Navigating HST Across Provinces: A Guide for Alberta Businesses

February 27, 2024

Post by Matthew Kozlowski, CPA

In our experience as an accounting firm based in Alberta, we have noticed that many of our clients are not fully aware that they can claim the provincial portion of the Harmonized Sales Tax (HST) as an Input Tax Credit (ITC) when HST is paid on goods.

This lack of awareness can lead to missed opportunities, especially when dealing with transactions involving provinces where HST is applicable. Understanding these nuances is crucial for businesses in Alberta to ensure that all GST/HST Input Tax Credits are claimed appropriately.

It is important note that HST and Provincial Sales Tax (PST) are not the same. The HST merges the federal Goods and Services Tax (GST) with PST, applied in provinces like Ontario and Nova Scotia, and administered federally by the Canada Revenue Agency (CRA). Conversely, the PST, separate from GST and known as QST in Quebec, is levied in provinces like British Columbia and Saskatchewan, with each province setting its rates and handling its administration. The primary difference lies in HST’s amalgamation and federal oversight, contrasting with PST’s independent provincial management.

Provinces with HST and Their Percentages

Firstly, it’s important to know which provinces charge HST and their respective rates. As of now, the following provinces have HST:

Province	HST Rate
New Brunswick	15%
Newfoundland and Labrador	15%
Nova Scotia	15%
Ontario	13%
Prince Edward Island	15%

HST Implications for Alberta Businesses

For businesses in Alberta (which typically have GST at 5%) the tax implications can be complex, especially when transactions involve provinces that do.

A common scenario to consider is when goods are purchased from an HST province (New Brunswick, Newfoundland and Labrador, Nova Scotia, Ontario, or Prince Edward Island) and delivered to Alberta. This situation should prompt a review of the source documentation to determine if HST (and not just GST) was paid on the invoice.

What type of sales tax (GST or HST) is charged is determined generally by the place of supply. The place of supply is determined on where legal delivery of the goods occur. When legal delivery of the good occurs is typically outlined in the terms of the agreement for the sale of goods.

Example 1 (HST can be claimed):

A manufacturer in Ontario sells a good to a corporation in Alberta. Legal delivery of the good occurs in Ontario at the manufacturer’s premises as per the terms of the sales agreement. The corporation regularly purchases goods from the manufacturer and establishes freight terms with a common carrier for the regular transportation of goods from the manufacturer’s premises to Alberta whenever required. The corporation instructs the manufacturer to contact the carrier directly to advise the carrier whenever goods are ready for pick-up. The carrier invoices the corporation for any transportation service that is provided pursuant to their arrangement.

The good is delivered to the purchaser in Ontario. Therefore, the supply is made in Ontario and is subject to HST at a rate of 13% all of which can be claimed as an ITC.

Example 2 (GST only can be claimed):

A corporation in Ontario sells a good to a purchaser in Alberta. Based on the terms of delivery in the agreement for the supply of the good, legal delivery of the good to the purchaser occurs in Alberta.

Because legal delivery of the good to the purchaser occurs in Alberta, the supply is made in Alberta and is subject to GST at a rate of 5%.

*Note – the above place of supply rules do NOT apply to specified motor vehicles. Specified motor vehicles are generally all motor vehicles except racing cars and any prescribed motor vehicles.

For specified motor vehicles, the place of supply is determined by where the vehicle was registered (other than on a temporary basis).

Claiming HST as an Input Tax Credit (ITC)

If HST is paid by a registrant business or individual in Alberta and it was incurred for commercial goods used in a commercial sense, then the HST (including the provincial portion) can be claimed as an Input Tax Credit (ITC). This is a significant aspect for businesses as it allows for the recovery of HST paid on business-related purchases.

Key Takeaways

-Always review source documentation for transactions involving provinces with HST to determine tax implications.

-Generally, where the good is legally delivered is the place of supply and that is the relevant GST/HST tax rate that should be used.

-If you are a GST/HST registrant and have paid HST on a business-related item you can claim the full amount of HST (including the provincial portion) on your GST return.

