• 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.

• On December 12, 2003, the Canada Customs and Revenue Agency (CCRA) (the Canadian tax authority) became the Canada Revenue Agency (CRA). However, until it’s officially modified by an act of Parliament, CCRA remains the only name that can be used on documents of a legal or contractual nature.

• In Airport Auto (2003 GTC 899-105), CCRA (the Canadian Income Tax Agency) attempted to force a purchaser to pay GST again after the vendor did not remit the tax. The court dismissed CCRA’s argument and held that, based on simple agency law, the payment of the tax to a vendor as the Crown’s agent extinguishes the payer’s liability to pay the tax in the absence of fraud or collusion or explicit statutory language to the contrary; any other outcome would be “ludicrous.”

• Certain extended cab pick-up trucks and SUV’s may not be subject to the Canadian income tax rules limiting capital cost allowance (tax depreciation) or to the employee benefit rules.

• If you dispose of capital assets and provide financing to the purchaser, you are entitled to a reasonable reserve for Canadian Income Tax purposes in computing your capital gain. The maximum amount of the reserve is 20%, meaning the capital gain has to be recognized over 5 years.

• The merger of an existing operating corporation with a shell corporation is sometimes undertaken solely for the purpose of triggering a new year end. CCRA (the Canadian income tax department) views this type of transaction to be a misuse of the Act and the general anti-avoidance rule (GAAR) would apply.

• On December 5, 2003 the Minister of Finance made a press release with respect to Canadian income tax shelters. The press release is available at http://www.fin.gc.ca/news03/03-061e.html. If you enter into a tax shelter transaction after December 5, 2003 6:00 PM EST make sure that the shelter has not been adversely affected by the new rules.

• Tax shelters are transactions structured in such a way as to provide a tax benefit in excess of the cash investment. For the first time in 2003 there is a tax shelter that has insurance from Lloyd’s that will pay any taxes, interest or penalties arising as a result of a reassessment by CCRA (the Canadian income tax department).

• A private Canadian corporation that has at least 50% Canadian shareholders is entitled to a lower rate of taxation on its active income of up to $200,000. If non-residents of Canada own more than 50% of the shares the corporation loses its entitlement to this lower rate of tax.

• If CCRA (the Canadian income tax department) serves you with a formal written demand for information or returns you must comply or risk prosecution under the Income Tax Act.

• A business owner who pays service providers as independent contractors rather than as employees runs the risk of being assessed for penalties and interest if CCRA (the Canadian income tax department) finds that the individuals were in fact employees.

• After a Canadian taxpayer has filed a Notice of Objection an Appeals Officer is assigned to the file. The Appeals Officer is mandated to look at the file from an objective point of view to try to come to a fair (in accordance with the Income Tax Act) resolution of the dispute.

• Once CCRA (the tax department) commences a criminal investigation of a taxpayer they must act in accordance with the Canadian Charter of Rights and Freedoms.

• It is important to consider income taxation when creating a will to ensure that you properly allocate your estate among your beneficiaries on a post tax basis.

• If you have missed the deadline to file a Notice of Objection to a Canadian Income Tax assessment you can apply for an extension of time. However there are strict time limits for the application and there must have been a valid reason to have missed the deadline.

• If you have made a mistake in filing your Canadian income tax return you should file a Notice of Objection, if you are within the allowable time period, to protect your rights.

• In certain limited cases when you wind up a subsidiary into a parent, for Canadian income tax purposes you can receive an increase, or bump, in the cost base of the shares of the parent.

• American citizens with Canadian Registered Retirement Savings Plans (RRSP) who have not elected under the Canada - US Income Tax Treaty to defer tax on income earned by the RRSP have until October 15, 2003 to file an amended US return with the IRS claiming the treaty exemption.

• The reimbursement of legal fees incurred to establish a right to a retiring allowance or salary in lieu of notice is included in income but there is a corresponding deduction.

• The Ontario Ministry of Finance has recently issued a ruling that subscription fees paid for the right to access certain online databases are not subject to retail sales tax. An application for a refund of taxes paid can be submitted. The policy of CCRA (the Canadian income tax department) is that pre-judgment interest on an award of damages for wrongful dismissal is not taxable.

