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Weekly tax highlights, December 1, 2011

December 1, 2011

Taxpayer relief deadline is December 31, 2011

In a November 21, 2011 news release, the Canada Revenue Agency (CRA) reminds taxpayers and tax registrants that requests under the taxpayer relief provisions for the 2001 tax year and any reporting period that ended during the 2001 calendar year must be filed no later than December 31, 2011.

Under the taxpayer relief provisions, the Minister of National Revenue has discretion to cancel or waive penalties and interest, among other things, upon request by a taxpayer within a 10-year limitation period.

The CRA has noted that it accepts the Federal Court of Appeal decision in Bozzer v. Canada (2011 FCA 186) which provides a more generous interpretation of the 10-year limitation period for interest relief than that previously applied by the CRA. As a result, the Minister may now permit the cancellation or waiver of interest that accrued during the 10 calendar years preceding the calendar year in which the request is made, regardless of the year in which the tax debt arose.

The CRA also confirms that this change not only applies to the interest relief provisions of the Income Tax Act and of the Excise Tax Act, but also to interest relief requests made under the Air Travellers Security Charge Act, the Softwood Lumber Export Charge Act, 2006 and the Excise Act, 2001.

EI and QPIP premiums for 2012

The CRA, which administers the requirements relating to Employment Insurance (EI) premiums, has announced that the maximum insurable earnings for 2012, applicable to all provinces and territories, will be $45,900 – up from $44,200 in 2011. The employee premium rate will be 1.83%, for a maximum annual premium of $839.97 ($786.76 for 2011) for the country except Quebec and 1.47% for Quebec, for a maximum annual premium of $674.73 ($623.22 for 2011). The employer contribution will remain at 1.4 times the amount of the employee premium for all provinces and territories, unless the employer qualifies for a reduced rate. These rates are published in the CRA’s draft publication T4127, Payroll Deductions Formulas for Computer Programs.

Revenu Québec recently posted the 2012 Table for Québec Parental Insurance Premiums. The maximum insurable earnings subject to Quebec Parental Insurance Plan (QPIP) premiums will be increased to $66,000 for 2012 ($64,000 for 2011). The employee premium rate will be 0.559% for a maximum annual premium of $368.94 ($343.68 for 2011) and the employer premium rate will be 0.782% for a maximum annual premium of $516.12 ($481.28 for 2011).

Entry into force of tax treaty between Canada and Italy

The Convention between Canada and the Government of the Italian Republic for the Avoidance of Double Taxation with respect to Taxes on Income and the Prevention of Fiscal Evasion that was signed on June 3, 2002 has finally been ratified and entered into force on November 25, 2011. In Canada, its provisions have effect in respect of tax withheld at source on amounts paid or credited to non-residents on or after January 1, 2011 and in respect of other Canadian taxes, for taxation years beginning on or after January 1, 2011.

The Convention replaces the tax convention signed on November 17, 1977. Under the 1977 treaty, the withholding tax rate on dividends and interest was 15%, and most royalties were subject to a 10% withholding tax. The new treaty limits the rate of withholding tax to:

  • 5% for certain non-portfolio dividends and 15% for all other dividend payments
  • 10% for interest, and
  • 5% for royalties in respect of certain computer software, patents and know-how and 10% for other royalty payments

An exemption for certain interest and copyright royalties is also provided. The full text of the treaty can be found on the Department of Finance website.

The Fiscal Monitor – budgetary deficit of $13.2 billion for the period of April to September 2011

In the November 2011 edition of The Fiscal Monitor, the Department of Finance provided an overview of the budgetary deficit for the first six months (April to September) of the 2011-2012 fiscal year. The deficit in September was $2.5 billion. Thus, the total deficit for the six month period was $13.2 billion, compared to a deficit of $17.4 billion reported in the same period last year. For the six months combined, revenues increased by $4.3 billion, or 3.9%, to $114.4 billion. Total program expenses in that period were $111.8 billion, down $0.4 billion, or 0.4%, from the prior year.

 

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