Looking back to 2013 and FORWARD TO 2014

Transcription

1 YEAR-END TAX PLANNER 2013/2014 IN THIS ISSUE Federal Highlights 1 Provincial Highlights 1 Sales Tax Highlights 1 International Highlights 2 Entrepreneurs 2 Personal Tax Matters 4 United States Matters 8 International Matters - General 8 Key Tax Dates 10 Appendix I : 2013 & 2014 TOP MARGINAL PERSONAL INCOME TAX RATES 11 Appendix II : 2013 & 2014 CORPORATE INCOME TAX RATES 12 December 2013 Looking back to 2013 and FORWARD TO 2014 Federal Highlights Lifetime capital gains exemption ( LCGE ) The LCGE will increase from $750,000 to $800,000 in 2014 and will be indexed thereafter. Small business owners should consider a review of their ownership structure in light of the recent changes to determine if additional planning may be beneficial. Non-Eligible dividends Federal tax rate on noneligible dividends will increase from 19.58% to 21.22% in Consider paying non-eligible dividends in 2013 prior to the increase. Capital cost allowance ( CCA ) The 50% straightline accelerated CCA rate for Manufacturing and Processing ( M&P ) equipment has been extended for an additional two years. M&P equipment acquired prior to 2016 will continue to be eligible for the accelerated CCA rate. Partnership Information Returns Transitional relief with respect to expanded reporting requirements for adjusted cost base and at-risk amounts on Partnership returns will be extended to include 2013 fiscal periods. Provincial Highlights Small business rate and threshold $500,000 small business threshold is now applicable in all provincial jurisdictions except for Manitoba and Nova Scotia. On January 1, 2014 the threshold in Manitoba will increase from $400,000 to $425,000 while the threshold in Nova Scotia will decrease from $400,000 to $350,000. In Nova Scotia, the small business rate declined from 4% to 3.5% on January 1, 2013 and will decrease to 3% on January 1, In Prince Edward Island, the small business rate increased from 1% to 4.5% on April 1, General and M&P rate British Columbia increased its rate from 10% to 11% on April 1, 2013 while New Brunswick increased its rate from 10% to 12% on July 1, Stephen Rupnarain, CA, is a Senior Tax Manager in the Toronto office of Collins Barrow. Ontario personal income tax Ontario personal income tax rate increases from 12.16% to 13.16% in 2013 on income over $509,000. Ontario dividend tax rate On November 7, 2013, Ontario announced proposed measures which will effectively increase the combined Federal and Ontario marginal tax rates on non-eligible dividends. As a result the top marginal tax rates on non-eligible dividends will increase from 38.60% to 40.13% in 2014 on income over $509,000 and, from 34.92% to 36.45% on income over $135,054 up to $509,000. British Columbia personal income tax British Columbia personal income tax rate will increase from 14.7% to 16.8% for 2014 and 2015 (i.e. a temporary tax) on incomes over $150,000. Quebec personal income tax Quebec personal income tax rate increased from 24% to 25.75% in 2013 on incomes over $100,000. Sales Tax Highlights British Columbia: The reintroduction of the 7% Provincial Sales Tax ( PST ) and 5% Goods and Services Tax ( GST ) replaced the 12% Harmonized Sales Tax ( HST ) effective April 1, Prince Edward Island: The 14% HST replaced the combined 15.5% PST/GST on April 1, Nova Scotia: HST rates will decrease from 15% to 14% on July 1, 2014 and to 13% on July 1, Manitoba: PST rate increased from 7% to 8% on July 1, Quebec Sales Tax ( QST ): QST increased from 9.5% to 9.975% on January 1, 2013 when harmonized with GST (effective GST/QST rate unchanged at %).