• If you have not filed Canadian income tax returns for a number of years there is no reason to be worried about severe penalties. CCRA (the Canadian income tax department) has a policy designed to encourage taxpayers to come forward and make a voluntary disclosure about unfilled tax returns. They will not charge any penalties, just the normal interest due. A taxpayer who suffers from severe physical or mental impairment is entitled to a tax credit for Canadian income tax. A form T2201 must be filled out by a physician and submitted to the tax department.

• CCRA (the Canadian income tax department) has released a proposed guidelines dealing with charities and political activities.The guidelines can be viewed and commented on at the CCRA charities web site .

• CCRA (the Canadian income tax department) is aggressively auditing taxpayers who purchase art at a discounted wholesale price and soon afterwards donate it to a charity at an increased retail value.

• If CCRA (the Canadian income tax department) believes that a taxpayer may dispose of assets and it may not be able to collect amounts owing to it, it can apply to a court without notice to the taxpayer for a “jeopardy order” allowing it to take collection action at the same time as it issues an assessment.

• The Federal Court of Appeal has stated in the June 2003 Benoit decision that denied exemption from all taxation to certain native groups based on a treaty exemption that native oral histories must be given proper weight in evaluating them as evidence.

• June 15 is the deadline to file Canadian personal income tax returns for individuals with self employment income.

• If you fail to keep proper books and records CCRA (the Canadian income tax department) may do a net worth assessment, which looks at the increase in your assets over time and assesses income tax on that increase.

• The Province of Ontario is in the midst of a crackdown on Ontario corporations that have not filed corporate income tax returns or exempt from filing declarations. Failure to respond, even where there are no taxes owing, may result in penalties including revocation of the corporate charter.

• CCRA (the Canadian income tax department) has extensive powers of enforcement to ensure that taxpayers comply with the Income Tax Act. These include the power to inspect and the power to require a person to produce information or documents.

• Tax planning is an ongoing process. Having just filed your 2002 Canadian income tax returns, now is the time to start planning for 2003.

• If you are grossly negligent in failing to report income on your Canadian income tax return you can be assessed a penalty equal to 50% of the tax owing.

• April 30 is the deadline for individual taxpayers (except for those who are self employed) to file their T1 personal Canadian income tax returns. The return should be filed even if there is an unpaid balance of taxes owing in order to avoid the late filing penalty.

• Ontario has released a new budget. For details go to Ontario Ministry of Finance

• An amalgamation is the combination of 2 or more existing corporations into one. Amalgamations can generally take place without any adverse income tax consequences.

• Canada has entered into an extensive series of Income Tax Treaties designed to prevent double taxation. If you have foreign source income be sure to review the relevant treaty.

• In the recent Manrell decision the Federal Court of Appeal confirmed that payments received for a non-competition covenant as part of the sale of shares are non-taxable. This is a confirmation of the court’s decision made in 2000 in the Fortino case.

• Investing in a labour sponsored investment fund through your RRSP will give you a 15% tax credit in Ontario, in addition to the RRSP deduction.

• The Supreme Court of Canada has just decided in the Markevich decision that CCRA can’t collect funds owing to it if has failed to take enforcement action within the times set out in provincial and federal limitation periods.

• The Supreme Court of Canada held in the Jarvis decision that where the purpose of a tax inquiry is the determination of a penal liability, CCRA auditors must warn the taxpayer in order to avoid infringing the Canadian Charter of Rights.

• The Tax Court of Canada held in a recent case that part of the cost of installing hardwood floors as required for the health of a severely asthmatic child on the advice of a physician are deductible for Canadian Income Tax purposes.

• The latest Federal Budget was released today. for details go to Finance Canada February 18, 2003

• You can hold a maximum of 30% foreign content in your RRSP.

• As a result of the Supreme Court of Canada decision in 65302 British Columbia Limited vs. The Queen, CCRA now recognizes that most fines or penalties can be deducted (or capitalized) for Canadian income tax purposes.

• An owner/manager of a corporation will have to include as a taxable benefit for Canadian income tax purposes the personal use of corporate property and most loans received. Certain specific loans, such as housing loans, may not have to be taxed.

• Losses incurred in an RRSP cannot be deducted against other income for Canadian Income Tax purposes.

• An owner/manager of a corporation will have to include as a taxable benefit for Canadian income tax purposes the personal use of corporate property and possibly any loans received.

• CCRA (the tax department) has issued a statement allowing an employee to attend an employer provided party that is generally available to all employees as long as the cost is reasonable (up to $100 per person is their guideline) without having to report a taxable benefit for Canadian income tax purposes.

