{"id":103,"date":"2021-06-14T21:32:38","date_gmt":"2021-06-14T21:32:38","guid":{"rendered":"https:\/\/canadiantaxpodcast.ca\/?p=103"},"modified":"2021-06-14T21:32:39","modified_gmt":"2021-06-14T21:32:39","slug":"canadian-tax-podcast-014-tfsa-us-contractor-inter-corporate-loans","status":"publish","type":"post","link":"https:\/\/canadiantaxpodcast.ca\/index.php\/2021\/06\/14\/canadian-tax-podcast-014-tfsa-us-contractor-inter-corporate-loans\/","title":{"rendered":"Canadian Tax Podcast 014: TFSA; US Contractor; Inter-corporate Loans;"},"content":{"rendered":"\n<p>Canadian Tax Podcast for the week of June 14th, 2021. This week we cover:<\/p>\n\n\n\n<ul><li>The ProPublica tax leak;<\/li><li>CRA releases details on new tax scam;<\/li><li>More detail on G7 worldwide corporate tax proposal;<\/li><li>Bill C-208;<\/li><li>What to do with a TFSA if you move to the US;<\/li><li>Canadian resident doing contract work for US client;<\/li><li>Inter-corporate loans;<\/li><\/ul>\n\n\n<p><!--more--><\/p>\n\n\n<h2>[INTRO]:<\/h2>\n\n\n\n<p>\u201cThis is the Canadian Tax Podcast, <strong>Episode # 014<\/strong>,&nbsp; hosted by me, Cameron Ware. Good morning\u201d<\/p>\n\n\n\n<h2>&nbsp;[NEWS SECTION]<\/h2>\n\n\n\n<ul><li>\u201cHappy Monday, it is the week of <strong>&nbsp;June 14th, 2021.<\/strong> We\u2019ll start with the news.<\/li><\/ul>\n\n\n\n<h2>&nbsp;[ITEM 1] \u2013 ProPublica\u2019s Tax Article<\/h2>\n\n\n\n<ul><li>Last week the US outfit ProPublica released an analysis contrasting the wealthiest Americans against the tax they paid;<\/li><li>Simple calculation: Take the person\u2019s tax paid, and compare it to their net worth as stated in Forbes Magazine.<\/li><li>Received the tax information via a leak.<\/li><li>This is a complicated issue, and it ultimately hinges on the technical difference between earned income vs. unrealized gains<\/li><li>[explain unrealized gains.]<\/li><li>I don\u2019t know what the right answer is here. I certainly have opinions, and agree that the system only works insofar as citizens believe that everyone is paying their own fair share. However, taxing wealth is very difficult.<\/li><li><a href=\"https:\/\/www.propublica.org\/article\/the-secret-irs-files-trove-of-never-before-seen-records-reveal-how-the-wealthiest-avoid-income-tax\">https:\/\/www.propublica.org\/article\/the-secret-irs-files-trove-of-never-before-seen-records-reveal-how-the-wealthiest-avoid-income-tax<\/a><\/li><\/ul>\n\n\n\n<h2>&nbsp;[ITEM 2] \u2013 CRA on TFSA Scam<\/h2>\n\n\n\n<ul><li>CRA has put out an advisory related to a TFSA scheme<\/li><li>Specifically the scheme involves the creation of a mortgage investment company, that then issues two classes of shares: one that pays low rate dividends, and one that pays high rate<\/li><li>The participants <strong>buys<\/strong> the low rate shares via their RRSP\u2019s, and the high rate\u2019s via TFSA.<\/li><li>The mortgage corp then lends the money from the share purchase back to the participant (interest deduction) and the participant then invests the proceeds with the promoter, and earns investment income<\/li><li>Participant then makes annual RRSP\/RRIF withdrawals, and claims the interest deduction against the tax that the RRSP draw triggers.<\/li><li>Over time, the participant can supposedly shift their entire RRSP over to their TFSA, without ever actually paying tax.