June 2019 Newsletter

If you “do work” for a company, are you an employee or an independent contractor? And why does it matter?

For tax purposes, it matters a lot. Generally, being an independent contractor is preferable from a tax point of view, though there are some drawbacks.

If your relationship to the company is that of independent contractor (i.e., you are carrying on your own business and providing services to the company), then:

As you may know, Canada provides a “foreign tax credit” (FTC) to Canadian residents, to reduce double taxation on foreign-source income.

The FTC rules are complex. In general terms, Canada allows a credit to a Canadian resident for foreign income tax paid on foreign-source income, up to a limit of the Canadian tax payable on the same income.

The effect is that you pay total tax equal to the higher of the two rates of tax (Canadian and foreign) on the foreign-source income.

If your business purchases goods or services from other businesses, and you think some of them may not be complying with their tax obligations, there is a serious risk that you need to address. The risk is primarily in the GST/HST area.

This comes up in everything from construction services, to agencies that supply temporary personnel, to garment work, scrap metal sales, building cleaning services, and many other areas.

Change of address notification to CRA for income tax was enough for GST/HST

The recent Kirschke decision of the Tax Court of Canada (2019 TCC 68) was an application for extension of time to file a late notice of objection. The application was technically dismissed, but for reasons that made it clear that the applicant won her case.

(Normally an objection to an income tax or GST/HST assessment must be filed within 90 days of the date on the Notice of Assessment. In certain cases an extension of up to one year is possible. Without a valid Notice of Objection filed on time, one cannot appeal the assessment.)