• The tax department (CCRA)’s policy is that employers are allowed to give two non-cash gifts a year to employees without the employee having to include the gifts in income for Canadian income tax purposes provided that the gifts total less than $500.

• An employee who earns sales commissions and incurs sales related expenses is permitted to deduct those expenses, including related reasonable automobile expenses, in computing income for Canadian Income Tax purposes. The employer must provide the sales rep with a completed form T2200.

• The Canadian Income Tax Act has “stop loss” rules that limit a taxpayer’s ability to claim losses in certain specific situations.

• A non-arm's length disposition of capital property such as a rental property, for example a transfer to a child, is deemed to take place at fair market value for Canadian Income Tax purposes. If you transfer property that has appreciated in value you will have to report a capital gain of fair market value less cost.

• If you appeal a Canadian income tax dispute with CCRA (the tax department) to the Tax Court of Canada and lose, a further appeal to the Federal Court of Canada is available.

• The Supreme Court of Canada has just determined that section 232 of the Income Tax Act, which sets out a procedure for potentially privileged client documents to be seized from a lawyer’s office, is unconstitutional.

• If separated or divorced parents have joint custody of a child, only one of them may claim the equivalent to married credit under the Canadian Income Tax Act. If they cannot agree on who will claim the exemption, neither may claim it.

• 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.

• You are generally entitled to receive a tax credit on your Canadian Income tax return for the amount of foreign withholding tax paid on amounts received from other countries. In effect CCRA recognizes the foreign tax that you have paid as a reduction of your Canadian income tax liability.

• The "kiddie tax" applies to certain income received by a trust from a related business where minors are beneficiaries of the trust. If a family trust is established for the benefit of a spouse or children who have reached age 18 in the year, the kiddie tax won't apply on income taxed in the hands of these beneficiaries.

• Disability insurance receipts will be free of Canadian income tax only if an employee has paid the insurance premiums personally, or if the premiums for all employees were paid by the employer, and included as a taxable benefit of each employee. If the employer pays the premiums and they are not treated as a taxable benefit for all employees, then any disability insurance benefits will be taxable to the individual recipient.

• If you disagree with the tax department' income tax assessment you need to file a Notice of Objection to protect your rights.

• Changing the use of a capital property from personal to business or vice versa gives rise to a deemed disposition for Canadian Income Tax purposes.

• Interest on money borrowed for investment purposes is deductible for Canadian Income Tax purposes for as long as you own the investment or a replacement investment. Once you dispose of the investment the interest ceases to be deductible.

• The latest Ontario budget has delayed scheduled income tax cuts by one year.

• If you formally appeal a Canadian Income Tax assessment, CCRA (the Tax Department) is obliged to suspend collection action until the appeal is settled. No such end to collection action occurs with a GST appeal.

• The Supreme Court of Canada has just released two cases rejecting the “Reasonable Expectation of Profit” test and confirming that tax motivated transactions are not prohibited.

• If you are leaving the country and want to determine your tax status, the Canada Customs and Revenue Agency provides form NR73 Determination of Residency Status (Leaving Canada) if you want to obtain an official determination. This is essentially a questionnaire in which you provide details of your residential ties or lack of them. To become a non-resident of Canada you must divest yourself of as many residential ties as possible. Proper pre-departure planning is essential.

• The Home Buyers’ Plan allows a first time homebuyer to withdraw up to $20,000 from an RRSP to buy or build a principal residence. The funds can be repaid over 15 years.

• Transactions in stock options are treated in the same way as stocks for Canadian income tax purposes. In most cases they will give rise to a capital gain or loss.

• As a general rule, the receipt of a stock option in a Canadian corporation will not have any Canadian income tax consequences while the exercise of the stock option will be a taxable event.

• If you earn income from your principal residence, for example from renting a room, your principal residence will still be exempt from Canadian income tax on any capital gain rising on disposition provided the income is incidental to your use of the property, you make no structural changes to the property and you don’t claim capital cost allowance (depreciation) on the property.

• All amounts that you incur as current expenses related to the business are deductible for Canadian income tax purposes. Capital expenditures can be depreciated. If your business never earns a profit the deductions may be challenged on the basis that you have no reasonable expectation of profit.

• 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.

• If you fail to file Canadian income tax returns the tax department may arbitrarily assess you and you have the burden of disproving the arbitrary assessment.

