[CHP 1 and 2: Introduction and Liability for Tax] Stock option of $10 granted, at the time FMV was $10 exercised option when FMV was $15  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