2 2 E-filing of GST/HST returns: Required if GST/HST registrants have greater than $1.5 million in annual taxable supplies on an associated group basis. International Highlights Foreign income verification statement (Form T1135) Revisions to Form T1135 add greater complexity and require more detailed information on foreign property owned for taxation years ending after June 30, The normal reassessment period is extended by an additional three years in certain circumstances where foreign information reporting is required. Thin capitalization rules For taxation years beginning after 2013, application of the rules have now been extended to Canadian resident trusts and non-resident corporations and trusts that carry on business in Canada (i.e. branches). Entrepreneurs Dividends or salaries An owner-manager must determine the most tax effective salary-dividend mix that minimizes overall taxes for the corporation and the relevant individuals. The ownermanager must consider personal marginal tax rates, alternative minimum tax ( AMT ), the corporation s tax rate, RRSP contribution room, provincial health and/ or payroll taxes, CPP contributions and other personal deductions and credits available. If personal cash requirements are low, consider retaining income in the corporation to obtain the tax deferral as corporate rates are lower than personal rates. Dividend payments Required to follow specific procedures to designate dividends that qualify as eligible dividends at the time of payment. Be aware that dividends may increase exposure to AMT. For dividends paid after March 28, 2012, a corporation can designate at the time it pays a taxable dividend, any portion of the dividend to be an eligible dividend. Late designations are acceptable if the corporation makes the late designation within the three-year period following the day on which the designation was first required to be made. Qualifying Small Business Corporation/Capital Gains Exemption The decision regarding dividends and/or bonuses may cause an increase in passive investments and could compromise the ability to claim the $750,000 LCGE (increased to $800,000 in 2014) on the sale of the shares of the business. Consider implementing appropriate planning to allow for the removal of passive investments on a tax-efficient basis. Shareholder loans Ensure that you repay shareholder loans from your corporation no later than one tax year after the end of the tax year in which the amount was borrowed. Subject to certain exceptions, unpaid amounts after such time will generally be treated as a dividend to the shareholder. Depreciable Assets Consider purchasing equipment prior to the end of your fiscal year in order to accelerate access to CCA (be aware of the available for use rules); and A special election can be used to treat leased fixed assets as purchases under a financing arrangement. Income to family members Consider paying salaries to family members who work in the business. Keep in mind the salaries must be reasonable or the amounts may be challenged by the CRA. Salary payments as opposed to dividends also allow the recipient to have earned income for child care expense, CPP and RRSP purposes. Dividends to family members Individuals with no other income can receive up to about $50,000 in dividends, without triggering any tax, depending on their province or territory of residence and the availability of the general rate income pool (GRIP). Remuneration accruals For salaries and bonuses to be deductible, they must be accrued before the business year-end and paid within 179 days thereof. Appropriate source deductions and payroll taxes must be remitted on time. Private health services plan ( PHSP ) premiums If you are self-employed, PHSP premiums paid may be deducted from your self-employment income in certain situations. Premiums not deductible may be claimed as a medical expense for purposes of the medical credit.

3 3 Ontario Employer Health Tax ( EHT ) Effective January 1, 2014, EHT exemption (for associated employers) increases from $400,000 to $450,000 (indexed thereafter). The exemption is not available to employers with annual Ontario payrolls over $5 million. Hiring credit for small business Credit of up to $1,000 in 2013 if your 2012 employment insurance premiums were less than $15,000 and increased in Employee stock options Consider if it will be the employee or the employer who will take the appropriate tax deduction for cashed-out stock options (keep in mind an election may be required). E-filing of corporate income tax and information returns Required if corporate tax returns have gross revenues exceeding $1 million; and Required for Information returns if more than 50 slips are submitted annually. Tax liabilities Final corporate tax liabilities need to be paid within two months after year end, and three months for certain eligible Canadian controlled private corporations ( CCPC s ). Scientific Research and Experimental Development ( SR&ED ) Remember that forgoing bonus payments (i.e. lowering income to the small business limit) may cause a CCPC s SR&ED investment tax credits ( ITCs ) to be non-refundable and subject to the lower ITC rate in the following year; File SR&ED claims no later than 18 months after the corporation s year end; If you are a corporate partner of a partnership, the deadline for filing an SR&ED claim in certain situations, has been reduced by up to 13 months; Capital property acquired after 2013 is neither deductible as an SR&ED expenditure nor eligible for ITCs; The overhead proxy rate will be reduced from 60% to 55% after 2013; The non-refundable ITC rate will decrease from 20% to 15% for taxation years ending after 2013 and is pro-rated for taxation years that straddle January 1, 2014; and Taxpayers are required to provide additional information in respect of SR&ED program tax preparers and billing arrangement for claims filed after January 1, A penalty of $1,000 per claim will be introduced for failure to provide the required information. The taxpayer and the tax preparer will be jointly and severally liable for the penalty. Taxable Capital Monitor the corporation s taxable capital for federal tax purposes. If in excess of certain limits, the corporation will begin to lose access to the small business deduction and the 35% refundable investment tax credit for SR&ED expenditures. Consider the following: Use excess cash to pay off some debts; Declare dividends; Planned dispositions that will result in income should be deferred until after year-end; Maximize federal and provincial refundable and non-refundable tax credits; and Trigger capital losses to recover capital gains tax paid in previous years. Personal Services Business Applicable for taxation year s ending on or after October 31, 2011 the tax rate applicable to income from personal services businesses increased to 28% (due to removal of Federal abatement). Consider if still beneficial to carry on business through this type of vehicle. Leveraged life insurance arrangements Draft legislation eliminates certain tax benefits for leveraged insured annuities and 10-8 arrangements. For a leveraged insured annuities plan, certain changes include annual accrual-based taxation, non-deductible premiums and no addition to the Capital Dividend Account ( CDA ) from a resulting death benefit, effective for taxation years ending after March 20, For a 10-8 arrangement, effective January 1, 2014, interest on related borrowings and insurance premiums will not be deductible and the death benefit will not increase the CDA balance. Certain exceptions apply.