• When buying or selling the assets of a business be sure to allocate the purchase price among the different asset types, as this will determine the values for Canadian income tax purposes.

• The Ontario Court of Appeal has confirmed in the Juliar case that the principle of rectification, obtaining a court order to retroactively correct a written agreement that does not properly record what the parties had intended, is applicable to transactions with Canadian Income Tax implications.

• If you operate a business from home you are entitled to deduct the cost of your home office for Canadian Income Tax purposes only if a separate part of your home is used to carry out the business.

• An amalgamation under the Canadian Income Tax has the effect of combining 2 or more corporations into a new corporation with no adverse tax consequences to the shareholders or the combining corporations.

• In the 1999 Canadian Income tax case of McFadyen v. The Queen, the taxpayer moved to Japan with his wife, not knowing when and if he would return. He stored his furniture and appliances in Canada and maintained two bank accounts in Canada, owned two houses which he rented out, maintained his membership with a professional association in Ontario, rented a safety deposit box, and maintained an RRSP, credit card and Ontario driver's licence. The Tax Court of Canada concluded that these ties were significant enough to make him ordinarily resident in Canada for the years in question.

• A voluntary disclosure is a method to allow you to deal with unfilled Canadian income tax or GST returns, or unreported income, without incurring penalties.

• Prior to 1995, self-employed businessmen and professionals were allowed to report their income for Canadian income tax purposes on a non-calendar year basis. Starting in 1995 they have been required to report their income on a calendar year basis. Taxpayers were permitted to claim a reserve for the additional income. A decision to leave a professional practice, or close down a business, and become an employee can trigger unexpected taxes payable if part of the 1995 reserve is outstanding.

• A director can avoid liability under the Canadian Income Tax Act if he can demonstrate that he exercised the degree or care, diligence and skill necessary to prevent the failure to deduct, withhold or remit that a reasonably prudent person would have exercised in comparable circumstances.

• Starting with the 2001 tax year, same sex couples can make spousal RRSP contributions for Canadian income tax purposes and can make tax free RRSP rollovers in the same way that opposite sex couples can.

• In order to become a non-resident of Canada for Canadian income tax purposes you must sever most ties with Canada, including your residence. Proper pre-departure planning is essential to avoid future Canadian taxation.

• The Canadian Income Tax Act renders a director jointly and severally liable with his corporation for failure to deduct, withhold or remit income tax, payroll or GST amounts required, along with any related interest or penalty. Legal or accounting fees incurred to challenge a tax assessment are a deductible expense for Canadian income tax purposes.

• Assets of a business, or shares of a corporation, can be transferred on a tax deferred basis by a taxpayer to a corporation by electing under section 85 of the Canadian Income Tax Act. Failure to prepare and file the election can result in a tax liability.

• On death of a Canadian individual there is a deemed disposition of all capital property giving rise to Canadian income taxation on the capital gain. An estate freeze is a way of postponing some of the potential capital gains tax liability.actions, other than RRSP contributions, need to be completed prior to December 31, 2001.

• If you own real estate (other than a principal residence) which has gone up in value since purchase, you have an inherent capital gain that will be taxed when you dispose of the property or die. If you plan to leave the property to your children then gifting it to them before death will trigger the tax. As an alternative you can consider an estate freeze.

• A testamentary trust is entitled to the benefits of marginal tax rates when computing its Canadian income tax liability while all income of an inter-vivos trust is taxed at the top marginal income tax rate.

• Legal fees incurred in respect of a child support application are deductible for Canadian income tax purposes.

• If CCRA (the Tax Department) has challenged any Canadian income tax returns that you have filed, be sure that you keep all original documents related to the year being challenged until the matter is finally settled. In order to claim a Canadian income tax deduction for an allowable business investment loss (ABIL) for money lent to a Canadian Controlled Private Corporation (CCPC), the debt must have been established to have gone bad at the end of the year.

• The Supreme Court of Canada has recently confirmed that it has never held that the economic realities of a situation can be used to recharacterize a taxpayer's bona fide relationships. It has held that, absent a specific provision of the Income Tax Act to the contrary or a finding that they are a sham, the taxpayer's legal relationships must be respected in income tax cases.

• The recent Supreme Court of Canada decision in the income tax case of Singleton confirmed the principal that in determining whether interest is deductible, if a direct link can be drawn between the borrowed money and an eligible use, the interest expense is deductible.

