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U.S. Tax Tips
GILTI (Global Intangible Low Taxed Income)
There are a couple of developments on the GILTI front that readers may find interesting. First, last month the IRS issued final and proposed regulations involving GILTI and the high-tax exclusion. Second, one of Democratic U.S. Presidential nominee Joe Biden’s tax proposals is the doubling of the effective GILTI corporate tax rate from 10.5% to 21%.
To understand the potential impact of these, you first need to have a general understanding of what the GILTI provisions are meant to do and their current impact.
Revocable Living Trusts
It is a fairly common estate planning technique in the United States to utilize a revocable living trust (“RLT”) as part of a “United States person’s” estate planning. For U.S. estate tax purposes, a United States person would include a U.S. citizen and a U.S. domiciliary. What is not so common though, is the potential foreign impact when the underlying U.S. grantor moves to a foreign jurisdiction.
Economic Impact Payments – An update
In prior U.S. Tax Tips we discussed the requirements for qualified U.S. taxpayers to receive the Economic Impact Payment. The Economic Impact Payment (“EIP”) is part of the CARES Act and represents a pre-payment of a 2020 tax credit of US $1,200 per “eligible individual” and an addition US $500 per “eligible child.” Technically this credit will be claimed as part of their U.S. personal income tax return (if one is required to be filed). The payment is not limited to U.S. residents but includes “eligible individuals” who live outside the United States. Many of our clients have received their payments.
Tax Tips
New Trust Reporting Requirements Starting 2021
As part of the Canadian government’s efforts to combat money laundering, aggressive tax avoidance and tax evasion activities relating to trusts, enhanced income tax reporting requirements for certain trusts will be required for the 2021 and subsequent taxation years. The new rules also contain harsh penalties for knowingly fail to comply with the new trust reporting requirements or non-compliance due to gross negligence…
CRA Extensions v1.1
On July 27, 2020, the Canada Revenue Agency (the “CRA”) announced a further extension to the tax payment and filing due dates for certain taxes from September 1, 2020 to September 30, 2020. The extension applies to current year individual, corporate, and trust tax returns, as well as instalment payments. Interest will not be charged on these amounts if payments are made by the extended deadline of September 30, 2020. Whether or not full payment is required in order to receive this relief is unclear.
The Canada Emergency Wage Subsidy – The Cavalry Is Coming
The Canada Emergency Wage Subsidy (“CEWS”) legislation has been released and is now law. In general, the CEWS will reimburse eligible employers 75 per cent of the amount of remuneration paid to eligible employees (to a maximum benefit of $847 per week).
The legislation was prepared under less than ideal circumstances so it is not surprising that there are a number of questions and observations we hope the government will address. However, we can now provide more answers than in our April 7, 2020 Tax Tip.
