What s new and what s changed for 2017

Transcription

1 P R I T A X I N F O R M A T I O N V A T E YOUR 2017 TAX RETURNS: PREPARING EFFECTIVELY What s new and what s changed for 2017 PROVINCIAL INCOME TAX RATES FOR SMEs Changes announced in the 2015 and 2016 provincial budgets affecting tax rates for some businesses came into effect on January 1, As of this date, to fully benefit from the small business deduction (SBD) and get a combined federal/provincial tax rate of 18.5% on the first $500,000 of active income, an incorporated business operating in Quebec must have had employees who accumulated at least 5,500 paid hours during the year. There are several criteria to consider when calculating the number of required hours. There is a mechanism in place to prevent a company from losing the entire SBD due to a minimal variance from the hour requirement. If a company has between 5,000 and 5,500 hours, the SBD rate is reduced on a straight-line basis to zero at 5,000 hours. Companies that do not meet the minimum hour requirement are subject to a combined federal/provincial tax rate of 22.3% on their first $500,000 of active income. Businesses operating in the primary and manufacturing sectors are not subject to the 5,500-hour requirement if their eligible primary and manufacturing activities account for over 50% of all their activities. If their percentage of eligible activities is between 25% and 50%, the $500,000 SBD will be reduced proportionally. CHANGE IN THE TAX TREATMENT OF GOODWILL AND OTHER ELIGIBLE CAPITAL PROPERTY For 2017 and subsequent years, eligible capital property (ECP), including goodwill, is now considered depreciable property to be included in tax category 14.1 for capital cost allowance (5%). There are a number of transitional provisions in place to provide a smooth transition to the new plan. The tax treatment of the disposition of ECP, by sale or otherwise, has also been amended, effective January 1, NEW: YOUR 2017 TAX SLIPS ARE AVAILABLE IN ELECTRONIC FORMAT To get yours, log on to your private access and agree to receive your slips online by accepting the changes to the terms of your management agreement. Your tax slips will then be posted in your private access as they become available, under the Tax Slips tab. Each time a new slip becomes available, you ll receive a notice in your private access inbox. On April 1, you ll receive a final notice confirming that all your tax slips have been uploaded.

2 RETROACTIVE EASING OF PROVINCIAL RULES FOR QUEBEC FAMILY BUSINESS TRANSFERS On February 21, 2017, Quebec s Minister of Finance announced that he was planning to extend the easing of tax rules for the transfer of family businesses in Quebec to all industry sectors, and not just primary and manufacturing sectors, as announced in previous budgets. The easing will now cover eligible sales of shares by parents to children for family farms, family fishing businesses and small businesses in other sectors. This measure is retroactive to March 17, This change essentially provides a provincial cumulative capital gains exemption for parent sellers triggered by a sale of eligible shares to a corporation controlled by the child of the parent, as long as the seven previously announced tax criteria are met. EXTENSION OF THE RÉNOVERT TAX CREDIT The temporary credit for renovations has been extended to. Eligible work carried out by a qualified contractor under a contract signed before April 1, 2018, and paid before January 1, 2019, is entitled to a 20% refundable tax credit on expenses over $2,500. This credit is limited to $10,000 and applies only in Quebec. WHAT TO WATCH FOR IN 2018: TAX REFORMS ANNOUNCED JULY 18, 2017 On July 18, 2017, the Department of Finance proposed amendments that, if adopted, would greatly affect tax planning using private corporations. These changes would affect (i) income splitting through private corporations, (ii) the multiplication of the lifetime capital gains exemption (LCGE), (iii) the taxation of passive investments generated by private corporations and (iv) the conversion of income into capital gains. At the time of the announcement, the government requested comments on these measures from the tax community. In response to consultations, the Department of Finance cancelled some of the announced measures at various points in the fall of Therefore, the proposed restrictions on the use of the LCGE and on converting income into capital gains have been abandoned for the time being. During the same period, the Minister of Finance also recommended new rules that would relax previously announced changes to rules on income splitting and the taxation of passive income in private corporations. In 2018 and when the next federal budget is released, we will need to monitor how the recently proposed easing measures are officially applied. 2