• Most legal fees incurred in family law situations are not deductible for Canadian income tax purposes. The main exception is for fees incurred to enforce a maintenance order. The status of fees incurred to obtain a spousal support order is less clear.

• A corporation is a separate legal entity, so losses that it incurs can't be claimed by it's shareholders. Loans advanced to a corporation by a shareholder may be deductible as an Allowable Business Investment Loss (ABIL).

• Attribution rules don't apply to earned income on investments bought in a child's name with the Child Tax Benefit provided an account was established for the child.

• If you deliberately falsify your Canadian income tax return, or are grossly negligent in preparing it, you may be subject to a penalty of 50% of the additional tax liability.

• If you earn more than $30,000 per annum you are required to register for GST.

• If moving expenses have been incurred by a student to move from school back home either for the summer or permanently, these expenses can generally be deducted for Canadian income tax purposes by the student against income earned at the moved-to location.

• If you run a business, your spouse and children can be paid reasonable salaries which become a business expense that is deductible for Canadian income tax purposes.

• The Canadian income taxation of child support payments changed as of May 1, 1997. If you amend a written support agreement made before that date the tax treatments of payments which were deductible to the payor and taxable to the recipient can change.

• If you transfer money to a minor child earns and it earns capital gains instead of interest or dividends, the capital gain would be reported on your child's tax return, not on yours, thereby reducing the family’s overall Canadian income tax liability.

• Offshore income earned by a Canadian resident is fully taxable in Canada and must be reported for Canadian income tax purposes. Failure to do so is tax evasion.

• The use of spousal RRSPs during working years permits the higher income spouse to get the tax benefit of the RRSP income tax deduction, while incurring tax on a lower income when the amounts are withdrawn on retirement.

• If you have income which is not subject to deductions at source you may have to pay quarterly income tax installments. If you fail to pay the installments when due you will be charged interest.

• A loss realized on shares of a small business corporation or debt owed by a small business corporation may give rise to an allowable business investment loss (ABIL), 75% of which is deductible in computing your Canadian income tax liability.

• If you owe money to CCRA (Revenue Canada) and can't pay the full amount be sure to negotiate an acceptable payment arrangement with them so that they don't seize any of your assets.

• If you are the owner of a corporation and pay yourself a salary, you are not eligible for Canadian Employment Insurance as an owner-manager so you should not make any remittance when you complete your personal Income Tax return.

• If you’re incorporating your existing business you will have to carry out a tax free rollover of the assets into the corporation and elect to defer income tax under section 85 of the Canadian Income Tax Act to avoid an immediate tax liability.

• All amounts that you incur as current expenses directly related to your business are deductible for Canadian income tax purposes. Capital expenditures can be depreciated at the prescribed tax depreciation rates. If your business never earns a profit the deductions may be challenged on the basis that you have no reasonable expectation of profit.

• A car allowance is taxed as regular income for Canadian income tax purposes. If you require the car for work and your employer gives you a form T2200 you may be able to deduct travel expenses.

• Interest, dividend and most other payments made to a non-resident of Canada are subject to withholding tax under the Canadian Income Tax Act.

• Reasonable expenses for meals and entertainment incurred for the purpose of earning business income are deductible for Canadian income tax purposes. However, only 50 per cent of these costs are allowed as a deduction for tax purposes. The costs of restaurant gift certificates used for promotion are also subject to this limitation.

• If your liabilities for unpaid Canadian Income Taxes are too high for you to pay you can consider either a formal Proposal under the Bankruptcy and Insolvency Act or going bankrupt.

• When making your calculations to determine your Canadian income tax deductions for RRSP contributions, remember that certain deductions, such as net losses from rental properties or employment-related expenses including union dues or traveling expenses will reduce your "earned income" which reduces your RRSP contribution limit for 2001. Also excluded from "earned income" are certain types of income including interest, dividends, capital gains, and most pension income.

• To make changes to previously filed personal Canadian income tax returns, individuals should not file an amended tax return. Canada Customs and Revenue Agency (CCRA) prefers that individual taxpayers who wish make changes to returns, use form T1-ADJ (Adjustment Request), available at local tax services offices or on the CCRA Web site.

• There are no immediate Canadian income tax consequences as a result of the transfer of capital property to former spouses where the transfer arises from divorce or separation settlements.

• All amounts received as a consequence of termination of employment, even if received as damages, are fully taxable for Canadian income tax purposes in the year received. However, a portion of the payment may be eligible for transfer to an RRSP.

