We assist our clients with management, planning and tax compliance, sales taxes (GST/HST/PST and fees), corporate reorganizations, non-resident taxation, the preparation of federal and provincial tax returns for individuals, corporations and estates.
While sometimes legitimate tax planning is misconstrued to be tax evasion, the following provides a distinction between these two terms:
Tax Planning – In tax planning, a tax payer seeks to minimize payments by taking actions that are either permitted by the law or that are not expressly prohibited by the law. Such planning consists of a genuine arranging of one’s affairs openly and within the framework of the law so as to keep one’s taxes to a minimum.
Tax Evasion – According to Revenue Canada documentation, tax evasion is the deliberate attempt to deceive the taxation authorities by understating revenues, overstating deductions or any other activity to evade the payment of taxes. Such actions can result in a charge being laid in the criminal court under subsection 239(1) of the Income Tax Act.
Common Taxable Entities
The following list provides the most common taxable entities in Canada, you are strongly advised to contact our firm for current information:
(A) Individual or Persons (Form T-1) – All persons resident in Canada, employed in Canada, or carrying on a business in Canada are required to file a tax return and pay income taxes due. A full-time resident is taxed on his or her worldwide income for a full year. Normally, a person is deemed to be a resident of Canada if he “sojourned” in Canada in the year for an aggregate of 183 days or more (ITA 250(1)). Part-time residents are taxed on their worldwide income earned during the part of the year that they are resident in Canada. Partnerships and proprietorships are not treated as separate taxable entities from the owners, and therefore are not required to file a separate income tax return. The income of a partnership or proprietorship is taxed in the hands of the partners and proprietors as individuals.
(B) Corporations (Form T-2) – Any corporation that was incorporated or conducted business in Canada is required to file a tax return and pay any taxes due.
(C) Trusts and Estates (Form T-3) – A Trust, like a corporation is taxed as an individual. A trust that is residents in Canada is taxed subject to all the income generated by the trust. A non resident trust is taxable only on its Canadian source income. Note: The taxes payable are subject to international tax treaties negotiated by Canada and other countries to prevent the incidence of double taxation and tax evasion. In situations where there is conflict between the Canadian Income Tax Act and one of the international agreements, the terms of the agreement prevail.
Other commonly used information returns:
- T4: Reports the remuneration paid to employees by the employer.
- T5: Normally used by Banks & Financial institutions. Reports royalty, dividend, and interest payments.
- NR4: Reports amounts paid or credited to non-residents
- T600: Filed when cashing bonds.
- T2047: An election under subsection 85(1) for the disposition of eligible property to the corporation in exchange for a consideration that includes shares of any class.
- GST34: Except for businesses with over $1.5 million in annual taxable supplies that are required to file electronically, a GST/HST return may be filled using this form and the Canada Revenue Agency provides electronic filing options.