Happy New Year! The Government is imposing various tax increases for all Quebecers in 2012. An increase in the QST, increase in the QPP contribution rate, increase in the health contribution fund, increase in gas tax, etc…
Now, more than ever it’s extremely important to seek professional advice and take advantage of all possible tax deductions available to you.
For more information on the various tax increases, please watch this short video.
If you are Canadian and thinking about working abroad or you are from another country and considering making Canada your new home for family and work, you’ll need to understand the tax treatment you’ll receive from the two countries involved. Canada maintains tax treaties with almost one hundred countries around the world, some large, some small.
The idea of a tax treaty is that you can legally avoid double taxation in circumstances where you would otherwise pay tax on the equivalent income in both countries. Usually, the planning behind a tax treaty decides how much tax is paid in one country and the level in the other. Tax treaties often cover pensions, wages, salaries and interest.
Look At An Example of a Treaty
As an example, let’s look at the tax treaty between Canada and Ireland as there is a high exchange of workers between these two nations. Most tax treaties are quite similar although if you are planning on making a move which involves use of a tax treaty, you will need to take professional advice to ensure you completely understand any taxation system you are entering.
It’s always a difficult time moving to another country, especially if you are taking family with you and maybe arranging schooling as well. Nevertheless, planning and information gathering is an immense task that you should start sooner rather than later so you are able to consider matters including:
You shouldn’t base your taxation planning on this article; it’s here to help you decide which information you should go and find out more about.
At least you know a tax treaty exists between the two countries. Now it’s time to read all the documentation, making notes as you go along so you are able to ask the right questions later.
Domiciles And Residence
Domiciles and residence are two important concepts. Your permanent home is your domicile. It has nothing to do with nationality or tax residence. If you have no fixed expectation of moving to the other country, your domicile won’t change.
If you are moving to Ireland, in our example, but remain a Canadian for domicile purposes, your taxation will be paid on a remittance basis, even if you are noted as resident in Ireland. Only taxable work and money you bring into Ireland will be taxed there.
Residence is confirmed by legislation. If you spend 183 days or more in Ireland in a tax year or 280 days or more over two years, you will be considered tax resident in that country.
The main reason for this legal jargon is to show that you won’t be taxed in both countries. So as a Canadian, resident in Ireland and earning income in Canada, your Canadian government will charge a withholding tax against the income. That turns into a tax credit when you arrange your affairs in Ireland – so you don’t pay the tax twice.
Inheritance or Estate Taxation
Thinking ahead, Ireland applies what it calls Capital Acquisitions Tax on gifts and inheritances – remember there’s been no inheritance or estate tax in Canada since 1972. If you live in Ireland for five years you will be open to their taxation of Irish gift and estate taxes.
If you’re thinking of staying in Ireland for a long time (and are allowed to do so) you will need to learn their pay-related social insurance plans – regular contributions from salary which include a health levy. Ireland has a social security agreement with Canada. This means that any contributions you pay in either country are treated towards your final pension arrangements, wherever you take them. So either your Canadian Pension Plan counts over there or your Irish pension counts in Canada.
Essentially, you won’t pay tax on the same worldwide assets and income in both countries. One will offset against the other. It is imperative that you take serious accounting and taxation advice before considering such a move as the implications may be long term and not that friendly if you don’t plan properly.
Olivia Lennox is a personal finance writer and frequently writes on tax issues. She writes on behalf of a 0% balance transfer service and other consumer sites
An overtaxed society can create a deficient economy when the populous is burdened with the extra expenses of excessive tax. Funds used here can be used on a more productive level or a healthier happier lifestyle. The journey from which the sum of $200 takes from pay check to the last penny is likely taxed in more ways than we realize and below is compromising example.
To begin with, let’s remove the 20% income tax leaving $160.00
From there, a modest 3% for old age pension contribution leaving $152.00 Next, a modest 2% for EI contribution which leaves $148.96 Then of course for the benefit of this example non-food purchases are made from the remaining $148.96 which of course are taxed a further 14% leaving an actual spending net of $128.10 from the original $200. Calculate this example over a year’s time and the average citizen could dish out close to $1,000 in taxes just on this $200 monthly allowance. And this is not inclusive with home expenses, heating, vehicle, gas, clothing, gifts etc.
