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Rob Kreklewetz & Shahrukh Khowaja

Rob Kreklewetz & Shahrukh Khowaja

Rob Kreklewetz & Shahrukh Khowaja has not set their biography yet

Canada Border Services Agency (“CBSA”) resets it “audit priority areas” twice a year. This sees CBSA designate certain tariff classification codes as CBSA’s priority areas for custom verifications (i.e., “audits”), which is based on program areas that the CBSA believes pose significant risks for non-compliance. The non-compliance risk is generally in tariff classification, valuation and origin of goods imported.

Right on schedule, CBSA has now released its July 2021 Trade Compliance Verifications, which update where CBSA started in January of this year.

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The Canada Revenue Agency (“CRA”) has been rigorously challenging intermediaries in the financial services industry, categorizing their services as taxable promotional, advertisement or taxable administrative services (as opposed to treating them as GST/HST exempt financial services).

While this aggressive approach seems (at first blush) consistent with the definition of a “financial service” under 123(1) of the Excise Tax Act (“ETA”) (which exempts the “arranging for” processing of credit and debit card payments, while excluding from exemption “promotional or advertising services”), many have suggested that contrary:   that CRA was trying to pigeon-hole what these service providers do in order to find “taxable” services.

In the recent Zomaron Inc. v. The Queen case (“Zomaron”), the Tax Court of Canada (“TCC”) found against CRA, and concluded that the dominant element of the services being provided were “exempt” in nature, and that the promotional, advertisement or administrative elements of the services did not serve to disqualify from GST/HST exemption.

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In a prior Blog on the “Time Bomb Ticking on Canadian Home Construction Industry” we discussed the problems facing Canadians who make money buying, fixing up, and reselling their alleged “principal residences”.

We said then: “An individual buying a run-down house, fixing it up, and living in it a while, and then selling for a tidy income tax exempt profit (the house being the individual’s principal residence) sounds like a recipe for success. [But repeat] that 21 times in a row, and you may have a different kettle of fish!”

Apparently, all you have to do is “repeat 2 times in a row” to be liable for income taxes on our profits, and uncollected GST/HST on your sales revenue!

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The Canada Revenue Agency (“CRA”) has broad audit powers, allowing it to request any documents, records, and information from taxpayers and third parties under audit. The 2021 Federal Budget proposed an expansion (!) to these powers – allowing CRA to compel interview and answers from an owner-manager and any other employees of the business. The changes are aimed at making it easier for the CRA to get information and issue assessments, but those in the know predict real problems for unrepresented taxpayers and their employees! The worry is that CRA will have a single mindset heading into these interviews and will use them to simply gain ammunition for an Assessment.

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