CRA: Cannabis Taxation at a Glance

Beginning likely in 2020, the Government of Canada will begin to legalize, regulate, restrict and tax cannabis to keep it out of the hands of kids, and profits out of the hands of criminals.

The Government of Canada believes that the total of federal and provincial-territorial taxes on cannabis products should not exceed $1.00 per gram, or 10% of the producer’s sale price of a product, and that this tax room should be shared equally between the Federal government and the Provincial government.

The proposed federal excise duty rate would be 50 cents per gram of cannabis, or 5% of the producer’s sale price of that product.

An additional rate would apply for an agreeing province or territory.

The proposed duty would apply to all cannabis products available for legal sale, including fresh and dried cannabis, cannabis oils, as well as seeds and seedlings for home cultivation.

The rate will also apply to the sale of medical cannabis.

It is important to note that excise duties are not paid directly by consumers. Rather, they are paid by manufacturers.

Cannabis product sales will be taxable under the Goods and Services Tax/Harmonized Sales Tax (GST/HST), as is currently the case for medical cannabis, for example.

The following example, provided by the government of Canada, illustrates the final price paid by consumers at a combined rate of $1.00 per gram, or 10% of the sale price:

One gram of dried cannabis

Pre-duty price: $8.00

Excise duty (per gram): $1.00

Subtotal: $9.00

GST/HST: $1.17

Total: $10.17

60 ml bottle of cannabis oil

Pre-duty price: $130.00

Excise duty (%): $13.00

Subtotal: $143.00

GST/HST: $18.59

Total: $161.59

 

 

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Canada Revenue Agency (CRA) Voluntary Disclosure Program (VDP) Changes March 1st, 2018.

The Canada Revenue Agency (CRA) have announced that effective March 1, 2018, changes will be made to the Voluntary Disclosures Program to narrow its eligibility criteria.

What is the Voluntary Disclosure Program (VDP)?

The VDP provides Canadians a second chance to change a tax return which has been previously filed with the Canada Revenue Agency (CRA), OR to file a return(s) which you should have filed with the CRA.

Your application under the VDP – if approved – allows you to file or amend a return without the CRA prosecuting you, or assessing penalties.

Who Can Apply?

Taxpayers!

Taxpayers can be;
• Individuals
• Employers
• Corporations
• Partnerships
• Trusts
• GST/HST registrant / claimants
• Registered exporter of softwood lumber products

You can apply, or you can have an authorized representative – like an accountant, or tax professional like inTAXicating, submit the application on your behalf.

How Many Times Can You Apply?

The CRA would prefer you use VDP once and stay up-to-date on filings from that point onwards, however should circumstances warrant it, you can apply again.

Conditions of a Valid Application

To qualify for relief, the application must:
• Be voluntary – You come to the CRA before the CRA gets to you.
• Be complete – You cannot file for one year, for example, you have to file everything and disclose everything.
• Penalty: Involve the application or potential application of a penalty and, for GST/HST applications, the application or potential application of a penalty or interest
• Time: Include information that is at least one year past due for income tax applications and, for GST/HST applications, at least one reporting period past due; and
• Include payment of the estimated tax owing.

The Process

Submit an application to the CRA, and if the CRA approves it, the returns in question are filed or amended and there is no penalties or fear of prosecution (unless you are engaged in criminal activities).

The CRA then expects you to pay the balance owing – or make arrangements to pay – because while there is no penalties, there is still interest accruing on the account.

* The above information applies until February 28, 2018.

The CRA will update their VDP guidelines as of March 1, 2018, so in order to be considered under the existing VDP, the CRA must receive your application, including your name, on or before February 28, 2018.

What Changes March 1st, 2018? 

On March 1, 2018, when the new VDP comes into effect, it narrows the eligibility criteria to access the Program and imposes additional conditions on applicants, making it more difficult for those who intentionally avoid their tax obligations to benefit from the VDP.

Income Tax Disclosures

With the changes to the program, two tracks will be created for income tax disclosures:

1. Limited Program

The Limited Program provides limited relief for applications that disclose non-compliance where the facts suggest that there is an element of intentional conduct on the part of the taxpayer or a closely related party.

Under the Limited Program, taxpayers will not be referred for criminal prosecution with respect to the disclosure and will not be charged gross negligence penalties, however, they will be charged other penalties and interest as applicable.