4 4 Health care spending accounts Starting January 1, 2013, a bonus can no longer be redirected to a health care spending account on a taxfree basis. GST/HST and QST Management/intercompany fees - Ensure that GST/HST or QST as applicable is charged on intercompany management fees within the corporate group. A corporation may be exempt from the said rule if a special election is made. Place of supply rules If sales of taxable supplies are made to different Canadian jurisdictions, be aware of the provincial place of supply rules and ensure the correct rate of tax has been applied to the transactions. Input tax credit documentation Ensure proper written documentation has been obtained to support the input tax credit claims. Information about the GST/HST (or QST) registration number of the suppliers can be found on the CRA (or Revenue Quebec) website. Taxable benefits GST/HST (or QST) needs to be assessed on certain amounts reported as employees taxable benefits. Personal Tax Matters I am an employee so what do I need to know? Employment-related courses Consider having your employer pay directly for jobrelated educational courses. Gifts and awards Subject to certain exceptions, non-cash gifts and noncash awards with a total value of $500 or less annually may not be taxable to you personally. Ask your employer to consider this option. Employee loans Pay 2013 interest on or before January 30, Employee Stock Options If you dispose of stock options for cash, discuss with your employer as to whether they can elect to forgo the tax deduction so that you may claim it; Employee election to defer the payment of tax on stock option benefits until the shares are sold is no longer allowed; and Employers are now required to withhold and remit income tax relating to the taxable benefit realized when public company options are exercised. Home office Ensure you claim your entitlement to home office expenses if your employer will complete Form T2200. Public transit pass tax credit Ensure you claim the cost of public transit (subject to certain criteria). Retain passes or receipts to support claims. Overseas employment tax credit Please be aware that if you currently claim this credit it will be eliminated in stages by Corporate Vehicle Reduce your operating cost benefit and/or standby charge benefit if you have access to a company vehicle. To reduce the operating cost benefit: Consider reimbursing your employer for some or all of the personal use portion of the actual operating costs by February 14, 2014; and Reduce your personal driving (to < 50% of the total driving, if possible). To reduce or eliminate your standby charge benefit: Limit your access to the vehicle (i.e. not every day); and Avoid personal use driving. Group sickness or accident insurance plans Employer contributions to a group sickness or accident insurance plan generally made after March 28, 2012, relating to coverage after 2012, will be included in your income for the year in which the contributions are made. Pooled registered pension plan (PRPP) Consider joining a PRPP if you do not have access to an employer-sponsored pension plan. PRPP s are a voluntary savings plan similar to a defined contribution RPP or RRSP.

