Archive: Business Tax

Quebec Sales Tax Registration

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The recent Quebec Budget introduced significant revisions to the QST legislation to apply to the taxation of the digital economy and e-commerce in Quebec.

More specifically, effective January 1, 2019, non-residents of Canada will be required to register for QST and charge QST to specified Quebec consumers on sales of digital services and incorporeal moveable property.  This change will likely require non-resident media companies such as Netflix and iTunes to register for QST and charge QST to many Quebec consumers on subscriptions and other fees.

Further, effective September 1, 2019, residents of Canada but non-residents of Quebec will be required to register for QST and charge QST to specified Quebec consumers on sales of corporeal moveable property (such as goods), as well as sales of digital services and incorporeal moveable property.  As a result, a resident of Canada that is not resident in Quebec that sells goods to Quebec specified consumers through a website (or other means) may now be required to register for QST.  Pursuant to the current rules however, QST registration (and thus the collection of QST) may not have been required for such sales of goods by a non-resident of Quebec on the basis that the non-resident did not have a significant presence in Quebec.

The term “Quebec specified consumers” refers to a person who is not registered for QST purposes and whose usual place of residence is in Quebec.  Accordingly, suppliers that are only making sales to persons that are registered for QST purposes will not be required to register pursuant to the new rules.

Registration under the new rules will be pursuant to a different chapter of the QST legislation, with the result that any person registered pursuant to the new rules will not be entitled to claim any input tax refunds in respect to any QST paid in the course of their commercial activities.  Accordingly, any persons required to register pursuant to the new rules may wish to consider voluntarily registering pursuant to the ‘old rules’ to thus allow ITRs to be claimed.  However, registration and filing QST returns pursuant to the new rules will be streamlined and simplified.

In addition to the above changes, digital platforms will also be required to be registered for QST where the platform provide services to a non-resident supplier that enables the platform to make supplies of incorporeal movable property or services to specified Quebec consumers where the platform controls the key elements of transactions (such as billing, terms and conditions, and delivery).  This will result in certain conduits or other parties that are not necessarily the vendor of the property or services being required to charge and collect QST on certain transactions.

Registration pursuant to the new rules will not be required where the total taxable supplies made to consumers are less than $30,000 in the 12 previous months.  Further, all QST returns filed by registrants pursuant to the new rules are required to be filed quarterly. Lastly, the new rules provide that QST may be paid in certain currencies, including USD and Euro, provided the registrant is paid in that currency.

Vern Vipul, LL.B., M.Tax

Senior Associate, Commodity Tax

Segal LLP

New Quebec sales tax and e-commerce

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This article is from the quarterly Canadian Overview, a newsletter produced by the Canadian member firms of Moore Stephens North America. These articles are meant to pursue our mission of being the best partner in your success by keeping you aware of the latest business news.

Measures relating to the Quebec sales tax and e-commerce

The rise of e-Commerce created QST collection difficulties for suppliers with no physical or significant presence in Quebec. This situation negatively affected Québec’s supplier competitiveness, and it’s shorting the provincial government necessary revenue. The policy response to this was the Mandatory Registration System (MRS).

About the MRS

In its 2018-2019 budget, the Quebec government introduced the MRS (also known as the “specified registration system”) for non-resident suppliers. The rules require non-resident suppliers to collect and remit the QST on taxable incorporeal movable property and services supplied in Québec to people who live in Québec but who are not registered for the QST. Moreover, Canadian suppliers will be required to collect and remit QST on corporeal movable property supplied in Québec to a Quebec consumer.

To establish residency and location, non-resident suppliers can refer to a customer’s billing address, IP address or banking information. And customers who falsify this information could face stiff penalties.

MRS and eCommerce

Digital property and services distribution platforms (“digital platforms”) are now required to register under the MRS in cases where the digital platform controls the key elements of transactions with specified Québec consumers (billing, transaction terms & conditions and delivery).