2. General Program

Under the General Program, taxpayers will not be charged penalties and will not be referred for criminal prosecution related to the information being disclosed. The CRA will provide partial interest relief for years preceding the three most recent years of returns required to be filed.

GST/HST, excise tax, excise duty, softwood lumber products export charge and air travellers security charge disclosures

For GST/HST, excise tax, excise duty, softwood lumber products export charge and air travellers security charge disclosures, three categories will be created:

1. Wash Transactions

Wash transactions are generally transactions where a supplier has failed to charge and collect GST/HST from a registrant entitled to a full input tax credit. This category provides relief only for applications involving GST/HST “wash transactions” that are eligible for a reduction of penalty and interest under the policy set out in GST/HST Memorandum 16.3.1, Reduction of Penalty and Interest in Wash Transaction Situations.

Registrants will not be charged penalties nor interest and will not be referred for criminal prosecution related to the information being disclosed.

A registrant must now disclose information on any non-compliance during the four years before the application is filed.

2. Limited Program

This category provides limited relief for applications that disclose non-compliance where the facts suggest that there is an element of intentional conduct on the part of the registrant or a closely related party.

Under the Limited Program, registrants will not be referred for criminal prosecution with respect to the disclosure and will not be charged a gross negligence penalty, however, they will be charged other penalties and interest as applicable.

3. General Program

All of cases fall under the General Program where registrants will not be charged penalties and will not be referred for criminal prosecution related to the information being disclosed.

The CRA will provide partial interest relief and a registrant must now disclose information on any non-compliance during the four years before the application is filed.

How to Determine if a Disclosure Falls under the General or Limited Program?

For both income tax and GST/HST disclosures, the determination of whether an application should be processed under the General or Limited Program will be made on a case-by-case basis and in doing so, the CRA may consider a number of factors, including but not limited to:
• The dollar amounts involved;
• The number of years of non-compliance; and
• The sophistication of the taxpayer/registrant.

Other Significant Changes to the VDP

1. Payment

Payment of estimated taxes owing: Payment of the estimated taxes owing will be required as a condition to qualify for the program (When a taxpayer does not have the ability to make payment at the time of filing the VDP application, they may request to be considered for a payment arrangement.)

2. Anonymous Disclosures Eliminated

The “no-names” disclosure method has been eliminated and replaced by a new pre-disclosure discussion service.

The process for taxpayers and authorized representatives to make disclosures on a no-names basis has been eliminated. Under the new “pre-disclosure discussion” service, taxpayers or their authorized representatives can have a conversation with a CRA official on an anonymous basis, but that discussion does not constitute acceptance into the VDP.

3. Large Corporations

Generally, applications by corporations with gross revenue in excess of $250 million in at least two of their last five taxation years, and any related entities, will be considered under the Limited Program.

4. Transfer-Pricing

Due to the complexity of transfer pricing issues, applications will now be referred to a specialized Transfer Pricing Review Committee, which will review the applications instead of the VDP.

For efficiency, taxpayers may send their applications directly to this committee.

5. Review by Specialists

Applications involving complex issues or large dollar amounts will be reviewed for completeness by the relevant specialist from the program area prior to being accepted.

6. Disclosure of Advisors

The name of the advisor who assisted with the non-compliance should now be included in the application.

7. Cancellation of Previous Relief

The new VDP regulations provide the CRA with the ability to cancel relief which was previous provided to a taxpayer if it is subsequently discovered that a taxpayer’s application was not complete due to a misrepresentation.

8. Mandatory Waiver of Rights of Objection and Appeal

Under the Limited Program, participants will have to sign a waiver of their right to object and appeal in relation to the specific issue disclosed.

 

If you need assistance with a Voluntary Disclosure – at any time – we can help!

Email: info@intaxicating.ca

On the phone: 416.833.1581 (If you are outside of Toronto, and would like to speak to us live, please email us, and we will gladly call you at your convenience)

On our website: http://www.intaxicating.ca (Portal coming soon – currently under construction).

Full Disclosure Alert: Know Who You Are Dealing With!!

I had the most interesting comment sent to me today, by someone who used to work at the CRA.

She noticed on my blog, and on social media, that I “claimed” to have been a “Former CRA Employee of the Year” and she, having worked at the CRA, was not familiar with the award.

She questioned my legitimacy!

I love it.

It reminded me that I had not finished updating the “About Us” section on the inTAXicating website, and in doing so, I will include the details of this honour.

