2.5%.

In-Person Payment Options for the CRA

You can make a payment to CRA by visiting your Canadian bank, financial institution, or credit union, if you have a personalized remittance voucher. Personalized remittance vouchers can be requested through My Account or by calling the appropriate general enquiries line 1-800-959-5525 (Business) or 1-800-959-8281 (Individual). For individual taxpayers only, your tax return preparer may be able to print a personalized remittance voucher that can be used to make your tax payment in person via cheque or debit.

CRA’s newest payment option allows you to pay in person with cash or debit at any Canada Post outlet across Canada using a QR code that contains information that allows CRA to credit your account. Personalized remittance vouchers from CRA or from your tax return preparer will already contain this QR code. If you do not have a personalized remittance voucher, you can create a QR code at paysimply.ca. Service fees for Canada Post payment services range from $3.95 – $7.95 and are dependent on the amount of the payment.

Filing Your Taxes

The step before making a payment to the CRA is to ensure your taxes have been filed properly and that you are not overpaying. Here are some helpful articles on filing your income taxes:

About Avisar Chartered Professional Accountants

Avisar Chartered Professional Accountants provides a ‘beyond the numbers’ approach to supporting small business owners. We provide a wide range of accounting & auditing services tailored to our client’s needs, including accounting services for privately-owned businesses, not-for-profit organizations, as well as tax planning and business advisory services. Avisar is leading accounting firm located in Langley, Vancouver, Abbotsford, Surrey, and the entire Lower Mainland.

Disclaimer: Avisar Chartered Professional Accountant’s blog deals with a number of complex issues in a concise manner; it is recommended that accounting, legal or other appropriate professional advice should be sought before acting upon any of the information contained therein.
Although every reasonable effort has been made to ensure the accuracy of the information contained in this post, no individual or organization involved in either the preparation or distribution of this post accepts any contractual, tortious, or any other form of liability for its contents or for any consequences arising from its use.

CRA Audit

Surviving a CRA Audit: What You Should Know

It’s the letter you never want to receive from the Canadian Revenue Agency (CRA). You are subject to a CRA Audit.

The CRA sends thousands of letters every year to notify people that they’re being subjected to an audit. Of all the returns they receive, it’s usually business taxes that they take a fine-tooth comb to. This is unfortunate because business owners and entrepreneurs are often swamped with numbers, and the last thing they have time for is to parse through each one.

If you want the best chance of successfully getting through a CRA audit, we’ll look at how they decide who to investigate, what you can do to prepare, what’s going to happen, and what your accountant should be doing in the meantime.

Risks for a CRA Audit

The biggest risk for being selected for a CRA audit is the size of your business. The majority of the CRA audit program spending is devoted to small and medium-sized businesses. When they run through all of the numbers, here’s what they’re looking for:

  • Discrepancies: Officials are looking for gaps and glaring margins between the reports. For instance, if your reported income is different than the average reported income in prior years, this could be a red flag for the CRA. Or if your income is far higher than the norm in your industry, this may trigger the next step.
  • Deductions: Sometimes just claiming home office deductions, which can include utilities, insurance, and property taxes, can be enough to have the CRA send you a letter. Because many people will claim these expenses when they aren’t explicitly used for the business, many of the write-offs don’t qualify. You may also face an audit if you’re making a lot of charitable donations or medical expenses.
  • Cash: Dealing with a lot of cash in a business opens the path to fraud because it’s notoriously difficult to track. This is doubly true if you’re reporting loss after loss in a cash-heavy business.
  • Family: There are plenty of business owners out there who will take advantage of their familial connections to make it easier to pay their taxes. So while plenty of people will employ family members without breaking the rules, you may be flagged simply for having a child or spouse on the books.

