Category: Domestic Tax

Various changes and issues have arisen in respect of T-slips to be filed and processed for the 2023 year.

Dental benefits

Beginning with the 2023 year, issuers of the T4 Statement of Remuneration Paid and T4A, Statement of Pension, Retirement, Annuity, and Other Income must report whether the recipient or any of their family members were eligible to access dental insurance or dental coverage of any kind (including health spending and wellness accounts) from their current or former employment.

The T4 will include new box 45, employer-offered dental benefits.

The T4A will include a new box 015, payer-offered dental benefits. This box must be completed if an amount is reported in box 016, pension or superannuation.

CRA indicated that it is mandatory to indicate whether the employee/former employee, or any of their family members were eligible, on December 31 of that year, to access any dental care insurance, or coverage of dental services of any kind, that the employer offered.

The employer/issuer must select which of the following scenarios apply.

1. Not eligible to access any dental care insurance, or coverage of dental services of any kind
2. Payee only
3. Payee, spouse, and dependent children 4.Payee and their spouse 5.Payee and their dependent children

Electronic Distribution

In a December 13, 2023, update to CRA’s webpage, CRA discussed the ability to distribute T4, T4A, T5, and T4FHSA slips using the issuer’s secure electronic portal without obtaining written or electronic consent from the employees or recipients. However, using a secure electronic portal is not available where any of the following situations exist:

• the employee or recipient requested that paper copies of the slips be provided;
• the employee or recipient cannot reasonably be expected to have access to the slips in electronic format at the time the slips are issued; or
• for T4s, if the issuer distributes the T4 when the employee is on extended leave or is a former employee at the time the slip is issued.

Employers/payers must also provide the option to receive these slips in paper form.

If distributing these slips by email, the employer/payer must receive consent in writing or electronic format before sending by email.

Electronic filing thresholds

Effective January 1, 2024, certain information returns must be filed electronically with CRA where more than 5 information returns (reduced from 50) of a particular type are required for a calendar year. The impacted information slips include forms NR4, T5007, T5018, T4ANR, T5, T5013, T4A, T4, and T3. A penalty of $125 will apply where between 6 and 50 slips are filed on paper.

Errors on T-slips

In a recent communication, CRA addressed the concern that auditors and appeals officers may base a decision on issued T-slips without considering the possibility that the issuer made an error in their preparation.

CRA stated that it is the taxpayer’s responsibility to verify the validity and accuracy of the information slip. If the taxpayer notices an error, the taxpayer should contact the issuer to attempt to discuss/resolve the issue. CRA noted that they cannot validate the accuracy of a slip as the relevant information to do so is retained by the issuer and the taxpayer. If the issuer refuses to correct the form, the taxpayer can inform CRA by filing an employee complaint with the employer accounts and services section.

When a taxpayer objects to CRA’s assessment/ reassessment, the taxpayer must provide the reason for the objection. The appeals officer should investigate the accuracy of the information slip when it is part of the disputed issue. The appeals officer may also ask the taxpayer to provide representations.

ACTION ITEM: Various changes to T-slip completion, filing, and distribution are effective for 2023 slips, filed in early 2024. Ensure that these changes are incorporated into your business processes.

On December 11, 2023, Health Canada issued details on the Canada dental care plan that would cover a wide variety of dental services for certain Canadian residents. The plan will be rolled out from late 2023 to 2025.

To be eligible, the individual and their spouse or commonlaw partner (if applicable) must meet all of the following conditions:

• have an adjusted family net income (AFNI) of less than $90,000;
• be a Canadian resident for tax purposes;
• have filed their tax return in the previous year; and
• not have access to dental insurance, meaning that it is not available through the taxpayer’s or a family member’s employer or pension, or not purchased through a group plan.

Eligibility for children under 18 will be determined by their parents’/guardians’ eligibility.

Individuals will need to meet the eligibility requirements annually. More information on the annual reassessment process will be provided by the government at a later date.

The CDCP will pay for eligible services provided by an oral health provider (such as dentists, denturists, dental hygienists, and dental specialists), less a portion that is to be paid directly by the patient (the “co-payment”). No copayment is required if AFNI is under $70,000. The co-payment starts at 40% for AFNI between $70,000 and $79,999 and increases to 60% for AFNI between $80,000 and $89,999.

