Tax Implications of Doing Business in Canada:

Transcription

1 Tax Implications of Doing Business in Canada: Risk and Recovery Presenters: Clyde Seymour, C.A., MAcc Tax Director Canada Sheila Wisner, C.A. Canadian Sales Tax Subject Matter Expert General Information Share the webinar Ask a question Votes (polling questions) Rate (before you leave) Attachments (you can download today s materials) Experis Thursday, October 25,

2 Earning CPE Credit To receive 1.0 CPE credit for this Webinar, participants must: Attend the Webinar for at least 50 minutes on individual computers (one person per computer) Answer polling questions asked throughout the Webinar Experis Thursday, October 25, Meet our Presenters Clyde Seymour, C.A., Macc Tax Director Canada Sheila Wisner, C.A. Canadian Sales Tax Subject Matter Expert Experis Thursday, October 25,

3 Agenda Canadian Tax Update Canadian Federal and Provincial Taxation Sales Tax Update - Compliance Sales Tax Update Recovery Goods & Services Crossing the Border (Customs & Sales Tax) Experis Thursday, October 25, Canada Corporate Taxation Nexus, Filing Requirements, Tax Rates 3

4 Canadian Corporate Tax General Application Canada has two levels of corporate tax: 1) federal (Form T2) 2) provincial Corporate taxation can involve: Income tax on profits Capital taxes on equity and debt financing (federal and provincial phase-out) Canadian NEXUS: Taxation occurs where a person carries on business in Canada. This term is widely defined Taxation is mitigated via treaty Article VII of the Canada-U.S. treaty restricts taxation to carrying on business through a permanent establishment (PE) in Canada. A PE is a fixed place of business, generally a branch, office (sales people), factory The treaty applies at a federal level. The provinces maintain separate definitions of nexus that generally mimic the treaty Experis Thursday, October 25, Canadian Corporate Tax Rates and Compliance Federal and provincial rates declining Target of 25 percent combined Capital gains (proceeds over ACB) 50 percent of gain included in income. Capital losses can only be applied against capital gains Common compliance timelines No extensions in Canada Federal T2, Provincial Returns, Form T106 Tax return due on or before six months after the year-end Form T1134 Information Return Relating to Foreign Affiliates due on or before 15 months after the year-end Experis Thursday, October 25,

5 Corporate Tax Rates Federal 19.00% 18.00% 16.50% 15.00% 15.00% 15.00% 15.00% Alberta 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% British Columbia 11.00% 10.50% 10.00% 10.00% 10.00% 10.00% 10.00% Manitoba 12.50% 12.00% 12.00% 12.00% 12.00% 12.00% 12.00% New Brunswick 12.50% 11.50% 10.50% 10.00% 10.00% 10.00% 10.00% Newfoundland and Labrador 14.00% 14.00% 14.00% 14.00% 14.00% 14.00% 14.00% Northwest Territories 11.50% 11.50% 11.50% 11.50% 11.50% 11.50% 11.50% Nova Scotia 16.00% 16.00% 16.00% 16.00% 16.00% 16.00% 16.00% Nunavut 12.00% 12.00% 12.00% 12.00% 12.00% 12.00% 12.00% Ontario 14.00% 13.00% 11.75% 11.50% 11.50% 11.50% 11.50% PEI 16.00% 16.00% 16.00% 16.00% 16.00% 16.00% 16.00% Quebec 11.90% 11.90% 11.90% 11.90% 11.90% 11.90% 11.90% Saskatchewan 12.00% 12.00% 12.00% 12.00% 12.00% 12.00% 12.00% Yukon 15.00% 15.00% 15.00% 15.00% 15.00% 15.00% 15.00% Experis Thursday, October 25, Polling Question #1 1. Which scenario currently best describes your business structure for Canadian activities: A. U.S. selling into Canada through a branch B. A simple Canadian incorporated C-Corp C. A hybrid involving disregarded entities in both countries D. A Canadian sub and U.S. parent conducts activity in Canada Experis Thursday, October 25,

