Our firm has recently seen a major increase in Regulation 102 and Regulation 105 related inquiries and mandates. 

Our experience is that the CRA is taking a hard line on implementing these regulations.

Services (Regulation 105)

Canadian companies are being checked for compliance with these complicated rules. The main issue is Canadian companies paying non-residents for services performed in Canada. Unless a waiver is obtained in advance, these Canadian corporations must withhold 15% when paying the non-resident. Quebec adds an additional 12% for services rendered in Quebec.

Salaries (Regulation 102)

Unless specific secondment or other arrangements are made, foreign corporations sending employees to work in Canada must ensure that these employees are paid through a Canadian payroll.

Non-resident Tax Refunds for Withholdings

In addition, US and other foreign companies are now required to provide more supplementary information to receive their treaty-based refund filings.

Contact us if you have any questions regarding what your Reg 102/105 requirements are, and how to make sure that you recoup the maximum withholdings possible.  

(October 30, 2012) The Canada Revenue Agency (CRA) issued a news release stating that it is implementing “additional steps to protect taxpayers by auditing all gifting tax shelter schemes before a donation claim will be allowed”. 

Canadian parents (who are not Americans/Green Card Holders) often want to want to give gifts to their children who are US citizens or Green Card holders. 

According to the IRS, a foreign gift is money or other property received by a US person from a foreign person that the recipient treats as a gift or bequest and excludes from gross income. 

If the child is an American or Green Card holder they may be required to file Form 3520 with the IRS. Form 3520 does not result in taxes payable - it is an information return, and is due on the date that your income tax return is due, including extensions. 

Not all gifts are required to be reported. Form 3520 must be filed if you are a US person (which includes a Green Card holder) who receives either:

• More than $100,000 from a nonresident alien individual or a foreign estate that you treated as gifts or bequests; 

              or

• More than $14,375 from foreign corporations or foreign partnerships that you treated as gifts.
  

If either applies, the US gift recipient is required to file Part I and IV of Form 3520.

We recently planned and implemented an asset reorganization for a recently opened estate such that taxable assets were transferred to a holding company that had significant tax losses available for carry forward. 

UHY Victor was engaged to assist a high net-worth family settle a complex estate. 

UHY Victor is often called upon to advise families on estate planning, primarily to reduce income tax exposure, to equalize inheritances amoung family members, and to avoid litigation wherever possible. The firm is also called upon to act as an arbitrator to resolve disputes between vendors and purchasers of corporations. 

 UHY Victor has developed extensive expertise in R & D claims.

We recently revised a corporation's R & D application to use what is called the "Proxy Method" to calculate overhead. This method uses salaries to determine an implied overhead for an R & D project, which is often greater than the entity's actual overhead. The "Proxy Method" should always be considered when an R & D application is prepared.

Call me to discuss how the "Proxy Method" can be used to increase your R & D claim.

 I have spent considerable time this year working with professionals who earn income.

Several of these individuals were unaware that they could claim deductions for the use of a home office, as well as a portion of their car expenses.

Others were unaware that they can now practice through a corporation, which can yield significant tax savings. 

The total tax savings to these clients from these completely legitimate plans will be significant!

Call me if you wish to review your personal income tax situation.

I have recently assisted a non-resident vendor of Canadian / Quebec real estate. 

The law states that a non-resident vendor of real estate situated in Quebec must inform the Canadian and Quebec governments of the sale of real estate within 10 days of the sale.

The purchaser of the property (usually via the notary closing the sale) is required to withhold non-resident taxes of 25% (federal) and 12% (Quebec) of the gross proceeds of sale.

However to reduce the withholding of non-resident taxes, the non-resident owner can file requests (within 10 days of the sale) to the CRA and Revenue Quebec. If approved, the forms enable the non-resident taxes withheld to be limited to slightly more than the actual tax on the gain realized on the sale. 

After their review of the non-resident's forms, the CRA and Revenue Quebec issue "Certificates of Compliance".   These certificates allow the purchaser to reduce the tax withholdings on the sale. 

Generally the notary will issue cheques from their trust account holding the sale proceeds to cover the amounts owing calculated on the certificate requests.

Once the non-resident tax are withholdings are remitted, the notary will generally distribute the remainder of the proceeds to the non-resident seller.

Note that this process describes the withholding taxes only. The actual income tax liability is determined by filing Canadian and Quebec tax returns by April 30 of the year following the sale.

Contact me directly if you require assistance with the sale of real estate located in Canada.

We have been involved with an intricate tax case, which recently resulted in an appeal court ruling that we believe will assist Canadian taxpayers design and implement tax plans with greater clarity. 

An Individual Pension Plan (IPP) is a registered defined benefit plan for individuals which offers the following benefits: - They offer higher deductible contributions than RRSPs - Contributions increase in age whereas the maximum RRSP contributions are set - Assets are creditor proof - The employer can deduct the contributions and fees associated with an IPP An IPP is ideal for an owner/manger, a professional (doctors, dentists etc.) with a professional corporation, executive of a private or public company. Normally the individual is at least 40 years of age and is already able to maximize their RSP contributions. Feel free to call me if you want more information about IPP's.

A number of clients have recently received Notices of Reassessment from Revenue Quebec, adding alleged undeclared investment income. 

We are currently investigating the affairs of an Estate wherein it is alleged that one of the Liquidators has acted in bad faith. This is an interesting forensic mandate.

A real estate company approached our firm to assist them to revise their revenue recognition policies. 

UHY Victor has been engaged to assist a corporation with a large insurance litigation case. Our firm is working on behalf of an insured corporation, whose business interruption claim was rejected by their insurance company. The client is pursuing this claim in court, and we have been engaged to provide litigation support regarding the quantum of the business interruption loss sustained.

At present tax planners are waiting for the US government to clarify the future of US Estate Taxes.

Effective January 1, 2010 the US federal estate and  generation-skipping transfer (GST) taxes were repealed, yielding the following results:

• George Steinbrenner, owner of the New York Yankees, passed away on July 13, 2010. His estate is estimated to save more than $500 million in estate taxes, a debt that may have forced the family to sell the team.
• Energy tycoon Dan Duncan died on March 28, 2010 with an estimated worth of more than $8 billion. His death in 2010 saved his estate an estimated $4 billion in estate taxes.

In the absence of congressional action, both taxes are scheduled to be reinstated in 2011 at 2001 levels, with a $1 million estate tax exemption and GST tax exemption of approximately $1,34 million.

Efforts to reach a congressional resolution continue, including the possibility of retroactively extending the 2009 rate and exemptions through 2011 to allow Congress more time to address the issue. However the passage of time makes the application of such a law more difficult and virtually guarantees long and drawn out litigation.

Most commentators predict that even if the repeal  remains in effect for all of 2010 it will not be extended, and that future estate tax rates and exemptions will be closer to the 2009 levels ($3,5 million exemption with a 45% top tax rate) than the scheduled 2011 levels ($1 million exemption with a 55% top tax rate).

We will continue to monitor developments and will provide an update as more information becomes available.

We are now completing the upgrade of the computer system at UHY Victor, which includes workstations, network and software.

If you want an objective assesment of your information tecnology situation, please contact me.