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Weekly tax highlights, December 8, 2011

December 8, 2011

Top 10 year-end tips for global mobility and assignment professionals

Many Canadians approach New Year’s Eve as a chance to make a fresh start. With this in mind, we offer our top 10 tips to help you start fresh at the office in 2012:

  • Stock option exercise withholdings
  • Payroll waivers
  • Ensuring accurate T4 reporting
  • U.S. plan participation and pension adjustment T4 reporting
  • Non-resident directors and payroll withholding/reporting
  • Tracking international workdays
  • Totalization agreements and certificates of coverage
  • Compensation plan deferrals
  • International business travelers
  • Achieving all of this by December 31

Read more in our Canadian Tax Alert.

New protocol to treaty with Singapore

On November 30, 2011, the Department of Finance announced the signing of a protocol amending the tax treaty between Canada and Singapore. The protocol includes provisions reflecting the standard developed by the Organisation for Economic Co-operation and Development for the exchange of tax information. The protocol will enter into force 30 days after  both countries have notified each other that their respective domestic implementation procedures are complete.

The full text of the protocol is posted on the Department of Finance website.

Entry into force of the TIEA between Canada and the Turks and Caicos Islands

The tax information exchange agreement (TIEA) previously concluded between Canada and the Turks and Caicos Islands under Entrustment from the United Kingdom entered into force on October 6, 2011.

TIEAs provide for the mutual exchange of tax information with a view to better administering and enforcing taxation laws and preventing international fiscal evasion. As well, the Income Tax Regulations were amended in 2008 to extend to countries with which Canada has a TIEA certain favourable corporate tax provisions that had previously only been available to countries with which Canada has concluded a tax treaty. These incentives provide that if a jurisdiction enters into a TIEA with Canada, active business income earned by a foreign affiliate of a Canadian corporation that is resident in that jurisdiction and carrying on business there will be included in “exempt surplus” and, consequently, dividends paid to the Canadian corporation from the affiliate will not be subject to Canadian tax. The Regulations provide that a foreign affiliate of a Canadian company that is resident in a country which has entered into a TIEA with Canada can earn exempt surplus in respect of active business income for its taxation year that includes the effective date of the particular TIEA, retroactive to the beginning of the taxation year. Thus, a foreign affiliate in the Turks and Caicos Islands that has a taxation year based on the calendar year will be eligible to earn exempt surplus for its entire 2011 taxation year.

For more information on Canada’s TIEAs, please see our previous Alert. For a list of jurisdictions with which Canada has entered into a TIEA or with which negotiations are ongoing, please see the Department of Finance website.

2.8% indexation adjustment for personal income tax and benefit amounts in 2012

On November 22, 2011, the Canada Revenue Agency (CRA) announced that an inflation-based increase of 2.8% will apply for personal income tax and benefit amounts, effective January 1, 2012. Among the indexed amounts are the tax bracket thresholds and the amounts relating to non-refundable tax credits. For example, the basic personal amount will increase from $10,527 in 2011 to $10,822 in 2012. Similarly, the highest tax bracket (29%) threshold will be indexed and take effect when taxable income is above $132,406 in 2012 (above $128,800 in 2011).

 

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This publication is produced by Deloitte & Touche LLP as an information service to clients and friends of the firm, and is not intended to substitute for competent professional advice. No action should be initiated without consulting your professional advisors. Your use of this document is at your own risk.