3 Deductibility of carrying charges Management fees paid for your non-registered portfolio may also be deductible as carrying charges. Which is why it s important for you to keep the quarterly fee statements we sent you during the year they are your receipts and the tax authorities could potentially ask you to provide them. The Government of Quebec limits the deductibility of the investment expenses you incurred based on the investment income you earned during a taxation year. This limit applies mainly to: Investment management and administration fees and expenses Custodial fees and expenses Interest paid on funds borrowed to purchase stocks, bonds or mutual fund units ACCRUED INTEREST ON BOND PURCHASES Accrued interest on bond purchases made during the tax year also appears in the list of transactions made on a trade basis. Add together the total amount of interest accrued on your purchases and the total amount of the expenses you paid to earn your investment income, and enter the result on line 231 of your provincial tax return and on line 221 of your federal tax return. The main types of investment income reported are: Taxable dividends of taxable Canadian corporations Interest from Canadian sources Net investment income earned abroad Taxable capital gains Royalties from Canadian sources Earnings on a life insurance policy Trust income To calculate the amount of carrying charges in excess of investment income, Revenu Québec asks taxpayers to complete Schedule N of the tax return. Enter any adjustment amounts on line 260 of your provincial income tax return. Investment expenses that could not be deducted in a given year can be carried back and claimed against the investment income of the three preceding years or carried forward to any subsequent year, as long as the investment income of those years is greater than the expenses being deducted. To date, the federal government has not adopted a similar measure. EXPENSES INCURRED FOR THE MANAGEMENT OF TAX-DEFERRED ACCOUNTS Investment management and administration fees and expenses of a Registered Retirement Savings Plan (RRSP) or other type of registered account, including a Tax-free Savings Account (TFSA), are not deductible. However, they may be paid by either the annuitant or the plan without any tax consequences for one or the other. To unitholders of DIM Private Monthly Distribution Funds The adjusted cost base (ACB) of your securities is equal to the ACB of the previous year less the amount of return of capital. When a sale takes place during the year, the return of capital is not known, which is why it can be applied only at the end of the year and for all of the year s transactions. The enclosed list of transactions includes return of capital and shows the ACB and adjusted capital gain or loss. 3

4 2017 tax slips Over the next few weeks, you will likely receive different types of tax slips relating to the assets you have under Discretionary Portfolio Management. You may find the table on page 5 very helpful. IF YOU HAVE MADE WITHDRAWALS FROM A REGISTERED ACCOUNT Funds withdrawn from a Registered Retirement Savings Plan (RRSP), a Registered Retirement Income Fund (RRIF) or a Life Income Fund (LIF) between January 1 and December 31, 2017 must be added to your annual income for If you ve made withdrawals from a managed account, the trustee (Desjardins Trust) will send you T4RSP or T4RIF slips, as the case may be, as well as an RL-2 showing the amount withdrawn and the tax withheld at source. IF YOU HAVE MADE CERTAIN TRANSFERS FROM A REGISTERED ACCOUNT If you have made a transfer from a RRIF or a LIF into an RRSP or a locked-in retirement account (LIRA), you will receive a T4RIF/RL-2 slip and a contribution receipt. T3 AND RL-16 SLIPS (DIM PRIVATE FUND INCOME) If you held DIM Private Fund units or other mutual fund units during 2017, the information relating to those investments will be sent to you directly by the trustee of the fund. One information slip will be issued for all of the funds held. Slips for DIM Private Funds will be sent out at the end of February If you are a unitholder of DIM Private Monthly Distribution Funds (Growth or Income), a return of capital might appear on your statement. Note that the amount is not taxable and is used to calculate the adjusted cost base of your units. INCOME TRUSTS AND LIMITED PARTNERSHIPS (FOR CERTAIN ACCOUNTS) The filing deadline for T3 and T5013 slips and RL-15 and RL-16 slips for the entities listed above is March 31 (instead of February 28 as for most others). You might not receive these slips until April. A separate information slip is issued for each security. You should make sure you have received all of the slips before completing your income tax returns. Note that no slip will be issued if the only income distributed is Other income under $50. T5 AND RL - 3 SLIPS (INTEREST AND DIVIDENDS) The interest on available cash for all of the active Canadian and U.S. accounts you hold, as well as the dividend and interest income on the securities that were held in your nonregistered portfolio during 2017 appear on the T5 slip and RL-3 issued and mailed at the end of February by Desjardins Trust as asset custodian. A breakdown is provided on the list of transactions made on a trade basis. Note that dividends and interest not reported on a T5 slip and an RL-3 must still be included in the calculation of your income. Note that no slip will be issued if the only income distributed is Other income under $50. TWO TYPES OF DIVIDENDS Canada recognizes two types of dividends: eligible dividends, which receive preferential tax treatment, and other than eligible dividends. Essentially, eligible dividends are taxable dividends paid by public companies and companies resident in Canada which are not Canadian-controlled private corporations. The dividends paid by the companies included in the portfolios managed by Desjardins Wealth Management are mainly eligible dividends. RRSP CONTRIBUTION RECEIPTS FOR 2017 RRSP contributions made in 2017 are deductible from your taxable income, subject to certain limits. Receipts for RRSP contributions made between March 1 and December 31, 2017 were mailed around January 20, Note that receipts for contributions made during the first 60 days of 2017 were sent out in March If you did not deduct these amounts on your 2016 income tax return, they may still be deductible, in whole or in part, for RRSP CONTRIBUTIONS MADE DURING THE FIRST 60 DAYS OF 2018 Taxpayers can also make contributions that are deductible for 2017 during the first 60 days of If you have done so, you will receive your contribution receipts no later than early March T5008 SLIP / RELEVÉ 18 DISPOSITIONS The T5008 slip and Relevé 18 show the amounts that were paid to you or credited to you in respect of securities that you sold or that you disposed of during the year. 4

