Canadian Private Company Tax Hot Topics November 2012 Zaheer Jamal

Canadian Private Company
Tax Hot Topics
Zaheer Jamal
Iain Morris
Bruce McGregor
November 2012
Tax Update - Agenda
1. Indirect Tax Update – Zaheer Jamal
2. Canadian Income Tax Update – Iain Morris
3. International Tax Update – Bruce McGregor
PricewaterhouseCoopers LLP
November 2012
2
Indirect Tax Update
Zaheer Jamal
604 806 7221
[email protected]
PricewaterhouseCoopers LLP
November 2012
3
Indirect Tax Update
Background – Current & Future
• BC and Ontario harmonized on July 1, 2010
• BC will de-harmonize & implement new PST April 1, 2013
• Quebec further harmonizes & moves to flat rate of 9.975% January 1, 2013
• Manitoba, Saskatchewan, and PEI currently PST systems; PEI harmonizes
April 1, 2013
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November 2012
4
Indirect Tax Update
Background – Canada Rates at April 1, 2013
-
YK
GST 5%
PST n/a
NWT - Nunavut
GST 5%
PST n/a
BC
GST 5%
PST 7%
AB
GST 5%
PST n/a
NL
HST 13%
SK
GST 5%
PST 5%
MB
GST 5%
PST 7%
*Nova Scotia HST rate will be lowered to14% on July 1, 2014, and 13% on July 1, 2015.
** Quebec (PQ) will no longer be based on base + GST but will move to a flat rate of 9.975% January 1, 2013
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PQ
GST 5%
QST** 9.975%
PEI
HST at 14%
ON
HST 13%
NS*
HST 15%
NB
HST 13%
November 2012
5
Indirect Tax Update
Background – BC New PST
• BC will operate under a 7% PST and 5% GST
• ‘All permanent exemptions retained’, with administrative enhancements
• Regulations to be released late 2012
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November 2012
6
Indirect Tax Update
BC - New PST
• BC PST is similar to the old BC SST but ‘beefed up’
• New provisions – hotel room tax, GAAR
• New definitions – accommodations, affixed machinery
• Key definitions are enhanced - fair value, purchase and sale, use, vendor
• Software has been excluded from the definition of tangible personal property
(“TPP”), and is now taxed separately
• Taxable services definition includes a ‘related service’ which, subject to
certain exclusions, is any service provided in relation to TPP
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November 2012
7
Indirect Tax Update
BC - New PST
• Registration begins January 2, 2013 (Bulletin PST 001)
• Transitional Rules discussed in Notice 2012-010
• Under common law, vendors are required to register if they are carrying on
business in BC
• BC PST Act broader in scope:
o Vendor sells/leases taxable TPP, service or software to final user in the
ordinary course of business in BC
o Person who carries on business (“COB”) in BC
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November 2012
8
2012
Nov Dec
Jan
PST Transitional Timeline
2013
Feb Mar Apr May Jun
Jul
Aug
Sep
New PST Regulations
Jan 2, Registrations opens
BC’s Outreach Program
Business Transition
New PST Reviews for 12 months
Old PST Audits Open Until June 2014
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9
Indirect Tax Update
BC - New PST
• What you need to do now:
o Review Regulations in detail for exemptions
o Ensure relevant internal group tasked with key responsibilities
o Systems changes – not just a return to the old PST
o Budgeting should incorporate changes
o Contracts, invoices, web site information
o Fixed price contracts – whose responsibility?
o Capital Acquisitions
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November 2012
10
Canadian Income Tax Update
Iain Morris
604 806 7211
[email protected]
PricewaterhouseCoopers LLP
November 2012
11
Canadian Tax Update
What’s new?
• Eligible dividends – personal taxes increased in 2012
• Employee profit sharing plans (EPSPs) – new tax for certain contributions
made after March 28, 2012
• Retirement compensation arrangements (RCAs) – anti-avoidance rules
expanded
• Thin capitalization rules – 2-to-1 debt-to-equity ratio decreasing to 1.5-to-1
for taxation years beginning after 2012
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November 2012
12
Canadian Tax Update
What’s new?
• Scientific research and experimental development (SR&ED)
o 20% investment tax credit (ITC) decreasing to 15% for taxation years ending after 2013
o Capital expenditures no longer eligible for SR&ED deduction or ITCs after 2013
o Overhead proxy rate reduced in stages from 65% to 55% after 2012
o SR&ED contract payments eligible for ITCs reduced in some cases after 2012
o Program to be reviewed
• CRA Hot Topics
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November 2012
13
Canadian Tax Update
Combined Corporate Income Tax Rates
General BC% Small Business BC Small
BC%
Business
Threshold
2011
26.5
13.5
500,000
2012
25
13.5
500,000
2013
25*
13.5*
500,000
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November 2012
14
Canadian Tax Update
Corporate Income Tax Rates - Integration
Eligible
2012 & 2013
Non-eligible
2012 & 2013
Gross up rates
38%
25%
Tax credit rates
Federal
Provincial
15.02%
10%
13.33%
3.40%
25.78%
33.71%
Effective individual
top marginal rate
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November 2012
15
Canadian Tax Update
References
www.pwc.com/ca/publications
• Tax Facts and Figures
• World Wide Tax Summary
• Tax Memos
• Articles including budget commentaries
• Wealth and Tax Matters for individuals and private companies
• Year-end tax planner
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November 2012
16
International Tax Update
Bruce McGregor
604 806 7079
[email protected]
PricewaterhouseCoopers LLP
November 2012
17
International Tax Update
• Canadian International Tax Developments
o New draft legislation
• US Tax Developments
o Sunset of specific tax provisions on December 31, 2012
o FATCA for Non-Financial Foreign Entities
o Debt vs. Equity Cases
o State income and sales tax
o IRS Form 8937 – Report of Organizational Actions Affecting Basis of
Securities
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November 2012
18
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