<\/li><li>Confused? I am. Main thing here is CRA says this whole thing is nonsense. (And it is.) You\u2019re essentially loaning money to yourself at inflated interest rates. Sham.<\/li><li><a href=\"https:\/\/www.canada.ca\/en\/revenue-agency\/news\/newsroom\/tax-tips\/tax-tips-2021\/warning-watch-out-for-tfsa-maximizer-schemes.html\">https:\/\/www.canada.ca\/en\/revenue-agency\/news\/newsroom\/tax-tips\/tax-tips-2021\/warning-watch-out-for-tfsa-maximizer-schemes.html<\/a><\/li><\/ul>\n\n\n\n<h2>[ITEM 3] \u2013 Proposed G7 tax rates<\/h2>\n\n\n\n<ul><li>G7 tax proposals (discussed last week.) This is the proposed 15% tax on the profits it earns inside of a country<\/li><li>Pay this tax in every jurisdiction it operates in.<\/li><li>However, this is assessed on the basis that the corp isn\u2019t paying tax<\/li><li><em>\u201cOttawa will get 15 per cent of profits net of foreign corporate and withholding taxes paid to that country. If other countries already take 15 per cent or more, Ottawa gets nothing.\u201d<\/em><\/li><li>To put this a less confusing way (steal another quote): <em>\u201cA Canadian firm paying 12.5 per cent on its profits in a more lightly taxed country will have to pay another 2.5 per cent to Ottawa to get up to 15 per cent.\u201d<\/em><\/li><li>This type of thing attracts problems. Tax is never \u201cabsorbed\u201d \u2013 It\u2019s passed on to consumers. Second, in practice the net effect is zero. Charge 15% tax, but then give rebates\/incentives that create a lower effective tax rate net of the credits\u2026<\/li><li>Conclusion: these things are hard. No one-size fits all solution<\/li><li>https:\/\/financialpost.com\/opinion\/jack-m-mintz-biden-tax-cartel-isnt-good-for-canada<\/li><\/ul>\n\n\n\n<h2>ITEM [4] \u2013 Bill C-208<\/h2>\n\n\n\n<ul><li>New Bill C-208 is out (well was out in May) but it\u2019s up for the 3<sup>rd<\/sup> reading.<\/li><li>This bill is supposed to streamline the sale of a family business to another family member.<\/li><li>Right now the sale of a small business to a family member is not eligible for the QSBC capital gains exemption.<\/li><li>Specifically 84.1 triggers a deemed dividend \u2013 Instead of capital gain\/gains exemption<\/li><li>Good news: this has bi-partisan support, so let\u2019s hope it gets through and isn\u2019t stalled going into parliament\u2019s summer recess.<\/li><li>Good legislation (generally).<\/li><li><a href=\"https:\/\/parl.ca\/DocumentViewer\/en\/43-2\/bill\/C-208\/third-reading\">https:\/\/parl.ca\/DocumentViewer\/en\/43-2\/bill\/C-208\/third-reading<\/a><\/li><\/ul>\n\n\n\n<h2>QUESTIONS<\/h2>\n\n\n\n<ul><li>TN Visa + Move + TFSA<ul><li>Question<\/li><\/ul><ul><li>Easy answer: get rid of your TFSA prior to the move.<\/li><\/ul><ul><li>For those who don\u2019t know: US treats TFSA as foreign trust (Form 3520 disclosures). Expensive<\/li><\/ul><ul><li>Second, no tax deferral.<\/li><\/ul><ul><li>&nbsp;<\/li><\/ul><\/li><li>Contractor doing work for US Client<ul><li>Question<\/li><\/ul><ul><li>You\u2019re a Canadian, in Canada, rendering the work on-site in Canada<\/li><\/ul><ul><li>Based on this, you don\u2019t have US tax exposure.<\/li><\/ul><ul><li>However, fill out a W8-BEN (or BEN-E) and this eliminates any requirement for withholding on the part of your US client.