For any further questions or clarifications, please contact our office at 780-532-4641 or e-mail office@fulcrumgroup.ca

Personal Service Businesses

February 13, 2024

Post by: Cory Lefebvre, CPA, Associate

A personal services business (PSB) exists where the individual performing the work would be considered to be an employee of the payer if it were not for the existence of the corporation. A corporation may be a PSB if the following criteria are met:

the incorporated employee performing services owns at least 10% of the issued shares of any class of the corporation providing the services.
if the corporation did not exist, you would be considered an employee of the entity receiving the services.
your corporation does not employ more than 5 full-time employees throughout the tax year, and the amounts received by your corporation for services were not received from a related secondary corporation.

Tax Implications for Personal Service Businesses and its Owner:

Loss of eligibility for tax deductions: PSBs are not eligible for the small business deduction, which provides a lower corporate tax rate on the first $500,000 of active business income. There is also no access to the general rate reduction of 13% and an additional 5% tax penalty. In Alberta, if the corporation is classified as a PSB, the tax rate would be 41% compared to 11% for a similar corporation not classified as a PSB.
No Access to the Lifetime Capital Gains Exemption: PSBs do not have access to the Lifetime Capital Gains Exemption, which allows individuals to shield a portion of their capital gains from taxation upon the sale of qualifying assets.
Non-Deductibility of Certain Expenses: the only eligible expenses allowed for PSBs are salary and wages paid to incorporated employees, benefits or allowances provided to incorporated employees, expenses associated with selling property or negotiation contracts, legal expenses incurred to collect amounts owing. Common business deductions such as travel, professional fees, tax depreciation of capital assets, or fuel are all not eligible deductions for a PSB.

Risk Mitigation Strategies:

Diversify Client Base: avoid over-reliance on a single client, as this can trigger PSB classification.
Document contracting relationship with corporate customer: an employment relationship with your customer causes as PSB classification. Properly document the relationship with the contracting customer and ensure you use your own equipment, have control over your work and schedule, work independently with no close supervision, hire your own employees or subcontractors, and invoice your customer for services provided.
Provide Goods Alongside Services: offering goods alongside your services can help demonstrate that your business is not purely a personal service business.
Remuneration Planning: carefully plan how you pay yourself, balancing salary and dividends to optimize your tax position. Salary is the preferrable option for companies at risk as salaries are an eligible deduction for PSBs.
Focus on Growth and Expansion: invest in expanding your business, hire employees, and take on multiple projects. This can help prove that your business is not solely dependent on your personal skills.

Conclusion:

Operating a personal service business in Canada comes with unique tax implications and potential risks due to the distinct tax treatment. To mitigate these risks, it’s essential to diversify your client base, document your relationship, consider offering goods alongside services, manage your compensation wisely, and focus on business growth. Feel free to contact our office if you have any questions about personal service businesses or feel you may be at risk.

Government Proposes Changes to Underused Housing Tax (UHT) for 2023

January 4, 2024

In Budget 2021, the Canadian government introduced the Underused Housing Tax (UHT), a 1% annual tax on the value of non-resident, non-Canadian-owned vacant or underused residential real estate. In response to feedback on the onerous filing, the government is proposing significant changes to streamline compliance. These changes have not yet been passed with federal legislation but are expected to be passed and enacted in the coming months.

One notable proposal is the elimination of filing requirements for certain owners. “Specified Canadian corporations,” partners of “specified Canadian partnerships,” and trustees of “specified Canadian trusts” are slated to become “excluded owners,” relieving them of UHT reporting obligations. The government aims to expand these definitions to include a broader range of Canadian ownership structures, reducing the compliance burden for eligible entities starting from the 2023 calendar year.

This means that most Canadians should not have to file a UHT return in 2023.

To further ease the transition, the government is also suggesting a reduction in minimum failure-to-file penalties. The minimum penalties for individuals and corporations for late filing UHT returns are proposed to decrease from $5,000 to $1,000 and from $10,000 to $2,000, respectively, beginning in 2022.

The requirement to file UHT returns for 2022 under the original legislation will continue and the deadline has been extended to April 30, 2024. If you have not filed your UHT returns yet or are unsure if you have a filing obligation, please contact Fulcrum Group.

*The information contained in this post reflects the standards and rules applicable at the date posted and may or may not be relevant at future dates

Shareholder’s Loan – What is it and How Does it Work?