I was nominated for the “Most Valuable Player” award – which was the wording they used for the Employee of the Year – by a colleague of mine in 2002.

The nomination was his acknowledgement that I went way above and beyond the scope of my employment not only professionally but personally to support my colleagues, staff and to represent the CRA in a positive manner.

This was before my MBA, and before children.

I had recently started a Mentoring Program for the Collections division at our CRA office and the program was so successful, that we began running it through the rest of the departments in our building and in other Tax Services Offices. I was also responsible for overseeing the Write Off inventory, managing a New Intake collections / compliance team, heavily into training staff and had recently taken over the Director’s Liability inventory and was in the process of cleaning that up.

Personally, I had just gotten married, had been right in the middle of taking accounting courses towards my CGA designation and was volunteering my time with a Big Brothers and Big Sisters Program here in Toronto.

I was also on the board of the Government of Canada Charitable Workplace Campaign, and in the role, I went to each and every employee in the Revenue Collections division in our office and spoke to them one-on-one about the program and their contribution.  They donated record amounts.

I had several inventories of business collections accounts, and when the office renovated floors and we had to move staff between floors, I was the coordinator.  I was also the employee who received the sensitive issues from the Director’s Office to hand, with care.

I was busy.  Could have been much busier, but certainly I was fully engaged.

I was nominated and both myself and the nominator received recognition for the honour.

I was deeply honoured and appreciative.

Then I won.

I was shocked.

I drove to Niagara Falls, accepted the award from then Commissioner of the Canada Revenue Agency Ruby Howard, and I drove back home to attend class later that evening.

The following day, the first person I met when I arrived into the building greeted me like this;

“Hey Warren. Congratulations on the award. I just don’t feel that you deserved it.”

“Thank you”, I replied to him. “Neither do I.”

“Sorry, that might have been harsh”, he said to me.

“I’d rather you speak the truth, than keep that from me” I said.

“You know what”, he said. “Maybe I just don’t know you well, enough, but time will tell.”

Just a year before this man passed away from a long battle with cancer, he said leaning over the cubicle right beside me where he sat; “You know what, Warren. I’m surprised you only won one of those things.”

That comment from one of the smartest people the CRA had ever employed, meant a lot to me.  Not many people got along with this gentleman because he was all business, all the time, but I deeply respected him and I let him know it.  He earned that respect from everyone, but few knew how to pass it along to him.

But, getting back to my “claim”…

I decided to attach the picture of my award;

Me accepting the award in Niagara Falls;

My certificate of my 10-year’s of service to the CRA;

…and a word of advice for anyone who has tax problems…

Know who you are dealing with. Understand their expertise in the field you are looking for expertise in.

What makes inTAXicating so successful is that Taxpayers, business owners and other professionals read my words, Google me, check out my LinkedIn profile and determine that I know my stuff.

Which I do.

Then they reach out.

I expect each and everyone of you to do the same.  Read some posts, Google me. Check out my LinkedIn profile and reach out for tax help, to have questions answered, to learn more about the CRA, or to help your clients so you can help them.

Email: info@intaxicating.ca

SEO Spam, inTAXicating, and Why Businesses Fail

Anyone else get a lot of SEO Spam?

SEO, in case you were not aware is the acronym for Search Engine Optimization, and is a marketing technique which focuses on growing the visibility of your web-site through non-paid search engine results.

To get a higher ranking website, you need a combination of good content and your site has to hit the right keywords.  Doing this will drive traffic to the website, and all of this helps the search engines know that your site needs to be shown to people searching for whatever you have written about.

It stands to reason then, that just because you created a web-site (or blog) it doesn’t mean that anyone will see it or read it.  The site has to be “indexed”, meaning that it needs to show up in search engines, and it gets indexed by having people show up and visit the site.

The more visitors, the higher the ranking.

What does SEO spam have to do with businesses failing?  Directly, a lot, yet indirectly, a lot as well.

In and amongst the spam I get at http://www.intaxicating.ca, I seem to get a LOT of pitches from SEO companies who promise to help me get your website on the “first page of Google”.

Now, I know that a lot of these inquiries are spam because they are fraudulent – trying to steal identities and money – however there are some real companies who reach out to help me improve my site’s ranking.

If you are going to take the time to make a pitch to company, should you not check before you reach out to ensure that you are offering a service which they actually need?