<\/li><\/ul><\/li><li>Inter-corporate loans<ul><li>[quote]<\/li><\/ul><ul><li>What you\u2019ve described here is a standard inter-corporate loan (sorry, no loophole)<\/li><\/ul><ul><li>You see this frequently with opco\/holdco arrangements. Strip assets out of opco for creditor-proofing, leads to big interco AR\/AP<\/li><\/ul><ul><li>Pro-tip: paper these things correctly, especially with interest-free loans. Don\u2019t give CRA any wiggle-room to get their fingers into things.<\/li><\/ul><ul><li>&nbsp;<\/li><\/ul><\/li><\/ul>\n\n\n\n<h2>OUTRO<\/h2>\n\n\n\n<p>That will wrap things up for today. Like always, if you have any questions, send them to <a href=\"mailto:questions@canadiantaxpodcast.ca\">questions@canadiantaxpodcast.ca<\/a>, or find us on twitter: <a href=\"https:\/\/twitter.com\/cdntaxpodcast\">https:\/\/twitter.com\/cdntaxpodcast<\/a>&nbsp;&nbsp;<\/p>\n\n\n\n<p>This is Canadian Tax Podcast, thanks for listening.&nbsp;<\/p>\n<iframe src=\"https:\/\/player.blubrry.com\/?media_url=https%3A%2F%2Fmedia.blubrry.com%2Fcanadiantaxpodcast%2Fcontent.blubrry.com%2Fcanadiantaxpodcast%2F2021-06-14_CTP-014.mp3&amp;podcast_link=https%3A%2F%2Fcanadiantaxpodcast.ca%2Findex.php%2F2021%2F06%2F14%2Fcanadian-tax-podcast-014-tfsa-us-contractor-inter-corporate-loans%2F#mode-Light&border-000000&progress-000000\" scrolling=\"no\" width=\"100%\" height=\"165\" frameborder=\"0\" id=\"blubrryplayer-1\" class=\"blubrryplayer\" title=\"Blubrry Podcast Player\"><\/iframe><p class=\"powerpress_links powerpress_links_mp3\" style=\"margin-bottom: 1px !important;\">Podcast: <a href=\"https:\/\/media.blubrry.com\/canadiantaxpodcast\/content.blubrry.com\/canadiantaxpodcast\/2021-06-14_CTP-014.mp3\" class=\"powerpress_link_pinw\" target=\"_blank\" title=\"Play in new window\" onclick=\"return powerpress_pinw('https:\/\/canadiantaxpodcast.ca\/?powerpress_pinw=103-podcast');\" rel=\"nofollow\">Play in new window<\/a> | <a href=\"https:\/\/media.blubrry.com\/canadiantaxpodcast\/content.blubrry.com\/canadiantaxpodcast\/2021-06-14_CTP-014.mp3\" class=\"powerpress_link_d\" title=\"Download\" rel=\"nofollow\" download=\"2021-06-14_CTP-014.mp3\">Download<\/a><\/p>","protected":false},"excerpt":{"rendered":"<p>Canadian Tax Podcast for the week of June 14th, 2021. This week we cover: The ProPublica tax leak; CRA releases details on new tax scam; More detail on G7 worldwide corporate tax proposal; Bill C-208; What to do with a TFSA if you move to the US; Canadian resident doing contract work for US client; [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[31,8,27],"tags":[],"_links":{"self":[{"href":"https:\/\/canadiantaxpodcast.ca\/index.php\/wp-json\/wp\/v2\/posts\/103"}],"collection":[{"href":"https:\/\/canadiantaxpodcast.ca\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/canadiantaxpodcast.ca\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/canadiantaxpodcast.ca\/index.php\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/canadiantaxpodcast.ca\/index.php\/wp-json\/wp\/v2\/comments?post=103"}],"version-history":[{"count":1,"href":"https:\/\/canadiantaxpodcast.ca\/index.php\/wp-json\/wp\/v2\/posts\/103\/revisions"}],"predecessor-version":[{"id":104,"href":"https:\/\/canadiantaxpodcast.ca\/index.php\/wp-json\/wp\/v2\/posts\/103\/revisions\/104"}],"wp:attachment":[{"href":"https:\/\/canadiantaxpodcast.ca\/index.php\/wp-json\/wp\/v2\/media?parent=103"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/canadiantaxpodcast.ca\/index.php\/wp-json\/wp\/v2\/categories?post=103"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/canadiantaxpodcast.ca\/index.php\/wp-json\/wp\/v2\/tags?post=103"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}