How the CRA Audit Process Works

The first step is a CRA auditor contacting you (usually by mail or by phone). They’ll give you specifics of the auditing process and then conduct an on-site audit at the place of business. The auditor is generally looking at the following paperwork:

  • Tax returns, perhaps and organizational chart or property details, depending on the nature of the audit.
  • Ledgers, invoices, receipts, contracts, bank statements.
  • Records of other individuals or entities not being audited (e.g., partnerships, corporations, spouses, common-law partners, etc.)

The records looked at will include those for your place of business but also your personal records as well. They’ll also look at any adjustments made by your bookkeeper or accountant to ensure that they were all completed according to tax law.

By the end of a CRA audit, the auditor will either declare your filing to be a correct assessment, which means that your case is complete and your audit will be closed. Or they may conclude that you either owe additional taxes or that you’re entitled to a refund.

What You Can Do to Prepare For A CRA Audit

The best way to prepare is by organizing all your records and ensuring that there’s concrete evidence to justify your numbers and answer any questions. This can include anything from invoicing history to physical receipts. The CRA requirement is to keep your records for at least seven years before shredding them, though CRA will generally audit within three years of your return being filed.

You can also consider gathering proof for regional shifts in supply and demand for your industry. For instance, if you’ve taken several losses over the course of your business, you may be able to point to general trends that have pushed down revenue among all of your competitors. However, these records are not to be shown to the auditor unless specifically asked for. Simply having them at the ready can help give you a sense of confidence as you move into the proceedings.

In addition, when you’re getting ready to speak to the auditor, make sure that you’ve given some thought about what you want to address with them. Generally, less is more and answer what is asked of you.  You should be friendly but also thorough when asking about anything from due dates to expectations. It’s common for people to get flustered when they’re talking to an official from the CRA — even when they haven’t done anything to be nervous about. When the auditor is working with you, they should get the sense that you have nothing to hide.

The Role of Your Accountant During A CRA Audit

A CRA audit can be difficult for many reasons, particularly if you’re a busy business owner who doesn’t have a lot of bandwidth to organize, catalog, and verify every last record. When you have a good accountant on your side, they can help you manage the process from beginning to end. Accountants stand between you and the auditor, making it easier to handle the questions and produce the paperwork they need to close the case.

Disclaimer: Avisar Chartered Professional Accountant’s blog deals with a number of complex issues in a concise manner; it is recommended that accounting, legal or other appropriate professional advice should be sought before acting upon any of the information contained therein. Although every reasonable effort has been made to ensure the accuracy of the information contained in this post, no individual or organization involved in either the preparation or distribution of this post accepts any contractual, tortious, or any other form of liability for its contents or for any consequences arising from its use.

JULY 27, 2020 UPDATE: Canada Emergency Wage Subsidy (CEWS)

On July 27, The Federal Government passed Bill C-20, which provides significant changes to the CEWS for claim periods beginning July 5, 2020. The changes are aimed to support more businesses that have been negatively impacted by the COVID-19 pandemic.  

The extended CEWS introduces changes to the base subsidy and provides for a top-up subsidy for certain employers.

CEWS: Base Subsidy

The updated CEWS applies a specified rate based on eligible remuneration of up to a maximum of $1,129 per week for each employee. The base rate will depend on the amount of the revenue drop.

As illustrated in Table 1, if an eligible employer experiences a revenue decline of more than 50%, the employer would be eligible to apply a maximum subsidy rate of 60% in Periods 5 and 6. This rate would gradually be reduced to 20% by claim Period 9.

Employers who experience a revenue drop of less than 50% will apply a multiplier of 1.2 in Periods 5 and 6. For claim Periods 7-9, multipliers of 1.0, 0.8, and 0.4, respectively, will be applied to the percentage of the revenue drop to determine the base CEWS rate.

This is outlined in Table 1 and will result in a reduced subsidy rate. It should be noted that the objective of the new rate structure is to allow all eligible employers with a revenue drop to qualify. 

