As announced in the March 2010 Provincial Budget, the Solidarity Tax Credit replaced the following:
- QST credit
- Property tax refund
- Tax credit for individuals living in a northern village
To claim the solidarity tax credit, an individual must:
- Be 18 or over
- Be resident of Québec
- Have legal status (Canadian citizen, permanent resident, refugee, etc.)
- Not be confined to a prison or similar institution
Only one solidarity tax credit claim can be made per couple. To receive the tax credit payments, individuals must be registered for direct deposit. Individuals who are not already registered for direct deposit can register online using the Register for Direct Deposit service or submit their request for direct deposit along with their 2010 Personal Income Tax filing.
Payments for this new refundable tax credit will be paid once a month.
Make sure to count all your pennies because you are going to need them!
As of January 1, 2011 there have been a broad range of tax increases for all Quebecers and those individuals who live on the island of Montreal. Below is a list of all increases:
- The Provincial sales tax rate (QST) increased to 8.5%. The combined GST/QST rate stands at 13.925%
- QPP contributions will be calculated on the first $48,300 of earnings in 2011, up from $47,200 in 2010, so that the maximum payable by Quebecers will rise to $2,217.60 from $2,163.15 in 2010.
- For the Quebec Parental Insurance Plan, the earnings threshold rises to $64,000 from $62,500 and the employee contribution rate increases to 0.537% from 0.506%, boosting the maximum payable to $343.68 from $316.25 in 2010.
- Employment Insurance dues will be calculated at 1.41% on the first $44,200 of income, up from 1.36% on the first $43,200 in 2010, raising the maximum annual cost to $623.22, up from $587.52 in 2010.
- The Quebec prescription drug insurance plan, also had its maximum annual premium increased to $600 from $585, though Quebecers who use the plan won’t face that cost until they file their provincial income-tax returns in early 2012.
- A new provincial health contribution was announced in the last Quebec budget: $25 for all tax filers on 2010 returns, $100 in 2011 and $200 in 2012.
- Individuals living on the island of Montreal will be subject to a new “car tax” which will be capped at $50 per vehicle owned. This new tax will be collected at the time of payment of the vehicle registration.
Corporate taxes are based on the business net income and not the sales. The Federal small business corporate tax rate is 11% for up to $500,000 in net income. The General rate is 16.5% for net taxable income above $500,000.
In addition, each Province has its own tax rates which vary from Province to province as per the table below:
|2011 Corporate Income Tax Rates
||11% / 10%
|Newfoundland & Labrador
|Prince Edward Island
Personal income tax needs to be paid on the money you withdraw from your corporation. You can withdraw money in the form of a salary or a dividend. Salary, an expense to your business, is tax deductible for your corporate tax. Dividends are paid out of your company’s after tax net earnings.
Both salaries and dividends are taxed at different rates on a personal level.
Canada’s tax system is based on self-assessment, which means that individuals are responsible for accurately completing and filing their tax returns on time. The Canada Revenue Agency (CRA) provides Canadians with the information they need to meet their income tax obligations.
Auditing is a way for the Canada Revenue Agency to monitor and inspect GST/HST and income tax returns, excise taxes and duties, and payroll records. Although there is a high standard of compliance with the law in Canada, audits help maintain public confidence in the fairness and integrity of Canada’s tax system.
There are four common ways of selecting files for audit; computer-generated lists, audit projects, leads and secondary files.
For additional information on how the audit is conducted, please consult the “Audit” section of the Canada Revenue Agency’s website.
On January 1, 2011, the rate of the Québec sales tax will rise from 7.5% to 8.5%. The new rate will apply to taxable supplies for which the QST will be payable as of January 1, 2011.
The rules for determining when the QST will apply at the rate of 8.5% depend on the nature of the good or service supplied and the type of supply made.
For more information on how this increase affects your business, please consult Revenu Quebec’s website link.
Recently, we came across a very interesting website about our favourite television show of all time, Seinfeld! Seinfeld ran for nine seasons on NBC and became famous for “a show about nothing”. In reality, the show was about all kinds of things which appear in our daily lives.
The website titled “The Economics of Seinfeld”, uses simple examples from the Seinfeld show to teach Economics in a fun and easy way to understand. Most people find Economics to be a very boring class taught in high school and college, however this website makes learning Economics fun!