Some of the blog posts contained on the inTAXicating blog already come up on the first page of Google.  In fact, several inTAXicating posts come up before the Canada Revenue Agency when they are being searched.

Forget the offer to be on the 1st page of Google searches.  When you’re number 1 already, why even make the offer of service.

If you cannot see that, what else are you going to miss which is a lot less obvious?

Business fail because they do not take the time to check their prospective client(s) out and they end up making a pitch which shows there is no attention to detail being paid.

In the meantime, when you have a tax issue, and you need the best, contact inTAXicating.  We rank higher than the CRA on CRA tax matters for a reason.

info@intaxicating.ca

 

Cobourg, Ontario Resident Sentenced by CRA for Tax Evasion.

The Canada Revenue Agency (CRA) announced that, on December 4, 2017David Porter Wilson of Cobourg, Ontario, was sentenced to a fine of $97,173 after pleading guilty in the Ontario Court of Justice in Cobourg, Ontario, to two counts of income tax evasion.

In addition to the court imposed fine, Wilson will also have to pay the full amount of tax owing, plus related interest and any penalties assessed by the CRA.

A CRA investigation revealed that Wilson failed to report income that he earned as a commissioned salesperson for a marketing company, totalling $449,745 on his personal tax returns for 2006 and 2007, thereby evading federal income taxes totalling $97,173. While under investigation, Wilson left Canada, and after the charges were laid an arrest warrant was issued on September 7, 2011. Wilson did not return to Canada until August 9, 2017.

All case-specific information above was obtained from the court records.

The CRA takes tax evasion very seriously.

Tax evasion occurs when an individual or business wilfully ignores or disregards Canada’s tax laws. For example, those participating in tax evasion under-report taxable income or claim expenses that are non-deductible or overstated.

Those who do not fully comply with tax laws place an unfair burden on law-abiding taxpayers and businesses and jeopardize the integrity of Canada’s tax base.

For the five-year period of April 1, 2012 to March 31, 2017, the courts have convicted 408 taxpayers – This involved $122 million in federal tax evaded and court sentences totaling approximately $44 million in court fines and 3,103 months in jail.

If you have made an omission in your dealings with the CRA, made a tax mistake or left out details about income on your tax return, the Agency may give you a second chance to correct your tax affairs and avoid criminal prosecution.

The Voluntary Disclosures Program (VDP) may give you the opportunity to come forward, make things right, and have peace of mind. Disclosures that are made before the CRA launches an enforcement action such as an audit or criminal investigation may only result in you having to pay taxes owed plus interest. That being said, the VDP is currently under review. Changes were announced in the fall of 2017. More information on the VDP can be found on the CRA’s website at Canada.ca/taxes-voluntary-disclosures.

The CRA has set up a free subscription service to help Canadians stay current on the CRA’s enforcement efforts.

Associated Links

Offshore Tax Informant Program
Informant Leads Program
Voluntary Disclosures Program

Stay Connected

To receive updates on what is new at the CRA, you can:

SOURCE Canada Revenue Agency

7 Ways the Tax Man is Watching You: MoneySense.ca

When I saw this headline in Money Sense.ca I immediately felt upset that this article was going to be a bunch of made-up, fear-mongering, scare tactics along the lines of something that would come from an advertising campaign from a certain tax law / brokerage firm.

They popularized the calling of the CRA the “tax man” and since we all know the CRA hates that, its worth noting that it a confrontational relationship with the CRA is what they are all about.

Some people need that.

Most don’t.

Then, upon reading the list, I noticed that each and every one of the 7 items has a quote from… Dioguardi, and once the shock and surprise wore off, I shook my head and wanted to set the record straight, as far as I see it.

Not really...
The CRA is watching you!

The link to the original article is here;
http://www.moneysense.ca/save/taxes/cra-watching/

So let’s look at these items in a bit more depth;

1. Social media. Sure. If you make it public, and you have a unique name, the CRA can see what you’re posting. It doesn’t mean that if you have $40K in reported income and buy a $100K boat that they are going to assess you. If you are in collections and the CRA’s collections officers are trying to get you to pay, and all of a sudden a boat shows up on their radar, they will do their research and determine who owns it, how it was purchased and if it belongs to someone who owes the CRA taxes, then you have better have a good explanation as to why you didn’t disclose it.