TABLE 1: Rate Structure of The Base CEWS

CERS rate structure
  • In Periods 5 and 6, employers who are better off in the CEWS design of Periods 1-4 will be eligible for a 75% wage subsidy if they have a revenue drop of 30% or more. Please refer to the Safe Harbour rules for Period 5 and 6 below.

As was done for Periods 1-4, eligible employers will be required to assess their revenues for each relevant reference period as it relates to the specified claim period. For example, for claim Period 5, an employer will compare its July 2020 revenues to its July 2019 revenues.

Also, employers will have the option to assess the revenue drop of the preceding month compared to the same month in the prior year. Eligible employers can then choose the higher the revenue drop of the two reference periods. For example, for claim Period 5, ABC Co. experienced a revenue drop of 30% in July 2020 as compared to July 2019. Furthermore, the business realized a revenue drop of 52% in June 2020 as compared to its revenues in June 2019.

Therefore, ABC Co. will have the option to choose 52% as its revenue drop and qualify for the maximum subsidy rate of 60%.

An alternative approach is also available, whereby the employer can assess the revenue drop of the relevant month or the preceding month and compare that to the average monthly revenues of January and February 2020. The employer can then choose the higher of the decrease.

Please refer to Table 2 for the reference periods as they pertain to their specified claim periods.

CEWS Top-Up Subsidy

For employers who have experienced a revenue drop of more than 50% on a 3-month average, the updated CEWS provides a “top-up” subsidy up to an additional 25%. The calculation of the top-up subsidy is outlined in Table 3.

Table 3: Calculation of The Top-Up Subsidy

To qualify for the top-up subsidy, eligible employers will be required to assess the average decline in revenues of the preceding 3 months and compare the results to the same 3 months of the prior year.

An alternative approach is available, where the eligible employer can compare the average decline in revenues of the preceding 3 months to the average monthly revenues of January and February 2020. The reference periods for the top-up CEWS is further outlined in Table 4 below.

Safe Harbour Rules for Periods 5 & 6

The updated CEWS includes “safe harbour” rules for claim Periods 5 and 6. The rules allow for eligible employers entitled to the 75% subsidy, previous to the update, to use the rules that were in place for Periods 1-4 (ie. the “old rules”).  

In other words, for claim Periods 5 and 6, employers with a revenue drop of 30% or more can receive the higher of the “old rules” and the “new rules” outlined above.

Furloughed Employee

There is to be no changes in claim Periods 5 and 6 as it pertains to furloughed employees. The subsidy would be the greater of 75% of the amount of remuneration paid to a maximum of $847 per week or 75% of the pre-crisis weekly remuneration to a maximum benefit of $847 per week, whichever is less.

For claim Period 7-9, the CEWS for furloughed employees would be adjusted to align with the benefits provided through the Canada Emergency Response Benefit (CERB) and/or Employment Insurance (EI).

Other Changes

Eligible Employees

In claim Periods 1 – 4, employees who were without pay for 14 or more consecutive days were excluded from the calculation of the CEWS. However, effective July 5, 2020, the eligibility criteria will no longer exclude these employees in an eligibility period.

For more information regarding the definition of an eligible employee, click here.

Disclaimer: Avisar Chartered Professional Accountant’s blog deals with a number of complex issues in a concise manner; it is recommended that accounting, legal or other appropriate professional advice should be sought before acting upon any of the information contained therein.

Although every reasonable effort has been made to ensure the accuracy of the information contained in this post, no individual or organization involved in either the preparation or distribution of this post accepts any contractual, tortious, or any other form of liability for its contents or for any consequences arising from its use.

Trust Returns: Enhanced Reporting Requirements

There will be new and enhanced trust reporting requirements that will apply to taxation years ending on or after December 31, 2021.

Which Trusts Are Affected?

The requirements are applicable to all express trusts that are resident in Canada. An express trust is a trust created with the settlor’s express intent, such as through a trust deed or a will.

