202-3256 Cambie St.
Vancouver, BC V5Z 2W4
Guaranteed Income Supplement (GIS)
General Information
GIS provides additional money, on top of Old Age Security, to low income seniors living in Canada. You only need to apply once for the benefit and will not need to re-apply as long as you file an income tax return each year. However, if you do not file an income tax return or the CRA requires more information, the CRA will send you a renewal application form in the mail. Once you receive it, you must complete this form even if you file an income tax return.
Qualifications for GIS
In order for you to qualify for GIS, you must be eligible for the Old Age Security (OAS) pension. Your eligibility also depends on the combined income of you and your spousal/common-law partner. On July 1, 2008, an amendment to the Old Age Security Act came into effect, increasing the GIS earning exemption to $3,500 from $500. If your annual income (not including OAS pension) exceeds $16,511.99 (single, widowed or divorced) or $21,839.99 (married or common-law partner), you do not qualify for GIS.
Old Age Security (OAS)
General Information
The OAS pension is a monthly benefit available to most Canadians 65 years of age or older who lived in Canada for at least 10 years. You can apply for OAS via a Service Canada application kit. You can get the kit by contacting Service Canada, picking it up from a Service Canada centre near you, or printing it from the Service Canada website.
Qualifications for OAS
The 3 main components to determine if you are eligible to receive OAS are your age, your legal status, and the number of years you have lived in Canada.
You may be eligible to receive full OAS pension in Scenario 1 and 2.
Scenario 1 – People Living in Canada
- Must be 65 years of age or older (See Budget 2012 Changes)
- Must live in Canada and be a Canadian Citizen or a legal resident at the time of pension approval
- Must have lived in Canada for at least 10 years after the age of 18
Scenario 2 – People Living Outside of Canada
- Must be 65 years of age or older (See Budget 2012 Changes)
- Must be a Canadian Citizen or a legal resident of Canada the day before you left Canada
- Must have lived in Canada for at least 20 years after turning 18
Calculations for OAS
Full Pension
1. Lived in Canada for at least 40 years after turning 18
2. Reached the age of 25 on or before July 1, 1977, and at that time:
- Lived in Canada
- Did not live in Canada but you had some residence in Canada after the age of 18, or; You were in possession of a valid Canadian Immigration Visa AND
- You lived in Canada for the 10 years immediately before the approval of your OAS application
If you did not live in Canada continuously for 10 years immediately before the pension approval, you may still qualify if:
- You lived in Canada the entire year immediately before the approval of your application and
- You lived in Canada (since age 18) for at least 3 years for every 1 year absence from Canada during these last 10 years
Partial Pension:
The minimum period you need to qualify is 10 years of residence in Canada after age 18 (as long as you live in Canada when you receive your OAS pension). For example, if you lived in Canada for 10 years after your 18th birthday, you may qualify for ¼ of the full OAS. Once the partial pension is approved, you cannot increase the number of years of residency on which your pension is based.
Budget 2012 Changes
The government is gradually increasing the age of eligibility for the OAS and GIS between 2023 and 2029, from the age of 65 to 67. However, people currently receiving the OAS benefits will not be affected. If you were born in 1957 or earlier, you will not be affected by the new changes. From April, 1958, the government will increase 1 month time after age 65 every 2 months. For example, if you were born in June, 1958, you will be eligible for OAS at the age of 65 + 2 months. If you were born in February, 1962 or later, you will be eligible for OAS at the age of 67.Canada Pension Plan (CPP)
General Information
The CPP is a monthly taxable benefit to retired contributors. You can apply electronically and submit it online to Service Canada, or print the form and complete it by hand, then mail it to Service Canada.
Changes to CPP
Following are some of the changes implemented in January, 2011:
- Monthly CPP retirement pension amount will increase by a higher percentage if taken after the age of 65
- Monthly CPP retirement pension amount will decrease by a larger percentage if taken before the age of 65
- Number of years of low or zero earnings that are automatically dropped from calculation of the CPP will increase
- Contributors will be able to receive their CPP retirement pension without any work interruption
For example, in 2013, if you start receiving your CPP pension at the age of 70, your pension amount will be 42% (30% before 2011) more than it would have been if you had taken it at the age of 65.
Provincial Sales Tax (PST)
General Information
Businesses need to register to collect PST if they sell or lease taxable goods, or provide taxable software or services in BC. You can register online, in person, or by mail/fax.