6 Canada Federal & Provincial Budgets Foreign Affiliate Regime Credits & Incentives Thin Capitalization Canada - Federal Budget Update Federal budget released March 29, 2012 No corporate tax changes When transfer pricing adjustments are made to the Canadian company (referred to as a primary adjustment), the adjustment amount can, when beneficial to the related non-resident be treated as a dividend paid to the non-resident (a deemed dividend). The budget proposes to confirm deemed dividend treatment. It also proposes to provide relief from this deemed dividend when the transfer pricing adjustment is repatriated (repaid) to the Canadian company. This previously only occurred through CRA administrative practice and accordingly was not universally applied. Other changes: - Foreign Affiliate regimes changes - Scientific Research & Experimental Development Credits - Thin Capitalization Experis Thursday, October 25,

7 Canada - Provincial Budget Update Ontario budget released March 22, 2012 proposed a freeze in the corporate tax rate at 11.5 percent. This freezes previously planned reductions introduced on July 1, 2010, which would have ultimately lowered the rate to 10 percent Ontario is supporting idea of consolidated tax filing for corporate groups Quebec budget released March 20, 2012 No corporate tax changes Historically Ontario and Quebec offered elimination of corporate capital taxes for M&P companies in qualifying periods, including retroactive application. The application form was distributed after the release of numerous electronic tax-software packages, making it necessary to re-file historical provincial compliance documents. Check old returns to ensure you received the benefit of the elimination Tax administration streamlining - Trend for provinces to allow provincial tax management by the federal government. Ontario harmonized in 2009 Experis Thursday, October 25, Canada Foreign Affiliate Update 2011 Proposals Upstream Loans: An Upstream loan is a loan made by a foreign affiliate (FA) to a specified debtor. A specified debtor is the Canadian company or an entity which is non-arms length to the Canadian company The provision treats the loan as income to the Canadian company when the loan is outstanding for more than two years from the date the loan is originally made Loans made in the ordinary course of the creditor s business are excluded from the provision The upstream loan proposal was released August 19, 2011 Hybrid Surplus: A Hybrid Surplus account will be applied to non foreign accrual property income gains (non FAPI gains) of a foreign affiliate (FA) on the sale of FA s shares Currently such gains are applied ½ to exempt surplus and ½ to taxable surplus The Hybrid surplus will force exempt and taxable portions of such gains to be distributed together Hybrid surplus will be distributed after exempt surplus but before taxable surplus The Hybrid Surplus proposal was released August 19, 2011 Experis Thursday, October 25,

8 Canada Foreign Affiliate Update Recent Legislation Foreign Affiliate Dumping: The practice, referred to as foreign affiliate dumping transactions was undertaken in order to increase the paid up capital of the Canadian company shares by the foreign parent. Property transferred by the Canadian corporation in respect of the investment (other than shares of the corporation) will be deemed to be a dividend to the foreign parent and no amount may be added to the paid-up capital of the shares of the Canadian corporation because of the investment. The share capital created may not be used in the calculation of thin capitalization equity. The draft legislation to enact these provisions was introduced on October 15, 2012 and affects transactions entered into after March 28, Debt Dumping: The practice, referred to as debt dumping transactions were undertaken in order to provide an interest deduction to the Canadian company in respect to the debt while enabling the same company to receive tax-free dividends from the acquired FA (if paid out of the exempt surplus of that FA). Debt undertaken by the Canadian company to finance the purchase of the FA will be treated as a deemed dividend (subject to withholding tax). The draft legislation to enact these provisions was introduced on October 15, 2012 and affects transactions entered into after March 28, Experis Thursday, October 25, Canada Credits, Incentives, Capital Tax Federal credit against taxes payable for Scientific Research & Experimental Development (SRED) of 15 (down from 20) percent of eligible expenditures for years ending after 2013 Capital Expenditures will no longer receive SR&ED treatment and will therefore not be eligible for SR&ED Investment Tax Credits, and the SR&ED proxy rate will be reduced from 65 percent to 60 percent for 2013 and 55 percent thereafter Form T661 & technical descriptions due 18 months after the year-end Deferred deduction for SRED expenditures indefinitely Manitoba, British Columbia, and Ontario have eliminated the Corporate Capital Tax (CCT) and Federal Large Corporation Tax (LCT) Provinces of Quebec offer Wage Credit for qualifying SRED wages incurred in the province. The credit is refundable where no tax is due General incentives focus on energy conservation (credits or accelerated tax depreciation), M&P equipment, jobs creation Experis Thursday, October 25,