Mandatory registration will apply to non-resident suppliers (NRS) when the value of taxable goods and services exchanged in Québec exceeds $30,000 a year. As NRSs registered under the new MRS are not subject to other QST provisions, claiming an input tax reimbursement is not possible. However, an NRS can register under the general QST if it meets registration requirements.

The Québec government’s goal is the make the MRS simple and easy to use. The return must be filed electronically on a quarterly basis and the remittance can be paid in USD and EURO.

The MRS comes into effect on January 1, 2019, for non-resident suppliers outside Canada, and September 1, 2019, for non-resident suppliers located in Canada.

For more information about the MRS, what it means for your business and how it may or may not affect how you do business, book a consult with us and we’ll get you prepared for continued success in Québec.

Contributed by Benoit Vallée from Demers Beaulne. This piece was produced as a part of the quarterly Canadian Overview, a newsletter produced by the Canadian member firms of Moore Stephens North America.

Cannabis Update

cannabis

This article is from the quarterly Canadian Overview, a newsletter produced by the Canadian member firms of Moore Stephens North America. These articles are meant to pursue our mission of being the best partner in your success by keeping you aware of the latest business news.

Cannabis Update

On June 19, 2018, the Senate passed Bill C-45, the Cannabis Act, which legalizes the consumption of recreational cannabis across Canada. The Act comes into force on October 17, 2018.

Consumption of cannabis will continue to be forbidden in public places, workplaces and vehicles, with some possible exemptions for people who consume marijuana medicinally.

So what does this mean for employers?

Impairment in the workplace is still unacceptable

While employers have a legal duty to accommodate medical cannabis, there is no such obligation with respect to recreational cannabis. It should be treated in the same manner as alcohol or other drug-related use or impairment in the workplace.

Accommodating medical cannabis is still recommended

Employers have a responsibility to take every reasonable precaution in the interests of employee safety. This includes accommodating an employee’s disability to the point of undue hardship. However, employers can (and should) ask for supporting medical documentation addressing medical cannabis use during work hours, including but not limited to a copy of the licensing documentation.

However, a cannabis prescription does not give workers the right to compromise their safety or the safety of others. If the essential duties of a position are safety-sensitive, no amount of impairment is tolerable. If the essential duties of an employee’s position are not safety-sensitive, some degree of impairment may be acceptable. Employers will need to prove tangible safety risks to refuse accommodation.

Also, employers are not obligated to let employees smoke cannabis in their workplace’s designated smoking area. If an employee needs to smoke prescribed marijuana during the workday, a place and time should be established to not expose other employees to cannabis smoke.

Finally, dependence on recreational marijuana may be a disability.  Employers should encourage their staff to report any cannabis addictions they may develop so that they can be accommodated in compliance with the Human Rights Act.

Drug and Alcohol Policy – The Next Steps

Employers are encouraged to be proactive by reviewing and updating their policies and procedures regarding cannabis use. If intoxication in your workplace poses a risk to safety, you likely already have a policy in place to forbid consumption of any substance that causes impairment at work.

Remember that testing for substances is acceptable only in limited circumstances. Any related policy should be reviewed by a lawyer, as should any cannabis-related termination to ensure human rights requirements are met.

Key Canadian Cannabis Contacts

Contributed by Chantal Roy from Marcil Lavallée. This piece was produced as a part of the quarterly Canadian Overview, a newsletter produced by the Canadian member firms of Moore Stephens North America.

Foreign Corporations in Canada: Permanent Establishment and Taxes

By Howard Wasserman, Principal—Taxation at Segal LLP 

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Any non-resident that has sales in Canada is taxable in Canada on the profit on those sales.

A number of treaties state that a non-resident corporation is only taxable in Canada if the non-resident corporation has a permanent establishment in Canada: a fixed place of business through which the business of a resident of one country is carried on.

In the Canada-US tax treaty, a permanent establishment is defined to be a place of management, a branch, an office, a factory or a workshop. Building sites or installation projects are also considered permanent establishments if they last more than 12 months. So too are people in Canada habitually exercising the authority to conclude contracts in the name of the non-resident.

