Rules for taxation in Canada

Canadian Government has made special rules for the comfortable stay of its people. Because, of its policies and a stable governance it is a developed country. One of such policies which supports in the smooth running of the Governance system is the special Taxation Policies for the Non residents.

The Non residents’ tax policies are applicable on all those people the people who either are not the residents of Canada and live in another country or those who do not have proper residential ties in Canada. Resident ties includes those people who have lived outside Canada either for the entire tax year or if a person lives in Canada for less than 183 days in a year.

Thus all the people who do not follow the certain things such as having a place of residence in Canada or having a spouse or a common law partner in Canada or not having a property in Canada. In addition to that a person must have some other ties in order to be a Canadian resident which includes having a Canadian driving license and bank account in Canada and a health insurance in a Canadian territory.

Canadian taxation of non residents:

As a non resident of Canada the income tax is paid in order to receive the sources from the Canadian government. The kind of tax that will have to be paid would depend on the income that you receive.

The rules for the Canadian taxation for Non residents have been explained in the Part 13 of the taxation policy.

According to the part XIII of the Canadian Income Tax policy the taxes are deduced from the types of the income. In order to ensure that the correct tax amount that is deducted for the payees, they would need to submit the right taxes.

The Canadian income taxes according to the Part XIII are:

1) Dividends: Dividend may be defined as the payments that are made by the company or the corporate in order to make the payments of the share holders.

2) Rental and Royalty payment: The royalty may be given against a product that originally is of someone else but is used by the company or the corporate.

3) Pension Payments: The pension payments include payment of the pension for the people who have retired from their jobs.

4) Retiring Allowance: It is the amount that is paid on retirement.

5) Registered saving plans: These are the payment plans which are paid on the savings.

In addition to this there are other fees which include the management fees.

In addition to the part XIII tax there is part 1 tax which includes the conditions for the payment of the income tax in accordance with the business in Canada.

According to this payment scheme, if the business is carried in Canada then the tax payments can be seen by referring to the Guide T4002 by the Business and Professional Income in order to find the taxes which are needed to be paid in instalments.

Thus, there are various policies adopted by the government in order to acquire taxes from the government.

Estate Planning in Canada: Some basic considerations

Canada is a country which does not charges any taxes under the name of the estate tax. This is true but the taxes for the state fall under the category of the deemed deposition tax. The deemed disposition tax includes the taxes which are similar to the estate taxes and are applicable when a person is dead.

Thus while having the estate planning for yourself in Canada you must be aware of certain small things which includes the issues related to the taxation policies. The deemed deposition tax is names as it is deemed at the time of the disposition of the person i.e. the death. The capital gains that are made by the sale also includes the retirement accounts and the income which is received from the stocks, real estate investments, treaties, bonds and other plans such as the life insurance which proceeds in the death year for any person which starts from the first day of January and continues up to any month. The final tax returns also include the tax gains which are filled in the year of death. The final taxation under the real estate is substantial and consists of the tax rates up to 29 percent. This also includes the provincial and the probate tax.

A good thing about the disposition tax is that it is also transferable under the surviving spouse. The taxes are also deferred even if the assets are transferred to the surviving partner. The taxes are also deferred in case the spouse sells the assets and the tax is applied. When the person also dies and the assets are passed on to their successors, the half of the capital gains which are earned from the stocks, bonds and other real estate investments. 

A better option is to make a will before the death. This is beneficial because if you make the will the successors would get the real estate property according to the person’s choice. In the otherwise situation the Canadian province has the right to decide the distribution of the same without the wish. According to the laws which are followed by the policies, the amount in cash or the property up to first $50000 is deposited to the surviving partner and the rest are distributed among the spouse and the children

If there is no spouse or the child then the parents enjoys the amount, which is followed by the brothers and sisters.

If the person dies without the payment of the will then it would also lead to the delays and the payment of the extra expenses.

These considerations are also applicable in case of an offshore trust which is the offshore trust involving the offshore jurisdiction. Now it is very important to have the offshore trust in order to consider the trustee for any kind of real estate. This is because it is of prime importance to have a trustee during the real estate buying and selling. The settling or the transferring of the policies is also managed under the offshore trusts.

Corporation Taxes: An overview

The corporation income tax in Canada has to be paid by the corporations and the organisations, these corporate taxes have to be filed in the category of the corporate income tax which are payable under the return scheme every year whenever there is no tax which has to be paid.

This corporation tax is not payable for following organisations and corporate:

1) The corporation taxes are not applicable to the non profit organisations who work for the social benefit but fall under the category of the business and the corporate.

2) The corporate taxes are applicable to the corporations which fall under the category of tax exemption.

3) The corporate taxes are not applicable to the inactive corporations

Even if these organisations and the corporations do not have to pay the corporate taxes they will have to file the Corporation Income Tax return every year. The filing is mandatory because of the following reasons:

The government is also conducting certain projects for the development of the nation. Some of those includes the inter nations taxes. Canada-Us tax is an example of the same. Under which they are paying certain services and the values to the tax payers. This kind of tax payments are also constant in other leading administrations which are related to taxes. Most of the corporate tax file returns are paid in the present times using the internet by the commercial software, thus the information is automatically transferred to the CRA. 

Various large corporations in the present days file under the available technology by making a good business sense, in addition to this it also helps in the sustainable development of the nation. The corporate find it feasible to file the corporate returns online by using the internet.

