Resource: Worldwide Personal Tax and Immigration Guide 2021-22

Resource: Worldwide Personal Tax and Immigration Guide 2021-22

by | Apr 2, 2022 | New Canadians, Personal Finance, Personal Income Tax

Governments worldwide continue to reform their tax codes at a historically rapid rate. Taxpayers need a current guide, such as the Worldwide Personal Tax and Immigration Guide, in such a shifting tax landscape, especially if they are contemplating new markets.

The content is straightforward. Chapter by chapter, from Albania to Zimbabwe, we summarize personal tax systems and immigration rules in more than 150 jurisdictions. The content is current on 1 July 2021 with exceptions noted.

Keep up-to-date on significant tax developments around the globe with the EY Global Tax Alert library. Only some of the chapters in this Tax Guide reflect COVID-19 tax policy measures. The United Kingdom chapter provides information regarding Brexit. Readers should obtain updated information regarding Brexit before taking actions.

Each chapter begins with our in-country executive and immigration contact information, and some jurisdictions add contacts from our Private Client Services practice. Then we lay out the essential facts about the jurisdiction’s personal taxes. We start with the personal income tax, explaining who is liable for tax and, at some length, what types of income are considered taxable and which rates, deductions and credits apply. A section on other taxes varies by jurisdiction but often includes estate, inheritance, gift and real estate taxes. A social security section covers payments for publicly provided health, pensions and other social benefits, followed by sections on tax filing and payment procedures as well as double tax relief and tax treaties. The immigration sections provide information on temporary visas, work visas and permits, residence visas and permits, and family and personal considerations.

At the back of the guide, you will find a list of the names and codes for all national currencies and a list of contacts for other jurisdictions.

This resource is available through EY.com

Click HERE to go directly to their website to download the full report

 

Attendant care and care in a facility – Medical Expenses

Attendant care and care in a facility – Medical Expenses

by | Feb 18, 2022 | Disability, Personal Income Tax

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Attendant care and care in a facility

Attendant care is care given by an attendant who does personal tasks which a person cannot do for themselves. This includes care in certain types of facilities.

You can claim amounts paid to an attendant only if the attendant met both of the following criteria:

  • They were not your spouse or common-law partner.
  • They were 18 years of age or older when the amounts were paid.

An attendant who is hired privately will probably be considered an employee. For more information, see Guide RC4110, Employee or Self-employed?

Who can claim these expenses

You can claim as medical expenses the amounts you or your spouse or common-law partner paid for attendant care or care in a facility. The expenses must have been paid for the care of any of the following persons:

  • yourself
  • your spouse or common-law partner
  • your dependant

A dependant is someone who depended on you for support and is any of the following persons:

  • your or your spouse’s or common-law partner’s child or grandchild
  • your or your spouse’s or common-law partner’s parent, grandparent, brother, sister, uncle, aunt, nephew, or niece who lived in Canada at any time in the year

Amounts you can claim as medical expenses

Full-time care or specialized care

Generally, you can claim the entire amount you paid for care at any of the following facilities:

  • nursing homes (full-time care)
  • schools, institutions, or other places (providing care or care and training)

We consider care to be full-time care when a person needs constant care and attendance.

Other places could include an out-patient clinic, such as a detoxification clinic; however, they do not include a recreational facility, such as a residential summer camp, even if it caters to persons with disabilities.

Note

Generally, you cannot claim the entire amount you paid for a retirement home or a home for seniors. However, you can claim salaries and wages for care in such facilities if the care recipient qualifies for the disability tax credit (see Salaries and wages).

What we mean by nursing home – A nursing home is generally a facility that gives full-time care, including 24-hour nursing care, to individuals who are unable to care for themselves. Any facility could be considered a nursing home if it has the same features and characteristics as a nursing home.