And what’s not a permanent establishment?

1. The use of facilities for storage display or delivery of goods.
2. The maintenance of a stock of goods.
3. The purchase of goods or merchandise or the collection of information.
4. Advertising.
5. The use of a broker commission agent or any other independent agent.

Tax implications of permanent establishments

Once a permanent establishment has been created, the non-resident is taxable only on the profits earned in Canada, not the revenues. This can be calculated using foreign expenses that relate to the activity in Canada. For example, a non-resident corporation could allocate some management or administration costs if they can be clearly tied to the activities in Canada.

Additionally, the non-resident corporation must meet Canadian filing requirements even if no taxes are payable. More specifically, the foreign corporation should file schedule 91 and schedule 97 that would be attached to the jacket of a T2 corporate tax return. In this filing, the non-resident corporation is stating that the corporation earns Canadian revenue but is not taxable in Canada because there is no permanent establishment.

Tax implications of doing business in Canada in general

All payments to the non-resident corporation doing business in Canada are subject to 15% withholding tax on the work done in Canada. If it has been determined that the non-resident corporation is not taxable in Canada, then the non-resident corporation can file the treaty-based tax return and request a refund of the withholding taxes.

There is an opportunity to request a waiver for the 15% withholding tax on work done in Canada before the work commences. In order to get a waiver, a submission must be made to CRA, which often includes the contract related to the work being done in Canada. This gives CRA an opportunity to examine the situation to determine if the foreign corporation is taxable in Canada.

If the non-resident corporation receives a waiver, the corporation can give this waiver to its customers to ensure the no withholding tax is payable. Even if a waiver is received, the non-resident corporation must still file a treaty-based Canadian income tax return because of the Canadian revenues earned.

There are a number of issues to be dealt with on carrying on business in Canada, but the first one is always the determination of whether the company owes Canadian corporate income taxes. For help or advice, you can contact me directly.

Avert Penalties, Confirm Customer GST Registrations

When your company sells a commercial property, one party must pay a Goods and Services Tax (GST). And occasionally, the burden of responsibility can create a problem. If the buyer isn’t registered for GST, it’s your company’s responsibility to collect the GST on the sale and remit it to Canada Revenue Agency (CRA).

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The GST Advantage

Even if your company qualifies as a small supplier that may not have to register for GST, it can make economic sense to get a number.

Generally, a business doesn’t have to register for GST if it is a sole proprietorship, partnership, or corporation whose total taxable revenues before expenses are $30,000 or less annually ($50,000 for such public service bodies as charities, non-profit organizations, municipalities, or universities.)

However, registration may give your company a tax advantage: It can claim tax credits for the GST/HST paid on such operating expenses as commercial rent, utilities, office supplies, as well as meal and entertainment expenses, reimbursements to employees or partners and capital property. And that can lead to a GST refund.

But if the buyer is registered, the responsibility shifts to the buyer who must report the tax and can claim any available Input Tax Credits to offset the GST (see right-hand box). On the face of it, this is an uncomplicated transaction and your company is in the clear.

But a Tax Court ruling suggests that you might want to double check the accuracy and validity of GST numbers to avoid an unpleasant surprise.

In the court case, the buyer of a commercial property claimed the company was registered for GST and provided a number. During an audit of the sale, however, the number was discovered to be invalid. The CRA had cancelled the purchaser’s registration.

But it wasn’t the buyer who wound up having to pay the GST — it was the seller. The Tax Court ordered the seller not only to pay the tax that should have been collected, but also to pay penalties and interest, despite the buyer’s misrepresentation in the deed of the sale about the validity of its GST number. (Lee Hutton Kaye Maloff & Paul Henriksen v. The Queen)

In theory, of course, the seller could bring a civil court action against the buyer to recover the GST it was forced to pay. In practice, however, that would mean incurring more expenses for legal fees. Moreover, the seller would still be liable for the penalties and interest. The Excise Tax Law doesn’t provide for the recovery of those costs.