9 Thin Capitalization For years beginning after March 29, 2012, interest paid to specified non-resident related companies on outstanding debt is not deductible if the average amount of outstanding debt to specified non-residents at any time exceeds 1.5 (lowered from 2) times the company s equity [(Average debt 1.5 x equity)/average debt] x interest expense on non-resident debt = non-deductible interest expense Average outstanding debt for the year is the average of the highest outstanding debt in each calendar month Equity consists of: Opening retained earnings Average contributed surplus at the beginning of each month Average paid up capital of the corporation at the end of each month Experis Thursday, October 25, Thin Capitalization (continued) Equity excludes: Appraisal surpluses Retained earnings of others companies included in the taxpayers accounts through equity accounting A Specified non-resident is one who owns either 25 percent or more of the voting shares of owns shares having a FMV of 25 percent or more Rights to acquire shares are deemed exercised as well as right to redeem shares (including redemptions by other unrelated shareholders) The rules are now specifically extended to cover partnerships Disallowed interest will be treated as a dividend Experis Thursday, October 25,

10 Canada Crossing the Border: Transfer Pricing Tax Waivers Withholding Tax Personal Income Tax Transfer Pricing Contemporaneous documentation due at tax return date with yearly update. Penalty for non compliance. Canada follows the OECD Model Increased government audit focus on cross-border transactions Audits are targeting where documentation is traditionally weaker Management Fees and Undocumented Advances (cash sweep) Unsupported management fees can be assessed unreasonable with the following implications: Denial of deduction Assessment as dividend subject to withholding tax Where cash is swept from Canadian subsidiary as an undocumented advance and above basis (debt and equity), if O/S is greater than one year, loan is deemed income to parent, deemed as dividend, and subject to withholding tax Experis Thursday, October 25,

11 Canadian Withholding Tax Canada imposes a flat 25 percent withholding tax under Section 212 of the Income Tax Act on rents, royalties, interest and dividends Withholding on qualifying interest paid to third parties is nil, effective 2008 Withholding taxes can be mitigated under Tax Treaty through elimination and/or rate reduction. General example: 1) No withholding on software Article XII 2) Dividends five to 15 percent Article X 3) Royalties 10 percent Article XII For unincorporated ventures (branch), treaty reduces withholding tax to five percent and exempts first $500,000 of profits Article X Withholding tax due by 15 th of month following payment. Five percent late filing penalty. Annual NR4 filing due by March 30 Experis Thursday, October 25, Carrying on Business in Canada Waiver Application Regulation 105: 15 percent on services performed in Canada by non-residents. Tax is collected by the payor Regulation 102: Payroll source deductions required to be withheld by Canadian employer for foreign individuals working in Canada Regulation 105 does not apply where Canadian nexus (PE) does not exist and a waiver is obtained by the company working in Canada Regulation 102 does not apply where the individual applies for a waiver if exempt from personal taxation in Canada More tax audit focus on Regulation 105 and 102 For Regulation 102, company can still be assessed even if the individual is not subject to tax where no waiver obtained Consider Voluntary Disclosure Experis Thursday, October 25,