All regular fees paid for full-time care in a nursing home or for specialized care or training in an institution are eligible as medical expenses, including fees for all of the following:

  • food
  • accommodation
  • nursing care
  • administration fees
  • maintenance fees
  • social programming and activities fees

However, extra personal expenses (such as hairdresser fees) are not eligible.

Salaries and wages

You may be able to claim the fees for salaries and wages paid for attendant care or care or supervision in any of the following facilities:

  • self-contained domestic establishments (such as your private home)
  • retirement homes, homes for seniors, or other institutions that typically provide part-time attendant care
  • group homes in Canada
  • nursing homes – special rules apply to this type of facility, see the chart

Eligibility for the disability tax credit may be a requirement to claim fees for salaries and wages as medical expenses. See the reference to Form T2201 on the chart.

Expenses you can claim

You may be able to claim as medical expenses the salaries and wages paid to all employees who do the following tasks or services:

  • food preparation
  • housekeeping services for a resident’s personal living space
  • laundry services for a resident’s personal items
  • health care (registered nurse, practical nurse, certified health care aide, personal support worker)
  • activities (social programmer)
  • salon services (hairdresser, manicurist, pedicurist) if included in the monthly fee
  • transportation (driver)
  • security for a secured unit

If you are receiving attendant care in your home, you can only claim for the period when you are at home and need care or help. For an expense to be eligible as a medical expense, you must either:

  • be eligible for the disability tax credit
  • have a written certification from a medical practitioner that states the services are necessary

Expenses you cannot claim

You cannot claim the cost of any of the following:

  • rent (except the part of rent for services that help a person with daily tasks, such as laundry and housekeeping)
  • food
  • cleaning supplies
  • other operating costs (such as maintenance of common areas and outside grounds)
  • salaries and wages paid to employees such as administrators, receptionists, groundskeepers, janitors (for common areas), and maintenance staff

Special rules when claiming the disability amount

There are special rules when claiming the disability amount and attendant care as medical expenses. For information on claiming attendant care and the disability amount, see the chart.

Calculate your net federal tax by completing Step 5 of your tax return to find out what is more beneficial for you. You can also see the examples.

If you claim the fees paid to a nursing home for full-time care as a medical expense on line 33099 or 33199 of your tax return (Step 5 – Federal tax), no one (including yourself) can claim the disability amount for the same person.

You can claim the disability amount together with the portion of the nursing home fees that relate only to salaries and wages for attendant care (up to the limit indicated in the chart). However, you must provide a breakdown of the amounts charged by the nursing home showing the portion of payments that relate to attendant care.

For more information on the disability tax credit and how to claim the disability amount, go to Disability tax credit.

Documents you need to support your attendant care expenses

Receipts

Receipts must show the name of the company or individual to whom the expense was paid. If an individual issues a receipt for attendant care services, the receipt must include his or her social insurance number.

Certification

You may need to provide a certification to claim amounts paid for attendant care as medical expenses. To determine which type of document you need, see the chart.

Detailed breakdown

To claim attendant care expenses paid to a facility such as a retirement home, you have to send us a detailed breakdown from the facility.

The breakdown must clearly show the amounts paid for staff salaries that apply to the attendant care services listed under Salaries and wages – Expenses you can claim.

The breakdown should also take into account any subsidies that reduce the attendant care expenses (unless the subsidy is included in income and is not deductible from income).

Examples of the detailed information we need

Forms and publications

Related links

Do It Yourself Financial Planning

Do It Yourself Financial Planning

by | Feb 13, 2022 | Personal Finance, Personal Income Tax

The fight for financial freedom isn’t fair. No matter what kind of spin you try to put on it, the path to comfortable living seems either impossible or too long to attempt. Many people these days are spending copious amounts of money going to see professional financial planners for advice on how to get their money situation under control. But let’s be honest, while a financial planner can show you how to prioritize your spending and how to go about consolidating your debt, surely there must be a way to plan your finances that doesn’t cost you visits to a professional? This article has been written to open some people’s eyes to the fact that it is possible to properly plan your finances from the comfort of your own home.