Oral health providers are encouraged to follow the CDCP fees, which are not the same as the provincial and territorial fee guides, so their patients do not face additional charges at the point of care. Oral health providers who have enrolled with CDCP will bill the plan directly. Health Canada noted that patients should ask if the provider has enrolled in the CDCP when booking their appointment to limit unexpected out-of-pocket payments.

The program will be first rolled out to seniors with application invitation letters starting in December 2023. Eligible seniors will be able to engage in covered services as early as May 2024. Those with a disability tax credit certificate (T2201) or under 18 years of age can begin to apply as of June 2024. The remaining eligible residents will be able to apply in 2025.

CRA noted that only those who are 70 years old or older by March 31, 2024, have AFNI of less than $90,000 for 2022, and were Canadian tax residents for 2022 will receive the initial application instruction letters.

Once an individual has applied and is determined to be eligible, Service Canada will share the individual’s information with Sun Life, the contracted service provider, for enrolment into the CDCP. Eligible individuals will receive a member card, and be notified of the start date of their coverage. The start date will vary based on when each group can apply, when the application is received and when enrollment is completed.

Oral health providers will be able to enroll voluntarily as a participating CDCP provider directly with Sun Life in early 2024. Details on this process will be available on Health Canada’s webpage when enrollment opens. Oral health providers enrolled in the CDCP will be required to submit the claims directly to Sun Life for payment rather than having patients seek reimbursement from Sun Life for services covered under the plan.

ACTION: If you are an eligible individual, apply for this new benefit when invited. If you are a oral health care provider, consider enrolling as a provider in the plan.

The $2/day flat rate method available to claim expenses for employees working from home was a temporary administrative measure only available from 2020 to 2022; it is no longer available in 2023. As such, employees working from home can only use the detailed calculation when claiming expenses.

For 2023 and subsequent years, a deduction can only be claimed where one of the following criteria is met:

1. the work space was the place where the individual principally (more than 50% of the time) performed their duties of employment; or
2. the individual used the space exclusively during the period to earn employment income and used it on a regular and continuous basis for meeting clients, customers, or other people with respect to employment.

CRA indicated that they would consider i) to be met by employees who were required to work from home more than 50% of the time for a period of at least four consecutive weeks in the year.

ACTION ITEM: The $2/day temporary flat rate method cannot be used by employees to claim home office expenses in 2023. Instead, receipts and records must be kept to make claims under the detailed method.

Authored by RSM Canada

Executive summary

To simplify your tax-filing experience, we have compiled the key tax filing and payment deadlines for the middle-market taxpayers. This article will serve as a one-stop solution for keeping track of the key tax deadlines approaching. By filing the tax return(s) and paying the taxes due on time, taxpayers can avoid delays to any refund, benefit, or credit payments they may be entitled to. In addition, complying with the due dates will help to avoid late-filing and/or late-payment penalties and interest.

Canadian tax filing and payment deadlines for middle-market taxpayers for 2024

With the approaching tax season, a taxpayer may have to file numerous returns to ensure tax compliance. In addition, with the fast-paced tax developments happening, keeping track of the annual tax filing and payment deadlines could be difficult. This article is a one-stop solution for middle-market taxpayers as it summarizes key tax filing and payment deadlines for the year 2024. The table below is not exhaustive but caters to the most common compliance relevant for middle market taxpayers.

Where the taxpayer omits filing and payment, late files and remits, additional penalties and/or interest kicks in leading to an additional cost burden on the taxpayer.