5 5 RRSPs, RPPs and DPSPs If you contributed less than the maximum allowable amount to your RRSP in a previous year, use the unused contribution room for 2013 in addition to your normal contribution. If you decide not to contribute your entitlement for 2013, your ability to do so carries forward indefinitely. However, even if you do not need the deduction in 2013, you should still make the contribution if you have excess funds, so the funds can start to grow on a tax deferred basis. You can claim the deduction in any future year. REGISTERED PLANS - CONTRIBUTION LIMITS Basis for deduction Registered retirement savings plan ( RRSP ) 18% of earned income for the previous year Defined contribution registered pension plan ( RPP ) Deferred profit sharing plan ( DPSP ) 18% of pensionable earnings for the year Dollar limits 2013 $23,820 $24,270 $12,135 Dollar limits 2014 $24,270 Indexed I have investments so what do I need to know? Interest deductibility If you are incurring non-deductible interest and at the same time have cash or investments on hand, consider using some of your cash or investments to pay down non-deductible debt and then borrow to replace those investments (careful on triggering gains though if you liquidate investments). Interest income Consider waiting until January 2014, to purchase certain interest-bearing investments. Capital gains and losses If you have capital gains this year (or in 2012, 2011, or 2010), consider selling an asset with an accrued loss, which can then be offset against those capital gains this year and then from prior years (i.e. to recover tax). Before triggering losses, consider the superficial loss rules (see below). If you have little or no other income, or have capital losses to use up, consider triggering capital gains before year-end by selling an investment that has appreciated in value, then reinvesting the proceeds (even in the same investment). If certain conditions are met, you can dispose of shares of an eligible small business corporation and defer the recognition of capital gains by reinvesting the proceeds from the sale of those shares in another eligible small business corporation by April 30th, Superficial loss rules The superficial loss rules prevent a taxpayer from claiming a capital loss on an asset that the taxpayer clearly intended to continue to hold. If you are holding an asset with an accrued loss and wish to sell the asset to offset against any capital gains realized and you purchase the identical asset within 30 days either before or after selling the original asset, the superficial loss rules will apply to deny the capital loss, provided that the asset is held at the end of 30 days after the sale. The superficial loss would also apply if your spouse (or a company controlled by you or your spouse) buys the asset within the same timeframe. Investment holding company Ontario residents who earn investment income from portfolio investments that is subject to Ontario s high-earner income tax (i.e. on incomes exceeding $509,000 starting 2013) should consider holding these investments in a corporation to benefit from the lower corporate rate on investment income. Tax-Free Savings Account ( TFSA ) Contribution limit has increased to $5,500 from $5,000 for 2013; Canadian residents age 18 or older may contribute to a TFSA. Contributions are not deductible but withdrawals and income earned are not taxed;

6 6 Withdrawals should be done before year end as amounts withdrawn are not added to your contribution room until the beginning of the following year after the withdrawal; and Consider holding eligible investments that are subject to higher tax rates (i.e. interest and foreign dividends). First-time donor s super credit A first-time donor is entitled to claim an additional 25% credit on up to $1,000 of donations made after March 20, The credit can be claimed only once, after 2012 and before Donating Flow Through Shares Be conscious of the limits now applicable to donations of publicly listed flow-through securities acquired after March 21, Eligible dividends Eligible dividends may trigger AMT; and Eligible dividends could be tax-free if paid to individuals in lower tax brackets. Mutual funds If you are thinking of investing in a particular mutual fund before year-end, inquire as to whether there is going to be a significant taxable distribution reported in If so, consider waiting until January to make the investment to avoid paying tax on the distribution. Safety deposit boxes The cost of renting safety deposit boxes is no longer deductible for taxation years beginning after March 20, Offshore investment funds For investment in offshore investment funds, the prescribed income accrual percentage on such investment is increased by 2% (i.e. prescribed rate plus 2%). Further, the statute-barred period is now extended by an additional three years for taxpayers who have invested in offshore investment funds for taxation years ending after March 4, Synthetic dispositions New rules have been put in place to restrict the tax benefits associated with synthetic dispositions. These arrangements typically allow a taxpayer to obtain tax benefits whereby they have economically disposed of a property while retaining ownership of it for tax purposes. The rules generally apply to arrangements entered into after March 20, What do families need to know? Estate planning Ensure your estate plan is meeting your current and future objectives. Also ensure that your will is up to date. Income splitting Consider an income-splitting plan to lend funds to family members in lower tax brackets. The current prescribed rate is 2%. Interest on intra-family loans must be paid on or before January 30, 2014, to avoid attribution of income. Kiddie Tax Will apply to capital gains realized after March 21, 2011 that are included in the income of a minor, if the gain is attributable to a non-arm s length disposition of shares and any dividends on those shares would have been subject to the kiddie tax. Any such capital gains will be ineligible for the LCGE and be treated as dividends subject to the kiddie tax. Family Trusts In order to be included in the beneficiary s income and deducted from the trust s income, income earned by discretionary inter vivos family trusts must be paid or made payable to beneficiaries by December 31, CRA has raised concerns about the absence of proper accounting and trustee minutes with respect to inter vivos trusts. Therefore taxpayers should be following best practices with respect to maintaining their inter vivos trusts. Registered Education Savings Plan ( RESP ) Plan your contributions to ensure the RESP will receive the maximum lifetime Canada Education Savings Grant ( CESG ) of $7,200; and Set transfers between RESPs for siblings are now allowed (subject to certain criteria). Registered Disability Savings Plan ( RDSP ) Where you have a child who qualifies for the disability tax credit and RDSP, you should: Set up an RDSP in order to qualify for the Canada disability savings bond (maximum of $20,000 per child); and