12 Canadian Personal Taxation Canada applies personal taxation to residents on worldwide income Non-residents who stay in Canada for more than 183 days in a calendar year are deemed to be Canadian residents and subject to personal taxation on their worldwide income When such a person is also a resident of the United States, the treaty can provide relief. Paragraph 2 of Article IV deems a resident of both Canada and the United States to be a resident of only the country where his/her permanent home and vital interest (e.g., family) reside A non-resident of Canada is subject to personal taxation in Canada only on his/her earnings attributable to Canada normally employment income and the treaty can exempt income ($10,000 for U.S. residents) Experis Thursday, October 25, Canada Tax Treaty PE for Services Impact on Hybrid Structures 12

13 Fifth Protocol US/Canada Treaty Cross-Border Services The Fifth Protocol to the treaty introduced a new rule in Article V, under which the crossborder provision of services may give rise to a PE of the service provider. Under this new rule, a service provider may have a PE even in the absence of a fixed place of business or an agent that habitually concludes contracts on behalf of the non-resident Article V(9) deems a U.S. enterprise that does not otherwise have a PE in Canada to have a PE if it provides services in Canada and it meets either of the following two thresholds: a) The services are performed in the host country (i.e., Canada) by an individual who is physically present there for one or more periods totaling 183 days or more during any 12-month period, and the income derived from the services performed in the source country by that individual amounts to more than 50 percent of the enterprise s gross active business revenues during the 183+ day period; or b) The services are provided in the host country for an aggregate of 183 days or more in any 12- month period with respect to the same or connected projects for customers either who are hostcountry residents or who maintain a host country PE in respect of which the services are provided Note: Any 12-Month period is a fiscal test to be monitored Experis Thursday, October 25, Fifth Protocol Impact on Hybrid Structures Old assessing policy: Canada Revenue Agency (CRA) considered U.S. LLCs not to be resident in the United States and thereby denied treaty benefits pursuant to Article I The Fifth Protocol now provides access to treaty benefits to fiscally transparent entities (e.g., LLCs) subject to transition dates General rule for treaty application: Treaty will apply where a hybrid entity is used in a local jurisdiction to hold a foreign investment; treaty may not apply where hybrid entity is used in a foreign jurisdiction to hold a foreign investment The Fifth Protocol entered into force on December 15, 2008, and provisions regarding fiscally transparent entities entered into force on January 1, 2010 Planning: Review your cross-border Canadian holding structures for applicability of treaty benefits where hybrid structures are used Simplify your holding structures to save on compliance costs Experis Thursday, October 25,

14 Canada Tax Trends Canadian Tax Trends IFRS Income Tax Act How is profit calculated? Subsection 9(1) a taxpayer s income for a taxation year from a business or property is the taxpayer s profit from that business or property for the year Profit is calculated under well accepted principles of business practice or well accepted principles of commercial trading (Supreme Court Canderel) Well Accepted Principles generally acknowledged to be GAAP as defined pursuant to the CICA Handbook Canada Revenue Agency For financial reporting purposes, both PAEs and non-paes may adopt IFRS early. If early adoption of IFRS for tax purposes is being considered purely for the taxpayer's administrative ease, the CRA will accept early adoption for years commencing on or after January 1, 2009 (ITTN 42, May 31, 2010) A taxpayer that is not obliged to use IFRS statements for accounting purposes, and does not prepare them for other users, is not required to prepare them solely for tax purposes (ITTN 42, May 31, 2010) Experis Thursday, October 25,

15 Canadian Tax Trends The Self Audit United States In U.S., FASB introduced Interpretation 48 to FAS109 (FIN 48) FIN 48 analysis becomes a roadmap for a government tax auditor No equivalent of FIN 48 under old Canadian GAAP In U.S., Form UTP ( Uncertain Tax Positions ) No equivalent to Form UTP in Canada Canada Canada is trending towards U.S. lead IFRS introduced FIN 48 concept with exposure draft to IAS 12 (withdrawn) IFRS and U.S. GAAP convergence will likely lead to IFRS FIN 48 standard CRA tax auditors regularly ask for FIN 48 documentation Department of Finance has commenced internal talks re: UTP reporting Experis Thursday, October 25, Canadian Corporate Tax Wrap-up Impact to a U.S. company doing business in Canada? Non-Compliance can lead to large penalties and interest t Assess Nexus risk and document technical positions to prepare for government audit Understand withholding obligations and impact Consider Secondment Arrangements to mitigate nexus for intercompany services Consider sde Voluntary ou taydisclosure scosuetoa avoid odpenalty aty (Regulations 105 & 102) Voluntary Disclosure can initially occur on a no names basis to protect position if audit starts prior to complete submission Experis Thursday, October 25,