You can learn all about imperfect information, price ceilings, cost benefit analysis, game theory, competition, saving, free entry and exit, etc… Unfortunately, we have not yet been able to find any learnings about income taxes or government.
The website can be found here. The Economics of Seinfeld
The “Welcome Tax” is a land transfer tax or in French, commonly referred to in Montreal as the “taxe de bienvenue”.
Since January 1, 1992, every Quebec municipality must collect duties on the transfer of any immovable situated within its territory. This tax is payable by the buyer and is calculated as follows:
- 0.5% of the first $50,000;
- 1% of the next $50,000 to $250,000;
- 1.5% of the next $250,000 to $500,000.
- 2% of any portion exceeding $500,000
If a property is sold for $429,000. The taxes payable to the municipality will be:
- 0.5% of the first $50,000 = $250
- 1% of the next portion $50,000 to $250,000 = $2,000
- 1.5% of the portion exceeding $250,000 = $2,685
- 2% is not applicable in this case
Total taxes payable is $4,935.
Full details, please refer to the City of Montreal’s Website Duties on transfers of immovables.
For most people, tax planning is at the bottom of their to-do list. While we all complain about paying income taxes, we should also put in the effort to reduce our income taxes payable come tax filing next year.
Right now, things are quiet and you can go through things without a panic. When we’re in tax season, we become stressed and tend to overlook things which can cost us money.
Here are some year-end tax planning tips:
- Add up your taxable income from all sources. Include employment income, investments, RRSPs, etc… There may be ways to reduce your income tax bill but you will be limited after December 31.
- Get organized. If you haven’t already, start an envelope or folder to hold all your tax slips and receipts.
- TFSA withdrawals. If you plan on making a withdrawal from your tax free savings account, you should do so prior to December 31. You will then have the opportunity to recontribute as of January 1.
- Pool medical expenses. Medical expenses can be claimed in any 12 month period and the family’s expenses should be pooled together on to one tax return.
- Review your stock portfolio. It can be a wise decision to sell some stocks to lock in a capital loss or gain. Capital losses can be carried back three years or carried forward indefinitely.
- Don’t forget your renovations. You may have some receipts from early 2010 that are eligible for the home renovation tax credit (HRTC). The HRTC was available to be claimed only in 2009, so if you have receipts, you need to file an adjustment to your 2009 income tax return.
- Plan your moving day. Check the provincial income tax rates before in the province before you move. You are subject to provincial tax based on where you reside on December 31. So if there is a substantial difference in tax rates, you may want to speed up your move or defer it until the next year. For example, if you plan on moving from Toronto to Montreal, you should wait until after January 1 to avoid an extra tax bill.
- Purchase new computer equipment. If you are in business, you have until February 2011 to take advantage of the 100% capital cost allowance on your income tax return.
- Make an RESP contribution. To take advantage of the government’s Canada Education Savings Grant for 2010, you must make a contribution to your child’s RESP before December 31.
If you own a small corporation in Canada, you have the choice to pay yourself via salary or dividends. Recently, there was an interesting article published in the Globe and Mail discussing this very topic. In many cases, one would argue that dividends pose more tax advantages to business owners than salary.
Here is the link to the article: Skipping the RRSP, and paying yourself in dividends
Last month, Quebec Finance Minister Raymond Bachand gave up the idea of charging user fees every time a patient sees a doctor and is instead searching for new revenues to finance Quebec’s health care system. Bachand had described the $25 user fee as a deductible for the doctor visit and it would be assessed when the individual pays their income tax the following year.
The user fees were expected to raise an additional $500 million per year in extra revenues.
Doctors and nurses associations said the charge would discourage people from seeing a doctor. Other party leaders opposed the idea as well saying that both the rich and poor would be paying the same amount for each visit.
Although user fees may have been abolished for now, don’t forget about the new “Health Contribution”. Quebecers are now paying a $25 “Health Contribution” this year, rising to $100 next year and then $200 in 2012.
The real solution to Quebec’s health care woes is to make people responsible for a portion of the health care services they use, and the principle behind a user fee does just that. The fee would help individuals to make reasonable choices when using medical services and provide more incentive to choose healthier lifestyles.
Raising taxes with a new “Health Contribution”, provides no incentive and does not solve the underlying problem with the health care system.