In Canada, residents are taxed on their worldwide income. Some Canadians think that they can invest in corporations outside of Canada, and because corporations are separate entities, there is no taxes to pay on the income the corporation is earning. While this can be correct, taxpayers must be careful that they do not run afoul of the FAPI rules. FAPI stands for foreign accrual property income and comes into play when taxpayers own a foreign corporation that is earning passive income. Passive income is exactly what it sounds like, nothing is done to earn the income. Royalties, interest, rent, these are all examples of passive income. Here is an example to make it easier: A Canadian resident taxpayer has $500,000 and wants to buy a rental property as an investment. If the rental property is bought in Canada, or personally offshore, then the rental income is subject to tax in

A Group Registered Retirement Savings Plan (“RRSP”) is an employer-contribution retirement plan, that it similar to an individual RRSP. However, it is administered by the employer. The significant advantage to a Group RRSP is that contributions from your employer are made on a pre-tax basis through payroll deductions. Meaning if you were to receive a $10,000 bonus from your employer, you would only actually receive about $5,400 after taxes. However, if the bonus is paid directly into your Group RRSP, then the full $10,000 would be deposited into the savings account. An additional feature is that employee contributions are often matched by the employer. Group RRSPs are not locked in. So once you leave your employer you can transfer from the Group to your own individual RRSP, use it to buy an annuity, or take it as cash and count it as income in the year of receipt. CLICK HERE

April 27, 2015 – Augusta Dwyer from The Globe and Mail wrote an informative piece on What to do if they CRA comes calling. Mr. Barrett suggests meeting with CRA staff in a neutral atmosphere free of details about the business owner’s personal life, such as vacation photos. “Put them in a room where they can’t speak to other people,” he said. “Don’t chat with them. Give them what they need, no more and no less.” For the article in its entirety click here. CLICK HERE TO BOOK A CONSULTATION WITH A TAX LAWYER

April 27, 2015 – Diane Jermyn from The Globe and Mail wrote a helpful article “Tax advice for entrepreneurs, no strings attached.” Barrett Tax Law: This Toronto-based business offers a toll-free number throughout Canada (1-877-8-TAX-TAX) where small business owners, the self-employed and taxpayers can schedule a free, one-time consultation with either a tax lawyer or tax specialist in accounting. “Tax is one of those areas that’s very difficult to negotiate by yourself,” says Dale Barrett, tax counsel and principal, who acknowledges that the majority of callers don’t turn into clients. Mr. Barrett’s book, Tax Survival for Canadians: Stand Up to the CRA,published by Self-Counsel Press, provides a general overview about tax procedures and the appeals process. “After reading the book, you can do a lot of things without having to get a lawyer,” he says. The article in its entirety can be accessed here. CLICK HERE TO BOOK A CONSULTATION

April 24, 2015 – Andrew Seale from Yahoo Finance wrote a riveting article on whether or not the CRA can use your social media accounts against you. Of course, technically and ethically, they should start by looking at your books and records to determine how much you’re making and spending, says Dale Barrett, a Toronto-based tax lawyer. “Only if your books and records are lacking are they supposed to start looking at external sources of information,” says Barrett. If those don’t seem to be painting the full picture they can do what’s called a “Net worth assessment.” “They’ll look at how much money it costs you to live, they’ll look at the type of vehicle you drive, the trips you go on and they’ll just make up what they think you earned over the three year period they’re auditing you for,” he says. “The danger in that is they’re not

April 18, 2015: Brian McCullough from National Post wrote a very informative article “Be Prepared When Canada Revenue Agency Comes Calling” Tax lawyer Dale Barrett has one simple question for small-business owners and self-employed people who run afoul of the Canada Revenue Agency: Can you really afford to go up against the CRA alone? Barrett, president of Barrett Tax Law, and bestselling author of the 2013 guide, Tax Survival for Canadians: Stand up to the CRA, says that at any given time many thousands of Canadians are involved in disputes with the CRA over everything from back taxes to unfair audits. “Whatever the reason is for the dispute,” he says, “the CRA can be an intimidating organization.” The article in its entirety can be accessed here. CLICK HERE TO BOOK A CONSULTATION WITH A TAX LAWYER

Many Canadians who own property in Florida are inadvertently bound by Florida probate law. This means that upon the death of a Canadian or nonresident, if real property was owned and located in Florida, ancillary probate is required by Florida State Law despite having a will stating otherwise. The result is often cumbersome, dealing with jurisdiction far away from the decedent’s family who are likely located in Canada, and paying attorney’s fees that can be high in settling the estate. There are ways around ancillary Florida probate that require careful planning with a professional. One way of avoiding Florida probate would be to effectively title how the property is held. Different consequences exist depending on the type of ownership elected, and the eligibility and election of title must be carefully planned, with consideration of legal and tax consequences. The default form of property ownership in Florida for unmarried individuals holding

The Lifetime Capital Gains Exemption is a tax planning technique that is available to business owners who are selling shares of their private companies. This is an economic incentive to help raise the level of investment in small businesses, however, not everyone meets the criteria necessary to qualify for this exemption. In order to qualify for the enhanced capital gains exemption, an individual must dispose of a share that they have in a Qualified Small Business Corporation (“QSBC”). A QSBC share is a share of a corporation’s capital that meets the following criteria: Small Business Corporation Test: At any time (the “Determination Time”) it is a share of a “small business corporation” owned by the individual. In order to qualify as a “small business corporation”, it is required that: (a) The corporation be a Canadian-controlled private corporation (“CCPC”); and (b) All or substantially all of the fair market value of the assets

Form T1135 – Foreign Income Verification Statement Are you a Canadian resident who is an individual, corporation, partnership, or trust? If so, you are required to report holdings of Specified Foreign Property that, collectively, costs $100,000 or more at any time during that given year. Specific Foreign Property can consist of a number of different things such as foreign bank accounts, shares of Canadian corporations on deposit with a foreign broker, interest in a non-resident trust and patents, copyrights or trademarks held outside of Canada. Does this sound like you? If so than you are required to submit the Foreign Income Verification Statement form on an annual basis. In an attempt to make the filing of this form as convenient as possible, the T1135 can now be electronically filed. However, if there are things that you need to enclose with the form then it should be paper filed. Sometimes life

If a taxpayer does not agree with an assessment from the Canada Revenue Agency (“CRA”), there are a number of avenues the taxpayer may explore to dispute the assessment. Once an assessment is in dispute, the taxpayer usually does not have to pay the amount in dispute until a conclusion has been reached and the taxpayer agrees to not appeal the decision any further. What taxpayers do not realize is that if CRA feels that waiting will significantly hurt their ability to collect amounts owing, it can apply to the Federal Court of Canada, without any notice to the taxpayer, to approve the collection of debts prior to the conclusion of the issue. CRA is attempting to obtain a Jeopardy Order allowing it to collect the outstanding debt not withstanding that the amount is in dispute. A Jeopardy Order is issued if, “there are reasonable grounds to believe that the