16 Canada Sales Tax Overview Federal GST/HST Provincial PST Canadian Sales Tax Overview Federal Sales Tax Goods and Services Tax (GST) 5 percent Harmonized Sales Tax (HST) Various Rates Value Added Tax ( VAT ) Taxable, Zero Rated, Exempt Status Applies on most goods and services Flow-through tax in some cases Input tax credits for sales tax on purchases Registrant remits net monthly, quarterly or annually Electronic Filing Experis Thursday, October 25,

17 Canadian Sales Tax Overview (Continued) Provincial Sales Taxes Provincial Retail Sales Taxes in three provinces Saskatchewan 5 percent, Manitoba 7 percent, PEI 10 percent (until April 1, 2013) Taxes goods, software and telecommunications, some services Paid by end-user and businesses (except on inventory) Not recoverable when paid; monthly remittance of collection First Nations Sales Taxes Unique to each First Nations Band Experis Thursday, October 25, Canadian Sales Tax Overview (Continued) Quebec Sales Tax (QST) Jan 1, 2012 rate increase to 9.5 percent Calculated on top of GST effective rate of percent on price Harmonization January 1, 2013 (discussion slide to follow) Separate disclosure on reporting and remittance of federal and provincial components Tax Risk: Risk of under-collection of HST because most Quebec accounting systems are not in compliance with place of supply rules Experis Thursday, October 25,

18 Canadian Sales Tax National Summary PROVINCE/TERRITORY GST HST QST NON-VAT COMMENTS 5% 12%-15% 9.5% SALES TAX P.E.I (changing April 1, 2013) X X N.B X N.S X NFLD X QC (changing Jan 1, 2013) X X ON X MAN X X SASK X X ALTA X BC (changing April 1, 2013) X YUKON X NWT X NUNAVUT X Experis Thursday, October 25, Polling Question #2 For the 2013 Canadian sales tax changes, we have done the following: A. Implemented computer changes including re-mapping our GL B. Discussed but not implemented computer changes yet C. We have done nothing yet D. We did not know there were any tax amendments E. I don t know what our Canadian operations have done Experis Thursday, October 25,

19 Canada The HST Canadian Sales Tax HST Harmonized Sales Tax One federal tax called GST/HST Harmonized Sales Tax (HST) 12 percent, 13 percent, or 15 percent Complicated additional rules In place in most of Canada HST in place in five provinces, B.C. to De-Harmonize e (discussion slide to follow) o Rate increase in Nova Scotia July 1, 2010, to 15 percent Transitional rules in B.C., Quebec, and PEI for 2013 Experis Thursday, October 25,

20 Canadian Sales Tax HST (Continued) Rate increases from 5 percent to 12/13/15 percent Employee Expenses Higher percentage available for refund Charging Tax Assessment of under-collected tax if GST collected instead of HST (complicated place of supply rules ) Paying Tax - not always recoverable (restricted ITCs) Higher tax dollar volumes Higher interest and penalties on assessments for non-compliance with higher tax base Increased cash flow issues Experis Thursday, October 25, Canadian Sales Tax HST (Continued) Risks From Provincial Changes Transitional rules for provincial harmonization or de-harmonization Rules are different for each province Computer Systems Reporting to multiple tax authorities Increased audit cooperation between federal and provincial governments Experis Thursday, October 25,