A simple way to avoid this problem is to request CRA confirmation of a purchaser’s GST registration status.

There are other tax and GST issues involved in the sale of real estate and other commercial goods, so consult with your professional advisor before your company completes a major sale to make sure everyone understands the consequences of the transaction.

Properly Account for Asset Transfers

lores_hr_employee_business_man_reading_paper_work_amIf you are incorporating a partnership or a sole proprietorship, you will likely transfer assets. When you do that, take precautions so you don’t pay too much in taxes.

The transfer of physical assets into a corporation is considered a disposition at fair market value (FMV). You cannot assign little or no value to the assets. If you do, Canada Revenue Agency can later determine that you not only owe taxes but also must pay penalties and interest. Transfers of assets can generate gains or losses, and the tax treatment depends largely on whether the property has been previously used in a business.

Income Taxes

Gains: The transfer of assets that were not previously used in a business will generally produce capital gains, in which case fifty per cent of the difference between FMV and the original cost will be taxable income.

In cases where the property had already been used in a business, the transfer is taxed in two steps:

1. The gain is first accounted for as a recapture of previously claimed Capital Cost Allowance (CCA) and taxed as business income.

2. If the FMV of the asset exceeds the original purchase price plus improvements, the excess will be a capital gain.

Losses: If an asset was not already used in a business, a loss from the transaction won’t be deductible because it will be considered a loss on a personal-use asset.

Property that was used in a business can generate two types of losses, depending on the nature of the asset. For example, land will produce a deductible capital loss while buildings vehicles, equipment or tools will produce a terminal loss.

Stop-loss rules may apply when transferring assets. Consult with your accountant before transferring any assets.

Section 85 Elections: To avoid taxes immediately on asset transfers, you can make an Election on Disposition of Property by a Taxpayer to a Taxable Canadian Corporation. This allows many, although not all, assets to be transferred to a corporation without triggering taxes.

The corporation is deemed to have acquired the assets at the original cost and to have taken Capital Cost Allowance in prior years. If the corporation later disposes of the assets, it will add the CCA recapture to income and either pay a capital gains tax, deduct a terminal loss or claim a capital loss, depending on the situation.

Excise Taxes

The Excise Tax Act allows for a tax-free transfer of the assets of one business to another, as long as both are GST/HST registrants. You must file an Election Concerning the Acquisition of a Business or Part of a Business.

Personal assets not used for business purposes before transferring them to a corporation or using them in a proprietorship aren’t subject to GST/HST on the transfer. These assets may qualify for input tax credits when the business starts to use them. The most common example of this is when you start to use your personal vehicle for commercial purposes.

The tax implications of asset transfers can be complicated. Talk to your accountant about the transaction before you incorporate. Waiting until it’s time to file a tax return could cost you money.

When Expectation Becomes Intention

Owning rental property has long been a popular investment, particularly when losses from the property can be deducted against other income. However, Canada Revenue Agency (CRA) sometimes attacks rental-related expenses and denies the deductions.

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The Landmark Cases Stewart v. The Queen.

The taxpayer invested in four condominium units and the investment had no element of personal use.

He incurred losses from the beginning because the purchase was financed almost entirely with debt and he had significant interest expenses. Losses were projected to continue for up to 10 years. The CRA disallowed the losses using the “reasonable expectation of profit” test, arguing there was no source of income. The deduction for interest expenses was also disallowed.

The Supreme Court of Canada ruled that Stewart was entitled to deduct his losses since his rental property lacked any element of personal use and was clearly a commercial activity.

Walls v. The Queen. A limited partnership invested in a warehouse business. The partnership paid service charges, management fees, and 24% annual interest on the purchase price of $2.2 million.