• Hair transplant costs paid to a doctor will generally qualify as medical expenses and will give rise to tax credit for Canadian Income Tax purposes. However only medical expenses in excess of 3% of income will be eligible for the tax credit.

• If a relative wins a lottery and decides to share the winnings with his family, the person who receives the gift from the family member will not have to pay tax on what he receives since there is no gift tax in Canada. Any amounts arising from any source, including lottery winnings, can be gifted to any person without Canadian tax implications.

• New Canadian income tax rules provide for a tax-free rollover of capital gains on disposition of shares of certain active Canadian corporations where the proceeds are used to invest in shares of another active Canadian corporation.

• Individuals with grown children who own their own homes or with no children should consider donating an interest in a personal residence to a charity. If the donor wishes to continue to have use of the property for the remainder of his or her lifetime, a residual interest in the property could be gifted to the charity currently without the use of a trust. The donor will receive an income tax receipt for the value of the residual interest transferred. Provided that the home is a principal residence, there will be no taxable capital gain

RENTING YOUR HOUSE OR BASEMENT?

Here is the list of expenses you can deduct from rental income? If you rent out one or more rooms in your home, or if you own a rental property, there are many expenses that can be deducted in calculating your net rental income. These expenses include mortgage interest (but not principal), property taxes, utility costs, house insurance, maintenance costs, advertising, and property management fees. If you rent out only a portion of your home, you would only be able to deduct a portion of the costs. If you rent a room to a friend or relative at less than fair market value and this results in a rental loss, you would not be able to deduct the rental loss. Capital cost allowance (CCA) may be claimed based on the purchase price of the building only, not the land, and may not be used to create or increase a rental loss. If you only rent a portion of your home, then you would only be able to claim a portion of the CCA, and this may result in the loss of the principal residence exemption when you eventually sell your home. The claiming of capital cost allowance will probably result in a recapture of the CCA when the property is sold. This will happen if the selling price of the building is greater than the remaining undepreciated capital cost (UCC) at the time of sale. The difference between the original cost and the UCC will be added back to income. If the selling price is greater than the original cost of the building, then the difference between the selling price and the original cost will be a capital gain. When purchasing or selling a rental property, it is important to break down the purchase or sale price between buildings and land. A change in use of your home from personal residence to rental property, or from rental property to personal residence, can result in a deemed disposition for tax purposes. This means that you will be considered to have sold your home and repurchased it immediately thereafter for fair market value. There are many factors which affect this, and professional advice is recommended. Net rental income is reported on line 126 of your personal tax return. This net income is included in "earned income" for purposes of calculating your allowable RRSP deduction limit for the following year. Zubair Choudhry is a Registered Professional Accountant with over 15 years of experience dealing with tax matters in Canada. For further information, please visit www.mintax.ca or contact Zubair Choudhry at 905-270-4217 or email at Zubair@mintax.ca

Who must report?
Reporting is required by all businesses, whether carried on by an individual, partnership or corporation, whose principal activity is construction. For this purpose, construction is defined as erecting, installing, altering, modifying, repairing, improving, demolishing, dismantling or removing any structure or part thereof.

What payments must be reported?
Payments to subcontractors for construction services must be reported if the amount paid for services is $500 or more. Subcontractors include businesses that are below the $30,000 limit for goods and services tax (GST) purposes. Payments for goods are not to be included in determining if a payment satisfies this test. The payments can be reported on either a calendar-year or fiscal-year basis.

For example, assume your business's year-end is June 30, 2003. Your reporting return for 2003 can either report all payments from July 1, 2002 to June 30, 2003 or it can report all payments made from January 1, 2003 to December 31, 2003.

What information must be reported?
If you are involved in the construction business and pay a subcontractor for services rendered, you must report the name of the subcontractor, the business address, the subcontractor's Business Number (BN) or Social Insurance Number (if no BN is available), and the amount paid for the reporting period.

The information can be reported on either a Contract Payment Reporting Information return (form T5018) or, alternatively, the information can be reported on a line-by-line basis in a column format with the appropriate summary information.

In general, the due date for filing the required information is six months from the end of the reporting period.

Although there is no requirement to provide any information slips to the subcontractors, it is reasonable to assume that they will want to know what information is being reported to the CCRA.

MINTAX TAX TIP
If you are in the construction business and pay subcontractors for work performed, you should ensure that you obtain all of the necessary information to complete the information return.