September 14, 2023

As a shareholder of your corporation, your shareholder’s loan is an important account that indicates how much the company owes to you or how much you owe to the company. It is important to know how the shareholder’s loan works and how it can affect your personal taxes. You should ensure that you are aware of what transactions impact your shareholder’s loan balance and where the balance is at the end of every year.

How it Works

Cash Withdrawal

When an owner takes cash out of the company, it is considered to be an owner withdrawal and is money that is owed back to the company if not repaid. If, as a shareholder, you use company funds to make a personal purchase, the purchase price is considered a withdrawal of company funds for personal use and is also owed back to the company.

Cash Contribution

Sometimes the company will not have enough cash to operate. If this is the case, the shareholder may lend money to the company. These amounts are owed back to the shareholder and can be repaid at any time. There are no personal tax consequences to repaying them. The contributions can also offset any personal withdrawals of company funds. If, as a shareholder, you were to contribute or sell equipment to the company without receiving any reimbursement directly, it would also be considered a contribution.

Shareholder Balance

If at the end of your fiscal year, your shareholder’s loan is overdrawn, the overdrawn amount must be repaid by the end of the following year. If you intend to repay the overdrawn amount by the end of the following year, no additional steps may be necessary. Alternatively, if you choose not to or are unable to repay the overdrawn amount, a dividend can be issued to clear up the shareholder’s loan balance. These dividends are reported on a T5 slip and are included as taxable income on your personal tax return in the year they are declared.

If the overdrawn shareholder’s loan is not repaid by the end of the following year and dividends are not recorded, CRA could consider this to be personal income and require an adjustment to your personal tax return for the year in which the amount became overdrawn. If, in later years, you repay any portion of the overdrawn amount, you can record a deduction equal to the amount repaid to offset your income in that year. This scenario can often result in significant tax in the year of income inclusion and include additional interest and penalties, so it is best to avoid this scenario if possible.

Something to be aware of is that you cannot repay an overdrawn shareholder’s loan at your year-end date and then take the money back out the following day. CRA will consider this to not be repaid and taxation can still occur. For example, if you have a December 31st year-end and repay the overdrawn amount on December 31st but then take it back out again on January 1st, CRA will likely consider it to not have been repaid.

If you feel like you may be running into a shareholder’s loan issue, or would like to learn more about how it works, please contact us to discuss how it may impact you.

Understanding Tax Rules for Passing on Businesses to Family and Employees

July 18, 2023

Passing on businesses to family members or employees in Canada has historically come with tax challenges. Budget 2023 introduced new tax rules to address these issues, making it easier for business owners to transfer their businesses. This post aims to explain these changes in simple terms and how they might affect business succession from 2024 onwards.

Family Business Transfers:

Before Bill C-208, there was a tax difference between selling a business to a family member and selling it to someone unrelated. Selling to a family member could result in higher taxes due to certain rules. Bill C-208 aimed to fix this disparity by excluding certain transactions from these tax rules. Budget 2023 builds on these changes and sets conditions for a “genuine intergenerational business transfer” to qualify for tax benefits (Bruce Ball, 2023).

Budget 2023 proposes several conditions for such transfers, including immediate transfers made within 36 months and gradual transfers made over 5 to 10 years (Bruce Ball, 2023). If the conditions are met and an election is made, the transfer would be exempt from certain tax rules.

Budget 2023 also suggests other changes to simplify the process, such as eliminating the need for independent assessments and affidavits, extending timeframes for capital gains exemptions, and introducing joint and several liability for tax payment under certain circumstances (Bruce Ball, 2023).

Employee Ownership Trusts (EOTs):

Existing tax rules have made it challenging to create Employee Ownership Trusts (EOTs) in Canada (Bruce Ball, 2023). However, Budget 2023 proposes new rules to overcome these obstacles and offer a succession planning option for business owners.

An EOT involves selling a business to employees through a trust that holds the shares on their behalf. This simplifies matters compared to each employee owning shares individually.

How do Employee Ownership Trusts work?

Here is a simplified explanation of the EOT process (Bruce Ball, 2023):

Formation: An EOT is created, and employees become beneficiaries of the trust.
Negotiation: The trust negotiates the purchase of the business shares using debt financing.
Repayment: The trust repays the debt over time using earnings from the business.