Additionally upon retirement our little nest egg is taxed once again. Not only does this compound the original taxes taken years prior from the original $200, taxes 30 years later are far higher. Now, if we the people can find ways to adapt our living habits and by force mind you to accommodate this excessive taxing and/or create ways to generate additional income, then why is it so difficult for government to apply the same effort?
Each year the same questions arise within government. How can they raise more money? How can they pay for this service or that project? Yet, each time the answers fall under the same category or are mentioned on their list of solutions; tax the people. A simple and effortless solution is often considered ideal when the labouring efforts of others are involved isn’t it?
Alternative yet Simple Methods
An ideal start might be to revamp the way government and its branching departments spend our tax dollars in the first place. Needless expensive ad campaigns, excessive monthly allowable budgets inclusive with expensive dinner engagements, gas allowance, private travel etc. Do they really need to have that $200 meal? Is that really necessary when lower income earners foot the bill?
With a prosperous income to begin with why is there a need to use income from the people for their extravagant business trips and dinners? An ideal way to re-direct this money back to the people would be to account for it themselves and apply them as business expenses when filing taxes like the rest of the population.
There are far too many small government offices and positions branched out into too many different departments. An example: a simple phone call to any municipality and the prompts are endless as to which department you seek. Multi-tasking within these positions would definitely generate money.
Reason being, the regular job market which is another disturbing problem has developed into a endless array of multi-tasking jobs but are all categorized under one single job description. Yet, our wages are based on a pay scale which is outdated and almost pathetic.
If we the people can adapt to the demanding needs of a competitive job market saturated with multi-tasking jobs, then the thousands of needless departments within government can apply these same methods. This is how companies in Canada survive. This is how government can re-modify their labour costs using the savings to benefit in needed areas that seem to arise year after year.
Government needs to address these issues as it’s becoming more difficult to acquire simple jobs and simple housing for the average citizen who can’t afford post secondary education. How does one acquire experience when companies large and small refuse to train even for the simplest positions?
Today’s society and government is far too demanding, far too selfish focusing more on profits gained from citizens with the perfect credit rating, the healthy bank account and that over qualified resume.
Focusing on the whole picture here, a little leniency, human compassion and an overall team effort can go a long way when creating a healthy economy and a balanced government.
Author: Kellie Hastings
Researcher and writer of articles pertaining to health, anti-aging, pollution, and public/health awareness. For health concerns on GE Foods, Cloned animal foods, GE Food Watch List, Diseased Factory Farms- videos and FDA corruption visit [http://www.discovery-health.org]
With the economy going the way it is practically everyone is becoming self-employed these days. According to Industry Canada’s Small Business Quarterly, the number of self-employment workers increased by 40,000 to 2.633 million from 2008 to 2009, an increase of 1.5 percent. But are you really self-employed? Yes, of course the guy who is paying you tells you, ‘its ok, you are self-employed’. He calls you a contractor and even has you sign a contract but does CRA (Canada Revenue Agency) think you are self-employed. It is an important question to ask yourself because you may end up being reassessed on the basis of your employment status. This would mean some or all of your deduction may be disallowed by CRA.
Employment status directly affects your entitlement to EI (Employment Insurance) and CPP (Canada Pension Plan). If you are an employee, the payer is considered an employer. Employers are responsible for deducting CPP contributions, EI premiums, and income tax from amounts they pay to their employees. They have to remit these deductions along with their share of CPP contributions and EI premiums.
Certain factors have to be considered when determining if you are an employee or self-employed individual. In all provinces or territories except Quebec, the following determine your employment status. When examining whether or not you are an employee or self-employed individual, the key question is whether or not your were engaged to perform services as a person in business on your own account, or as an employee.
The intent of you and the payer when you both entered into the working arrangement is very important. Did the two parties (you and the payer) intend to enter into a contract of service (employer-employee relationship) or did they intend to enter into a contract for services (business relationship)? The best way to show clear intent is to have a written agreement- the terms and conditions of the work to be performed. Note: In a written contract, the parties may state that in the event of a disagreement regarding the contents of the contract, it is to be interpreted under the Quebec law (Civil Code), even though the contract was formed for example in Ontario (Common Law).