The main aim when planning your finances is to make everything as simple as possible. There is nothing worse than sinking so far into depression that you can’t see a way out. Whether you are in debt and looking to get out of it of if you are simply looking for a way to keep a little more spending money aside each month, the simpler you make your planning the better the result you will get. From the beginning, you need to be realistic. I’ll start with the example of a single income situation, firstly you need to calculate what your net pay is per month. If you’re self employed or not on a regular pay, always calculate the worst-case-scenario, what is the lowest you might get paid. Then go through your monthly bills and write down the ones that are a fixed amount. Do the same for all other bills but use the worst-case-scenario again, what is your estimation of the most that those bills might be. Add everything up and subtract it from your net income total.

Next onto the incidental expenses you might run into on a monthly basis. These might include petrol, car upkeep, public transport fares, food etc. make a list of all the little expenses you might need money for in a month. Even things that you’re not sure you might need to buy. Don’t add general spending money to the list, be specific. Always add more to the totals if you’re not sure as you can fine tune it later. Again, subtract your total from the money left over from your bills. Don’t worry if you’ve gone into the negative figures here, we can fix it.

Once you’ve got your expenses total in front of you, obviously any money that is left over is your profit for the month. In the event that you have nothing left or have gone into the minus figures, the next step is to minimize your expenses. Pretty straight forward, huh? Any incidental expenses that you might not need, remove them. And any expenses you know you will have, like food and petrol for example, really get down to the lowest spend on them. How much do you really need to spend on them? Your aim should be to save at least $50 per month after spending money. All that extra builds up and gives you a nice petty cash at the end of a few months!

If you are in a multiple-income situation, the same process applies. You need to start building up that petty cash tin. There will always be unexpected expenses, everyone knows that. In truth, the basis of comfortable living is really the knowledge that you can afford to pay for something unexpected.

To finish, all of this can be done on a piece of paper if you want to invest a little time, or you can lay it all out on an Excel spreadsheet. The way that saves the most time is to use a Financial Planning software program, you enter the numbers and the program gives you an automatic monthly planner. Whatever way you choose to go, always remember to keep it as simple as possible. When you’re following a plan, the pressure on you will decrease. What more could there be to comfortable living?

What You Should Know About Probate

What You Should Know About Probate

by | Feb 10, 2022 | Personal Finance, Personal Income Tax

Death is never easy to deal with and knowing what to expect in probate will ease your concerns and allow you to think only of your dying loved one. The definition of probate is legally settling the deceased’s property, also known as their estate. When a death occurs, the debts, property, possessions and money of the deceased will need to be dealt with in a legal manner and according the wishes of the deceased. There are few instances when probate is not needed in the event of a death. If the person is married, in most cases without a legal will, everything belonging to the deceased will be transferred to their spouse upon their death. If a will does not exist, the courts will need to ensure that all the property left by the deceased is legally distributed.

If a will does exist, the will names a person chosen by the deceased as an executor of the will. This is generally a family member or an attorney. The executor is responsible for following the instructions the deceased has written into the will and ensure that the probate process is followed as they wish.

When it comes to probate, the process will take place in what is known as probate court. What will happen during probate will depend on where you live. However, the general aspects of probate court are as follows. The entire purpose of probate is to ensure that your debts are paid and your assets are properly transferred to your loved ones. Upon the death of a person, the executor is sworn in as such. All creditors, the public and heirs are notified of the death. Then all the property is inventoried and finally the estate is distributed in an orderly fashion.

It is important that you understand there are some possessions or property that cannot be presented to the courts. A good example is a life insurance policy. If there is a beneficiary listed on the policy then this will transfer to that beneficiary. The only time this will not occur is if the named beneficiary is also deceased and no other beneficiary is named. Other types of assets and property that cannot be presented to the courts include anything that is payable upon death to named beneficiaries. These instances do not require probate because the deceased has already named who these assets are to be released to.