The taxpayers then deducted their share of the losses. The CRA again disallowed the losses based on real expectation of profit but the Supreme Court ruled:

” . . . there was no evidence of any element of personal use or benefit in the operation. Where, as here, the activities have no personal aspect, reasonable expectation of profit does not arise for consideration. Although the respondents were clearly motivated by tax considerations when they purchased their interests in the partnership, this does not detract from the commercial nature of the storage park operation or its characterization as a source of income.”

Over the years, a number of special provisions have been introduced into the Income Tax Act to limit taxpayers’ ability to claim rental losses. For example:

Regulation 1100(11). Under this provision, a rental loss can’t be created or increased by claiming the Capital Cost Allowance (CCA). All rental properties owned are pooled for purposes of this regulation. The result is that a taxpayer can only claim the CCA if total rental revenue exceeds total rental expense, and then, only enough to reduce income to zero.

Subsection 13(21.1). When land and buildings are sold together, any terminal loss on the building is reduced to the extent of any capital gain on the land. So, you can’t manipulate the amount of the deduction of a terminal loss at 100% and report a capital gain taxable at 50%.

The tax agency also has a long history of denying rental losses due to a taxpayer having no “reasonable expectation of profit”. But in two Supreme Court rulings described in the right-hand box, the court struck down the expectation of profit test and said the tax agency should use a two-pronged approach to losses:

    • If the taxpayer’s activity is “undertaken in pursuit of profit,” the income is deemed to be from a business or property and losses will be allowed. Where there is no personal element, the CRA shouldn’t second guess a taxpayer’s business decisions.

 

  • If the enterprise has a personal element, the tax auditors must consider whether the taxpayer had an “intention to profit” from a business operated in a “sufficiently commercial manner.” (Stewart v. The Queen, 2002, SCC 46 and Walls v. The Queen, 2002, SCC 47).

While “sufficiently commercial” wasn’t defined, all circumstances surrounding the activity should be considered in making that determination.

So Finance Canada added a more restrictive and onerous test aimed at eliminating many real estate investments (including tax shelters). A loss on a property is only allowed if it is reasonable to assume that the taxpayer will realize a cumulative profit from the property during the time the taxpayer has held, or can be reasonably expected to hold, the property.

In addition, the expected profit has to come from renting the property. It can’t come from a capital gain due to the increase in value of the property. The legislation specifically provides that there is no source of income from capital gains, and therefore no profit from a capital gain.

The test is to be applied every year a loss is deducted. On the other hand, if the property starts to make a profit – even if there previously had been no reasonable expectation of profit – the profit will be taxable in the year it is made. (It doesn’t appear a taxpayer will be allowed to go back and amend prior years’ returns to deduct losses not previously deductible.)

If you have leveraged investments in real estate where the rental revenue isn’t expected to exceed the expenses for many years, consult with your advisor and review these four points:

1. Have there been profits or losses in the past?

2. How does your training and background affect the situation?

3. What is your profit intention?

4. Is there any personal element? For example, do you or family members use or reside on the property?

Is a Limited Partnership Right for You?

When you start a business, a key first step is to choose the form of business organization that most suits your business plan. Two of the structures you will likely consider are the corporation and the limited partnership.

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Questions to Help You Decide

Deciding which type of business structure to use can be difficult.

Some questions to ask when choosing among various business structures include:

1. How easy and costly is the form of business structure to organize?

2. How much capital will the business need?

3. How much capital will come from owners and how much debt financing will be needed?

4. What are the tax implications of each business structure?

5. How much personal involvement should the owners have in controlling and managing the business?

6. How much risk and liability for the business should the owners assume?

Discuss these questions and other aspects of setting up a business with your accountant.

Both entities are alike in that they each can be owned by several people. But that is typically where the similarities end. Partners in a limited partnership face issues that are diametrically different from those shareholders of a corporation must deal with and the main reason many people choose that form of partnership is tax liability.

Limited partnerships are often used where investors want the special tax treatment without incurring personal liability for all the partnership’s debts.

