Personal Services Business (PSB): CRA Education Initiative

In general, a personal services business (PSB) exists where the individual performing the work would be considered to be an employee of the payer if it were not for the existence of the individual’s corporation. These workers are often referred to as incorporated employees. Where it is determined that the income is earned from a PSB, the corporate tax rate increases significantly (potentially as high as 39% over the small business rate, depending on the province). In addition, significantly fewer expenditures are deductible against the income.

Since 2022, CRA has been conducting an educational pilot project in respect of PSBs. They have recently published findings from the project and highlighted future planned phases.

Phase I – Identifying companies that hire PSBs

Phase I of the project was conducted from June to December 2022. The results were as follows:

  • approximately 10% of participating corporations were likely to be carrying on PSBs;
  • approximately 64% of potential PSBs were incorrectly claiming the small business deduction (an average of $16,711 of additional federal corporate tax would be payable if this were corrected);
  • nearly 74% of potential PSBs work in the following three industries:
    • transportation and warehousing (35%), with 95% of these working in freight trucking;
    • professional, scientific and technical services (26%); and
    • construction (13%).
Phase II – Identifying potential PSBs

CRA indicated that Phase II is planned for October 2023 to June 2024, and will examine approximately 2,100 randomly selected corporations identified as potential PSBs. The examination will include a voluntary interview and focus on the 2022 tax year. CRA indicated that they hope to gain greater insight into how and why PSBs operate the way they do.

Phase III – Assisted compliance for PSBs

CRA indicated that the timing of Phase III has not yet been determined. They expect to address the 2022 and subsequent tax years with continued education, review of PSBs and assisted compliance of non-compliant PSBs.

ACTION ITEM: Identification of PSBs has become a focal point for CRA. If there is a risk of your corporation carrying on a PSB, inquire as to the corporation’s exposure and potential mitigation strategies.

 

Wine Sector Support Program: Applications for 2024-2025 Intake Opens Today

The Canadian Wine Sector Support Program has extended funds by $177 million over the next three years to help improve the wine sectors competitiveness as announced by Agriculture and Agri-Food Canada. The Government of Canada’s total investment to the program is more than $343 million. 

The program was introduced on June 29, 2022, by the Minister of Agriculture and Agri-Food, the Honourable Marie-Claude Bibeau. 

All licensed wineries in Canada that produce or contract out the production of bulk wine from primary agricultural products, such as grapes, berries, other fruit, dandelions, rice, and sap, is eligible for support under this program.

Support is provided in the form of a grant, and is based on the production of bulk wine fermented in Canada from domestic and/or imported primary agricultural products from the previous year. Individual payments are dependent on the total litres of eligible wine submitted and the individual applicants’ total eligible wine production.

Applications for 2024-25 will be accepted from April 8, 2024, until May 24, 2024. The application form will be available on April 8, 2024.

The program ends on March 31, 2027.

For more detailed information on who is eligible and how to apply, please visit: https://agriculture.canada.ca./en/agricultural-programs-and-services/wine-sector-support-program.

If you need assistance with general business advisory and/or accounting matters, we invite you to contact one of our agribusiness specialists.

Helpful links:

How to Make a Payment with Canada Revenue Agency for Your Business

Online Banking Payments

Make a payment to the CRA through online banking, the same way you pay your phone or hydro bill.

  • Sign in to your financial institution’s online business banking service.
  • Under “Add a payee,” look for an option such as:
    • Federal – Corporation Tax Payments – TXINS
    • Federal – GST/HST Payment – GST-P (GST-P)
    • Federal Payroll Deductions – Regular/Quarterly – EMPTX – (PD7A)
    • Federal Payroll Deductions – Threshold 1 – EMPTX – (PD7A)
    • Federal Payroll Deductions – Threshold 2 – EMPTX – (PD7A)
    • Federal – Canada emergency wage subsidy repayment
  • Enter your 15 digit business number as your CRA account number.

You are responsible for any fees that may be charged by your financial institution.


Debit Card Payments Via ‘My Payment’

Make a payment with your Visa® Debit, Debit MasterCard®, or Interac® Online debit card.

My Payment is an electronic payment service offered by the CRA that uses Visa® Debit, Debit MasterCard® or Interac® Online for businesses to make payments directly to the CRA using their bank access cards.  The CRA does not charge a fee for using the My Payment service. Credit Cards not accepted with this service.