It is of prime importance for the corporation who have gross annual revenue of over $1 million.

The corporate taxes are also applicable for the non resident taxes who have to file the T2 returns in certain situations.

The T2 returns are mainly of two different types:

1) T2 corporation Income Tax Return: This is an 8 page return which might be used to file the income tax for any corporate.

2) T2 short Return: This return is a 2 page return which includes three schedules. This type of return is not applicable for other corporations.

The declaration of the corporate tax year many vary. The tax year can be declared after the incorporation of the first T2 return. The financial statements should be attached related to the tax year.

As soon as the T2 returns are incorporated, the dates of the incorporation are applicable for the taxes. For all the subsequent returns the date of incorporation is used as the start date for the tax year. The tax year would thus start from the day after the end of the tax year.

If you are filing the corporate tax returns online then it is automatically forwarded to the CRA. However if you are filling the same offline you will have to send the same in different corporate return offices which are located in different places in Canada.

Canadian taxes on the business

The corporate taxes are the income tax which is levied by the federal government of Canada on the corporate. These taxes are applicable under all the private corporations in Canada which comes under Canadian Controlled Private Corporations.

Types of corporate taxes:

1) For private corporate who have small business the taxation rate is 11 percent. An example of the same can be the estate planning expert.

2) For all the other kinds of corporations in Canada the corporate rates are fixed at 15 percent.

The corporate tax for the big corporate of Canada was 18 percent in 2010 which was decreased to 16.5 percent in 2011 and 15 percent in 2012.

In order to take care of the corporate taxes the Canadian taxable revenue agency is responsible which includes the different tax rates which are to be charged by the provinces and the territories.

In Canada there are two main types of corporations, one of which is the Canadian Controlled Private Corporations and there are other corporations.

When it comes to the corporate taxes the Canadian controlled corporations have a better hand while the other corporations do not have.

One of the greatest advantages of the Canadian controlled corporations includes the eligibility to get the permission for the small business deduction. The tax deduction is thus calculated as eleven percent on the least business income of the corporate in a taxable year.

Another advantage of having the Canadian controlled corporations involves:

1) It involves an additional month where the taxes can be paid by the corporation.

2) It involves an enhanced investment to pay the tax credits for the expenditures which are qualified and the experimental development and the research conducted t the scientific level.

3) It ensures the capital gain exemption to the share holders for the deposition of the corporate business shares at the small level.

4) It also involves the deferral of the taxable benefits of the employees for exercising the options which are related to the stocks as per the grants given by the CCTC.

Reduction on the Canadian corporate tax:

1) There are two ways to reduce the amount of Canadian tax that the people of Canada have to pay. It is also notable fact that they do prescribe the things that they earn from the tax credits and tax the advantages of the other tax deductions.

The first method is the corporate tax credits. The tax credits include the federal investment credits which can be read in detail in the investment tax credits for Canadian small business. The best tax credit involves the scientific research.

The second method is the income tax deductions which are available to the Canadian controlled private corporate. The business tax deductions are available in the list provided in my business Expenses from the Accounting to the travel expenses.

The corporate income tax is thus needed to be paid by the people within the 6 months of the fiscal year. It is designed in order to benefit the corporate which are provided assistance from the revenues generated from the corporate tax.

Canadian System of Tax Havens

International corporations have for long been in search of methods or to be more precise, tricks, to evade taxation of countless types, across their global market destinations and that's where the tax implementation teams found their use, curbing the practice of tax evasion, on both corporate and individual scale but, one such practice seems to be defying every possible effort of these taxation departments, especially that of the US, of putting an end to the "not so illegal" practice of tax avoidance. Tax haven -a term that still remains largely undefined, has in a way provided a major outlet to individuals and corporate setups in saving huge capital which otherwise would have been taken as tax to the state.

The countries that provide basic modifiable tax structure which is composite in it and relies on the administration's alteration, with time which has been used to favour huge as well as middle class businesses in terms of tax reductions as compared to their home state. This is what attracts these huge corporate establishments to setup industries in these states i.e. to enjoy tax benefits, which when was calculated led to a staggering range of $10 billion to $90 billion of revenue losses to the taxation departments. To add to these excerpts of tax avoidance, the individuals too have started using these tax havens in their favour by purchasing foreign investments or by simply not reporting their income which they are free to save in foreign banks that do not give out any details of the client. Another method involves shell corporations and trusts that are exempted under the US tax laws from taxing interest income and capital gains, including investments within the US.

Real Estate Taxation in multiple countries have yet not faced a threat as the taxation department faces due to tax havens, but given the nature of real estate tax being imposed in various countries, the probability of tax evasion in this sector cannot be ruled out. Most of the countries, especially the western part of the world favours a flexible structure of tax amount estimation, that takes into account the current land value of the holding, which as compared to other countries like India, Denmark etc has a better relevance in present day because the stringent and rigid set of rules being followed by the former countries while evaluating tax results in people resorting to non-investment methods, especially in real estate which is at present in a booming stage and if not regulated well, will outgrow the administration by finding loopholes in the system.

For the rapid revenue losses, inflicted by none other than their own corporate industries, President Obama had presented International Tax Proposals that included restricted access to foreign tax credits, control over check-the-box practice and many more. With multiple proposals on regulation of this 'undefined' practice, the Obama administration aims to raise $210 billion for fiscal year 2010-2019, another $129 billion for fiscal year 2012-2021 and yet another $148 billion for the fiscal year 2013-2022.