A lot has been written about the lifetime capital gains exemption (“CGE”), now up to $866,912 and indexed annually, available to shelter gains from the sale of qualifying private company (“QSBC”) shares. Further, many have written about how prior deductions for allowable business investment losses (“ABILs”) and cumulative investment losses (“CNIL”) reduce the exemption that is actually available. Advisors are also generally aware that alternative minimum tax (“AMT”) can arise if an individual’s regular income tax in the year is low. If you think addressing these issues covers all the bases for determine how much CGE is really available and how much to use, think again.
HWTs must conform to the Private Health Service Plan rules in the Income Tax Act as well as CRA administrative rules. In theory, a HWT allows a company to deduct payments to fund the HWT and the shareholder/employee is not taxable on eligible medical expenses reimbursed to him or her by the HWT.
A non-resident of Canada is subject to Canadian taxation on gains arising from the disposition of taxable Canadian property (“TCP”). TCP includes many items but the most common one we see in practice is Canadian real estate. Many non-residents selling Canadian real property often discover the purchaser is withholding 25% of the gross proceeds pending receipt of a “compliance certificate” from the non-resident. In some cases, the withholding is 50%. Our discussion today focuses on a non-resident’s reporting and withholding tax requirements under section 116 of the Income Tax Act (the “Act”) upon the sale of TCP and more importantly, how to reduce the withholding tax amounts.