Return/ Form type	Taxpayer type	Due date of filing or payment
T1 Returns	Self-employed individuals or those whose spouses or common-law partners are self-employed	Return due on June 15, 2024* Tax owing due on April 30, 2024
	Other individuals	Return due on April 30, 2024 Tax owing due on April 30, 2024
	Deceased individuals where the date of death is before Nov. 1, 2023	Return due on: For self-employed individuals: June 15, 2024* For others: April 30, 2024 Tax owing due on April 30, 2024
	Deceased individuals where the date of death is on or after Nov. 1, 2023	Return due six months after the date of death Tax owing due six months after the date of death
	Non-residents individuals with a Canadian filing obligation (Section 216/217 returns)	Return due on June 30, 2024* Tax owing in excess of withheld amounts due on April 30, 2024
T2 Corporate tax returns	For corporations having a Dec. 31, 2023 calendar year-end	Return due on June 30, 2024* Tax owing due: For CCPCs claiming Small Business Deduction (SBD) with taxable income (including all associated corporations) less than the small business limit: three months after year-end For all other corporations: two months after year-end
	For corporations having a non-calendar year-end	Return due no later than six months after the end of the corporation’s taxation year Tax owing due: For CCPCs claiming SBD with taxable income (including all associated corporations) less than the small business limit: three months after year-end For other corporations: two months after year-end
T3 Trust returns	Inter-vivos trusts (required to have a calendar year-end)	Return due 90 days after year-end on March 30, 2024*
	Testamentary trusts and Non-resident trusts with a filing obligation in Canada (not required to have a calendar year-end)	Return due no later than 90 days after the trust’s year-end date
T4, T4A-NR, T5	–	Due on Feb. 29, 2024
NR4 Non-resident information returns	For an estate or trust	Return due no later than 90 days after year-end
	Other taxpayers	Return due on March 31, 2024*
T5013 Partnership returns	Where partners are either individuals, trusts, professional corporations or a combination thereof; and Partnerships that are tax shelters	Return due on March 31, 2024*
	Where partners are corporate partners (not including professional corporations)	Return due five months after the end of the taxation year of the partnership
	All other cases	Earlier of: March 31 after the calendar year in which the fiscal period of the partnership ended; The day that is five months after the end of the partnership’s fiscal period
T1134 Information return relating to foreign affiliates	For individuals and other taxpayers having a Dec. 31, 2023 year-end	Return due on Oct. 31, 2024
	For other taxpayers with a taxation year beginning in 2023	Return due no later than 10 months after the year-end
T1135 Foreign income verification statement	Self-employed individuals or those whose spouses or common-law partners are self-employed	Return due on June 15, 2024*
	Other individuals	Return due on April 30, 2024
	For corporations having a Dec. 31, 2023 calendar year-end	Return due on June 30, 2024*
	For corporations with a non-calendar year-end	Return due no later than six months after the end of the corporation’s taxation year
	Partnerships where partners are either individuals, trusts, professional corporations or a combination thereof; and Partnerships that are tax shelters	Return due on March 31, 2024*
	Partnerships where partners are corporate partners (not including professional corporations)	Return due five months after the end of the taxation year of the partnership
	All other partnerships	Earlier of: March 31 after the calendar year in which the fiscal period of the partnership ended; the day that is five months after the end of the partnership’s fiscal period
	Inter-vivos trusts with a Dec. 31, 2023 year-end	Return due on or before March 30, 2024*
	Testamentary trusts	Return due no later than 90 days after the trust’s year-end date
T106 Information return of non-arm’s length transactions with non-residents	Self-employed individuals or those whose spouses or common-law partners are self-employed	Return due on June 15, 2024*
	Other individuals	Return due on April 30, 2024
	For corporations having a Dec. 31, 2023 calendar year-end	Return due on June 30, 2024*
	For other corporations	Return due no later than six months after the end of the corporation’s taxation year
	Partnerships where partners are either individuals, trusts, professional corporations or a combination thereof; and Partnerships that are tax shelters	Return due on March 31, 2024*
	Partnerships where partners are corporate partners (not including professional corporations)	Return due five months after the end of the taxation year of the partnership
	Inter-vivos trusts with a Dec. 31, 2023 year-end	Return due on or before March 30, 2024*
	Testamentary trusts and Non-resident trusts with a filing obligation in Canada	Return due no later than 90 days after the trust’s year-end date
T661 Scientific Research and Experimental Development (SR&ED) claim	For self-employed individuals	Form due no later than 12 months after the filing due date of T1
	For corporations (except for non-profit SR&ED corporation)	Form due no later than 12 months after the filing due date of T2 or 18 months from the end of the taxation year
	For non-profit SR&ED corporation	Form due no later than six months after the end of the corporation’s taxation year
	For partnerships	Form due no later than 12 months after the earliest of all filing due dates for each member’s income tax return deadline for the tax year in which the partnership’s fiscal period ends.
	For trusts	Form due no later than 12 months after the filing due date of T3
RC313 Reportable Uncertain Tax Treatments (RUTT) Information Return	For corporations having a Dec. 31, 2023 calendar year-end that are required to disclose RUTT	Information return due no later than June 30, 2024*
	For corporations with a non-calendar year-end that are required to disclose RUTT	Information return due no later than six months after the end of the corporation’s taxation year
UHT-2900 Underused Housing Tax Return and Election Form	Certain taxpayers owning a residential property in Canada	Return for 2023 calendar year due on or before April 30, 2024 Return for 2022 calendar year due on or before April 30, 2024 due to the one-time extension allowed to the taxpayers Tax owing due on April 30, 2024

