Following the Budget 2019 announcements, the Canada Revenue Agency (“CRA”) launched a Real Estate Task Force whose mission is to deter tax non-compliance in the real estate market.
The federal government has allocated
significant funds and resources to scrutinize real estate transactions in which
parties have failed to comply with the appropriate regulations.
Here you will find a CRA questionnairesent to selected individuals and corporations as part of the audit process. The questionnaire is broad, contains over 35 questions and requests significant documentation.
This real
estate audit program is specifically aimed and can impact:
Promoters and developers for sales tax compliance;
Taxpayers involved in property flipping activities;
Taxpayers earning commissions in the real estate sector; and
Taxpayers reporting the sale of a principal residence.
In light of the foregoing, structuring and planning real estate transactions while ensuring tax compliance is of primary importance. If you have received a similar information requests, seeking legal guidance and advice is recommended before answering the questionnaire.
Nicolas Simard has extensive experience in every kind of tax litigation concerning income tax, consumption taxes and voluntary disclosure. He may be reached at 514-397-5288.
David H. Benarroch specializes in many areas of tax, including tax litigation, tax compliance and tax planning.
The award is granted annually to three
tax practitioners with less than ten years of tax experience. The award is
given for the best newsletter article which appeared in any of the three
Canadian Tax Foundation newsletters in a calendar year and was written solely
by author(s) who were young practitioners at the time of publication.
This month, the British Columbia Health
Minister announced plans to introduce legislation that will increase the BC’s
provincial tax on vaping products from 7% to 20%. In doing so, BC will become
the first province to tax e-cigarettes and vaping.
In all other provinces, vaping
demonstrates an interesting inconsistency in some provincial legislation: under
some provincial public health legislation vaping is regulated like other
tobacco use yet under provincial tax legislation vaping is not treated like tobacco
and is only subject to either the provincial HST component or provincial sales
tax. Thus, vaping actually provides a much more tax-effective way for a user to
get a nicotine fix. Put otherwise, vaping is essentially subsidized nicotine
consumption.
Vaping involves the use of a handheld
electronic device that heats an “e-liquid”—sometimes called
e-substance, e-oil, or e-juice—to a point where it becomes an inhalable vapour.
The e-liquid is typically composed of
nicotine, a carrier substance such as glycerine, and flavouring. E-cigarettes
and e-liquid are tobacco-free. Most Canadian provinces (Alberta and
Saskatchewan are exceptions) have public health legislation that regulates the
use of e-cigarettes in a manner that parallels the regulation of cigarettes and
other tobacco products.
For example, Ontario’s Smoke-Free Ontario Act, 2017 regulates the sale, advertisement, packaging, and consumption of e-cigarettes, in some ways reproducing restrictions on tobacco use.
In Canada, both federal and provincial
governments exercise jurisdiction over health. This dual jurisdiction explains
why there are two layers of tobacco legislation: the provincial laws noted
above and the federal Tobacco and Vaping
Products Act (SC 1997, c. 13), which governs public health aspects of
tobacco and vape consumption in Canada.
Although provincial public health legislation regulates e-cigarettes as it does tobacco cigarettes, provincial tax legislation does not. In all 10 provinces, tobacco sales are taxed under special tobacco tax legislation, and in most provinces tobacco sales are also subject to GST/HST. For example, in Ontario a pack of 20 cigarettes is subject to a tobacco tax of $3.30 and an additional 13 percent HST. However, vaping liquid, or e-liquid, does not come within the scope of tobacco tax legislation, which is limited to tobacco products. As a result without new legislation, vape products escape the additional taxed levied on tobacco products.
As explained above, e-cigarettes and
e-liquid are tobacco-free, and while the nicotine in e-liquid may give smokers
a sensation similar to that of a traditional cigarette, the nicotine is not a
tobacco product. As a result, while sales of e-cigarettes and e-liquid are
subject to GST/HST, they are not subject to a special tobacco tax.
This means that now as more Canadians have shifted from traditional smoking to vaping, they are escaping the financial burden of tobacco taxation. In turn, this means that provinces are losing their tobacco tax base. However, it is estimated that BC’s new legislation will generate roughly $10 million a year in new tax revenue. We won’t be surprised to see other provinces follow BC’s lead.
On August 8, 2019, the Canada Revenue Agency (the “CRA”) released an Income Tax Ruling, 2018-0776661I7, clarifying its view on the taxation of cryptocurrency miners.
The ruling responded to a taxpayer
inquiry, asking whether a bitcoin miner should include the value of mined
bitcoin in income at the time it is received.