EXCEPTIONS

There are a few trusts that are exempt from the filing requirements, these include:

  • A trust that has been in existence for less than three months,
  • A trust that holds less than $50,000 in assets throughout the taxation year (provided that their holdings are confined to deposits, government debt obligations and listed securities),
  • A trust that is a registered charity,
  • A graduated rate estate, and
  • A qualified disability trust

What Are The Reporting Requirements?

Affected trusts will be required to provide additional information about each person who is a trustee, beneficiary, and settlor. The information to be provided includes:

  • Name,
  • Address,
  • Date of birth,
  • Jurisdiction of residence,
  • Taxpayer identification number (ex. Social insurance number, business number, trust account number or a taxpayer identification number used in a foreign jurisdiction).

Trusts will be required to file an income tax return each year with the above information, even if the trust does not have any income to report.

Since some of the above information may not be readily available, we recommend that Trustees and Executors start compiling this information well in advance of the filing deadline for taxation years ending on or after December 31, 2021.

Penalties

The CRA will apply additional penalties for those who knowingly or due to gross negligence, make a false statement or omission on the trust income tax return. The penalty will also apply to those who fail to comply or fail to file an income tax return.

The additional penalties will be calculated as the greater of:

  • 5% of the total fair market value of all the property held by the trust in the year and
  • $2,500

The current existing penalty for failing to file a trust income tax return is $25 per day with a minimum of $100 and can increase up to $2,500.

Disclaimer: Avisar Chartered Professional Accountant’s blog deals with a number of complex issues in a concise manner; it is recommended that accounting, legal or other appropriate professional advice should be sought before acting upon any of the information contained therein.

Although every reasonable effort has been made to ensure the accuracy of the information contained in this post, no individual or organization involved in either the preparation or distribution of this post accepts any contractual, tortious, or any other form of liability for its contents or for any consequences arising from its use.

Tax Considerations When Buying or Selling a Home

Buying or selling a home is often an exciting, yet stressful time for most. This article highlights several important tax considerations to be mindful of when buying or selling a home.

The Principal Residence Deduction

The principal residence deduction allows individuals and families to avoid paying taxes on the sale of their primary place of residence. Each year, an individual or family can designate one property that they own as their principal residence as long as the property is primarily used to live in by the individual/family.

SALE OF A PRINCIPAL RESIDENCE

CRA now requires individuals to report the sale of their principal residence on their personal income tax return in the year the property was sold. In many cases, the principal residence deduction eliminates any taxes that would otherwise result from the sale.  However, disclosure of the sale is still required.

To report, the taxpayer must disclose the address of the property, the year it was purchased, as well as the proceeds from the sale. Failure to report the sale of a principal residence can result in penalties and/or denial of the principal residence exemption.

Renting & Flipping Property

If a property is purchased with the primary purpose of renting or selling it, the property is not eligible for the principal residence deduction and the subsequent sale will cause a taxable capital gain or loss.

It is the original intention when the property was first acquired which is the determining factor.

Homebuyers’ Amount

The CRA provides a $5,000 tax credit to first-time homebuyers (those who did not live in another home owned either by themselves, their spouse, or common-law partner in any of the four previous years). To qualify, the property must be purchased with the intention of the individual/family occupying it as a principal residence within one year of purchase.

Homebuyers’ Plan

First-time homebuyers may also be able to withdraw up to $35,000 from their RRSPs to help purchase or build a home as long as the withdrawn amount is repaid within 15 years.

GST/HST Rebate for Newly Built Homes

If you have bought a newly built home, or have substantially renovated a house to use as your principal residence, you may qualify to receive a rebate for some of the GST/HST that you paid on the purchase through the CRA’s GST/HST new housing rebate.

By making yourself aware of potential tax planning opportunities before you buy or sell a property, you can avoid an unexpected bill from the taxman. After all, nobody likes surprises at tax time.  

Disclaimer: Avisar Chartered Professional Accountant’s blog deals with a number of complex issues in a concise manner; it is recommended that accounting, legal or other appropriate professional advice should be sought before acting upon any of the information contained therein.

