Final Crib Sheet

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University of Toronto Scarborough
Financial Accounting
Sathees Ratnam

[CHP 1 and 2: Introduction and Liability for Tax] [08]Stock option of $10 granted, at the time FMV was $10[09] exercised option when FMV was $15 [10] Sold for $25 Liability of individuals for income taxes in Canada For CCPC (Canadian Controlled Public Corporation): $5 profit will be included in the 2010 employment income (stock sale year) not You are liable for tax in Canada only if you are considered to be a Resident (Not a citizenship issue) exercise year. Also get 50% deduction under Division C since option price was Equal to or greater than FMV on Grant date (If Option The 4 types of Residency: priceFMV). Also limit of $100000 of income per year from stock option benefit can be landed immigrant status / medical insurance coverage from Canada / vehicle registration in Canada / CDN passport / membership in deferred (No limit for CCPC.) Taxpayer also get 50% deduction under division C in 2010 since option price=>FMV. Also, a capital CDN org (union or professional) / G2 / Seasonal dwelling place in Canada. gain of $10 exist -(Other ties of limited importance): retention of CDN mailing address / CDN post office box / CDN Safety deposit box / business card [CHP 3 Employment Income Part II] showing CDN address / telephone listing in Canada / CDN newspaper and magazine subscription Deductions from Employment Income -(Nature of absence from Canada): evidence of intention to permanently sever ties with Canada / regularity and length of visits to Section 8 is the only provision of the Act which allows employees to deduct CERTAIN expenses required to earn emp. Income. Canada / residence ties outside of Canada It is important to know if an employee is Commission Employee OR regular employee in order to use S8 Deductions. [8(1)(f) Only -They are taxed on Worldwide Income available to commission employees. -Entitled to full amount of non-refundable credits (eg Personal amounts) 8(1)(f) Available to commission employees 2) Deemed Resident -Employee must be involved in sales or negotiating contracts. Employment contract must require employee to pay his/her expense (No - A person is deemed to be Full time resident of Canada if he/she sojourned in Canada for 183 days or more reimbursements from employer and not included in income pursuant to 6(1)(b)(v)) - Part day stay is also counted towards the 183 days by CRA -Maximum deduction is limited to commissions earned by the employee - Taxed on Worldwide Income -Type of expense deductible isnt lim(i.e., can deduct client ent., property taxes and house insurance for 8(1)(f) home office) - Entitled to full amount of the non-refundable credits (eg. Personal amounts) -If 8(1)(f) is chosen, you CANNOT use 8(1)(h) or 8(1)(h.1). However, can still use 8(1)(i) and 8(1)(j). You HAVE TO DECIDE WHICH 3) Part-time Resident PROVISION TO CHOOSE TO MAXIMIZE THE DEDUCTION. - There must be evidence of Clean break or Fresh Start 8(1)(h) Travel expenses deduction for all employees - only taxed on the worldwide income earned in Canada during the time he/she was considered to be a resident - Available to all employees not just to sales employees, however employment contract must require employees to pay for these - For the non-residency period only taxed on CDN source income (Not wwi) expenses and employee was not reimbursed and reimbursement was tax exempt under 6(1)(b) - Entitled to prorated amount of non-refundable credits (eg. Personal amount) -Can deduct travel expenses such as meals, accommodation, air travel, etc. subject to limitation. Cannot deduct client entertainment - Note individual can make fresh start in Canada and live for more than 183 days but still considered part-time resident not deemed expenses. Automobile expenses not deducted here but in 8(1)(h.1). resident because the stay is not temporary one. -Deduction is not limited to commission income of the taxpayer. - (Clean break have been made when): 8(1)(h.1) Auto expenses deduction for all employees -The individual leaves Canada - Employee is required to pay for car expenses per employment contract. -The individuals spouse and or dependants leave Canada - 8(1)(h.1) is available even if 8(1)(h) is used. However its not available if 8(1)(f) is used -The individual becomes a resident of the country to which he or she is immigrating - can also deduct the lease expense subject to limitation of: 4) Non-Resident Lesser of: (a) [(A x B)/30] C D E - Pays tax under part 1 of the income tax act on certain types of income only (Per Ssec 2(3) earned in Canada (b) [(F x G)/0.85*H] D E Per Ssec 2(3): Where a person who ius not taxable under subsection (1) for a taxation year where A is a dollar monthly maximum, as prescribed ( $800 plus PST and GST on the $800 After year 2000) (a) was employed in Canada ; (b) carried on a business in Canada, or ; (c) Disposed of a taxable Canadian Property B is the aggregate of the number of days the vehicle was leased for all years to the end of the present year; at any time in the year or a previous year, an income tax shall be paid, as required by this act on the persons taxable income earned in C is the aggregate of the lease cost deducted in all preceding years; Canada for the year determined in accordance with Division D. D is the imputed interest at the prescribed rate, on refundable amounts (ex., deposits) over $1000 - Not entitled to non-refundable credits unless report >90% of the income to Canada E is the total reimbursement receivable in respect of the lease in the year; - Also liable for withholding tax @ specificed rate (Generally 25% but reduced based on tax treaty) on interest, dividend, etc. F is the total lease charges payable (including PST and GST) for the year - The payer withholds the amount and remits to CRA. Thus, non-resident does not have to file any tax return with CRA for passive income G is the dollar maximum capital cost prescribed** (interest, dividend etc.) H is the greater
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