21 Canadian Sales Tax HST Special Rules Place of Supply Rules: Tangible personal property Where delivered d or made available; deeming rules can apply Services Address of customer, maybe! Intangibles (software, rights) Depends on value, greater than or less than $300 Real property Where is the property located? TAX RISK: Independent Contractors often charging the wrong rate: If overcharged, bottom line cost to you If undercharged, they and you are open to assessment Experis Thursday, October 25, Canadian Sales Tax HST Special Rules (Continued) HST Restricted Input Tax Credits Restriction is no refund of provincial component of HST Applies to Purchases of: Energy, Telecommunications, Road vehicles, Fuel, Meals and entertainment Phase In Rules Special Industry Exemptions (e.g., manufacturing) Unique to each province Restricted ITCs only apply to: Corporate group annual taxable sales in excess of $10 million All financial institutions Experis Thursday, October 25,

22 Canadian Sales Tax Quebec Harmonization Effective Date January 1, 2013 Old system: GST rate 5 percent + QST Rate 9.5 percent -- Effective Rate percent (QST rate applied on GST rate) New system : GST rate 5 percent + Provincial Component percent = Effective Rate percent Provincial Component does not apply on GST Increase to Provincial Component to maintain same effective overall rate Separate Legislations; Disclosure on Invoices; Registration Numbers; Remittance New rules for financial institutions Experis Thursday, October 25, Canadian Sales Tax PEI Harmonization Effective Date April 1, 2013 Old system: GST rate 5 percent + PST Rate percent = Effective Rate 15.5 percent (PST rate applied on GST rate) New system : GST rate 5 percent + Provincial Component 9 percent = Effective Rate 14 percent Fully harmonized system like Ontario Transitional rules not yet released Experis Thursday, October 25,

23 Canadian Sales Tax B.C. De-Harmonization Effective Date April 1, 2013 Current thst system: Federal rate 5 percent + Provincial i Component 7 percent + HST Rate 12 percent Return to old system: GST rate 5 percent + B.C. PST Rate 7 percent PST does not apply to same base as GST (e.g., generally not PST of services) PST exemption for manufacturers and goods held for re-sale (exemption certificates) t Transitional Rules different from other provinces and typically based on when payment is due and paid Experis Thursday, October 25, Canadian Sales Tax Risk Mitigation Avoid tax-inclusive pricing arrangements. If you lock in your GST/HST cost in a fixed contract and the rate increases, or location changes, your margin will decrease Consider customer demand under higher tax rate Consider voluntary registration to claim input tax credits Consider place of supply rules at time of contract negotiation Experis Thursday, October 25,

24 Canadian Sales Tax Wrap-up Impact to U.S. corporations carrying on business in Canada Higher rates and place of supply rules draw renewed attention ti to the Made in Canada rules U.S. companies may be required to register for GST purposes even where income tax registration is not required U.S. resident may want to revisit voluntary registration Cost-benefit analysis The value of input tax credits available has increased from five percent to 12 percent, 13 percent or 15 percent Experis Thursday, October 25, Canada Sales Tax Recovery 24

25 Polling Question #3 When was the last time you reviewed your Canadian sales tax process for both recovery and risk: A. Within the last 2 years B. Within the last 4 years C. We have never reviewed D. We rely on government audits to review Experis Thursday, October 25, Canadian Sales Tax Statute of Limitations Risk of Exposures Government Tax audits only identify liabilities Typical CRA Audit frequency Statute barred periods (GST/HST) Four years retroactive manufacturing and others Two years financial institutions Two years for GST Paid in Error (Exempt Supplies) PST (Ontario, B.C.) Four years from date of payment (ended July 2010) Ontario further limited PST refund claims received on or before Dec 31, 2012 Opportunity There is still time to file for Ontario and B.C. PST recovery, but the timeline is diminishing Experis Thursday, October 25,