How To Pay Less Tax In Canada

How To Pay Less Tax In Canada

by | Feb 9, 2022 | Personal Finance, Personal Income Tax

Everybody hates taxes, am I right? It doesn’t matter if you are rich or poor, barely making ends meet, or raking in heaps of cash, the CRA will come for their piece of your income.

After years of helping to prepare taxes for friends and family, the only thing I’ve seen that makes this financial obligation a bit more bearable is finding as many tax breaks as possible.

If you want to learn how to pay less tax in Canada, I hope these tips will help you out.

There are a number of (legal) ways to pay less tax in Canada. But relatively fewer people take advantage of all the credits and deductions that CRA permits, and that can lower your tax bill significantly. It’s mostly because a lot of people don’t even know where they can save on taxes.

But if you are determined to learn how to pay less tax in Canada, this article will hopefully identify at least some of the ways which apply to your particular situation.

1. Child Care Expense

Summary: If you have children, you can deduct childcare expenses from your tax bill.

If you and your spouse works and no one is home full-time to take care of the child, the chances are that you are paying a lot of money for daycare expenses. While that’s a necessary expenditure, you can lighten the burden a bit by claiming these expenses on the tax returns. The spouse/parent with the lower income has to claim these expenses on their returns.

You can claim up to $8,000 a year for a child aged seven or younger, and $5,000 for children between seven and sixteen. You can claim daycare, nursery, nanny, caretaker, and boarding school expenses. Make sure you ask for receipts and SIN numbers from these service providers.

2. Maximize RRSP Contribution

Summary: RRSP contributions are tax-deductible and can lower your tax bill by thousands of dollars.

Save for your future and contribute to your RRSP. Not only will your investments grow in a tax-free environment, but you can also lower your tax bill significantly. However, it’s not purely tax-free, and you will have to pay taxes on it once your RRSP matures, but you can convert it into an RRIF and reduce your tax burden.

The 2022 maximum RRSP contribution is $29,210, or 18% of your income, whichever is lower. See this list for updated numbers.

3. Spousal RRSP Contributions

Summary: Lower your tax obligations by contributing to a spousal RRSP.

If you are in a higher tax bracket than your spouse, you can maximize your tax break by contributing to a spousal RRSP (within your contribution limit for the year). Your contributions will not affect the available contribution room your spouse or common-law partner has.

Its benefits are two-fold. If your spouse earns less than you and is in a lower tax bracket, they wouldn’t have gotten a tax break as big as yours, even if they fully contributed to the RRSP on their own. Also, when your spouse finally withdraws from the RRSP (or RRIF), they will be in a lower tax bracket than you and pick up a lighter tax bill.

4. Claim Medical Expenses

Summary: Several medical expenses that are not covered by your insurance are tax-deductible.

If you or a dependent incurs medical expenses that aren’t covered by your insurance, you can claim them on your tax returns and lighten up your tax bill. Many of these expenses can be pretty hefty, like full-time and specialized care. You can claim the entire amount on your tax returns.

Apart from care, expenses like prosthetics, insulin, insulin pens, hearing aids, eyeglasses, contact lenses, vitamins, etc. For some of these, you need a medical prescription to claim the deductions.

5. Donate Generously (And Smartly)

Summary: Donations are a non-refundable tax credit and can reduce your tax bill.

Donations help you earn both provincial and federal tax credit, and can help offset your tax bill. You not only get to claim the tax credit on donations for the current year but also claim tax credits for donations up to five years back if you have proof that you donated to eligible entities.

Since it’s a non-refundable credit, you should only use this deduction for years where your tax bill is expected to be higher. A smart move is to donate securities that have accumulated capital gains directly. You won’t have to pay any tax on capital gains, and your tax charitable credit will be a bit higher.

6. Split Your Pension

Summary: Splitting a pension with a spouse or common-law partner can reduce your taxable income.