Budget 2023 proposes new rules to allow the creation of EOTs in Canada. The rules specify conditions for the trust’s holdings, employee eligibility, distribution limitations, and trustee appointments.

Tax Benefits of EOTs:

The proposed EOT rules offer the following tax benefits (Bruce Ball, 2023):

No 21-year deemed disposition rule: EOTs would not be subject to a rule that triggers a taxable event every 21 years.
Extended shareholder loan repayment period: The repayment period for certain loans would be extended to 15 years.
Extension of capital gains reserve: Vendors could defer recognizing part of the capital gain over up to 10 years.

Future Steps:

If approved, the new tax rules for family business transfers and EOTs will come into effect from January 1, 2024 (Bruce Ball, 2023).

Conclusion:

Budget 2023 introduces important tax changes to facilitate the transfer of businesses to family members and employees. The new rules aim to promote fair transfers and simplify the establishment of EOTs as a succession planning option. While this approach focuses on removing tax barriers, it still offers a valuable alternative for business owners. By understanding these new tax rules, business owners can make informed decisions when planning for business succession in 2024 and beyond.

Stay Informed:

For assistance or further information on this topic please reach out to our office at 780-532-4641 or e-mail office@fulcrumgroup.ca.

References

Bruce Ball, FCPA, FCA, CFP (2023, May 16). Business succession — New tax rules to consider for family business transfers. Retrieved from Chartered Professional Accountants Canada: https://www.cpacanada.ca/en/business-and-accounting-resources/taxation/~/link.aspx?_id=51946591F32B45D39E7EB58FD292CF71&_z=z

Blog Post Contributed by Matthew Kozlowski, CPA

Underused Housing Tax (UHT)

February 24, 2023

By Ian Penner & Sarah Penner

What is the UHT?

As part of the 2022 federal budget, the government passed the new Underused Housing Tax Act. This legislation creates a new 1% tax on the value of ‘underused housing’. While the underused housing tax (UHT) is intended to target foreign ownership, many Canadians through partnerships, trusts and small businesses will be required to file an annual return (Form UHT-2900) even though there are many exemptions from the tax itself. If you own residential property other than your principal residence, it will be essential to review any filing obligations.

Types of Property

Residential property of is defined as one of the following:

A detached house
Duplex (2 residential dwellings under one title)
Triplex (3 residential dwellings under one title)
Semi-detached house
Townhouse or rowhouse unit
Residential condominium

Unaffected property includes properties with 4 or more dwellings such as 4-plexes and apartments.

Types of owners

There are two types of owners in regard to the UHT. Type of ownership is based on December 31 of the calendar year.

‘Excluded Owner’

These are owners that DO NOT have to file the UHT-2900 and include:

an individual who is a Canadian citizen or permanent resident (except a trustee of a trust or a partner of a partnership)
a trustee of a mutual fund trust, a real estate investment trust (REIT) or a specified investment flow-through trust (SIFT)
a corporation whose shares are listed on a Canadian stock exchange
a registered charity
a cooperative housing corporation, hospital authority, municipality, para-municipal organization, public college, school authority, or university
an Indigenous governing body or a corporation wholly owned by an Indigenous governing body

‘Affected Owner’

These are owners that MUST FILE the UHT-2900 regardless of tax obligation and include:

an individual who is not a Canadian citizen or a permanent resident
an individual who is a Canadian citizen or permanent resident who owns a residential property as a trustee of a trust (other than as a personal representative of a deceased individual)
any person, including an individual who is a Canadian citizen or permanent resident, that owns a residential property as a partner of a partnership (this includes those that have filed a rental schedule – T776 on their personal return as a partner with a spouse or other individual)***
a corporation incorporated outside Canada
a Canadian corporation whose shares are not listed on a Canadian stock exchange
a Canadian corporation without share capital

All Affected Owners MUST file a separate return for EACH property even if they are exempt from the tax. Similarly, EACH member of a partnership MUST file a separate return for EACH property.

***Rental properties owned jointly with spouse (common-law partner). There is a possible obligation to file returns for personally owned property including property owned jointly with your spouse. Depending on circumstances, this arrangement can be considered a partnership. We encourage you to consult with your Fulcrum Group advisor to determine your filing obligations.