26 Canadian Sales Tax Recovering Overpaid GST/HST Process and timing of recovery of money easier and faster than U.S. sales tax recovery Take an input tax credit (ITC) for amount identified on your GST/HST return recovery is immediate in the filing period Immediate realization of refund through offset from your monthly/quarterly remittance Larger claims need to provide explanation/tax legislation along with submission of ITC depending on remittance volume trend Experis Thursday, October 25, Canadian Sales Tax HST Recovery Larger businesses with taxable sales in excess of $10 million annually will be restricted on claiming ITCs on the following expenses for at least five years: Energy (Hydro, Gas) except if purchased by farms or manufacturers Telecommunications except internet access or toll-free numbers Road vehicles weighing less than 3,000 Kg, parts and repairs, as well as fuel Food, beverages and entertainment t t Opportunity Examine allocation of activities to manufacturing Update G/L sales tax mapping for changes in restrictions Experis Thursday, October 25,

27 Canadian Sales Tax GST/HST Recovery Opportunities Input errors Missed ITC on supplier invoicesi Embedded GST on supplier invoices Misidentified HST (i.e., only booked the 5 percent GST component) Employee allowances and expense reports Broker statements (GST collected at border on imported goods from non-registrants) Experis Thursday, October 25, Canada Goods & Services Crossing the Border Customs & Sales Tax 27

28 Canadian Sales Tax Imports into Canada First Determine if made in Canada or imported Federal 5 percent taxed anywhere on Canadian border Goods Collected at the border Services/Intangibles Self-assessment if imported by FI or for use in exempt activities Provincial component 0 percent, 7 percent, 8 percent according to province of residence of importer Goods Payable only by non-businesses Services/Intangibles Self-assessment if acquired for use in province Transfers between provinces Only provincial component considered Goods Self-assessment required at rate of province when brought into a province if for use in non-taxable activities, such as non-businesses and financial institutions Services/Intangibles Self-assessment if for use in non-taxable activities, such as non-businesses and financial institutions Rebates for the inverse, when transferred to a lower rate province Experis Thursday, October 25, Carrying on Business in Canada Should you be registered for GST/HST? PE vs. carrying on business U.S./Canada Tax Treaty does not apply to the Excise Tax Act or provincial legislation that governs Canadian sales taxes Bar is lower for GST/HST purposes based on a carry on business test Considerations Are you missing cost-reduction opportunities? Retroactive registration may provide benefits Are you valuing goods correctly? Most common mistake is expensing the GST/HST/QST paid significant lost recoveries available to many U.S. companies Experis Thursday, October 25,

29 Customs Planning Issues NAFTA - properly completed Certificates of Origin Direct shipments - Beneficial rates if shipped directly to Canada from developing countries Value for duty - Transfer price rules are not the same for Canadian tax and Canadian customs Refunds/drawbacks - If you are exporting to Canada, you may be eligible to obtain a refund of any U.S. Customs paid Customs rulings Cross-border transactional costs - Using a customs broker? Self Clearance may be an option Experis Thursday, October 25, Customs Audits (Continued) What to do when Customs calls Being prepared reduces stress level and audit time Proper completion of documents A series of transactions are selected and then all documents supporting it are requested NAFTA certificates Have a process to ensure certificates are current and correct Tariff classification Has anyone reviewed the customs tariff? Value for duty There is a renewed focus with inclusion of former PST auditors Experis Thursday, October 25,

30 Customs Audits (Continued) There is going to be an increased focus on reviewing the G/L Auditors will be looking at transactions ti to determine if the proper reporting was made at time of importation, then auditors will look at post-importation activity to determine if post-importation adjustments needed to be made Trigger Points: Quantities imported vs. quantities declared Is everything included in your value for duty? Dutiable Assists? Related party transactions New auditors will embrace this Experis Thursday, October 25, Customs Wrap-up Old provincial sales tax auditors moving into Federal Customs audit role with little training Understand your customs process and costs Plan for the customs audit NAFTA duty exemption does not exempt you from audit risk regarding customs administration Experis Thursday, October 25,

31 Questions? Clyde Seymour, C.A., MAcc Tax Director Canada Experis Finance delivers innovative solutions that help companies create competitive advantage, custom tailoring our project solutions and professional resourcing services to fit our clients needs in risk advisory, tax and finance & accounting. Experis Thursday, October 25,

32 More information For more information, please visit Experis Thursday, October 25,