To use My Payment you need a card with a Visa Debit logo, a Debit MasterCard logo, and/or an Interac Online logo from a participating Canadian financial institution.

If your bank access card has both a Visa Debit logo and an Interac logo, use the Visa Debit option to pay.

If your bank access card has both a Debit MasterCard logo and an Interac logo, use the Debit MasterCard option to pay.

Before you start ask your financial institution about your daily or weekly transaction limit and any fees for making online payments. The CRA does not charge a fee for using this service.

CRA’s My Payment Webpage


Pay Through a Canadian Financial Institution

To make a payment at your Canadian financial institution, you will need a personalized remittance voucher. Financial institutions will not accept photocopies of remittance vouchers or payment forms.

You can make a payment in foreign funds.  The exchange rate you receive for converting the payment to Canadian dollars is determined by the financial institution handling your transaction on that day. You are responsible for any fees that are incurred.

Arrangements will need to be made with your financial institution if you are making a payment of more than $25 million.

Be sure to provide accurate information to help the CRA apply your payment to the intended account.  A personalized remittance voucher will help CRA apply your payment properly.  You can request personalized remittance vouchers online or by phone.


Mailing Your Payment

The government released legislation, effective January 1, 2024, that any tax payment or remittance made by a corporation to the CRA exceeding $10,000 must be done through electronic means.

If your tax payments exceed $10,000, you should no longer make these payments using a cheque.

It is highly encouraged to remit payments to the CRA electronically even if the amount is less than $10,000 as electronic payments are processed quicker. This will also significantly reduce the risk of lost or misapplied payments. Furthermore, it is usually far easier and faster for the CRA to trace a lost or misapplied electronic payment than a cheque mailed to the CRA.

If you still wish to send a cheque or money order, make it payable to the Receiver General for Canada and include your remittance voucher. Note: Payment is considered received on the date CRA receives the cheque, not the postmark date.

Mailing address:
Canada Revenue Agency
PO Box 3800 STN A
Sudbury ON P3A 0C3


Payment by Pre-Authorized Debit (PAD)

Set up a pre-authorized debit agreement and eliminate the need for postdated cheques.

Pre-authorized debit (PAD) is a secure, online, self-service payment option for individuals and businesses. This option lets you set the payment amount that you authorize the CRA to withdraw from your Canadian chequing account to pay your taxes on a date, or dates, of your choosing.

Due to the processes that must take place between the CRA and the financial institution, the taxpayer’s selected payment date must be at least 5-business days from the date their PAD agreement is created or managed.

See Federal holidays for a list of non-business days.

There is a ‘pay by pre-authorized debit’ option through GST/HST netfile available for an amount owing.

A PAD agreement can only be set up online, not over the phone.

Steps to create a pre-authorized debit agreement for businesses

To create a PAD you have to be registered for My Business Account.  Click on ‘CRA register’ or ‘Continue to Sign-In Partner’ and complete the steps.  Once completed, your official access code will be sent to you by mail.  Once you enter the access code into My Business Account you will have full access, which allows you to view, create, modify, cancel, or skip a payment.

This option is not designed to be used frequently due to the limitations on payments and the fees involved.

Steps to create a pre-authorized debit agreement for individuals

To create a PAD, you must to be registered for My Account. Once signed in:

  • Select the ‘Proceed to pay’ button and select the ‘Pay later’ option to create a PAD agreement.
  • Access ‘Manage pre-authorized debit’ under the Related services within the Accounts and payments section to view, modify, cancel, or skip a payment.
  • A PAD agreement can also be created within MyCRA, for an amount owing, by selecting the ‘Proceed to pay’ button and the ‘Pay later’ option. Your credentials are the same as in My Account.

Cash or Debit Card Payments

Make a payment with cash or debit in person at any Canada Post outlet.

You can pay your individual tax, benefits, and credits repayments, Part XIII – non-resident withholding tax, source deductions, T2 corporation tax, or GST/HST payments to the Canada Revenue Agency (CRA) in person with cash or debit card at any Canada Post outlet across Canada for a fee.  To do so you will need a self-generated quick response (QR) code.  This QR code will be personalized by you and will contain information that will allow the CRA to credit your account.  Canada Post uses a third-party service provider to generate and process the QR code.  To create your QR code, see the link below*.  

*Generate your QR code here.