****Property held in trust (cosigning and estate planning). There is an obligation to file a return when you are listed as the legal owner of a property but do not have beneficial ownership and are then deemed to own the property in trust. Below are two common examples of this but other do exist. Please consult Fulcrum staff if you might be a trust owner.

Scenario 1

A child is unable to qualify for a mortgage and a parent cosigned. Banks requires cosigners to be on title so now the parent is listed in fact as a legal owner. The child is the beneficial owner. The parent owns the property in trust and is deemed to be a trustee. The parent must file a UHT-2900 return (but will generally be exempt from tax). The child does not have a filing obligation for their personal residence.

Scenario 2

An aging parent is now the sole owner of their home. In order to simplify the estate a child/children are added to the title of the home. This is often done so the property can avoid probate. The child/children are now legal owners of the property but beneficial ownership is still solely that of the parent. The child/children have become trustees and must file a UHT-2900 return (but will generally be exempt from tax). The parent does not have a filing obligation for their personal residence.

Exemptions

Affected owners have several exemptions that will remove any tax obligations. However, even where exemptions apply, the affected owner will still be required to file the UHT-2900 return. The exemptions are classified in 3 parts as defined on Form UHT-2900.

Part 4 Exemption

Exemption for primary place of residence

The property must be the primary place of residence for any of the following:

You
Your spouse or common-law partner
Your child who is pursuing authorized study at a designated learning institution
Your spouse’s child who is pursuing authorized study at a designated learning institution

Part 5 Exemptions

Exemption for qualifying occupancy

The property must have one or more qualifying occupancy periods totaling at least 180 days where each day is part of increments of at least 1 month. (Short term rentals do not qualify for this exemption).

You will need to provide the total number of days on UHT – 2900 if claiming one of the following exemptions.

An arm’s length individual was given continuous occupancy of the dwelling under a written agreement
A non-arm’s length individual was given continuous occupancy of the dwelling under a written agreement for consideration that is not below fair rent[i]*
You or your spouse or common-law partner have continuous occupancy for the purpose of pursuing authorized work under a Canadian work permit
Your spouse, common-law partner, parent, or child, who is a Canadian citizen or permanent resident of Canada, has continuous occupancy

For individual owners who are neither Canadian citizens nor permanent residents, if between you and your spouse you own multiple residential properties, your ownership may not qualify for Part 4 or Part 5 exemptions. You and your spouse must each file an election with the CRA to designate only one property (the same property) for the purposes of the Part 4 and Part 5 exemptions.

Part 6 Exemptions

Other exemptions

You own the property as a partner of a specified Canadian partnership[ii].
You own the property as a trustee of a specified Canadian trust[iii].
You own the property and are a specified Canadian corporation[iv].
The property is not suitable for year-round use.
The property is seasonally inaccessible.
The property was uninhabitable for a minimum of 60 consecutive days due to a disaster or hazardous conditions beyond your control.
The property was uninhabitable for a minimum of 120 days due to renovations. (This exemption cannot be used if it was used in the previous 9 years)
You became the owner of the property in the calendar year and you had not been an owner of that property in the previous 9 years.
The owner died during either the current or in the previous calendar year.
You are the personal representative of a decreased individual who was an owner of the residential property during the calendar year or the previous calendar year
You were an owner of the residential property with an individual who was also an owner of the residential property on the day the individual died in the calendar year or the previous calendar year, and the deceased individual’s percentage of ownership was at least 25%.
Construction of the residential property is not substantially completed before April of the calendar year.
Construction of the property is substantially completed between January and March of the calendar year, the property is listed for public sale, and the property has not been occupied.
The property is located in an eligible area and is used as a place of residence by you or our spouse (common-law partner) for at least 28 days during the calendar year.

If you qualify for any one of the part 4, part 5 or part 6 exemptions, then there is no tax obligation.

Calculation of Tax

If you do not qualify for an exemption, you must calculate the tax owing for the calendar year.

Calculation:

Taxable value of the residential property x 1% x ownership %

Taxable value of the property is determined as follows:

Greater of:

Assessed value (obtain from property tax assessment)

OR Most recent sale price on or before December 31 of the calendar year

A Fair Market Value election can also be done to use the fair market value of the property rather than the taxable value. The amount reported as the fair market value of the residential property must be supported by a written appraisal prepared by an accredited real estate appraiser that was done specifically for the purposes of the UHT. This appraisal must be prepared between January 1 and April 30 of the following year.