Examples of When You’re Required to Register
- You sell taxable goods like alcoholic beverages, motor vehicles, boats, building materials, household or office furniture
- You lease motor vehicles, tools and equipment, aircraft and art work
- You provide services to taxable goods like:
- Repairing or maintaining automobiles, knives, watches, TVs
- Applying protective treatments such as fabric protection
- You provide legal services or telecommunication services
Examples of When You Don’t Need to Register
- You sell only non-taxable or exempt goods, such as food for human consumption, bicycles or children’s clothing
- You provide only non-taxable or exempt services, such as transportation or dry cleaning services
- You’re a wholesaler
PST Rates (Effective April 1, 2013)
Items | PST Rates
Goods and services | 7%
Alcohol | 10%
Accommodation | 8%
Passenger vehicles:
Less than $55,000 | 7%
$55,000 to less than $56,000 | 8%
$56,000 to less than $57,000 | 9%
$57,000 or more | 10%
Other motor vehicles and trailers 7%
Vehicles, boats and aircraft acquired from private individuals or non GST registrants (purchased or received as a gift | 12%
Four Types of Firms
Sole Proprietorship
- Business is usually owned and run by one person
- Typically have few, if any, employees
- Advantage
- Easy to create
- Disadvantage
- Unlimited personal liabilities
- Limited life
Partnership
- Similar to sole proprietorship but with more than one owner
- All partners are personally liable for all of the firm’s debts; a leader can require any partner to repay all of the firm’s outstanding debts
- The partnership ends with the death or withdrawal of any single partner
Two Types of Partnership
General Partners
- Have the same right and liabilities as partners in a “regular” partnership
- Typically run the firm on a day-to-day basis
Limited Partners
- Have limited liability and cannot lose more than their initial investment
- Have no management authority and cannot legally be involved in the managerial decision making for the business
Limited Liability Company (LLC)
- All owners have limited liability, but they can also run the business
Corporation
- A legal entity separate from its owners
- Has many of the legal powers individuals have such as the ability to enter into contracts, own assets, and borrow money
- The corporation is solely responsible for its own obligations; its owners are not liable for any obligation the corporation enters into
- Corporation must be legally formed
Steps to Incorporating a Company
To incorporate a company in BC, one or more persons (called the incorporators) may form a company by completing the following steps:
- Reserve the company’s name with the Corporate Registry
- Enter into an incorporation agreement
- Establish the company’s articles; and
- File an incorporation application with the Corporate Registry
After you filed the Incorporation Application electronically and the company is incorporated, the Corporate Registry will send you the original Certificate of Incorporation, a certified copy of the Incorporation Application and a certified copy of the Notice of Articles. These documents must be kept by the company as part of the company’s records.
The fee to incorporate a company by filing an Incorporation Application using Corporate Online is $350.00 and a BC OnLine service fee of $1.50 plus HST.
Becoming a Non-Resident of Canada
You are a non-resident for tax purposes if you:
- Normally or routinely live in another country and are not considered a resident of Canada
- Do not have residential ties* in Canada; and
- A: You live outside Canada throughout the tax year; or
- B: Stay in Canada for less than 183 days in the tax year
*Residential ties include:
- A home in Canada
- A spouse/common law partner or dependants in Canada
- Personal property in Canada, such as a car/furniture; and
- Social ties in Canada
Other ties that may be relevant:
- Canadian driver’s license
- Canadian bank accounts/credit cards
- Health insurance with a Canada province/territory
Tax Obligations
As a non-resident, you pay tax on income you receive from sources in Canada. This applies to the year you leave Canada and each year afterwards, provided you remain a non-resident for tax purposes.
Deductible Insurance
Advantage of Corporate-Owned Life Insurance
- Lower after-tax cost of premiums
- Increased flexibility in buy/sell situations
- Possible collateralization and thus a source of cash for the corporation
- Less cumbersome in multiple shareholder situation
- Shareholder preferences for spending corporation rather than personal dollars
- Increased assurance that funds are available to pay required premiums and that these premiums are paid on a regular basis
Deductibility of Insurance for Tax Purposes
- When the policy is used as a collateral, a corporation may be able to deduct all or a portion of the life insurance premiums
- Premiums are considered to be a taxable benefit received in an employment context
Tax Services Vancouver, BC | 604-876-7022
www.DaisyChuCPA.com
www.Tax-Services-Vancouver.com
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