Tax Updates

What’s new for 2018?

 

PayPal – You can make your payments using PayPal through a third party service provider. For more information, go to  Payments to the Canada Revenue Agency.

Individuals and families

For residents of Manitoba, New Brunswick, Ontario, and Saskatchewan – The Climate Action Incentive is a new refundable credit available as of January 1, 2018. For more information, see Schedule 14, Climate Action Incentive.

Employee home relocation loan deduction (line 248 of the return) – As of January 1, 2018, this deduction has been eliminated.

Medical expenses (lines 330 and 331 of Schedule 1) – Eligible medical expenses have been expanded to include a variety of expenses relating to service animals specially trained to perform specific tasks for a patient with a severe mental impairment.

Donations and gifts (line 349 of Schedule 1) – As of January 1, 2018, the first-time donor’s super credit has been eliminated.

As of February 27, 2018, registered universities outside Canada will no longer need to be prescribed in Schedule VIII of the Income Tax Regulations. For more information on qualified donees, see Pamphlet P113, Gifts and Income Tax.

Tax on split income (TOSI) (line 424 of Schedule 1) – As of January 1, 2018, in addition to applying to certain types of income of a child born in 2001 or later, TOSI may now also apply to amounts received by adult individuals from a related business. Where TOSI applies, the disability tax credit can now be used to reduce the individual’s tax payable for the year. However, income that is subject to TOSI must now be added to the individual’s net income for the purpose of calculating various deductions, credits and benefits. For more information, see Form T1206, Tax on Split Income.

Interest and investments

Investment tax credit (line 412 of Schedule 1) – Eligibility for the mineral exploration tax credit has been extended to flow-through share agreements entered into before April 2019. See Form T2038(IND), Investment Tax Credit (Individuals).

Accelerated Investment Incentive

The Fall Economic Statement 2018 introduced an accelerated deduction for Canadian development expenses (CDE) that a flow through share (FTS) investor receives from a principal business corporation (PBC). This tax measure applies to FTS agreements entered into after November 20, 2018 in regards to CDE incurred after the agreement date.

If you have invested in a FTS after November 20, 2018 and have received a statement of resource expenses from a PBC, you may claim CDE at the rate of 45% in the tax year in which such CDE is renounced to you and, thereafter, at a rate of 30%. See Form T1229, Statement of Resource Expenses and Depletion Allowance.

For more information, go to Accelerated Investment Incentive.

 

Do you have to file a return?

File a return for 2018 if:

  • you have to pay tax for the year
  • you want to claim a refund
  • you want to claim the working income tax benefit (WITB) or you received WITB advance payments in the year
  • you or your spouse or common-law partner want to begin or continue receiving the following payments (including any related provincial or territorial payments):
    • Canada child benefit (CCB)
    • GST/HST credit
    • guaranteed income supplement (GIS) If you have a spouse or common-law partner, they also have to file a return.
  • the CRA sent you a request to file a return
  • you and your spouse or common-law partner are jointly electing to split pension income. See Line 115 of this guide
  • you disposed of capital property (which could be a principal residence) or you realized a taxable capital gain in the year
  • you have to repay all or part of your old age security or employment insurance benefits
  • you have not repaid all the amounts you withdrew from your registered retirement savings plan (RRSP) under the Home Buyers’ Plan or the Lifelong Learning Plan
  • you have to contribute to the Canada Pension Plan (CPP) for 2018. This can apply if your total net self-employment income and pensionable employment income is more than $3,500
  • you are paying employment insurance premiums on self-employment income or other eligible earnings
  • you have incurred a non-capital loss in the year that you want to be able to apply in other years
  • you want to transfer or carry forward to a future year the unused part of your tuition fees
  • you want to report income that would allow you to contribute to an RRSP, a pooled registered pension plan (PRPP), or a specified pension plan (SPP) to keep your maximum deduction limit (see Schedule 7) for future years up to date
  • you want to carry forward to a future year the unused investment tax credit on expenditures you incurred during the current year

Deceased persons

If you are the legal representative (the executor, administrator, or liquidator) of the estate of a person who died in 2018, you may have to file a return for 2018 for that person. When there are no legal documents, you may request to be the deceased’s representative by completing an Affidavit form for intestate situations. For more information about your filing requirements and options and to know what documents are required, see Guide T4011, Preparing Returns for Deceased Persons, and Information Sheet RC4111, Canada Revenue Agency – What to do following a death.

