·     If a corporation has unpaid corporate income taxes, and a dividend is paid to the shareholder(s) of record, then the Canada Revenue Agency can recover that dividend paid  from the shareholder(s)  who received it using subsection160(1) of the Income Tax Act.

·    Businesses often want to retain independent contractors instead of hiring employees to avoid payroll taxes. The Canada Revenue Agency recognizes four tests for the determination of the nature of the work relationship between a business entity and the worker who provides services to it, as established by the Wiebe Door case.  They are: “control” test, “ownership of tools” test, “chance of profit or risk of loss” test, and the “integration” test. The risk of taking the position that a person is not an employee is that the minister will be reassess the business and as a result it will have to pay amounts that should have been withheld, as well as penalties and interest. If you and/or your business is involved in this position call us, we can help.

·    A Canadian employee cannot simply resign his employment and start billing for his services through a corporation.  Such an arrangement may be considered to be a “personal services business” with the result that most corporate expenses will be disallowed.

·    Incorporating a business offshore and running business operations through it will not avoid Canadian income taxation if the mind and management of the corporation are based in Canada.  That corporation will be considered to be resident in Canada, and fully taxable in Canada.

·     Subsection 227.1(4) of the Canadian Income Tax Act provides that no action for director liability for unpaid source deductions of a corporation may be commenced more than 2 years after a director ceased to be a director of the corporation.

·    A voluntary disclosure (tax amnesty) application can be submitted to the Canada Revenue Agency (Canadian tax department) for an individual even if the individual is a shareholder or director of a corporation and the corporation is the subject of a request to file returns or an audit.

·    The position of the Canada Revenue Agency (Canadian tax department) is that a voluntary disclosure (tax amnesty) must be substantially complete in order to be accepted as valid.  However a taxpayer must only make his reasonable best efforts to ensure that his disclosure is substantially complete, rather than meet some arbitrary test as to what constitutes completeness.   

·    As a result of the changes to the rules relating to taxable automobile benefits, CRA has indicated that they will become more stringent in requiring automobile logs to document business versus personal use of automobiles. This puts more pressure on directors to maintain proper mileage log journals. If you are being reassessed and or under current audit we can help.

·    In the case of Boucher v. The Queen, 2004 FCA 46, the Federal Court of Appeal held that penalties can be applied for unreported income even if the unreported income is offset by losses of previous years.

 ·   In the case of Boucher v. The Queen, 2004 FCA 47, the Federal Court of Appeal held that disputes regarding whether source deductions were withheld on behalf of a taxpayer need to be adjudicated in the Federal Court of Canada rather than the Tax Court.

·    Once CRA  commences a criminal investigation of a taxpayer they must act in accordance with the Canadian Charter of Rights and Freedoms.

·     If you fail to keep proper books and records CRA may do a net worth assessment, which looks at the increase in your assets over time and assesses income tax on that increase.   We at Hoffman & Associates have experience in handling net worth assessments, and can assist you in your representation with one specific goal in mind, compliance and minimization of tax.

·    Canadian residents are required to report worldwide income from all sources for Canadian Income Tax purposes. If you fail to do this, or if you choose an offshore structure that violates the intention or spirit of the Canadian Income Tax Act, you could face a battle with the Canada Customs and Revenue Agency, and if you lose you will be subject to interest and penalties.

·    If you disagree with the tax department' income tax assessment you need to file a Notice of Objection to protect your rights. We act on behalf of taxpayers in tax litigation including filing a Notice of Objection for individuals or corporations. Contact us - we can help.

·    If you owe money to the tax department and can't pay the full amount, file your Canadian income tax return on time to avoid the late filing penalty and be sure to negotiate an acceptable payment arrangement with them so that they don't seize any of your assets. We will act on behalf of taxpayers in negotiating a repayment schedule suitable for you with the Canadian tax department.

     A  Canadian resident who pays a fee or commission for services rendered in Canada to a non-resident is required to withhold tax of 15% and to remit it to the Canada Revenue Agency .  

·    Canadian businesses with cross border transactions must establish a detailed transfer pricing plan supported by comprehensive documentation to ensure compliance with the Canadian income tax rules.  

·    In the case of Ottawa Senators Hockey Club, 73 OR (3d) 737, the Ontario Court of Appeal decided that the Canada Revenue Agency has priority over other creditors for collected but unremitted GST, but not for penalties and interest on GST or unremitted payroll deductions for income tax, CPP or EI.

·    In the recent Tax Court of Canada income tax case of Aprile v The Queen the court allowed the taxpayer to deduct $7,000 in expenses paid to his 11 and 13 year old sons. The taxpayer testified as the exact duties performed by each son, including the number of hours worked. He also testified that he paid his sons in kind rather than by way of cheque.

·    The Canada Revenue Agency (the Canadian income tax department) has announced that effective May 25, 2004 it will no longer accept a single purpose Canadian corporation that would previously been set up to hold United States personal use real property with the objective of avoiding US estate tax on death of the individual. The previous policy will continue to apply to arrangements in place on May 25, 2004.   

       If you fail to file personal income tax returns, the tax department will arbitrary assess you thereby forcing you to comply. Now you will have the burden of disproving the arbitrary assessment. We will act on your behalf in challenging the arbitrary assessment.