PRESCRIBED INTEREST RATES

CRA has announced the prescribed rates for the fourth quarter, October 1 to December 31, 2010. The following rates apply:

• Interest charged on overdue taxes – 5%
• Interest paid on overpaid corporate tax – 1%
• Interest paid on overpaid personal tax – 3%
• Interest calculated on taxable benefits for shareholders and employees – 1%

 

CANADA – US TAX TREATY – PENSIONS AND STOCK OPTIONS

The fifth protocol to the Canada-US tax treaty will impact the taxation of commuting employees with pensions or stock options. The first change will benefit employees and employers as the changes will allow both to deduct contributions to plans in the home country. Also, commuters will be allowed to deduct pensions based in the country of employment. This means a Canadian employee of a US company working in the US will be able to claim pension contributions paid to a US pension plan. For US citizens resident in Canada this will allow them to deduct Canadian pension contributions to a company plan on their US tax return.

The eligible Canadian plans will be registered pension plans, group RRSPs (but not individual ones) and deferred profit sharing plans. Eligible US plans are 401(k) plans but not IRAs.

The changes related to stock options relates to the smoothing of differences between the jurisdictions as they treat stock options for an employee that has moved between the countries and receives the benefit after moving. The changes will allow for a more complete recognition of the foreign tax credit for the timing differences and reduce the likelihood of double taxation.

IN THE COURTS – GST AND SUBCONTRACTORS

In the case of Sport Collection Paris Inc the CRA attempted to disallow the ITC claims of the taxpayer on the basis that the work was performed by persons other than the subcontractors who issued the invoices. CRA seemed to have also taken the position that the subcontractors, or at least some of them, had not remitted the GST to CRA and therefore the ITCs should not be allowed.

There was no evidence that the taxpayer had colluded with the subcontractors but the CRA took the position that the taxpayer had not inquired whether they had remitted the tax.

The Court found that the taxpayer had confirmed the validity of the GST registration numbers and that the subcontractors were properly incorporated. Because there was no evidence of fraud or collusion it was determined by the Court that the ITCs were allowable.

PGC NEWS

The final numbers are in and the Caldwell Securities Ltd/Alzheimer Society 13th Annual Golf Classic set a new record for funds raised and golfers participating. Hold the date for next year’s event as we expect it to be even better and you don’t want to miss out. August 18, 2011 is the scheduled date.