Transfer Pricing Newsletter
Our Tax Books
Taxation of Trusts and Estates: A Practitioner's Guide 2019
Grace Chow, Ian Pryor
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Trusts and International Tax Treaties
Michael Cadesky
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Taxation at Death: A Practitioner's Guide 2016
G. Chow and M. Cadesky
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Towards greater fairness in taxation: A Model Taxpayer Charter
M. Cadesky, I. Hayes, D. Russell
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Taxation of Real Estate in Canada
Michael Cadesky
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In-Depth Articles
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The MLI: Getting Closer
by Henry Shew
Jul 31, 2019
On June 21, 2019, royal assent was given to Bill C-82 (An Act To Implement a Multilateral Convention To Implement Tax Treaty Related Measures To Prevent Base Erosion and Profit Shifting). This is another step in the progress of the multilateral instrument (MLI), which sits on top of and modifies bilateral tax treaties in order to curb tax treaty abuse and achieve the OECD’s BEPS goals. As the MLI gets closer to full implementation, it is useful to review the effective dates and examine a software tool provided by the OECD to analyze the impact of the MLI on any pair of countries…
Post Mortem Pipeline Fails For Non-Resident Beneficiaries
by Henry Shew
Feb 13, 2019
On the death of the owner of a private company, taxes are payable on the deemed disposition of shares, and taxes are payable again on funds being withdrawn from the company. Pipeline transactions seek to avoid this second level of tax; however, where a non-resident beneficiary is involved, pipeline transactions no longer seem to work after the enactment of amendments to section 212.1 on December 13, 2018 (Bill C-86). The stated purpose of these amendments is far different, so this effect may be unintended. There may be reason to hope for a fix through corrective legislation or CRA interpretation…
Safe Income May Vary Within Shares of the Same Class
by Henry Shew
Aug 31, 2018
The anti-surplus-stripping provision in subsection 55(2), which can recharacterize a dividend as a capital gain, is not of concern if the corporate group has sufficient safe income (retained earnings with certain adjustments). However, one peculiarity of the calculation of safe income is that safe income on hand is calculated on a share-by-share basis, based on the length of time that the shareholder has owned that particular share…
Investing with a Foreign Broker and Buying Canadian Shares
by Henry Shew and Randa Galloway
May 31, 2018
Foreign brokers can attract Canadian investors, perhaps because of low management fees. The foreign broker may purchase some Canadian shares (either on a foreign exchange or on the TSX). These shares should be treated as Canadian for the purposes of dividend tax credits and foreign tax credits (FTCs), but as foreign for the purpose of form T1135 filings; this counterintuitive treatment can lead to errors…
Withholding Tax on Capital Distributions to Non-Residents
by Henry Shew and Matthew Cho
Aug 31, 2017
It is generally understood that income distributions by trusts to non-resident beneficiaries are subject to part XIII withholding tax (paragraph 212(1)(c)), but many people are confused about whether to withhold on capital distributions by trusts to non-residents. Such distributions are common in, for example, family trusts where some family members have moved to the United States…
Taxation of Canadian residential real estate: what non-residents need to know
by Michael Cadesky, FCPA, FCA, FTIHK, CTA, TEP
Aug 24, 2017
This article provides a quick summary of important points concerning the taxation of Canadian residential real estate for non-residents of Canada.
The Canadian real estate market has attracted a lot of attention from foreign buyers. The Toronto and Vancouver residential property markets have had extraordinary price increases (for example a 30 per cent increase in Toronto in one year). This has caused governments at all levels, federal, provincial and municipal, to focus on the area. The result has been…
MNR v. KPMG: Professional Duty Overruled
by Henry Shew and Jody Wong
Feb 28, 2017
In Canada (National Revenue) v. KPMG LLP (2016 FC 1322), KPMG sought unsuccessfully to quash an order to disclose confidential information relating to its unnamed clients on the basis of CPA Ontario’s Code of Professional Conduct (“the code”)…
Multi-Level Farming Structures and the Capital Gains Exemption
by Henry Shew and Jody Wong
Aug 31, 2016
Taxpayers selling a farming (or fishing) business will want to have the assets that are being sold qualify as “qualified farm or fishing property” (QFFP) so that the sale will be eligible for the capital gains exemption of $1 million in 2016 under subsections 110.6(2) and (2.2) (the farming exemption)…
Section 119: Flawed Relief from Departure Tax
by Henry Shew
May 31, 2016
Section 119 is designed to provide relief from double taxation when an individual emigrates from Canada. Absent such a provision, an individual might be subject to tax under both part I and part XIII of the Act. Because relief does not exist in all situations, care should be taken when one is analyzing a departure situation…
Doing Business In Canada
by Michael Cadesky, FCA, FTIHK, TEP
Sep 03, 2014
This chapter is a general overview of Canadian tax principles and has been prepared by Cadesky and Associates LLP, a Canadian and International Tax Advisory firm. Comments should be regarded as a summary and should not be considered to be specific advise with respect to any issue.