It is a simple two-step process.  On the site, you will be asked to select the tax type you want to pay, your social insurance number or account number, your name, and the amount you want to pay.  A service fee will be charged based on the amount of the payment and displays when creating the QR code.

When you have completed the required fields, press ‘Continue’ to select where you want your QR code to display.  The choices are:  Send to Email; Send to Mobile or Print at Home.  You can choose any or all of these options.  If you choose Send by Email, you will need to enter your email address.  If you choose Send to Mobile, you will need to enter your 10-digit Mobile Number.  If you choose to print at home, a print icon will display.

Be sure to bring your phone or printed QR code to any Canada Post outlet to make a payment.  The clerk will scan your QR code and ask you how much you want to pay.  The amount you initially entered is for your reference only and is not displayed to the clerk.  The clerk does not see any CRA account information. The clerk will key in the amount you want to pay, add the service fee and accept payment by cash or debit card.  The clerk will then give you a paper receipt with the amount paid and the reference number for your files.


Credit Card Payments via Third-Party Service Providers

You can make a payment with a credit card by using a third-party service provider.

The third-party service provider will send your business or individual payment and remittance details online to the CRA for you.  

Ensure that you set up your payment well in advance of your payment’s due date as payment delivery is not immediate, and is determined by the third-party service provider that is used.

Note: Third-party service providers charge a fee for their services. Click here for a full list of third-party service providers.  


Payments via Wire Transfer for Non-Residents

Non-residents who do not have a Canadian bank account can make payments to the CRA by wire transfer.

Wire transfers for submitting your non-resident GST/HST security deposit are not available at this time.

What you need to know

All wire transfers must be in Canadian dollars.

Your financial institution may have standard charges that apply to wire transfer payments.  Make sure that your financial institution does not deduct the wire transfer fee from the total payment amount due as this will result in an underpayment.

Wire details

You will need the following information to transfer funds to the CRA’s account:

Name of banking institution: The Fédération des Caisses Desjardins du Québec
100 rue de Commandeurs
Levis, Quebec
Canada G6V 7N5
SWIFT: CCDQCAMM
Bank number: 815
Transit number: 98000
Beneficiary name: Receiver General of Canada
Beneficiary account number: MFI09708060815CAD3
(if space limitations, use at least: 815980000970806)
Beneficiary address: 11 Laurier Street
Gatineau, Quebec K1A 0S5
Description field: Authorization number: 122-25678-CRA
ABA code, if required: 081598000
Charges field: “OUR”

To avoid processing delays include the following information with your wire transfer:

For Businesses:

  • non-resident account number or business number
  • business name
  • period end date
  • fiscal year
  • telephone number
  • return/remittance
    • Provide a copy of your tax remittance or GST/HST return/remittance by fax to the CRA:
    • Attention: Revenue Processing Section
    • Fax: 204-983-0924
    • Provide the amount paid, the date paid and the confirmation number if available

Avoid late fees

You are responsible for making sure the CRA receives your payment by the payment due date. If you are using a third-party service provider, please ensure that you clearly understand the terms and conditions of the services that you are using.

New Mandatory System for Canadian Importers (CARM)

The CARM system, set to launch on May 13, 2024, will serve as the official platform for interacting with the Canada Border Services Agency (CBSA) regarding commercial import shipments into Canada. If your corporation imports goods and materials, we recommend that you proactively complete necessary registrations and meet requirements before this date to avoid disruptions in importing and conducting business with the CBSA.

Key points about CARM (CBSA Assessment and Revenue Management):

  1. Mandatory System: The CBSA has announced that CARM will become the mandatory system for Canadian importation. It introduces significant procedural changes for importers.
  2. CCP Account: Importers must register for a CARM Client Portal (CCP) account to continue their importing activities. Without a CCP account, importers will be ineligible to import goods on May 13th.
  3. Supply Chain Considerations: Importers should anticipate potential disruptions and consider increasing critical imports into Canada before the CARM system’s implementation.

Remember to gather the necessary information (such as GCKey, Business Number, and Import/Export Program account) to complete your CCP registration and ensure smooth operations with the CBSA. Individual access and authorization levels within the business account should also be addressed.

For more detailed information on this new mandatory system, please refer to the full article linked below, as written by RSM Canada.

The Tax Free Savings Account

In 2009, the federal government introduced the Tax Free Savings Account (TFSA) to give Canadians another means to save for their financial goals.  The TFSA is similar to the Registered Retirement Savings Plan (RRSP) in some ways, but different in others.

