The new year brings an important new reporting obligation likely affecting most Canadian and many US-based Oil, Gas and Petroleum businesses – and sadly, the in-house Customs & Trade Professionals they employ!
New Canadian Forced Labour Legis
Businesses engaged exclusively in commercial activities get full input tax credits (“ITCs”) enabling them to recover all the GST/HST they pay in the course of their business activities. Organizations engaged exclusively in “exempt” activities (financial services, healthcare, educational-related institutions) get no ITCs, meaning that GST/HST is a hard cost in their business.
In between the two are businesses that carry on BOTH commercial and exempt activities, and in order to determine the ITCs these businesses are eligible to claim, a “fair and reasonable” allocation method has to be used. A recent decision of the Tax Court of Canada (the “TCC”) in Marine Atlantic Inc. v. The King (2023 TCC 95) explores what that really means.
Global Affairs Canada (“GAC”) recently announced the opening of the tariff-rate quota (the “TRQ”) application period for the 2024-2025 dairy year, which is open from May 1, 2024, to June 15, 2024. We previously talked about the TRQ application process; however, this year’s announcement also comes with changes flowing from New Zealand’s successful challenge of Canada’s dairy TRQ policies.
The United States, Mexico and Canada have enjoyed near-complete free trade since the inception of the North American Free Trade Agreement (“NAFTA”) in 1994. In fact, Canada and the US have enjoyed “free trade” even longer than that, since the inception of the first Canada-US Free Trade Agreement in 1989. Unfortunately, free trade amongst the “three amigos” is not guaranteed!
In this blog we explore the mandatory Review and Term Extension Rules in the US-Mexico-Canada Agreement (“USMCA” – also known in Canada as the “CUSMA”), and what it is going to take in order to keep our vibrant North American trade relationship going!
With May 31st deadline quickly approaching for Canada’s first mandatory Annual Reports on Forced Labour, many in the Oil, Gas & Petrochem sector may have missed these requirements completely!
Most of Canada’s largest provinces have a version of something usually called an “Employer Health Tax” – or “EHT” for short – and that is imposed on provincial employers based on annual employee remuneration.
While EHTs are levied provincially, just how these provincial taxes are supposed to work intra-jurisdictionally is complicated. Think of an employer, with multiple work locations and with “remote employees scattered across Canada reporting to those multiple work locations. With all of those permutations and combinations, EHT liability can become a difficult question, fraught with potential double-tax issues.
As announced in the Liberal-NDO Coalition Government’s 2024 Budget, and at a time when the government seems hard-pressed to increase taxation in Canada to deal with the massive spending over the last few years, the Canada Revenue Agency (“CRA”) has been given some brand new tax Audit powers – which to some respects are downright frightening.
The Canadian government can and does impose sanctions against foreign States and non-state entities through a complex formula involving several different Acts and regulation sets. Navigating through this myriad of rules can be daunting.
Overview of Canada’s Sanctions Regime
Global Affairs Canada is the overall regulator of Canadian sanctions, and has just released some long-awaited clarifications on the scope of Canada’s current sanctions, which comes in response to the Canadian Senate’s 2023 Standing Committee Report on Foreign Affairs and International Trade.
Canada-India trade and trade relations have plunged, stopped in their collective tracks by a Canadian government allegation that India may have been involved in the assassination of a Canadian Sikh activist.
In the balance is whether a Canada-India Free Trade Agreement (“FTA”) will ever come to fruition, and Canada’s growing trade with this aspiring superpower.
Here are the high points on why and why not a FTA with India would be a good thing for Canada.
On April 22, 2024, the Canada Border Services Agency (“CBSA”) issued a Notice of Initiation of Investigation under the Special Import Measures Act (“SIMA”) in respect of the alleged dumping and subsidizing of certain pea protein from China. This investigation was prompted by a joint complaint filed by two manufacturers in Manitoba.
The goods under investigation are more specifically described as:
High protein content (“HPC”) pea protein originating in or exported from the People’s Republic of China in all physical forms regardless of packaging, with a minimum pea protein content of 65 percent on a dry weight basis calculated using a Jones factor of 6.25 (the “Subject Goods”).
As we initially described here, the Canada Revenue Agency (“CRA”) continues auditing and assessing individual home-owners who have either substantially re-built their homes or commissioned the construction of a new home for their own use on the resale value of those homes in a number of alarming instances.
While PSC’s update is aimed to provide clarity, it left many ambiguities, particularly regarding the definitions of “consolidated financial statements”, “asset” and “control”. These terms play a critical role in determining whether a foreign entity may fall within the reporting requirements of the FCLA.