* As per the Canada Revenue Agency (CRA) guidance, when a due date falls on a Saturday, Sunday or public holiday recognized by the CRA, the return is considered filed and the payment is considered to be made on time if the CRA receives the filing, or if the payment or filing is postmarked, on or before the next business day. Therefore, in these instances, as the due date falls on a weekend or a federal holiday, the filing or payment deadline is the first working day following.

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This article was written by Farryn Cohn, Chetna Thapar, Mamtha Shree and originally appeared on 2024-02-27. Reprinted with permission from RSM Canada LLP.
© 2024 RSM Canada LLP. All rights reserved. https://rsmcanada.com/insights/tax-alerts/2024/canadian-tax-filing-and-payment-deadlines-for-middle-market-taxpayers-for-2024.html

RSM Canada LLP is a limited liability partnership that provides public accounting services and is the Canadian member firm of RSM International, a global network of independent assurance, tax and consulting firms. RSM Canada Consulting LP is a limited partnership that provides consulting services and is an affiliate of RSM US LLP, a member firm of RSM International. The member firms of RSM International collaborate to provide services to global clients but are separate and distinct legal entities that cannot obligate each other. Each member firm is responsible only for its own acts and omissions, and not those of any other party. Visit rsmcanada.com/about for more information regarding RSM Canada and RSM International.

The information contained herein is general in nature and based on authorities that are subject to change. RSM Canada LLP guarantees neither the accuracy nor completeness of any information and is not responsible for any errors or omissions, or for results obtained by others as a result of reliance upon such information. RSM Canada LLP assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect information contained herein. This publication does not, and is not intended to, provide legal, tax or accounting advice, and readers should consult their tax advisors concerning the application of tax laws to their particular situations. This analysis is not tax advice and is not intended or written to be used, and cannot be used, for purposes of avoiding tax penalties that may be imposed on any taxpayer.

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.

Authored by RSM Canada

Executive summary

The General Anti-Avoidance Rule (GAAR) allows the Canada Revenue Agency (CRA) to assess tax where a taxpayer follows the letter of the law but not its object, spirit, and purpose causing a misuse or abuse of the Income Tax Act (Act). After years of the GAAR provisions remaining mostly unchanged, in the 2023 Budget, the federal government proposed some substantial changes in response to recent jurisprudence and the government’s concern that tax planning was increasingly circumventing the current GAAR.

The amendments, which would broaden the scope of the GAAR, are currently before the House of Commons as part of Bill C-59. Once enacted, the expanded GAAR will apply retroactively to transactions occurring on or after Jan. 1, 2024, except for the penalty which will apply to transactions occurring on or after Royal Assent. 

The proposed expanded GAAR appears to reflect Canadian and global tax policy trends around addressing and preventing strategies that exploit perceived loopholes.

Summary of amendments

Preamble – The government proposes to add a preamble to guide the interpretation of the GAAR. It also seeks to clarify that the GAAR is meant to strike a reasonable balance between protecting the tax base, i.e., limiting aggressive tax planning, and taxpayers’ need for certainty in planning their affairs.

Avoidance transaction – For the GAAR to apply, there must be an avoidance transaction. As part of the amendments, the government proposes to capture additional transactions by lowering the threshold to qualify from the “primary purpose” test to “one of the main purposes” test. This lowered threshold now means that if one of the main purposes of the transaction was to obtain a tax benefit and the transaction (or series of transactions of which the transaction is part of) results directly or indirectly in a tax benefit, then it would be an avoidance transaction.

Economic substance – Under the amended rules in Bill C-59, an avoidance transaction that significantly lacks economic substance is an important consideration when determining whether there was a misuse or abuse of the Act.