TFSA Quick facts:

  • Investments grow and compound on a completely tax-free basis within the TFSA.
  • Contributions to the TFSA are not tax-deductible, but withdrawals are tax-free and can be made at any time.
  • Unused contribution amounts accrue and can be used in future years.
  • The current annual contribution limit is $7,000 per person, increasing in $500 increments based on inflation.
  • Anyone who was 18 years of age in 2009 and resident in Canada during the period between 2009-2024 and has never contributed to a TFSA has a contribution limit of $95,000.
  • Withdrawals from the TFSA do not impact Old Age Security (OAS) benefits.

Things to consider when deciding to use a TFSA:

  • Consider how the TFSA fits within your overall financial plan –it may be better to maximize RRSPs, RESPs, or pay down personal debt first.
  • The TFSA can complement other retirement savings and since withdrawals are tax-free, they could help you avoid potential Old Age Security (OAS) claw-back.
  • Since contributions can be made at any age over 18, a TFSA can be a powerful estate planning tool in building a sizable tax-free asset for an estate or heirs – a benefit similar to using permanent life insurance.  If a specific beneficiary is named in a TFSA, the estate administration tax (probate fees) can be avoided on the value of the plan.
  • Consider using existing personal non-registered savings to maximize TFSA contribution limits in order to shelter future investment income from tax.
  • Investors owning a corporation may want to consider withdrawing additional dividends to fund a TFSA.  Although the additional income from the corporation would be taxable, future investment earnings on those contributions would be tax-free.
  • Both capital and growth can be withdrawn on a tax-free basis.  The total amount withdrawn can then be re-contributed in the next calendar year, or any time afterwards, with no impact on annual contribution limits.

A DJB Wealth Management Advisor can help you make the right choice.

AgriTech Innovation Initiative (ATII) Now Accepting Applications

The AgriTech Innovation Initiative (ATII) is now accepting applications. Applicants can apply through the portal on the Agricultural Adaptation Council website: https://adaptcouncil.org/program/atii. The intake closes on March 28, 2024, at 11am EST and is not on a first-come, first-served basis.

The Initiative will be delivered under three streams, as follows:

Stream 1 – Agri-Tech Innovation (total Eligible Costs per Project less than $100,000)

Stream 2 – Agri-Tech Innovation (total Eligible Costs per Project $100,000 and greater)

Stream 3 – Agri-Tech Energy Costs Savings

Supporting growth and productivity through innovation, advanced manufacturing, improved food safety and enhanced cyber security, and energy efficiency within the agri-food sector is the goal of the  Agri-Tech Innovation Initiative.

For more information and to access the guidelines for this initiative, visit the Agricultural Adaptation Council website.

 

New Trust Reporting: Unexpected Exposure

Breaking news! The CRA will not require bare trusts to file a T3 Income Tax and Information Return (T3 return), including Schedule 15 (Beneficial Ownership Information of a Trust), for the 2023 tax year, unless the CRA makes a direct request.

Changes requiring more trusts (and estates) to file tax returns and more information to be disclosed, first proposed in the 2018 Federal Budget, were delayed several times in the legislative process. As such, many trusts and estates (including many arrangements not commonly considered “trusts”) will be required to file for the first time.

Required reporting has been expanded to include situations where a trust acts as an agent for its beneficiaries (often referred to as a bare trust). This occurs when the person on title or holding the asset is not the true beneficial owner but rather holds the asset for the benefit of another party. There are many common situations that may constitute reportable bare trusts in which no lawyer or written agreement may have ever been involved or drafted. Many parties involved in a bare trust arrangement may not realize that they are, much less that there may be a filing requirement with CRA.

The following lists some examples of potential bare trust arrangements; CRA has not commented on several of the examples below. It is uncertain how they will interpret and enforce the law.

