Newsletter

03/2023 – UHT – Property with Joint Title

Based on recent discussions with other accountants and comments from Canada Revenue Agency, we understand that an Underused Housing Tax return filing may potentially be required in additional commonly encountered real estate ownership situations. For example:

  • if a child is purchasing a house and the parent is required to be on title for mortgage purposes
  • if a child is listed on title to parent’s house for probate purposes

While it is not entirely clear whether a filing is actually required, we would suggest filing to protect against potential annual penalties of $5,000 per owner. If you would like our assistance with preparing this filing (Due April 30th), please provide us with a copy of your:

  1. Land transfer documents for when the property was purchased
  2. Most recent property tax bill which includes the assessed value

Please contact your accountant if you have any questions related to the Underused Housing Tax or think that an annual return may be required.

02/2023 – Current Tax Highlights and 2022 Personal Tax Package

Click HERE to view a copy of our 2022 personal tax documents reminder and summary of current tax highlights.

02/2023 – OBCA Changes – Register of Individuals with Significant Control

As of January 1, 2023, private corporations incorporated under the Ontario Business Corporations Act (“OBCA Corporations”) will have new minute book disclosure requirements relating to individuals with significant control (“ISCs”). We suggest speaking with your corporate lawyer to ensure that you are complying with these new requirements. These rules require OBCA Corporations to maintain a new formal register in their minute books (the “ISC Register”) listing individuals, who are either registered or beneficial owners, with direct or indirect control over shares that (A) carry 25% or more of the voting rights attached to the OBCA Corporation’s shares or (B) represent 25% or more of the OBCA Corporation’s shares measured by fair market value. Additionally, an ISC can be an individual with direct or indirect influence that, if exercised, would result in control in fact over a OBCA Corporation. For each ISC, the ISC Register must disclose the following information:

  1. name, date of birth and latest address.
  2. jurisdiction of residence for tax purposes.
  3. date of becoming or ceasing to be an ISC.
  4. description of the nature of significant control.
  5. description of efforts undertaken to confirm accuracy of disclosures.

OBCA Corporations are required, annually, to take reasonable steps to ensure the ISC Register is complete and up-to-date. The ISC Register must be updated within 15 days of a OBCA Corporation becomingaware of any changes. While the ISC Register is not available to the public, the ISC Register may need to be disclosed, upon request, to certain regulatory authorities (including the Canadian government, police forces and the Canada Revenue Agency) and must be available for inspection by the OBCA Corporation’s shareholders and creditors. OBCA Corporations may request that their shareholders provide any information necessary to complete and maintain the ISC Register and such shareholders must cooperate with such requests as soon as feasible. These rules are intended to assist regulatory authorities to address tax evasion, money laundering and terrorist financing. Any director or officer of an OBCA Corporation who knowingly authorizes, permits or acquiesces in contravening these new ISC Register requirements may be liable to a fine of up to $200,000 or six (6) months’ imprisonment, or both.

For additional information please refer to https://www.ontario.ca/page/beneficial-ownership-information-requirements#:~:text=As%20of%20January%201%2C%202023,and%20regulatory%20and%20tax%20authorities

12/2022 – CRA Interest Rate Increase

Please be aware that as of January 1st, the interest rate charged by CRA on late remittances will be increasing to 8%. This interest expense cannot be deducted for income tax purposes.

We suggest taking the follow steps to help make sure your tax remittances are paid on time to minimize your CRA interest costs:

  • Electronic payments: In order to make sure payments are received by CRA on time, payments should be made electronically wherever possible. Payments made by cheque are treated as being received on the date that the mail arrives at CRA, which could result in additional interest costs incurred.
  • Instalment Interest: Make sure to stay up to date on your monthly/quarterly tax instalment payments. Please contact your accountant if you have any questions about the amount of personal or corporate instalment payments which should be made.
  • Corporate income taxes: Corporate tax returns are due six months after the year-end, however any taxes owing must be paid within two or three months of the year-end in order to avoid arrears interest charges. If you expect that your corporate income taxes owing may exceed the instalments already remitted for the year, please contact your accountant to discuss preparing an estimate of taxes owing.
  • GST/HST: As a reminder, GST/HST remittances for corporations which are annual filers are due three months after year-end. GST/HST remittances for monthly and quarterly filers are due at the end of the following month.
  • GST/HST Instalments: As a reminder, GST/HST annual filers may be required to make quarterly instalment payments if they had more than $3,000 of GST/HST owing for the prior year.