You can split your CPP pension by up to 50% with your spouse, depending on how long you have lived together. The pension split only makes sense when you are 60, and the income and tax bracket of one spouse is higher than the other. By splitting the CPP, the higher tax-bracket spouse can lower their taxable income. CPP splitting goes both ways. You can also split RRIF income, but the rules are different.

7. Transfer Tax Credit To Your Spouse

Summary: Some federal tax credits can be transferred between spouses

If your spouse or common-law partner has certain tax credits, but their tax obligation isn’t high enough to be canceled out to zero if they apply all the tax credit towards it, they can transfer the excess to you.

These expenses include tuition, education, and textbook amounts, pension amount, disability amount, age amount, and caregiver amount. This can help the high-income spouse offset their tax obligation, resulting in an overall lenient tax burden on the couple.

8. Contribute To RESP

Summary: Contributing to an RESP account can help you save for your child’s education tax-free.

While an RESP doesn’t lessen your tax obligation right away, it’s a powerful financial tool. Instead of paying for your child’s post-grad education with your taxable dollar, you can contribute to an RESP. It will still be with your post-tax dollars, but the money in the RESP will grow tax-free. At max, you can contribute up to $50,000 to an RESP, that’s equivalent to $2,500 a year for 20 years.

In the right investment vehicle (that offers 5% returns a year as an example), it can grow to $89,000. Plus, the $7,200 you will get from the government through matching contributions. The money is taxable when taken out, but since your child is likely to be in a lower tax bracket, their tax obligation will be close to zero.

9. Home Office Tax Credit

Summary: Working from home can make you eligible for significant tax breaks.

For self-employed individuals, home office expenses can also be a decent amount of deduction. You can claim the portion of your home (based on square footage) that you use as your home office, on your tax returns.

So if it accounts for 15% of the total space, you can claim 15% off on your utilities, insurance, mortgage interest, and property tax. You can even claim part of the wages you pay to the individual who provides cleaning services in your home. Stationary can also be claimed, but not capital expenses.

10. Employ In-House

Summary: Hiring your child and spouse can lower your tax obligation.

If you run a business, and you want to inflate your business expenses (legally), enough to lower your taxable income, a smart way is to hire your child or spouse in the business. Be warned that it’s something that CRA monitors closely, and you can’t just pay out a salary to your family members based on a pretend position. They must provide valuable service to the business (even if it’s as your assistant), and they have to be compensated fairly.

11. Incorporate

Summary: Once your business income grows beyond a certain point, it makes sense to get incorporated.

Some small businesses grow large enough that it makes more sense (tax-wise) to incorporate them because otherwise, the business income will push you in the top tax bracket. But it requires rigorous cost-benefit analysis. If the cost of incorporating your small business (or even a side hustle) outweighs the tax break you will get by incorporating; it doesn’t make financial sense to do so.

12. TFSA

Summary: Used effectively, it can be the most powerful tax-management tool you can have.

TFSA contributions aren’t tax-deductable like RRSP, but since whatever comes out of your TFSA is tax-free, if you have accumulated enough wealth in it, you can reduce your taxable income substantially, especially in your retirement years. For example, instead of withdrawing more than the minimum from your RRIF (which is taxable), you can withdraw from your TFSA and enjoy your stay in the lower tax bracket.

Conclusion

Effectively using your registered saving accounts, choosing the right securities to invest in, accounting for all child-related tax credits, benefiting from spousal tax privileges, and business-related tax-breaks – All of these can help push your tax bill to a more reasonable and manageable magnitude.

A Guide To Tax Season For Small Business Owners

A Guide To Tax Season For Small Business Owners

by | Feb 9, 2022 | Bookkeeping, Personal Finance, Personal Income Tax, Sole Proprietorships

It’s that time of year again – everyone is talking taxes and it’s at the top of your mind even though you’ve been trying to avoid it all year. Besides just getting your taxes filed to avoid scary calls from the CRA and those hefty penalties and interest – tax season is a great opportunity to get a clear picture of your company’s financial health.