The factors that may establish that a transaction lacks economic substance are:

• no substantial change in the opportunity for gain or profit and risk of loss of the taxpayer and non-arm’s length persons,
• the expected value of the tax benefit exceeds the expected value of the non-tax economic return, and
• the entire, or almost entire, purpose for undertaking or arranging the transaction or series was to obtain a tax benefit.

This list is non-exhaustive, and the government confirmed that these factors are to be read disjunctively – meaning that not all factors would need to be present to indicate a lack of economic substance. However, if the rationale underlying a provision is to encourage a particular policy, then it could result in a finding that there is no misuse or abuse in appropriate circumstances, for example, utilizing a tax-free savings account.

The economic substance requirement arguably already exists within the current GAAR case law, so it is debatable how much of an impact codifying this rule will have.

Penalty – The government opines that the current GAAR is not a sufficient deterrent to misuse or abuse of the Act as a taxpayer is simply denied the tax benefit. The amendments propose to introduce a penalty of 25% of the tax benefit obtained when the GAAR is found to apply, less any gross negligence penalties. The penalty can be avoided if the taxpayer can demonstrate that at the time the transaction was entered into, they relied on published administrative guidance or court decisions regarding an ‘identical or almost identical’ transaction such that it was reasonable to conclude the GAAR would not apply. This is called the ‘due diligence defence’ and as the CRA notes, it is a very high threshold. The penalty could also be avoided if the transaction was disclosed to the CRA under the mandatory disclosure rules (MDR) either voluntarily, or as required by legislation.

Reassessment period – The CRA normally has three or four years from the date of reassessment to reassess a taxpayer. The GAAR amendments propose a three-year extension to the normal reassessment period for GAAR assessments unless the transaction was disclosed under the MDR.

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This article was written by Sigita Bersenas, Mamtha Shree and originally appeared on 2024-02-06. Reprinted with permission from RSM Canada LLP.
© 2024 RSM Canada LLP. All rights reserved. https://rsmcanada.com/insights/tax-alerts/2024/tax-anti-avoidance-rule-changes-on-the-horizon.html

RSM Canada LLP is a limited liability partnership that provides public accounting services and is the Canadian member firm of RSM International, a global network of independent assurance, tax and consulting firms. RSM Canada Consulting LP is a limited partnership that provides consulting services and is an affiliate of RSM US LLP, a member firm of RSM International. The member firms of RSM International collaborate to provide services to global clients but are separate and distinct legal entities that cannot obligate each other. Each member firm is responsible only for its own acts and omissions, and not those of any other party. Visit rsmcanada.com/about for more information regarding RSM Canada and RSM International.

The information contained herein is general in nature and based on authorities that are subject to change. RSM Canada LLP guarantees neither the accuracy nor completeness of any information and is not responsible for any errors or omissions, or for results obtained by others as a result of reliance upon such information. RSM Canada LLP assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect information contained herein. This publication does not, and is not intended to, provide legal, tax or accounting advice, and readers should consult their tax advisors concerning the application of tax laws to their particular situations. This analysis is not tax advice and is not intended or written to be used, and cannot be used, for purposes of avoiding tax penalties that may be imposed on any taxpayer.

Various automobile deductions and taxable benefit rates are limited to amounts prescribed by the Department of Finance annually.

On December 18, 2023, the 2024, limits were announced as follows:

The limit on the deduction for non-taxable allowances paid by an employer to an employee using a personal vehicle for business purposes will increase in 2024 by 2 cents to 70 cents/km for the first 5,000 km driven and to 64 cents for each additional km. For Yukon, the Northwest Territories and Nunavut, the tax-exempt allowance will continue to be 4 cents/km higher, which is 74 cents for the first 5,000 km driven and 68 cents for each additional km.

The ceiling on the capital cost for CCA of most passenger vehicles will increase to $37,000 from $36,000, and the limit for zero-emission passenger vehicles will remain at $61,000.

The limit on leasing costs will increase to $1,050/month (from $950/month) for new leases entered into on or after January 1, 2024.

The maximum allowable interest will increase to $350/month (from $300/month) for new loans entered into on or after January 1, 2024.

The general prescribed rate used to determine the taxable benefit relating to the personal portion of automobile operating expenses paid by employers will remain at 33 cents/km. For taxpayers employed principally in selling or leasing automobiles, the rate will remain at 30 cents/km.

ACTION: Compare automobile allowances and other payments made against the limits to determine whether expenditures that do not reduce tax are being made.