Aside from the contract, you have to answer the following questions and if possible answer them in the contract. CRA uses these same questions to determine whether or not a business relationship existed.
What level of control the payer has over the worker
Control is the ability, authority, or right of a payer to exercise control over a worker concerning the manner in which the work is done and what work will be done. If the payer exercises a high level of control (especially on the worker’s daily activities) then an employer-employee relationship may exist. Some of the indicators that the worker is an employee are; the relationship is one of subordination; the payer controls the worker with respect to both the results of the work and the method used to do the work; the payer determines and controls the method and amount of pay; the worker requires permission to work for other payers while working for this payer; the payer determines what jobs the worker will do; the worker receives training or direction from the payer on how to do the work; and the payer chooses to listen to the worker’s suggestions but has the final word. Some of the indicators that the worker is a self-employed individual are; worker usually work independently within a defined framework; does not have anyone overseeing them; free to work when and for whom he or she chooses and may provide his or her services to different payers at the same time; can accept or refuse work from the payer; and the relationship between the payer and the worker does not present a degree of continuity, loyalty, security, subordination, or integration.
Did the worker provide the tools and equipment used?
If you own and provide tools and equipment to accomplish the work or have contractual control of and responsibility for, an asset in a rental or lease situation.
Can the worker subcontract the works or hire assistants?
If you have to perform the services personally and can not send a replacement then you are an employee. So the payer has no say in whom the worker hires.
What degree of financial risk taken by the worker?
If you made a significant investment in the tools and equipment along with the cost of replacement, repair, and insurance may place you at a risk of loss. There must not be any reimbursement by the payer for use of these tools and equipments supplied by the worker. With a risk of loss, you are taking high degree of financial risk.
What degree of responsibility for investment and management held by worker?
You had to invest capital to in order to get the contract. You manage your staff- you hire and pay individuals to help perform the work.
Is there an opportunity for profit by the worker?
You can realize a profit or incur a loss, as this indicates you control the business aspects of services rendered and that a business relationship likely exists.
Let’s look at the above statements from a cash-flow prospective. For example, if John Doe is the employee above and makes $19.31 per hour. His latest paycheck has the following information:
Gross Earnings $1057.22
CPP ($ 46.24)
EI ($ 18.32)
FED Tax ($ 120.38)
Take Home $ 872.28
Now if John Doe was self-employed then this is what his cash-flow would look like:
Gross Earnings $1057.22
Fed Tax ($ 120.38)
Take Home $ 936.84
There is a definite advantage to being self-employed over being employed from a cash-flow perspective. The disadvantage is you have to create your own retirement plan (CPP) and a cushion (EI) in the event of a slowdown or shut-off of revenue.
I believe that it is very important that everyone learn to manage and grow their money in as many ways as possible. I believe the key to do this is found through increasing one’s financial intelligence.
Author: Colin B Wallace
Article Source: EzineArticles.com
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
Are you self-employed? Aside from the business and income risks, were you aware that there is one main “tax” disadvantage for being self-employed?
The main disadvantage for being self-employed is the fact that you must make a full contribution to the CPP (Canada Pension Plan).
When you are an employee, you must contribute 4.95% of your gross earnings up to a maximum $2,163.15. The employer is obliged to match this contribution and contribute on your behalf.
When you are self-employed, you must contribute 9.90% of your net taxable earnings up to a maximum of $4326.30. This amount must be paid upon filing your annual tax return.
Federal tax rates for 2009 are:
15% on the first $40,726 of taxable income,
22% on the next $40,726 of taxable income (on the portion of taxable income between $40,726 and $81,452),
26% on the next $44,812 of taxable income (on the portion of taxable income between $81,452 and $126,264),
29% of taxable income over $126,264.
Employment insurance (EI) and Canada Pension Plan (CPP) is not a tax. They are collected separately as a percentage of your income.
EI – 1.73% max $747.36
CPP – 4.95% max $2163.15