Flashcards in Test 1 Deck (33):
What are the five objectives of taxation?
1. To maximize the growth and output of goods and services that are in the public interest
2. To redistribute wealth equitably
3. To protect liberty and rights of the individual
4. To strengthen federal and provincial relations
5. To be internationally competitive
What is direct tax?
Tax demanded by the government from the very person to hidden the tax applies
What is indirect tax?
Tax demanded from one person in the expectation that he will reimburse himself at the expense of another
What is value added tax?
Tax levied on the increase in the value of a commodity that has been created by the taxpayer's stage of the production or distribution cycle
What is consumption tax?
Tax levied on the consumption of some product or service
What is user tax?
Tax levied on the user of some facility
What is head tax?
Tax levied on the existence of a classified group
What is a tariff?
Tax imposed on importation or exportation of certain goods or services
What is transfer tax?
Tax imposed on the transfer of property from one owner to another
What is property tax?
Tax imposed on the ownership of some particular set of goods
What is income tax?
Tax imposed on the income of individuals corporations and trusts
What is tax planning?
1. Shifting income from one time to another (RRSP)
2. Transfer income to another entity (trusts)
3. Converting income from one type to another (capital gains)
What is specific anti-avoidance rules?
Prevents people from being too aggressive on tax planning.
Entertainment expenses abuse too much only certain things allowed. Private club taking clients there to lunch you can't write it off has been changed to a 50% deductible.
What are three general anti-avoidance rules?
1. Tax benefit must results
2. Transaction is an anti-avoidance transaction
3. Abusive tax avoidance is the sense that the tax avoidance would be inconsistent with the object spirit or purpose of this provisions relied upon by the taxpayer
What are the taxation years of individuals corporations and trusts?
1. Individuals December 31st
2. Corporations can choose fiscal year end
3. Trusts :
Intervivos December 31 Testamentary trust can choose the fiscal year end
Definition of who pays tax
An income tax shall be paid as hereinafter required upon the taxable income for each taxation year of every person resident in Canada at any time in the year
Who is a nonresident?
1. Didn't leave dwelling in Canada
2. Didn't leave a spouse or dependents in Canada
3. Didn't leave personal property in Canada
4. Established permanent residence somewhere else
5. Doesn't return to Canada on a regular basis
What is the two-year rule?
If a person is out of the country for less than two years presume to have maintained residence unless they convert Aultice a good supper if the person is out of the country for more than two years assumed they're nonresident unless otherwise proven.
What is a sojourner?
A person who is temporarily present in Canada for more than 183 days during any calendar year deemed to be a resident for the entire year even if home outside of Canada. If less than 183 days non-resident.
Tax implications for a resident
Taxed on world income for the entire year
Tax implications for a nonresident
25% of tax withheld at source
Tax implications for a part-time resident
Taxed in Canada on world income for the part of the year in which they were resident in Canada
Tax implications for deemed resident
Taxed on world income for the entire year
Tax implications on US citizen
Taxed based on residency and citizenship
April 26, 1965 corporations
1. Corporations incorporated in Canada after April 26, 1965 parking to the residence in Canada
2. Corporations incorporated prior to April 26, 1965 are treated as residents if they: reside in Canada, carry on business in Canada in any tax year ending after April 26, 1965 mind and management of operations are located in Canada
Employee or contractor test
1. Control test:
Who controls the work, when do you do the work, who supervises the work
2. Ownership of tools test:
Is the work being done at home on your own computer on your own time, if you're doing the same job at the employers business on their business computer, who owns the stuff
3. Chance of profit or loss test:
Can you lose money employees cannot they get paid by the hour regardless, is there a chance you can make more money by working faster
4. Integration test:
How important you are to the central function to the business, can't delegate the normal functions of a business
All salaries and wages including gratuities and text my benefits received from employer benefits.
All benefits received or enjoyed by the individual by virtue of employment should be included in income.
1. The expense is generally directly related to earning employment income
2. The terms of employment often require that the employee incur additional expenses in carrying out his or her duties
3. The employer does not reimburse for the expense
Income from business definition
Income earned from a profession calling trade manufacturer or undertaking of any kind whatever and adventure or concern in nature of trade.
Tax payable on profit only.
The difference between international financial reporting system IFRS and accounting standards for private enterprise ASPE
IFRS for publicly traded companies only need auditor ASPE doesn't even auditor only need an accountant to do the books
Prohibited and modified expenses
Recreation facilities and club dues, political contributions, construction expenses
Permitted business expenses
Landscaping grounds, reverse for bad debts, reverse for delayed income