7 7 Contribute to an RDSP in order to qualify for the Canada disability savings grant (maximum of $70,000 per child). Home buyers plan and incentives If you are a first time home buyer, you may withdraw up to $25,000 from your RRSP and your spouse s RRSP under the Home Buyers Plan ( HBP ) to acquire a home; You may be eligible to claim the First Time Home Buyers Tax Credit of up to $750; If you are planning on using the HBP, consider deferring the withdrawal until after December 31, which will extend your time period for purchasing your home and repaying the amounts withdrawn by one year; and If you participated in the HBP prior to 2013, you have a repayment due on or before March 1, 2014 for it to be considered to have been made in the 2013 taxation year (and therefore avoid a 2013 income inclusion). Child care expenses Ensure that child care expenses for 2013 are paid by December 31, 2013 and a receipt is obtained. Boarding school and camp fees qualify for the child care deduction (limits may apply). Universal Child Care Benefit ( UCCB ) and Canada Child Tax Benefit ( CCTB ) Consider investing the funds received from the UCCB and the CCTB in a separate bank account in trust for your children. Investment income on these funds will not be taxable to you. Children s fitness tax credit Claim this federal non-refundable tax credit on up to $500 of fees paid per child under the age of 17 for enrolment in an eligible physical activity program. These expenses have to be paid by December 31, 2013 and you must retain the receipts. Children s arts tax credit Claim this federal non-refundable tax credit on up to $500 of fees paid per child under the age of 17 for enrolment in an eligible program of artistic, cultural, recreational or developmental activities. These expenses have to be paid by December 31, 2013 and you must retain the receipts. Education and textbook tax credits Claim these credits if you attend post-secondary school either full-time or part-time. Eligible fees for exams taken after 2010 may qualify for the tuition tax credit. Unused and unclaimed tax credits Consider transferring your education, tuition or textbook tax credits to your spouse, parent or grandparent (subject to limitations) if you are unable to utilize them. The carryforward period is generally indefinite for unclaimed education, tuition and textbook credits and 5-years for unclaimed student loan interest. Moving expenses Your moving expenses may be deductible if you moved to attend school or moved from school to work or back home. Lifetime Learning Plan ( LLP ) You are allowed to make a tax-free withdrawal from your RRSP to finance full-time education (part-time for students who meet one of the disability conditions) for yourself, your spouse or your common-law partner. You may withdraw up to $10,000 in a calendar year and up to $20,000 in total. The Golden Years Inter vivos trust Consider establishing an inter vivos trust as part of your estate plan if you are 64 or older and live in a province with a high probate fee. Testamentary trust Beware of proposed changes which include elimination of graduated income tax rates, application of highest marginal rate and elimination of $40,000 AMT exemption for taxation years after Certain exceptions apply. RRSP If you turned 71 in 2013, you must collapse your RRSP. You may: Defer taxes on all or a portion of the amount in your RRSP by transferring the funds to a registered retirement income fund ( RRIF ) or a life income fund ( LIF ); Contribute to your RRSP only until December 31, 2013, if you have unused RRSP contribution room or earned income in the

