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The Canadian government has moved quickly to offer economic relief and adjust tax regulations to benefit businesses and workers hit by economic challenges.
To help you get up to speed, here is a quick summary of the most important tax changes affecting mid-sized Canadian companies in 2022, complete with links for further details.
Updated reporting requirement for trusts is on hold
The proposed beneficial ownership reporting requirements were scheduled to come into effect for tax years after December 30, 2021 and said affected trusts must provide additional information on their income tax return about its beneficiaries, trustees, settlors and protectors. However, the bill has not yet received Royal Assent, so the CRA has delayed administering the reporting requirements. They will not be enforced for 2021 T3 income tax returns and trusts should continue to file their returns under existing legislation.
Tax inefficiency removed for intergenerational sales of family businesses
Though Bill C-208 was delayed, it finally came into effect on Jan 1, 2022. The legislation now allows owners of small businesses, family farms, or fishing corporations to sell to non-arm’s-length purchasers (children or grandchildren) and claim the lifetime capital gains exemption. The bill removes a previously-existing potential 20% tax burden created because of anti-avoidance rules that result in a higher tax rate imposed in some provinces for selling to family members than on a sale to arm’s length parties. In addition, siblings have been extended tax relief to allow for certain corporate reorganization and transfers of assets.
Learn about other important changes family businesses are experiencing here.
Using the Substantial Presence Test to determine US tax return obligations
Snowbirds, cross-border workers or individuals spending a significant portion of their time in the US may have US tax return filing obligations. However, there are several ways to avoid being defined as a tax resident of both Canada and the United States, and having to pay double taxation, which is especially important because the IRA taxes on worldwide income! Here’s how to use the Substantial Presence Test to determine if you need to file a US tax return this year.
COVID-19
Expanded Local Lockdown Program eligibility
Eligibility for wage and rent subsidies under the Local Lockdown Program was temporarily expanded to include any business that had a location subject to public health restrictions (including capacity limits) lasting for at least seven days and experienced a 25% current-month revenue decline when it had to halt operations that had previously accounted for at least half of its qualifying revenues. These changes are in place for subsidy periods running from December 19, 2021, to February 12, 2022.
Reminder: COVID-19 support programs are taxable
If you or your company claimed any COVID-19 support programs, it’s important to remember that many of these subsidies are considered taxable income. In addition, the forgivable portion of the Canada Emergency Business Account (CEBA) loan is also considered taxable income the year the loan is received.
CEBA loan repayment deadline extended by one year
Because of continued economic challenges, the federal government is extending the repayment deadline for CEBA loans by one year to give businesses greater repayment flexibility. If eligible borrowers in good standing repay by the new December 31, 2023 deadline, they qualify for partial loan forgiveness for up to a third of the loan value (up to $20,000). The same deadline also applies to CEBA-equivalent lending through the Regional Relief and Recovery Fund.
Home office expense claim increase maintained
The maximum flat rate individuals can claim for working at home has increased to $500 for the year (250 days at $2/day). For employees claiming accurate amounts using the detailed method, businesses must provide a completed and signed Form T2200S / Form T2200.
Changes to employer-provided benefits and allowances
The CRA has also temporarily adopted new rules for taxable employer-provided benefits and allowances regarding commuting and parking costs, meals, and home office equipment. These rules are effective from March 15, 2020, to December 31, 2022. Businesses will need to adjust payroll and T4 reporting again this year to ensure employees’ taxable benefits are accurately calculated.
New GST/HST obligations for digital economy businesses
Effective July 1, 2021, non-resident vendors and online platform operators whose revenue exceeds $30,000 over 12 months, will be required to register, collect and remit GST/HST on digital products and services, goods supplied through fulfillment warehouses, and short-term accommodations. To simplify taxation, most vendors will be able to use the simplified framework, however, they will not be able to recover GST/HST paid on expenses incurred.
Proposed 1% tax on non-resident owned vacant residential properties
While the Underused Housing Tax Act is still in the draft phase, the government has said the act is still meant to take effect beginning January 1, 2022. The proposed act would see a one percent annual tax on the value of Canadian residential real estate owned by non-residents that is deemed to be vacant or underused, though there are exceptions.
Download Zeifmans’ Canada + US 2022 Tax Calendar
This comprehensive personal and corporate tax calendar comes complete with all the important tax filing dates for the year ahead, for both Canada and the US. Download your copy below.
Whether you’re a business owner who needs help with personal taxes, or a mid-sized company looking for advice on incorporating some of these new regulations into your 2022 tax planning, Zeifmans has you covered. Contact us today to speak with one of our experienced Canadian and US tax experts or learn more about our range of tax services here.