5 Statements and tax slips Delivery dates REGISTERED ACCOUNTS SLIP TYPE OF TAX SLIP MAILED NO LATER THAN Receipt of transfer Transfers into an RRSP or LIRA from a RRIF or LIF January 15, 2018 T4RIF/RL-2 Transfers into an RRSP or LIRA from a RRIF or LIF February 28, 2018 RRSP contribution receipt Contributions made between March 1 and December 31 January 15, 2018 Contributions made between January 1 and March 1 Weekly starting February 1, 2018 NR4 slip T4RSP slip T4RIF slip RL-2 slip NON-REGISTERED ACCOUNTS Withdrawals from RRSPs by non-residents Withdrawals from RRIFs by non-residents RRSP withdrawals RRIF withdrawals Submitted with T4RSP/T4RIF slip** February 28, 2018 SLIP TYPE OF TAX SLIP MAILED NO LATER THAN T5 slip RL-3 slip Dividend and interest income* Submitted with T5 slip** February 28, 2018 T5008 slip Return of Securities Transactions February 28, 2018 RL-18 slip Submitted with T5008 slip** February 28, 2018 T3 slip (trust units) Income from trust units T3 slip (mutual funds) RL-16 slip T5013 slip RL-15 slip NR4 slip Income distribution and return of capital distributions on mutual funds Submitted with T3 slip** Limited partnership income Submitted with T5013 slip** Distributions to non-residents - Investment income* - Partnership income * Amount totalling $50 or more ** Applicable only in Quebec 5

6 Dates to remember for your 2017 tax returns BEGINNING OF 2017 Request a reduction of your income tax withheld at source for substantially any significant deduction or tax credit expected in 2018 by filing forms TP-1016 or TP (Quebec) and forms T1213 or TD-1 (federal) together with the appropriate supporting documents. Some examples are RRSP contributions, deductible child care expenses and support payments, etc. Make an inventory of the documents required to file your 2017 income tax returns; generally, they should be sent to you no later than the end of February. At the beginning of the year, you can make an additional contribution of $5,500 to your TFSA for And, if you withdrew funds from your TFSA in 2017, you have the option of adding them to your new contribution for Make your 2018 RRSP contribution right away. MARCH 1, 2018 The deadline for 2017 RRSP contributions (and certain indirect transfers). The deadline for the annual repayment required by certain users of the Home Buyers Plan and the Lifelong Learning Plan. The deadline for the 2017 eligible investment credit for Labour-sponsored Venture Capital Corporations. MARCH AND JUNE 15, 2018 The payment deadlines for the 2018 federal and provincial quarterly installments (if you are required by the standards to do so). You will have to add September 15 and December 15, if necessary. Use investments outside of tax plans or borrow the amounts needed to meet these deadlines. If not, you will be liable for serious penalties and non-deductible interest. APRIL 30, 2018 The deadline for filing your 2017 federal and provincial income tax returns (pay attention to the special rules for certain operators of unincorporated businesses) and paying any balances owing. If you are claiming a refund, file your tax return promptly to get your refund as early as possible. JUNE 15, 2018 The deadline for paying your second installment. SUMMER 2018 Check your two 2017 assessment notices and take the appropriate measures within the time periods allowed if you object. Verify the amounts that appear on your assessment notices, including your RRSP and TFSA contribution room. SEPTEMBER 15, 2018 The deadline for paying your third installment, if any. SEPTEMBER 30, 2018 The deadline for buying an eligible home if you withdrew funds from your RRSP in 2017 under the Home Buyers Plan. BETWEEN SEPTEMBER AND DECEMBER 2018 Evaluate the tax impact of your transactions made on a trade basis during the year. It s in your own best interest to consider making any tax-efficient sales before December 28, DECEMBER 15, 2018 The deadline for paying your last installment, if any. DECEMBER 31, 2018 If you are aged 71 as of that date and hold an RRSP, this is the deadline for converting your RRSP into retirement income (if you do not have a younger spouse, it is also your last chance to make a contribution). The deadline for making certain eligible expenditures and purchases for Desjardins Wealth Management Private Wealth Management is a trade name used by Desjardins Investment Management Inc. and Desjardins Securities Inc. Discretionary portfolio management services are provided by Desjardins Investment Management Inc., registered as a portfolio manager and as an investment fund manager. Trust Services are provided by Desjardins Trust Inc., federal trust and financial planning firm. 6