Although every reasonable effort has been made to ensure the accuracy of the information contained in this post, no individual or organization involved in either the preparation or distribution of this post accepts any contractual, tortious, or any other form of liability for its contents or for any consequences arising from its use.

Federal Budget 2021: Sales & Excise Tax

GST New Housing Rebate

The GST New Housing Rebate entitles homebuyers to recover 36% of the GST (or the federal component of the HST) paid on the purchase of a new home priced up to $350,000. The maximum rebate is $6,300.

The GST New Housing Rebate is phased out for new homes priced between $350,000 and $450,000. There is no GST New Housing Rebate for new homes priced at $450,000 or more. In addition to these price thresholds, several other conditions must be met.

In particular, the purchaser must be acquiring the new home for use as their primary place of residence or as the primary place of residence of a relation (i.e., an individual related by blood, marriage, common-law partnership or adoption, or a former spouse or former common-law partner).

Under the current rules, if two or more individuals who are not considered relations for GST New Housing Rebate purposes buy a new home together, all of those individuals must meet this condition – otherwise none of them will be eligible for the GST New Housing Rebate.

Budget 2021 proposes to make the GST New Housing Rebate available as long as the new home is acquired for use as the primary place of residence of any one of the purchasers or relation of any one of the purchasers.

This measure would apply to agreements of purchase and sale entered into after Budget Day. For owner-built homes, the measure would apply where construction or substantial renovation of the residential complex is substantially completed after Budget Day.

Input Tax Credit (ITC) Information Requirements

Businesses can claim ITCs to recover the GST/HST that they pay for goods and services used as inputs in their commercial activities. Businesses must obtain and retain certain information in order to support their ITC claims, such as invoices or receipts.

The information requirements for these documents are graduated, with progressively more information required when the amount paid or payable in respect of a supply equals or exceeds thresholds of $30 or $150.

Budget 2021 proposes to increase these thresholds to $100 (from $30) and $500 (from $150).

In addition, under the ITC information rules, either the supplier or an intermediary (i.e., a person that causes or facilitates the making of a supply on behalf of the supplier) must provide its business name and, depending on the amount paid or payable in respect of the supply, its GST/HST registration number, on the supporting documents.

However, for the purposes of these rules, an intermediary currently does not include a billing agent (i.e., an agent that collects consideration and tax on behalf of an underlying vendor but does not otherwise cause or facilitate a supply).

Instead, the recipient of the supply must obtain the business name and registration number of the underlying vendor. Budget 2021 proposes to allow billing agents to be treated as intermediaries for purposes of the ITC information rules, removing this complexity.

These measures would come into force on the day after Budget Day.

Application of GST/HST to E-commerce

In the Fall Economic Statement 2020, the government proposed a number of changes to the GST/HST system relating to the digital economy, applicable to non-resident vendors supplying digital products or services, shipping goods from Canadian fulfillment warehouses, or facilitating short-term rental accommodation in Canada.

Under the proposals, GST/HST would be required to be collected and remitted by these entities commencing on July 1, 2021. Simplified registration and remittance frameworks would be available to these entities.

Budget 2021 proposes amendments to these proposals to take stakeholder feedback into account, including safe harbour rules to protect platform operators who reasonably relied on the information provided by a third-party supplier, and clarifying several aspects of the legislation.

Excise Duty on Vaping Products

Budget 2021 proposes to implement a tax on vaping products in 2022 through the introduction of a new excise duty framework. Feedback from industry and stakeholders on these proposals will be accepted until June 30, 2021 at: fin.vaping-taxation-vapotage.fin@canada.ca.

The new excise duty framework would be similar to existing excise duties on tobacco, wine, spirits, and cannabis products. It would apply to vaping liquids that are produced in Canada or imported and that are intended for use in a vaping device in Canada.