Please contact your accountant if you have any questions about the amount of instalment payments which should be made.  

12/2022 – Annual Declaration – Toronto real estate

Any person or corporation who owns residential property in the City of Toronto will be required to submit a declaration of their property’s occupancy status for the previous year.

Property owners should make their declarations through the city’s online declaration portal by February 2, 2023.  Failure to make a declaration will result in a fine of $250. If the property is vacant for more than 6 months throughout the year, it may, subject to certain exceptions, be subject to the Vacant Home Tax of 1%. This tax will be due May 1. For more information or to access the online declaration form, please see the link below.

https://www.toronto.ca/services-payments/property-taxes-utilities/vacant-home-tax/

10/2022 – New Trust and Bare Trust disclosure rules

The government of Canada announced new trust reporting rules in the 2018 federal budget and intends to have these rules effective for December 31, 2022 trust returns to be filed by March 31, 2023. If you have any questions regarding the following, please contact your accountant.

Bare Trusts Under the proposed legislation, bare trusts will now be required to file an annual T3 return. Penalties for failing to file this return can be incredibly expensive (see Penalties section below).

Bare trusts exist in situations where the person or entity holding legal title to an asset is different from the actual beneficial owner of the asset. The beneficial owner is the person or entity entitled to use the asset and benefit from any income/gains resulting from the asset. Some common situations include:

  • A nominee corporation holding legal title to real estate on behalf of another corporation, partnership, or trust.
  • A corporation holding legal title to personal real estate or personal investments on behalf of the shareholder for probate planning purposes.
  • Where ownership of an investment was registered in the name of the wrong individual/company.

Please contact us if you believe that you have any assets owned under a bare trust arrangement. We suggest reviewing your property tax bills to confirm whether the legal title holder is someone other than the beneficial owner of the property.

Inactive Trusts Required to File T3 Return All trusts, with very limited exceptions, will need to file an annual T3 return under the new legislation. Some of the exceptions include:

  • Trusts that have existed for less than three months
  • Trusts that hold less than $50,000 in assets throughout the tax year (as long as they only hold deposits, government debt obligations and listed securities)
  • Graduated rate estates 

Please contact us if you have any trusts which have not been filing a T3 return because of inactivity (cottage trusts, etc.). An annual T3 return may be required starting this year.

Additional Disclosures Trust returns will need to disclose additional information related to the identity of the settlor, trustees, beneficiaries, and any other person who has the ability (through the trust terms or a related agreement) to exert control or override trustee decisions. Required details will include the person/entity’s:

  • Name
  • Type of entity (corporation, individual, etc)
  • Address
  • Date of birth (if a natural person)
  • Country of residence
  • Taxpayer identification number (SIN, business number, or foreign tax account number) 

Penalties If a T3 return is not filed, or if the additional disclosure information is not provided, the penalty is $25 for each day late, with a minimum penalty of $100 and a maximum of $2,500.

Where a failure to file the return was made knowingly or due to gross negligence, there will be an additional penalty equal to the greater of:

  • $2,500 and
  • 5% of the maximum value of property held by the trust during the year.

For trusts holding significant assets (real estate, shares of family business, etc.), a failure to file can potentially result in very high annual penalties. For example, a trust or bare trust holding assets worth $2,000,000 could face a penalty of $100,000 per year. Additional Information For additional details, CPA Canada has prepared a very good summary which can be found at https://www.cpacanada.ca/en/business-and-accounting-resources/taxation/blog/2022/october/new-rules-for-trust-reporting-are-coming?sc_camp=3AE73D60DD5B48088A10587D65C85B3D