  • a child on title of a parent’s home (without the child having beneficial ownership) for probate or estate planning purposes only;
  • a parent on title of a child’s property (without the parent having beneficial ownership) to assist the child in obtaining a mortgage;
  • one spouse being on title of a house or asset although the other spouse is at least a partial beneficial owner;
  • a parent or grandparent holding an investment or bank account in trust for a child or grandchild;
  • a corporate bank account opened by the shareholders with the corporation being the beneficial owner of the funds;
  • a corporation being on title of an individual’s real estate, vehicle, or other asset, and vice-versa;
  • assets registered to one corporation but beneficially owned by a related corporation;
  • use of a nominee corporation for real estate development purposes;
  • a property management company holding operational bank accounts in trust for their clients, or individuals managing properties for other corporations holding bank accounts for those other corporations; • a lawyer’s specific trust account (while a lawyer’s general trust account would largely be carved out of the filing requirements, a specific trust account would not); and
  • a partner of a partnership holding a bank account or asset for the benefit of all the other partners of a partnership.

In addition to bare trust arrangements, other trusts that have not had to file in the past may have a filing obligation under these expanded rules.

Exceptions from filing a return for trusts and bare trust arrangements are available in limited cases. If filing is required, the identity and residency of all the trustees, beneficiaries, settlors, and anyone with the ability (through the terms of the trust or a related agreement) to exert influence over trustee decisions regarding the income or capital of the trust must be disclosed.

Failure to make the required filings and disclosures on time attracts penalties of $25 per day, to a maximum of $2,500, as well as further penalties on any unpaid taxes. New gross negligence penalties may also apply, being the greater of $2,500 and 5% of the highest total fair market value of the trust’s property at any time in the year. These will apply to any person or partnership subject to the new regime.

ACTION ITEM: Consider whether you may have a bare trust arrangement. If so, or if you are unsure, contact us to discuss.

Our History

Since 1940, Durward Jones Barkwell & Company LLP (DJB) has been providing financial and business consulting services to companies of all sizes. We can assist with complex mergers and acquisitions or guide you through the many facets of starting a small business. We do all this while remaining personally involved with our clients and the communities where we work and live.

Our professionals service clients locally, nationally, and internationally, offering industry-specific advice to clients in several industries, including agribusiness, construction & real estate, general contracting, healthcare, manufacturing & distribution, not-for-profit, professional services, tourism & hospitality, transportation, and wineries.

To learn more about our history, download the printable pdf.

Have you Considered the Scientific Research and Experimental Development Tax Credit?

Is your corporation involved in such activities as agricultural and food processing, information and/or communication technology, life sciences, advanced manufacturing, or independent research to name a few. If so, you may be eligible to claim a Scientific Research and Experimental Development Tax Credit (SRED).  When we think of scientific research, we often think of the scientist in the lab wearing a white coat.  This isn’t always the case as many claims are a result of development or improvements to a product or process on the shop floor.

In order to qualify, the work must be conducted for the advancement of scientific knowledge or for the purpose of achieving a technological advancement.  It is important to note that you do not have to achieve your goal in order to gain new knowledge. For example, if your work allowed you to understand that the idea you tested is not a solution for your situation, this can be considered new knowledge.  What’s important is that the knowledge gained advances the understanding of science or technology, not how the work advanced your corporation or business practices.

The work must be a systematic investigation or search that is carried out in a field of science or technology by means of experiment or analysis.  A systematic investigation or search refers to how SRED work is carried out. It is more than just having a systematic approach to your work or using established techniques or protocols.  A systematic investigation or search must include the following steps:

  • Defining a problem.
  • Advancing a hypothesis towards resolving that problem.
  • Planning and testing the hypothesis by experiment or analysis.
  • Developing logical conclusions based on the results.
  • The federal government will allow corporations  to claim an Investment Tax Credit (ITC) of 15% on eligible expenditures.  This ITC can be applied against the current year’s income tax or in some cases carried back to a previous tax year or forward to a future tax year.  However, some small business corporations may earn an ITC of 35% on eligible expenditures which may be fully refundable in the year.
  • Eligible expenditures include:
  • Canadian wages and salaries.
  • An overhead calculation.
  • Canadian R&D-related contracts.
  • Materials.
  • Payments made to eligible research institutions.

The province of Ontario also provides additional incentives to corporations carrying out SRED activities in the province.  Certain small business corporations can earn a refundable Ontario Innovation Tax Credit (OITC) of 8% on eligible expenditures.  In addition, the Ontario Research and Development Tax Credit (ORDTC) is available. It is a 3.5% non-refundable tax credit based on eligible expenditures incurred by a corporation in a tax year.

It is important to note that the deadline to file a SRED claim on your tax return is eighteen months after your taxation year.

So If you haven’t considered SRED, it may be worthwhile to do so.