Penalties for not filing

Minimum $5,000 for affected individual owners
Minimum $10,000 for affected corporate owners

Filing Deadline

The filling deadline for all UHT-2900 forms is April 30^th of the year following; however, an extension was granted for all 2022 returns to October 31, 2023. For future years, the deadline will remain April 30th.

Documentation

Several pieces of information are needed to file your UHT return, including a valid CRA tax identifier number (such as Social Insurance Number or Business Number). Corporations will also need to register for an Underused Housing Tax (RU) program account identifier code.

If you engage Fulcrum group to file the UHT 2900 on your behalf we will need the following for each property you or your spouse or common-law partner own:

A signed engagement letter
Mailing address
Citizenship of individual owner
Address of property
Current year (2022) property tax assessment
Property ID from registration system (in Alberta this is the title number from Alberta Registries) – Fulcrum can generally access this number for properties in Alberta through the Alberta registries portal at no charge.
A description of the type of property (see types of property above)
Year ownership was acquired.
Type of ownership
- Sole
- Joint tenancy (ownership is evenly split between the owners with the right of survivorship, that is, when one owner dies their ownership is passed to the surviving owners and is not subject to probate).
- Tenants in common (ownership can be freely decided, that is, when an owner dies their ownership passes according to their will and is subject to probate).
A list of all other owners and everyone’s percentage of ownership for each property you own
Original purchase price of the property. This can be confirmed through Alberta Registries if you are unsure of the exact amount.

A separate UHT-2900 return will be required for each property in which you have affected ownership. The forms can be submitted to CRA either through your CRA My Account or by mail to your designated tax centre (Winnipeg Tax Centre for Alberta residents).

[i] Fair rent is 5% of the taxable value of the residential property for the calendar year

[ii] A specified Canadian partnership is where all partners are either an excluded owner, and would be an excluded owner if they were not part of a partnership, or specified Canadian corporations (below)

[iii] A specified Canadian trust is a trust were each beneficiary on December 31 of the calendar year is either an excluded owner or a specified Canadian corporation.

[iv] A specified Canadian corporation is a corporation incorporated under federal or provincial laws in Canada and at least 90% of the equity and voting shares are owned by Canadian citizens, permanent residents or specified Canadian corporations.,

CRA Update: Gifting Employees

December 16, 2022

Happy Holidays from Fulcrum Group! If you are considering giving your employees a gift this Christmas, it is important to ensure your gifts meet the criteria set out by CRA, so that it is not considered a taxable benefit to the employee.

In order for a gift or award to your employee to be tax-free, it needs to meet the following criteria:

It cannot be more than $500.00 including all applicable taxes
It cannot be given to non-arm’s length employees such as shareholders or any person directly related to a shareholder
The gift must be for a special occasion like a holiday, birthday, wedding, or the birth of a child
The award must be for overall contribution to the workplace, and not performance-based, such as yearly reviews
If the gift or award was provided by manufacturers and other payers to your employees, provided through prize draws, loyalty or other points programs, or social events and hospitality functions, it is not included in the $500
The gift or award cannot be cash or a cash equivalent. This includes cash, cheques, bonds, securities, and until recently, all gift cards. These items are considered to be taxable benefits to the employee.

Changes for Gift Cards

Prior to this update, CRA always deemed gift cards to be a taxable benefit when gifted or awarded to employees. Under recent changes, gift cards will not be considered a taxable benefit if all of the following apply:

It comes with money already on it and it can only be used to purchase goods or services from a single retailer, or a group of retailers identified on the card.
The terms and conditions of the gift card clearly state that amounts loaded onto the card cannot be converted into cash
A log is kept to record gift card information that includes all of the following:
- Name of employee
- Date the gift card was provided to the employee
- Reason for providing the gift card
- Type of gift card
- Amount of the gift card
- Name of retailer(s)

This includes gift certificates, chip cards, and electronic gift cards. If the gift card meets all these conditions, it is considered non-cash for the purpose of the CRA’s administrative policy and is not a taxable benefit to the employee. If the card does not meet these conditions, it is considered a near-cash benefit and is taxable.