As we wrote about here Canada’s carbon tax system is complicated and causing problems.
Recently, the Canada Revenue Agency (“CRA”) has been auditing and issuing assessments based on the technical requirements of the legislation.
Background
Canada’s carbon tax legislation is called the Greenhouse Gas Pollution Pricing Act – and we will refer to it as the Carbon Tax Act or “CTA”. The CTA was enacted in 2018. Part of it enacts a “fuel tax” (called a “Fuel Charge” for optics) which adds additional Canadian taxation points to all transactions involving combustive fossil fuels. The Fuel Charge is levied under Part I of the CTA.
The Canadian International Trade Tribunal (the “CITT”) announced anOrder in Expiry Review RR-2023-001 on March 20, 2024 (the “Order”), continuing its finding made on April 23, 2018, in Expiry Review NQ-2017-005, in respect of the dumping and subsidizing of all dry wheat pasta originating in or exported from the Republic of Türkiye (the “Subject Goods”).
What is an Expiry Review
Expiry Reviews are conducted jointly by the Canada Border Services Agency (the “CBSA”) and the CITT to review prior Anti-Dumping Duty (“ADD”) or Countervailing Duty (“CVD”) findings made by the CITT (the “Findings”) under theSpecial Import Measures Act (“SIMA”). These Expiry Reviews generally occur every 5 years following the original finding or subsequent continuation orders (“Orders”).
In today’s economy, every dollar counts, a sentiment echoed by the Federal government. It appears that BC Finance also dances to this tune, as the province’s 2024 Budget includes an amendment to the definition of “software” in the BC Provincial Sales Tax Act(“PSTA”), retroactive to April 1, 2013!
While the amendment is described as “clarifying” the definition, it is difficult not to see it as BC Finance’s response to a recent tax appeal decision from the Supreme Court of British Columbia.
The Canadian International Trade Tribunal (the “CITT”) announced an Order in Expiry Review RR-2021-004 on October 19, 2022 (the “Order”), continuing its order made on January 4, 2017, in Expiry Review NQ-2016-002, in respect of the dumping of certain gypsum board products originating in or exported from the U.S., imported into Canada for use or consumption in the provinces of BC, AB, SK, and MB, as well as NT and YK (the “Subject Goods”).
In a “bad news case” for unsecured creditors, the Federal Court has confirmed that the CRA’s deem trusts over things like unpaid GST/HST and income tax source deductions take precedence to prevent loan repayment to unsecured creditors. This means that related and unrelated persons loaning money to Canadian small businesses on an unsecured basis (which is common - think about the loans being advanced by business partners, parents and spouses) are at risk when those businesses default on their tax obligations.
On March 27, 2024, the Canada Border Services Agency ("CBSA") received a representation from Tenaris Canada ("Tenaris"), requesting a reinvestigation of normal values and subsidy amounts for oil country tubular goods ("OCTG1") and seamless casing ("SC") exported from China. Under the CBSA’s policy, other interested persons have the opportunity to respond to this representation by submitting comments to the CBSA.
On March 8, 2024, the Canada Border Services Agency (“CBSA”) issued a Notice of Initiation of Investigation under the Special Import Measures Act (“SIMA”) in respect of the alleged dumping of certain wire rod from China, Egypt, and Vietnam. This investigation was prompted by a complaint filed by an Ontario manufacturer.
The goods under investigation are more specifically described as:
Certain hot‐rolled wire rod of carbon steel and alloy steel of circular or approximately circular cross section, in coils, equal to or less than 25.5 mm in actual solid cross‐sectional diameter, originating in or exported from the People’s Republic of China, the Arab Republic of Egypt and the Socialist Republic of Vietnam (the “Subject Goods”).
In December 2023, the Supreme Court of Canada dismissed the Crown’s application for Leave to Appeal the Federal Court of Appeal (“FCA”) decision in Canada v. Dr. Kevin L. Davis Dentistry Professional Corporation2023 FCA 76(“Davis”), leaving the FCA decision as the state of the law. The FCA had upheld the Tax Court of Canada’s (“TCC”) judgment (2021 TCC 25) allowing Dr. Davis to claim input tax credits (“ITCs”) incurred in the course of suppling orthodontic appliances and services to patients.
The direct selling industry poses a number of unique challenges for Canadian sales tax regimes. The patchwork of separate federal GST/HST and provincial PST/QST regimes only further complicate the matter, making it difficult for new entrants to the Canadian market to determine their collection, remittance, and reporting obligations. This revised article from our 2023 primer provides a brief overview these optional sales tax rules.
