Income Tax Act subsection 123(1) A “precious metal” is a bar, ingot, coin or wafer of gold, platinum or silver that is refined to a purity level of at least: 5% in the case of gold and platinum; and 9% in the case of silver. If a “precious metal” is sold, then the sale does not attract GST/HST. A major issue for the sale of “precious metal” comes from the following scenario: Customer sells scrap metal to gold shop; Gold shop sends scrap metal to refiner; Refiner smelts scrap metal for a fee; and Refiner then ships 99.5% purity gold back to gold shop. The typical issue from the above scenario is when the Canada Revenue Agency determines that the gold shop is selling the scrap metal to the refiner, who smelts it and then sells it back to the gold shop. This creates a sale where GST/HST should be

Income Tax Act subsections 125(7) and 123.4(1) A personal services business (PSB) is a corporation that carries on business through an individual, and that individual performs services while actually acting like an employee. This is occasionally known as the incorporated employee. The Income Tax Act provides that a PSB is found where an individual who performs services on behalf of a corporation, or a person related to the incorporated employee, is a specified shareholder of the corporation, while providing services to another business, and the relationship could be seen as an employee/employer relationship. If you would be considered an independent contractor and not an employee, then you would not be considered to be running a PSB. In C.J. McCarty Inc. v. The Queen, the Tax Court ruled that a corporation which was providing project management services to a client was found to be providing those services as an independent contractor

Income Tax Act Subsections 124(1) and 124(4) Income Tax Regulations subsection 400(2) A permanent establishment is a fixed place of business, which allows a certain jurisdiction to tax the income being made at that fixed place of business. The typical types of permanent establishment are: A fixed place of business; A construction of project; An agency permanent establishment; Rental operation; and Subsidiary of a corporation. If a business is found to be operating here in Canada or in a certain province through a permanent establishment, their income will be subject to tax here in Canada and in that province. This is why it is incredibly important not to run afoul of this rule. With the global economy of today, it can be very difficult to determine whether a business is operating through a permanent establishment. Tax treaties further complicate the matter by detailing what may, or may not qualify as a

Income Tax Act subsection 110.6 The Lifetime Capital Gains Exemption (LCGE) allows a taxpayer to receive $800,000 or $1,000,000 of otherwise taxable capital gains on a tax-free basis. The difference in tax-free amounts directly relates to the property that the gain relates to. The deduction is only available where: An individual owns qualified small business corporation shares (link to article); An individual owns qualified farm property (link to article); or An individual owns qualified fishing property (link to article). The calculation of the deduction is done on CRA form T657. The gain must exceed the Cumulative Net Investment Loss (CNIL) to be eligible for the exemption. The CNIL is the amount by which the total of all investment expenses exceeds the total of all investment income.  The CNIL calculation can be done on CRA form T936. CLICK HERE TO BOOK A CONSULTATION WITH A TAX LAWYER

Taxpayers are typically surprised to learn that income from illegal activities is still subject to tax here in Canada. The scenario usually plays out that someone is convicted of a crime (drug-dealing), and following this, that same individual is then audited for unreported income. It can be extremely difficult, if not impossible to lower the amount of income assessed by the Canada Revenue Agency (“CRA”). This is because criminals usually do not keep books and records. Without books and records, CRA will not provide deductions for expenses, Input Tax Credits, etc. According to Justice Hogan: “[i]t is well established that a taxpayer is subject to tax on his income regardless of its source. A taxpayer must keep reliable books and records for all of his income, including income from illegal sources.”   Case law Canadian Imperial Bank of Commerce v The Queen, 2013 FCA 122 – Legality, Morality, and Taxation

Income Tax Act Subsection 163(2), 163(3) If you, knowingly or under circumstances amounting to gross negligence, made a false statement or omission on your tax returns, the Canada Revenue Agency (“CRA”) may charge you with a penalty. The penalty is equal to the greater of: $100; and 50% of the understated tax and/or the overstated credits related to the false statement or omission. However, if you come forward voluntarily through the Voluntary Disclosures Program, the CRA may waive the penalties charged. To impose a gross negligence under section 163(2) of the Income Tax Act, the CRA must demonstrate that the incorrect statements were made either: knowingly; or under circumstances amounting to gross negligence. Knowingly means either the act was done intentionally, or the act was done while being willfully blind. Willful blindness means that the error was so blatant, that you chose to ignore it. This typically occurs with cases

In Canada, there will be no amount of taxes due from the receipt of a gift or inheritance in most circumstances. The giver of the gift may have a taxable event occur if they are gifting capital property. The gift will be deemed to have occurred at fair market value, and the gifter will have to pay any taxes owing on the capital gain, if any. If money or capital property is gifted to a non arms length party, the rules of attribution may apply.   Employer Gifts If you receive a gift from your employer, it will likely be considered a taxable benefit and therefore income to the employee. The CRA website provides employers a series of questions in order to determine if there is a taxable benefit. Pleasee see: Rules for Gifts and Awards.   CRA Resources T4130 Employers’ Guide Taxable Benefits General income tax and benefit package

Income Tax Act Subsection 245 The General Anti-Avoidance Rule essentially states that where a transaction, or a series of transactions results in a reduction, avoidance, or deferral of taxes owing, and the transaction or the series of transactions are only being attempted for the tax benefits, the transaction or transactions themselves may be invalidated. The Supreme Court of Canada has established a three-point test in determining whether or not to have GAAR applied. Did a tax benefit arise from the transaction or series of transactions? Is/Are the transaction(s) found to be avoidance transactions? Is the transaction abusive? Number one is easily satisfied as nearly all transactions are done with a tax benefit in mind. The second question asks whether the primary purpose of the transaction is to obtain a tax benefit. The third point is the most difficult point to prove for both sides. The question it poses is whether

Fiscal Arbitrators, Demara Consulting, and various other companies will tell you they know the secret to Canadian Income Tax. They will tell you they can file your returns in such a way that you will retrieve all taxes paid for the last 3, 7, or even 10 years. Should you be concerned about what your accountant is doing, seek legal assistance immediately. It may mean the difference between massive penalties and interest, and no penalties and interest.   CRA Resources Know how to recognize a scam Examples of fraudulent communications How to protect yourself from identity theft Have you been a victim? Scam stories    Case law Torres v. The Queen, 2013 TCC 380 – Willful Blindness (https://www.canlii.org/en/ca/tcc/doc/2013/2013tcc380/2013tcc380.html?searchUrlHash=AAAAAQASZmlzY2FsIGFyYml0cmF0b3JzAAAAAAE&resultIndex=4) Matsui v. Canada, 2014 FC 553 (CanLII) – Demara Consulting (https://www.canlii.org/en/ca/fct/doc/2014/2014fc553/2014fc553.html?searchUrlHash=AAAAAQARZGVtYXJhIGNvbnN1bHRpbmcAAAAAAQ&resultIndex=1) Chartrand v. The Queen, 2015 TCC 298 (CanLII) – Fiscal Arbitrators (https://www.canlii.org/en/ca/tcc/doc/2015/2015tcc298/2015tcc298.html?searchUrlHash=AAAAAQARZmlzY2FsIGFyYml0cmF0b3IAAAAAAQ&resultIndex=2) Brisson v. The Queen, 2013 TCC 235 (CanLII) –