Money is the bloodline of your business so it’s important to have a finger on the pulse of your finances and not be afraid of it.

To make it just a little easier for you and in hopes that you can use tax season as an opportunity to understand where all your hard earned money is going, here is a guide with some quick tips and helpful information that might make this season a little easier and more informative for you!

Get Your Financial Books in Order

If you’re one of those people who have meticulously organized and tracked your business finances (i.e. income and expenses) throughout the year then you’re ahead of the game.

However, if you’ve been putting off dealing with your business finances all year, then now is the time to sit down and get organized!

If you’re a sole proprietor, using a tool like Microsoft Excel is a cost-effective and simple tool to track all your income and expenses. Alternatively, a more robust option is to use cloud-based accounting software such as Xero. There are other great cloud-based solutions such as Receipt Bank or Hubdoc that can really help you get your receipts and invoices organized. These are also great tools to store all your supporting documents, in the event of a CRA audit/review. You wouldn’t want to pass over receipts that have completely faded, in which case, they might disallow your expenses!

If you just don’t have the time to get your books in order and you have room in your budget, consider hiring a qualified bookkeeper to help you. Having clean and organized books will also help reduce your cost to file taxes (if you’re paying an accountant to file for you).

Pro Tip: Keep your detailed and itemized receipts for everything! Bank statements do not count as supporting documents for expense claims.

Don’t Miss The Deadlines for Filing Income Tax Returns

Small businesses that are operating as a sole proprietorship or partnership will have until June 15th to file their taxes. However, it’s important to note that any income taxes owing are due by April 30th. If you file late and end up owing taxes, you’ll pay interest and penalties on your outstanding tax balance until you submit your payment to the CRA. Keep your money in your pockets!

Small Business Tax Myths

1. My business did not make any money so I don’t need to report anything on my tax return.

False. Even if you had a net loss for the year (i.e. more expenses than income), you are still required to report your business income and expenses on your tax return. Moreover, it’s actually beneficial for you to report that net loss as you can apply the loss to other sources of income, such as employment income or investment income. If you can’t use those business losses in the current year, you can carry them back for three years and recover taxes previously paid or carry them forward for 20 years, to offset future earnings.

2. I made less than a thousand dollars and it’s just a hobby so I don’t have to report that income.

False. Even if you only made $10, you are required to report that income to the CRA. The CRA does not determine what is and what isn’t a business by how much money you make or by your intentions to “run a business”. They define a business as “any activity that you do for profit”.

Review the Financial Health of Your Business

Once your business finances are in order after filing your taxes, this is a great time for you to review the financial health of your business, see how you performed in the past year, and set financial goals for the year ahead. Did you make money or did you spend way more than you brought in? Was there an area where you spent way more than you expected? Where can you streamline costs and cutback on expenses?

Most business owners think that racking up tax deductions is great as it reduces your taxable income. However, you are still running a business and the goal is that your business will make money. Reducing unnecessary expenses also means there is more cash in your pockets and less outflow of money. Paying taxes is not a bad thing. It means that you are running a profitable business!

Consider this:

Scenario 1 –

  • If you made $1000 of income and spent $500 on expenses. You will only get taxed on $500. The taxes you would have to pay to the CRA would be approximately $125.
  • Amount of money left in your pocket at the end of the year = $375 ($1000 of  income minus $500 of expenses and $125 of taxes).

Scenario 2 –

  • However, if you made $1000 of income and spent only $200 on expenses. You will get taxed on $800. The taxes you would have to pay to the CRA would be approximately $200.
  • Amount of money left in your pocket at the end of the year = $600 ($1000 of  income minus $200 of expenses and $200 of taxes).
  • You are still better off at the end of the year, if you managed your expenses and spent less money on things just for the sake of a “tax write off”.