2. Kijiji, eBay, etc. Yes, if you are selling items online as a way to earn an income it is income that you should declare and pay taxes on. The CRA have in the past requested and received information from eBay related to their top sellers. If, however, you are doing this as a business, it would have made sense to have engaged an accountant or tax professional to ensure that you are not only reporting correctly, but that you are claiming all eligible deductions and expenses – like a home office – to offset the income earned. A business is a business.

3. Credit card slips – yes, however only if it’s through an audit and the auditor has requested it directly from you. I suppose if you were under criminal investigation, or were in collections for a long time, the advanced collection techniques might include requesting this information, but the collections staff are not able to do anything with it. Auditors can assess with it. Collections cannot. Very misleading point here!

4. Bank accounts and investments – All financial institutions are required to provide year-end tax slips to taxpayers indicating their position during the year and in each and every case, a copy is sent to the CRA. They already have this information. They’re not watching anyone. The slips the bank sends is matched to the slips the taxpayer files. No slip, then the CRA asks for it (maybe you lost or forgot it) and then if it’s not accounted for, the CRA will raise an assessment.

If a taxpayer is in collections and the CRA wanted to know information about a bank or investment they have the ability to use a Request for Information, to ask for information and a Requirement for Information to ensure they get the information. Both processes are complicated and the CRA must prove that they were denied the information or that they need it urgently in order to raise an assessment.

5. This section is a bit vague and underwhelming. First, the CRA checks the sales records much faster than they did years ago – but they take that information then send out a questionnaire to the taxpayer to complete which is the supporting document they use to assess. They see you sold, but you let them know if there is cause for digging deeper.

On the rent side,, what catches the most number of people is when a renter pays rent in cash and the landlord and the landlord does not provide receipts and neither reports in… until there is an issue, and the renter declares rent paid. The CRA checks the landlord to see if they declared the rental income and when they have not… Assessment. The CRA is, again, not watching people in this case. They come across these assessments because of breakdowns in rental agreements.

6. Income and pensions. This list should have stopped at 5. This is not a case where CRA watches anyone. It’s about reporting and discrepancies.

7. Mystery diners – I’m not even going to comment on this than to say that it’s so over the top it’s unbelievable.

I will add, that while working at the CRA, I did attend restaurants as a representative of the Crown, however I disclosed my reason for being there and it was only in situations where restaurant owners had payroll debts over $300,000, and suddenly reduced their payroll from 15 full-time employees to 2 full-time employees. I just needed to check and see if they really did cut staff, or if they just started paying the other 13 cash under the table, to avoid having to deduct and remit the CPP, EI and tax. In each and every case, upon entering the restaurant, I would count the number of employees – when I saw more than 10, I would take the owner aside, explain this was not legal, then request a payroll audit and be done, until the audit assessment came into collections.

So to conclude, the most accurate part of this article is, “always give full and complete disclosure”.

The “tax man” is not watching you, unless you are in collections, under investigation, or trying to “game” the system.

If you have questions, concerns or comments, and want the truth about your situation, send us an email to info@intaxicating.,ca and we can have that discussion.

It’s hot outside! It’s the best time to think about solving that nagging tax issue.

If you live in Southern Ontario, you are in the middle of a heat wave.  Summer came back bigger, badder, stronger than it had all summer, and with humidex readings in the low 40’s, all the talk is about cooling off and extending the cottage season.

And there is nothing wrong with it.

But as the calendar creeps towards October, we enter the last quarter of the year and this is traditionally the best time of year to finally seek resolution on that nagging Canada Revenue Agency (CRA) tax problem.

The tax problem that causes you so much stress that you cannot open the brown envelopes from the CRA.

The tax problem which resulted in the CRA freezing your bank account or garnishing your wages.

That nagging tax issue which prompted the CRA to register a lien against your property.

The one that prevents you from having a full night’s sleep.

Yes, that one.

Well worry no more because help is here.

No matter how big, or small, complex or simple, we have seen them all, and resolved them all.  At the very least, after a meeting with us, you will understand the truth behind your tax problem – whether you have a chance of having it overturned or whether you actually are on the hook for the balance.

After a meeting with us, you can finally start on the pathway to resolving your tax troubles and no longer worry that when you try to use your debit card it might not work because the CRA froze your bank account and withdrew all of the funds.

inTAXicating

info@intaxicating.ca

Toronto-based.  Canada-wide Tax Liability Specialists.