These liquids generally contain vegetable glycerin, as well as any combination of propylene glycol, flavouring, nicotine, or other ingredients, all of which must comply with Health Canada regulations. The new duty would apply to these vaping liquids whether or not they contain nicotine.

Cannabis-based vaping products would be explicitly exempt from this framework, as they are already subject to cannabis excise duties under the Act.

The proposed framework would impose a single flat rate duty on every 10 millilitres (ml) of vaping liquid or fraction thereof, within an immediate container (i.e., the container holding the liquid itself).

This rate could be in the order of $1.00 per 10 ml or fraction thereof. The last federal licensee in the supply chain who packaged the vaping product for final retail sale, including vape shops holding an excise licence, as applicable, would be liable to pay the applicable excise duty.

Registration and licensing would not be required for individuals who mix vaping liquids strictly for their own personal consumption.

Tax on Select Luxury Goods

Budget 2021 proposes to introduce a tax on the retail sale of new luxury cars and personal aircraft priced over $100,000, and boats priced over $250,000, effective as of January 1, 2022.

For vehicles, aircraft and boats sold in Canada, the tax would apply at the point of purchase if the final sale price paid by a consumer (not including GST/HST or provincial sales tax) is above the $100,000 or $250,000 price threshold, as the case may be. Importations of vehicles, aircraft and boats would also be subject to the tax.

This tax would apply to the following;

1. LUXURY VEHICLES

New passenger vehicles are typically suitable for personal use, including coupes, sedans, station wagons, sports cars, passenger vans and minivans equipped to accommodate less than 10 passengers, SUVs, and passenger pick-up trucks.

It would not apply to motorcycles and certain off-road vehicles, such as all-terrain vehicles and snowmobiles, racing cars (i.e., vehicles that are not street legal and are owned solely for on-track or off-road racing); and motor homes (commonly known as recreational vehicles, or RVs) that are designed to provide temporary living, sleeping, or eating accommodation for travel, vacation, seasonal camping, or recreational use.

Off-road, construction and farm vehicles would fall outside the scope of the tax. Similarly, certain commercial (e.g., heavy-duty vehicles such as some trucks and cargo vans) and public sector (such as buses, police cars and ambulances) vehicles, as well as hearses, would not be subject to the tax.

2. AIRCRAFT

New aircraft are typically suitable for personal use, including aeroplanes, helicopters and gliders. As a general rule, it would not apply to large aircraft typically used in commercial activities, such as those equipped for the carriage of passengers and having a certified maximum carrying capacity of more than 39 passengers.

Smaller aircraft used in certain commercial (such as public transportation) and public sector (police, military and rescue aircraft, air ambulances) activities would also be excluded.

3. Boats 

New boats such as yachts, recreational motorboats and sailboats, typically suitable for personal use. Smaller personal watercraft (e.g., water scooters) and floating homes, commercial fishing vessels, ferries, and cruise ships would be excluded.

For vehicles and aircraft priced over $100,000, the amount of the tax would be the lesser of 10% of the full value of the vehicle or the aircraft, or 20% of the value above $100,000. For boats priced over $250,000, the amount of the tax would be the lesser of 10% of the full value of the boat or 20% of the value above $250,000.

The tax would generally apply at the final point of purchase of new luxury vehicles, aircraft and boats in Canada.

In the case of imports, the application would generally be either at the time of importation (in cases where there will not be a further sale of the goods in Canada) or at the time of the final point of purchase in Canada following importation.

Upon purchase or lease, the seller or lessor would be responsible for remitting the full amount of the federal tax owing, regardless of whether the good was purchased outright, financed, or leased over a period of time. Exports will not be subject to the tax.

  • GST/HST would apply to the final sale price, inclusive of the proposed tax, so
  • GST/HST would also be payable on this new tax. Further details are to be announced in the coming months.

Disclaimer: Avisar Chartered Professional Accountant’s blog deals with a number of complex issues in a concise manner; it is recommended that accounting, legal or other appropriate professional advice should be sought before acting upon any of the information contained therein.

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