International Tax - Canada

International Tax - Canada

Published September 2022

Author

David J. Rotfleisch

Firm: Taxpage
Country: Canada

Practice Area: Tax Planning

  • 2822 Danforth Avenue
    Toronto
    Ontario M4C 1M1

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We are Canadian tax lawyers who specialize in income tax, business tax, and business law. By staying small and specialized, our boutique tax law firm is able to respond quickly and effectively to our clients’ income tax issues and concerns as they arise. Our website, www.taxpage.com, is a vast resource on Canadian tax issues.   

Our Canadian tax lawyers provide the full suite of tax law services—from tax planning through to challenging the Canada Revenue Agency (CRA) [the Canadian tax authority administratively], and in the Tax Court of Canada or the Federal Court of Canada, as required—to our clients, whether they are businesses or individuals.  

Most recently, we have developed and demonstrated expertise and are one of the premier Canadian crypto taxation law firms. Many crypto traders and investors find that they have a substantial tax bill after they have crystallized their earnings. Many have unreported income. 

Because crypto tax law is relatively new, there are very few tax firms that know how it is treated for tax purposes. We are one of those tax firms in Canada. That website is www.cryptotaxlawyer.com.
One of our larger wins against the Canada Revenue Agency involved a client facing a $23 million tax reassessment for alleged unreported income based on a flawed analysis by CRA of casino records. 

We visited the casino, met with their senior financial and accounting people, and obtained a detailed explanation of all of their reports. We then analysed the reports and produced our own counter-analysis which demonstrated no unreported income. After extensive and detailed submissions to CRA, they accepted our position and completely eliminated the proposed reassessment, saving our client $23 million.

I have been a Canadian tax lawyer for 35 years and have also been a CPA for over 40 years. The Law Society of Ontario (LSO) has designated me as a Certified Specialist in Taxation. 

Reporters, editors and TV and radio producers frequently ask me to comment on Canadian tax issues. As a result I appear extensively in the media including print, radio and television. All these are archived on the Taxpage website, under Media. 

I am a prolific writer on Canadian tax topics and I publish extensively in many publications and websites. 

Interestingly, my web statistics show that CRA employees are heavy users of my website information. We have learned over the decades that many CRA employees [CRA employs 40,000 people] are not up-to-speed on Canadian tax legislation nor recent court decisions in tax court. That’s why CRA employees visit Taxpage.com to get correct tax information. 

Because of our known crypto tax expertise, we help Canadian clients with crypto tax problems every day. 

Some crypto clients have not reported crypto income, so we help clients by bringing them into compliance with the tax system by filing an application under the Voluntary Disclosure Program (VDP) which enables them to avoid both civil penalties and criminal prosecution. 

These files will also typically require an analysis of the nature of their crypto transactions to see if they are capital transactions, which are only taxed at 50% rate, or business transactions that are fully taxable. If clients are carrying out a crypto business, we typically recommend setting up a corporation to reduce their rate of taxation and carry out a tax-free reorganization to transfer their crypto coins into the corporation.

Canada taxes on two bases: 1) residence and 2) Canadian source income. Canada does not tax based on citizenship, unlike the United States. 

A Canadian tax resident is required to report all worldwide income. This includes, for example, pension income that might not be taxable in the country of origin. 

Canadian resident taxpayers are also required to report any offshore assets, other than personal use assets such as a vacation property, in excess of a cost of $100,000. Non-residents of Canada are taxable on Canadian source income. 

Canadian tax residents who emigrate are subject to a departure tax on the accrued capital gains of many of their assets, with an exception for assets which meet the test of taxable Canadian property, primarily real estate.

CRA tax audits are what cause most clients to come to a tax lawyer. The triggering event for a tax audit can be a specific CRA project such as the one focused on condo flipping or new housing rebate applications or, most recently, view of tax benefits given out during Covid-19. 

We deal with CRA daily and represent our clients from the moment we are retained until the matter is resolved, even if that requires going to Tax Court, it cost justified.

Canada has always been an attractive destination for inbound investment. It is known as a stable and safe investment and political environment. It has an extensive series of tax treaties to avoid double taxation. 

Canada has long had rules restricting the deduction of interest expense by domestic corporations with non-Canadian ownership. These rules, known as thin capitalization, have recently been augmented with new rules restricting interest deductibility. 

It remains to be seen whether these new interest deductibility rules will affect inbound investment.

The “papers cases” —the Pandora Papers, the Paradise Papers, and the Panama Papers—released by the International Consortium of Investigative Journalists (ICIJ) have caused politicians to focus on the issue of international tax evasion. 

The number of audits launched by CRA into Canadians named in the Paradise Papers is 100 (as of 2019). Federal taxes & penalties assessed against Canadians audited from Paradise Papers is Zero (as of 2019). Generally speaking, there don’t appear to have been large numbers of Canadians caught up in these offshore tax havens.

Our websites constitute one of the largest public databases of Canadian tax information for both overseas corporations as well as domestic taxpayers. 

In addition to our general website, www.taxage.com, we have specialized sites including: 





We also publish a comprehensive synopsis of Canadian and worldwide tax facts, updated annually, at Tax Facts

Crypto taxation is a new focus of CRA. Until very recently, CRA had no pronouncements on Canadian crypto taxation. This has started to change. Specifically, Draft Legislative Proposals concerning GST/HST and Treatment of Cryptocurrency Mining have just been released. 

As of September 1, 2022, Canada has introduced a so-called “luxury tax” that, in effect, adds a 10% surcharge to the cost of automobiles and planes that cost more than $100,000 or boats and yachts that cost more than $250,000.

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