8 8 previous year; Contribute to your spouse s RRSP until the end of the year that your spouse reaches age 71, if you have unused RRSP contribution room or earned income in the previous year; and Make a 2014 contribution by the end of December 31, 2013, subject to a small penalty. Pension income If you receive pension income, consider splitting it with your spouse or common-law partner (to a maximum of 50%). To maximize your pension credit, you will require at least $2,000 of pension income if you are age 65 or older. Old Age Security ( OAS ) Allocation of pension income from a spouse or receipt of dividends may trigger the OAS claw back. Consider measures to invest so as to earn capital gains as only 50% of the gain is included in income for the purposes of calculating the OAS amount. Alternatively, explore additional options to manage your income (e.g. through a corporation) in order to avoid the OAS claw back. Canada Pension Plan ( CPP ) If you are employed or self-employed and are 60 to 70 in age, you must contribute to the CPP. However, if you are between the ages of 65 to 70, you can elect to stop these contributions. This election can be revoked the following year. Be aware that CPP benefits are reduced if you begin collecting prior to turning 65. Individual pension plans You must make minimum withdrawals if you have a defined benefit RPP that was creating primarily for you and you are over 71 years of age. United States Matters U.S. estate tax Canadians may be exposed to U.S. estate tax if they hold U.S. property (i.e. shares in U.S. corporations, even if held in a Canadian brokerage account; U.S. real estate, including vacation homes; interests in U.S. partnerships, etc.). U.S. federal income tax return/treaty based tax return Determine whether you are conducting activities in the United States that require you to file U.S. federal income tax returns, or U.S. treaty based tax information disclosure returns. State and municipal taxes The rules differ in many cases from those at the U.S. Federal level. If you are carrying on business in the U.S., please consult your tax advisor to ensure that you are onside of the state and local tax laws (both income and sales/use taxes) as each jurisdiction has its own set of rules. U.S. retirement plans If you are a Canadian resident, consider transferring your U.S. 401(k) or IRA plans on a tax-deferred basis to an RRSP. U.S. tax reforms Limits the ability of a U.S. taxpayer to claim foreign tax credits in certain situations; Impose penalties on U.S. investors that fail to report their investments in foreign financial assets, PFICs and other foreign entities; Provides certain programs and procedures to catch-up filings (though such programs may be revoked at any time) with limited exposure to penalties and interest; and Foreign Account Tax Compliance Act ( FATCA ) initiative set to embark in mid-2014 that is designed to essentially force Canadian financial institutions to provide information on U.S. account holders to the IRS. International Matters - General Transfer pricing If your corporation has transactions with a related nonresident corporation or partnership, ensure that the transfer-pricing documentation meets the requirements imposed by the Canadian transfer-pricing rules (and those in the foreign jurisdiction too). Non-compliance can result in significant penalties. Foreign reporting requirements Individuals, corporations, trusts and partnerships that own specified foreign property with a total cost exceeding C$100,000 at any time in the year are required to file Form T1135. Review your foreign holdings to determine if you have a reporting obligation;

9 9 Form T1135 requires more detailed information about the foreign investments for taxation years ending after June 30, 2013; The normal reassessment period is extended by three years in certain circumstances; and Taxpayers resident in Canada who own shares of a non-resident corporation that is a foreign affiliate may be required to file an information return (Form T1134). Form T1134 has also changed and requires more detailed information, retroactive to taxation years that begin after Thin Capitalization Thin capitalization rules limits the deduction of any interest on that debt where the debt to equity ratio is greater than 1.5:1 for corporate taxation years beginning after 2012 and the creditor is a non-resident with significant ties to the debtor. Any disallowed interest expense is considered to have been paid as dividend and is subject to withholding tax for taxation years ending after March 28, For taxation years beginning after 2013, these new measures will further apply to Canadian-resident trusts and to non-resident corporations and trusts (i.e. Canadian branches) that carry on business in Canada, including when these are members of partnerships. Payments to non-residents You may be required to withhold and remit 15% of certain payments made to nonresidents in respect of fees, commissions or other services rendered in Canada; Be aware of the NR301, NR302 and NR303 forms that non-residents should file in support of reducing withholding tax rates on payments under a tax treaty; and Be aware of Form R102-R that has been released by the CRA to request reduced withholdings on payments made to nonresident employees. Loan receivable due from non-resident Corporation Where a non-resident controlled Canadian corporation makes loans to its foreign parent or related non-resident companies, the foreign corporation could be subject to shareholder benefits/deemed dividend and the Canadian corporation could be liable for withholding tax in certain circumstances. Newly enacted legislation permits the Canadian corporation to elect (jointly) out of the deemed dividend withholding tax rules if the Canadian corporation includes in income interest on the loan at a prescribed rate (currently 6%). The legislation applies to loans received or indebtedness incurred after March 28, Loans made by, or to, certain partnerships may also be eligible for the election. The rules are quite intricate and need to be examined on a case by case basis.