Limited partnerships generally are taxed on a flow-through basis. That means the partnership doesn’t pay tax on its income and doesn’t file an income tax return. Instead, the partners file their own income tax returns to report their share of the partnership’s net income or loss.

Any income the limited partnership earns is directed to and taxed in the hands of the partners. As well, any losses are allocated among the partners and may become deductions for each partner.

Limited partners are restricted in their ability to deduct losses and in aggregate can’t deduct losses that exceed the amount they have invested. This restriction can be less than the amount invested if the partner bought their interest from a former partner and not the partnership.

This requirement for each partner to report his or her share of the partnership’s net income remains whether the share of income was received in cash or as a credit to a capital account in the partnership.

Limited partnerships are used, for the most part, as a method for structuring tax driven investment ventures. If the investment is tax driven, the limited partnership may have to register with the Canada Revenue Agency as a tax shelter.

In a corporate structure, on the other hand, the company is a separate taxable entity and pays its own taxes. Profits paid to shareholders as dividends are also taxable. This double taxation is one of the disadvantages of forming a corporation.

Other advantages of limited partnerships include:

Liability: When a limited partnership is formed, one of the partners (usually a corporation with no assets, formed and controlled by the promoter of the investment for this sole purpose) is designated as the general partner and all other investors are usually designated as limited partners. The partnership agreement then makes the general partner responsible for managing the business of the partnership. The limited partners are simply silent investors with little or no say in the business activities of the partnership.

In the event the limited partnership is unable to meet its obligations, only the general partner will be liable for the debts of the partnership. The liability of a limited partner would be limited to the amount of capital the limited partner invested in the partnership. However, if the limited partner participates in the management of the partnership, that partner would lose his or her limited liability and may become liable for the debts of the partnership, the same as the general partner.

In a corporation, shareholders can be held liable only for the amount that they invested in the company.

Management: In partnerships, the management structure is decided by the partners. Legally, a corporation must be managed by a board of directors elected by the shareholders.

Life Cycle: Limited partnerships depend on the active participation of the general partner and contributions from the others. As a result, the entities’ life cycles are limited. When the general partner dies, the partnership terminates.

Limited partnerships are usually created for one business reason or to invest in businesses. It is often difficult to transfer ownership because it is generally necessary to create a new partnership.

A corporation, on the other hand, has a virtually unlimited life cycle. Because ownership is spread among shareholders, it can be easily transferred. And if a manager dies or quits, the company can easily recruit a new one.

Record-keeping: A partnership typically isn’t required to keep records of its meetings and other administrative activities. A corporation must keep those records of these activities.

Structure: Limited partnerships must have at least one general and one limited partner. The general partners control the daily management while the limited partners generally have little control over management decisions and primarily finance the organization.

Corporations are separate legal entities usually owned by one or more people or other organizations. Typically the owners, or shareholders, elect a board of directors. That panel, in turn, hires a management team.

Essentially the board runs the organization in the interest of shareholders. To do this, it follows the company’s bylaws, which are the rules that govern how the business should be managed.

Consult with your advisor, who can help you decide the best business structure for your needs.

2016 Year-End Tax Planning Letter

We are coming to the end of 2016, and our tax team has been busy compiling a list of tax planning ideas that can increase tax savings for yourself and family members.

The topics we cover include:

  • Changes in tax rates for individuals and corporations
  • Eligible capital property
  • Trust & estates
  • Key dates

To assist you with this, click here to view the Year-End Tax Planner which includes some ideas you may want to consider.  Your Segal advisor can assist you in determining which of these ideas make sense to you.

Please do not hesitate to call your Segal advisor with any questions about this communication

Recoup the Cost of Work-Related Courses

When you or an employee returns to the classroom to follow work-related courses or obtain a higher degree, some of the costs can be deducted and others are eligible for tax credits.

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Other Considerations

Other factors to consider and discuss with your accountant include:

The tuition tax credit may be used for fees to take exams required to obtain a professional status recognized by federal or provincial statute, or to be licensed or certified in order to practice a profession or trade in Canada. Ancillary fees and charges are also eligible for the credits.