Bitcoin miners have an essential role in
both the creation and the maintenance of the block-chain technology, which is
the foundation of bitcoin itself. When miners, using their computers, solve
computation-intensive math problems on the bitcoin network, they produce or
create new bitcoin. In addition, in solving the math problems, bitcoin miners
verify the network’s transaction information, securing the bitcoin payment
network.
One might say that miners create bitcoin, in which case mining bitcoin would not be a taxable event. Some in the cryptocurrency sector have analogized bitcoin mining with mining for gold. However, in the ruling the CRA takes the position that miners earn bitcoin, or receive bitcoin as consideration for their work in validating transactions on the block-chain, with the result that miners must include any bitcoin they mine in their income at the time it is received. In other words, the CRA ignores the
“creation” element of mining.
The CRA further advises that the value of
the bitcoin for tax purposes is determined by the barter rules, which in this
case would require that a miner bring into income the value of the mining
services rendered or the value of the bitcoin received. Since in most cases the
value of the bitcoin will be more readily valued, this is the amount to be
brought into income.
While many will find the CRA’s position
to be obvious given the miners play a key role in servicing the blockchain,
those who have relied on the gold mining analogy should note the tax consequences
of the CRA position. Another interesting issue is the extent to which “miners”
of other cryptocurrencies that may use other methods of creation, can rely on
this ruling. In either case, the additional clarity providing by the ruling is
useful to everyone working in the cryptocurrency space.
La récente décision de la Cour suprême du Canada
dans 1068754 Alberta Ltd. c. Québec (Agence du revenu)[1] confirme le droit de Revenu Québec d’envoyer une
demande péremptoire à une institution située en dehors du Québec sans que cette
demande n’ait une portée extraterritoriale.
Faits
En 2014, Revenu Québec a envoyé une demande
péremptoire de renseignements et de documents en vertu de l’article 39 de la Loi sur l’administration fiscale
(Québec) à une succursale de la Banque Nationale du Canada située à Calgary.
Par cette demande, Revenu Québec cherchait à établir le lieu de résidence de la
fiducie DGGMC Bitton Trust (la « Fiducie »), qui tient un compte bancaire à cette succursale, et à
déterminer si elle devait payer de l’impôt au Québec. Revenu Québec a envoyé sa demande à la succursale de
Calgary plutôt qu’au Québec afin de se conformer à la Loi sur les banques (Canada), qui exige que certains documents
concernant des clients des banques soient envoyés à la succursale de tenue du
compte.
La Fiducie s’est opposée à la demande de Revenu
Québec jusqu’en Cour suprême du Canada pour le motif qu’elle outrepassait sa
compétence. Selon la Fiducie, la Loi sur
les banques (Canada) exige que la succursale d’une banque doit être traitée
comme une entité distincte de la banque considérée dans son ensemble. En
conséquence, elle prétend que Revenu Québec a outrepassé sa compétence en
envoyant sa demande à l’extérieur du Québec.
Décision
La Cour Suprême du Canada, sous la plume
du juge Rowe, a rejeté l’appel de la Fiducie.
Selon la Cour, la Loi sur les banques (Canada) contraignait Revenu Québec à envoyer
sa demande à la succursale de la Banque Nationale du Canada à Calgary. En se
soumettant à cette obligation, Revenu Québec n’a pas agi de façon
extraterritoriale. Le fait qu’une
mesure prise par Revenu Québec dans l’exercice de ses pouvoirs ait des
répercussions à l’extérieur du Québec ne rend pas automatiquement une telle
mesure extraterritoriale.
De l’avis de la Cour, le facteur déterminant en
cause était le lieu où l’exécution de la demande de Revenu Québec peut être
réclamée. La Banque Nationale du Canada exerce des activités au Québec, et les
exigences procédurales de la Loi sur les
banques ne devraient pas empêcher Revenu Québec de transmettre une demande
péremptoire à une personne faisant affaires sur son territoire.
Il est clair pour la Cour que la Banque Nationale du
Canada forme une seule et même entité qui ne devrait généralement pas être
distinguée de ses succursales. Les faits en cause ne justifiait pas que la
succursale de Calgary soit traitée comme une entité distincte afin que les
objectifs de la Loi sur les banques
(Canada) soit satisfaits. C’est à la Banque Nationale du Canada que Revenu
Québec a adressé sa demande, peu importe où la demande fut envoyée.
Conclusion
Il appert clairement du texte du jugement que la
décision de la Cour, favorable à Revenu Québec, accorde une grande importance
au fait que la Banque Nationale du Canada fait affaires au Québec. La Cour
n’ayant pas statué sur la situation inverse, il y a lieu de se demander si la
demande de Revenu Québec à la succursale de Calgary aurait eu une portée
extraterritoriale si aucune activité n’était exercée au Québec.