10 10 KEY TAX DATES December 16, 2013 Final quarterly installment of 2013 tax due for individuals December 24, 2013 This is likely the final trading day for Canadian exchanges wishing to have trades settled for 2013 December 31, 2013 Last opportunity to make a payment for the following items in order to utilize any applicable credit or deduction on your 2013 return Charitable donations Payment of Union dues and professional fees Investment counsel fees, interest and other investment expenses Alimony and maintenance payments Child care and child fitness expenses Interest Medical expenses Moving expenses of individuals Political contributions Deductible employee legal fees Tuition fees and interest on student loans Payments to employer to reduce standby charge RRSP contributions if you turn 71 by December 31, 2013 January 15, 2014 U.S. taxes : estimated tax payments due for individuals January 30, 2014 Interest due on intra-family loans Non-deductible interest due on loans from your employer, to reduce your taxable benefit February 14, 2014 Payment to your employer to reduce your taxable operating benefit from an employer provided automobile February 28, 2014 Last day to file T4, T4A and T5 Summary and Supplementary forms March 3, 2014 Deductible contributions to your own RRSP or spousal RRSP (for 2013 deduction) RRSP HBP repayment due (to avoid 2013 inclusion) March 17, 2014 First quarter (2014) personal tax instalment due March 31, 2014 Last day to file income tax returns for inter vivos trusts without penalty Last day to file NR4 Summary and Supplementary forms regarding amounts paid or credited to non-residents of Canada April 15, 2014 U.S. individual tax return due if you have not obtained an extension April 30, 2014 Last day to file Canadian personal tax returns (except for self-employed individuals or spouses of self-employed individuals in which case the deadline is June 15, 2014). No matter your deadline, interest will be charged on any balance due after April 30 Filing deadline for personal return may be later if individual or spouse died during the year (terminal return required)

11 11 Appendix I 2013 & 2014 TOP MARGINAL PERSONAL INCOME TAX RATES Ordinary income and interest Capital gains Canadian dividends Eligible Non-eligible Federal 29.00% 14.50% 19.29% 19.58% 21.22% Alberta 39.00% 19.50% 19.29% 27.71% 29.87% British Columbia 43.70% 45.80% 21.85% 22.90% 25.78% 28.68% 33.71% 37.99% Manitoba 46.40% 23.20% 32.26% 39.15% 40.77% New Brunswick 45.07% 46.84% 22.54% 23.42% 24.91% 27.35% 33.05% 36.02% Newfoundland and Labrador 42.30% 21.15% 22.47% 29.96% 31.01% Northwest Territories 43.05% 21.53% 22.81% 29.65% 30.72% Nova Scotia 50.00% 25.00% 36.06% 36.21% 39.07% Nunavut 40.05% 20.25% 27.56% 28.96% 31.19% Ontario >$135,054 (indexed for 2014) >$509,000 (indexed for 2014) 46.41% 23.20% 29.54% 32.57% 36.45% 49.53% 24.76% 33.85% 36.47% 40.13% Prince Edward Island 47.37% 23.69% 28.70% 38.56% 40.03% Quebec 49.97% 24.98% 35.22% 38.54% 39.78% Saskatchewan 44.00% 22.00% 24.81% 33.33% 35.32% Yukon 42.40% 21.20% 15.93% 19.29% 30.41% 32.04% Non-Resident (in certain circumstances) 42.92% 21.46% 28.55% 28.98% 31.41%

12 12 Appendix II 2013 & 2014 CORPORATE INCOME TAX RATES Canadian-Controlled Private Corporations (CCPCs) General M&P Active business income earned in Canada up to $500,000 Investment income Federal 15.00% 11.00% 34.67% Alberta 25.00% 14.00% 44.67% British Columbia % 45.42% 13.50% % 45.67% Manitoba 27.00% 11.00% 23.00% 46.67% New Brunswick % 15.50% 45.67% % 46.67% Newfoundland and Labrador Northwest Territories 29.00% 20.00% 15.00% 48.67% 26.50% 15.00% 46.17% Nova Scotia % 27.00% 31.00% % 27.00% 50.67% Nunavut 27.00% 15.00% 46.67% Ontario 26.50% 25.00% 15.50% 46.17% Prince Edward Island % 31.00% % 50.67% Quebec 26.90% 19.00% 46.57% Saskatchewan 27.00% 25.00% 13.00% 46.67% Yukon 30.00% 17.50% 15.00% (non- M&P) 13.50% M&P 49.67%