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3520-1- updated 2013-1.1.docx

15 Pages

Administrative Studies
Course Code
ADMS 3520

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35201 Last updated August 27 20131153520 Lecture 1Canadian Tax Principles CTPSelected parts of Chapters 1 and 2 see references belowRecommended ProblemsCh 1 Exercises One1 3 4 6 and SelfStudy Problem One1Ch 2 All Exercises and Selfstudy ProblemsIntroduction to Federal Taxation in Canada ch 1Any tax system has abase what to taxtaxpayer or unit of taxation who to tax andrate how much to taxAlternative Tax Bases 11 to 16Several different tax bases exist in CanadaFor income taxes ie personal and corporate income taxes the base is incomeFor social securityPayroll taxes eg EI CPP EHT the base is salary and benefitsFor the HSTGST the base is the FMV of most goods and servicesCanada relies more heavily on personal income taxes and less heavily on social security taxes to raise revenues than do other countriesSee CTP Figure 11 Taxable EntitiesIncome Taxes 17 to 110The Income Tax Act the Act or ITA uses person to refer to the three entities that are subject to federal income taxationindividuals corporations and trustsThe ITA uses individual to refer to a human taxpayerIndividuals not married couples file T1s ie personal tax returns and are taxed at graduated personal tax ratesThe unit of taxation is the individual and the rate is graduatedie the rate is lower at lower income levels and rises as income risesCorporations file T2s ie corporate tax returns and are taxed at flat corporate rates with special reductions for certain private corporations earning business income etcTrusts file T3s ie trust tax returns Trusts created on death testamentary trusts are taxed at graduated personal rates but trusts created by living taxpayers inter vivos trusts are taxed at the highest personal rate 29 federallyThe base is taxable income as defined in the Act for all these taxpayers although the rates differCertain entities are exempt from income tax including municipal governments most Crown corporations registered charities most nonprofit organizations and pension trusts and This edition of the notes is updated by Priya Shah pshahyorkuca35201 Last updated August 27 2013215pension corporations including RPPs RRSPs deferred profit sharing plans and registered retirement income fundsFederal Taxationthe ProvincesPersonal Income TaxesBefore 2000 only Quebec had different rules for personal taxes and a separate return The other provinces charged their personal income tax based on aof federal taxes Now the federal government still collects personal income taxes for provinces other than Quebec but the provinces have their own tax rates There are few significant differences so far For example Ontario uses the graduated rates and tax credits similar to what was used before Only Alberta has something entirely different a flat rather than graduated tax rate ie the rate is the same no matter how much you earnSee also CTP 113 to 117Corporate Provincial Income Taxes 118 to 119Alberta and Quebec have separate corporate tax returns and collect their own taxesOntario has harmonized its corporate income tax with the federal income tax and the federal government ie the CRA collects and administers Ontarios corporate income taxAside from Alberta and Quebec provinces use federal taxable income the computation is done on the federal tax return and the federal government collects the taxes and remits to the province their applicable share GST PST and Harmonized Sales Tax HSTSee httpwwwcraarcgccatxbsnsstpcsgsttpsmenuenghtmlslnk Any person engaged in commercial activity in Canada must register collect and remit 5 GST on taxable supplies HST is discussed belowTaxable supplies include most commercial activities ie providing goods or services for profit other than zero rated supplies and exempt suppliesZero rated supplies include prescription drugs basic groceries and goods and services exported from CanadaZero rated supplies are not subject to GST however the supplier can still claim input tax credits ITCs for GST paid by the supplier to provide the zero rated supplyExempt supplies include health care services primary secondary and postsecondary education financial services sales of used residential housing and rentals of residential propertiesExempt supplies are not subject to GST and the supplier cannot claim ITCs for GST paid by the supplier to provide the exempt supplyHowever there is an exemption for small suppliers having 30000 or less in taxable supplies each year Small suppliers do not have to collect and remit HSTGST if they dont want toSee the guide at httpwwwcraarcgccaEpubgprc4022READMEhtmlThis edition of the notes is updated by Priya Shah pshahyorkuca
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