You may deduct tuition fees for auditing courses where you attend lectures but don’t take exams or receive credit.

You may claim a tax credit for transit passes generally totalling at least one month’s duration.

You may claim a GST credit if you are eligible.

In general, expenses are not deductible if they are eligible for tuition, education or other tax credits, if they are capital expenditures that produce a lasting benefit to the taxpayer or if they are personal or unreasonable. You could not, for example, deduct the costs when:

  • Medical general practitioners train to qualify as specialists;
  • Lawyers take an engineering course unrelated to their legal practice, or
  • An employee takes university or other courses leading to a degree or other certificate unrelated to your business.

Employers who pay for or reimburse employees for their tuition may deduct reasonable amounts as a business expense regardless whether the business or the individual benefits from the course. If your company provides an employee or former employee with a scholarship or bursary on the condition that the employee will return to the business, the amount paid is considered employment income.

Employees incur taxable benefits when courses are business-related and not directly related to your business (e.g. stress management, employment equity, first aid, and language courses) or when the employee develops personal interests or technical skills not related to your business.

Tax Deductions

You may deduct as a business expense the costs related to courses and training that maintain, update or upgrade an existing skill or qualification. For example, the following costs would generally be tax-deductible:

  • Professional development courses taken as required or recommended by a professional body to maintain professional standards;
  • Tax courses taken by lawyers or accountants who are qualified to do tax work, whether or not they have previously been involved in such work, and
  • Courses on electronic ignition taken by the owner of an automobile repair shop.

Eligible expenses include travel, food and beverages and lodging. They do not include tuition and other costs for which there are tax credits. Thus, if you or an employee plans to obtain an MBA, you could not deduct the costs, but they would generally be eligible for tax credits.

Tax Credits

In general, tax credits may be claimed for tuition fees if they:

  • Total more than $100 at a post-secondary school level paid to a university, college, or other educational institution in Canada;
  • Total more than $100 for a student who is at least 16 years old at the end of the taxation year with skills for (or improve the student’s skills in) an occupation, paid to an educational institution in Canada certified by the Minister of Human Resources Development;
  • Total more than $100 at a university, college or other educational institution in the United States to which a student living near the Canada-U.S. border commutes; or
  • Are for full time courses at a university outside Canada that last for at least 13 consecutive weeks and lead to a degree.

You cannot claim any amount less than $100 for the year or the costs of books, room and board, or student association fees. Otherwise, you can claim total fees. This could also include the cost of courses and seminars related to your work. Individuals taking courses as a condition of their job can claim the costs as an employment expense rather than as a tax credit.

The tuition tax credit may be claimed whether the students or the company pays the fees. However, if your business pays for or reimburses employees for all or a portion of their tuition, they may claim the credit only if the amount is included as a taxable benefit.

An education amount tax credit and a textbook credit can be claimed for each whole or part month in which a taxpayer was enrolled in a qualifying program. The amount of credits varies depending on whether the person was a full-time or part-time student. Individuals may claim the full-time credit if they attended only part-time and are eligible for the disability tax credit or would be eligible for the credit except that their disability is not severe and prolonged.

Unused Credits and Lifelong Learning

Unused tuition, education and textbook credits may be carried forward indefinitely to offset future income, or may be transferred to a spouse or common-law partner or to a parent or grandparent of you or your spouse or partner. The transfer of costs should not exceed more than the individuals can use on their tax returns. Any excess costs then can be carried forward.

If you have a Registered Retirement Savings Plan (RRSP), you may withdraw money tax-free to pay for qualifying full-time education and training for yourself or your spouse or common-law partner. However, you cannot withdraw money for both at the same time. If you are disabled, you can use the plan for both full-time and part-time education and training.

You may participate in the Lifelong Learning Plan as many times as you want, but you may not begin a new plan before the end of the year in which all previous withdrawals are repaid.

Consult with your accountant for more details.