For more information visit: CRA Policy on Gifts and Awards

Prescribed Interest Rate Changes

June 21, 2022

Did you know that CRA will be raising its interest rates as of July 1, 2022? Much like the Bank of Canada and most financial institutions, CRA will be increasing it’s prescribed interest rates this coming year.

After holding interest rates steady for several years and even decreasing rates in the third quarter of 2020, CRA will be increasing most prescribed interest rates in the third quarter of 2022 by 1%.

These changes will apply to amounts owing both to and from CRA. Updated rates can be found in the column to the far right below on various types of balances with CRA:

	First quarter (January to March 2022)	Second quarter (April to June 2022)	Third quarter (July to September 2022)
Charged on overdue taxes, CPP contributions, EI premiums	5%	5%	6%
Paid on corporate taxpayer overpayments	1%	1%	2%
Paid on non-corporate taxpayer overpayments	3%	3%	4%
Used to calculate employee taxable benefits and shareholder loans	1%	1%	2%

For more information, contact our office.

Carbon Tax Rebate Available to Alberta Farmers

March 10, 2022

Officially called the Return of Fuel Charge Proceeds to Farmers Tax Credit, a new carbon tax rebate for Alberta farmers became available as a refundable tax credit beginning in 2021.

Who is eligible?

Corporations, individuals, partnerships, and trusts that:
- Actively engage in either management or day to day activities of earning income from farming
- Have total farming expenses of $25,000 or more
For partnerships, the tax credit is calculated at the partnership level and then each partner calculates their credit entitlement based on their proportionate interest in the partnership.

How much is the tax credit?

2021: $1.47 per $1,000 of eligible farming expenses
2022: $1.73 per $1,000 of eligible farming expenses

What expenses are eligible?

Farming expenses must be attributable to farming in either Alberta, Manitoba, Ontario, or Saskatchewan and must meet or exceed the threshold of $25,000
All expenses deducted in calculating income from farming for tax purposes are eligible, with the exclusion of:
- deductions arising from optional or mandatory inventory adjustments
- transactions with non-arm’s length parties
When a tax year-end does not align with the calendar year-end, eligible farming expenses will be allocated to each calendar year based on the number of days in each calendar year over the total days in the taxation year.

How do I apply?

By filling out Form T2043 (this is part of your personal income tax return, or T1)
Tax credit received will be reported as income in the year of claim

How To Create an Effective Budget to Achieve your Financial Goals

November 25, 2021

If you feel like you don’t know where your money is going, don’t save regularly, have trouble paying off debt, or feel like you are not in control of your finances it might be helpful to make a budget. A budget can help you determine how much money you are making, spending, and saving which can help to guide your spending to achieve your financial goals.

The first step in making a budget is determining where you are currently spending your money. The best way to do this is to look at how you are spending in an average month by looking at all your statements (bank statements, credit card statements, and/or line of credit statements). It is useful to organize your purchases into essential and non-essential items. Essential items could include mortgage/rent payments, utilities, phone/internet bills, property taxes, insurance, groceries, fuel, and/or debt payments. Non-essential items would include entertainment, eating out, travel, gifts and other purchases, alcohol, or cosmetics.

This process will allow you to see clearly where you are spending your money and where you may be able to cut back. For example: if you are spending $5 a day on coffee that would add up to $1,825 per year. You could reduce that expense by making coffee at home in the morning to bring with you. The same principle could be applied to eating or drinking out. It may be possible to reduce essential expenses as well by combining your insurance payments for a lower rate or possibly speaking to a financial advisor about consolidating your debt at a lower interest rate.

Once you have a realistic idea of how much money is coming in and going out it is time to create a budget that includes the changes you would like to implement. Start with your income and then deduct from it your essential expenses after you have taken any steps necessary to reduce them, as mentioned above. From there, you can deduct additional payments you may wish to make, such as additional debt repayment or savings. Finally, allocate the remaining money you earn to non-essential expenses.

Each month, you should review your budget to determine if you were successful in sticking to it as planned and whether your budget goals were realistic or need adjusting.

The key to making a successful budget is to review it and update it regularly based on your circumstances. It is important to update your budget with any changes such as an increase in pay or an increase in any bills you incur.

If you would like assistance in setting up an effective budget or have any questions related to budgeting, contact our office.