DFK Tax Digest – Summer 2021

  • Doing Business in Canada? Watch Your Step – For many US companies, it’s a natural progression to the Canadian market given the proximity and relative ease of entering the Canada marketplace. However, understandably businesses tend to focus on operations first, and dealing with the tax repercussions comes later. Often foreign companies have already begun operating in Canada either directly from their home country, through a branch in Canada, or through a newly incorporated entity in Canada without putting much thought into the tax implications.   This article will focus primarily on the Goods and Services Tax and Harmonized Sales Tax (“GST/HST”), Regulation 105 withholding tax, and income taxes for non-resident corporations and their and Canadian branches. While many of the examples are specific to US businesses, the comments generally apply to all foreign businesses.
  • Private Member’s Bill C-208 – Changes to Section 84.1 – Anyone who has been following Bill C-208 will know that it has been a confusing process to implement the legislation.  Bill C-208 is a Private Member’s Bill that amends Section 84.1 of the Income Tax Act (ITA) that received royal assent on June 29, 2021.  The amendments to Section 84.1 of the ITA are poorly written and appear to be broader than what was intended.  As a result, the federal government initially stated that they would introduce legislation to clarify that the new rules would be effective on January 1, 2022. On July 19, 2021, the federal government acknowledged that Bill C-208 is now law and indicated that it will be amending the law as early as November 1, 2021.
  • The Use of Spousal Testamentary Trusts – Trusts can be used to protect and retain control of assets while still allowing individuals to benefit from these assets.  They can be extremely useful in certain situations and can be established informally or more formally with a legal agreement.
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