Due dates, penalties and interest

Due dates

Your 2018 return and payment are due on or before the following dates:

Person Return due date Payment due date
Most people April 30, 2019 April 30, 2019
Self-employed persons (and their spouse or common-law partner) with business expenditures that relate mostly to a tax shelter investment April 30, 2019 April 30, 2019
Self-employed persons and their spouse or common-law partner (other than those stated above) June 17, 2019* April 30, 2019
Deceased persons and their surviving spouse or common-law partner See Guide T4011, Preparing Returns for Deceased Persons

*Since June 15, 2019, is a Saturday, your return is due the next business day (June 17, 2019).

Note

Form T1135, Foreign Income Verification Statement, must be filed on or before April 30, 2019, or June 17, 2019, if you or your spouse or common-law partner carried on a business in 2018 (other than a business whose expenditures are primarily in connection with a tax shelter). For more information, see Form T1135.

Did you know: Benefits

Did you know…

Filing early ensures your benefit and credit payments are not delayed or stopped. These include:

  • guaranteed income supplement (GIS)
  • GST/HST credit
  • Canada child benefit (CCB)
  • related provincial and territorial programs

If you have a spouse or common-law partner, they also have to file a return. For more information, see Booklet T4114, Canada Child Benefit, and Guide RC4210, GST/HST Credit.

Penalties

The CRA may charge you a penalty if any of the following applies:

  • you filed your return late and you owe tax for 2018
  • you failed to report an amount on your return for 2018 and you also failed to report an amount on your return for 2015, 2016, or 2017
  • you knowingly or under circumstances amounting to gross negligence have made a false statement or an omission on your 2018 return

For more information, go to Taxes.

Interest

Interest you must pay to the CRA

If you have a balance owing for 2018, the CRA charges compound daily interest starting May 1, 2019, on any unpaid amounts owing for 2018. This includes any balance owing if the CRA reassesses your return.

Note

The CRA may cancel or waive interest if you cannot meet your tax obligations because of circumstances beyond your control. To make a request, get and complete Form RC4288, Request for Taxpayer Relief – Cancel or Waive Penalties or Interest. For more information, go to Taxpayer relief provisions.

Interest paid to you by the CRA

The CRA will pay you compound daily interest on your tax refund for 2018. The calculation will start on the latest of the following three dates:

  • May 31, 2019
  • the 31st day after you file your return
  • the day after you overpaid your taxes

Cancel or waive penalties or interest

The CRA may cancel or waive penalties or interest if you cannot meet your tax obligations because of circumstances beyond your control. To make a request, get and complete Form RC4288, Request for Taxpayer Relief – Cancel or Waive Penalties or Interest. For more information, go to Taxpayer relief provisions.

Gather all your documents

Gather all the information slips, receipts, and supporting documents you need to report your income and claim any deductions or credits.

What if you are missing information?

File your return on time even if you do not have all of your slips or receipts. You are responsible for reporting your income from all sources to avoid any penalties and interest that may be charged. If you have not received your slip by early April or if you have any questions about an amount on a slip, contact the payer.

Did you know: Missing Slip Pay Stub

Did you know…

If you know you won’t be able to get a missing information slip by the due date, use your pay stubs or statements to estimate your income and any related deductions and credits you can claim. Enter the estimated amounts on the appropriate lines of your return.

Email address

If you would like to receive email notifications from the CRA, read and agree to the terms of use for email notifications below, and enter an email address. You can also register by going to My Account at My Account for Individuals and selecting the “Notification preferences” service.

Terms of use for email notifications – The CRA will send email notifications to the email address you have provided in order to notify you of any CRA mail available in My Account, and to notify you of certain changes to the account information, and other important information about the account. The notifications that are eligible for this service may change. As new types of notifications are added or removed from this service, you may not be notified of each change.

To view CRA mail online, you must be registered for My Account, and/or your representative must be registered for Represent a Client and be authorized on this account. All CRA mail available in My Account will be presumed to have been received on the date that the email notification is sent. Any mail that is eligible for electronic delivery will no longer be printed and mailed.

It is your responsibility to ensure that the email address provided to the CRA is accurate, and to update it when there is any change to that email address. CRA email notifications are subject to the terms of any agreement with your mobile carrier or Internet Service Provider. You are responsible for any fees imposed by them.

These email notifications are sent unencrypted and unsecured. The email notifications could be lost or intercepted, or could be viewed or altered by others who have access to your email account. You accept this risk and acknowledge that the CRA will not be liable if you are unable to access or receive the email notifications, nor for any delay or inability to deliver notifications.

These terms of use may be changed from time to time. The CRA will provide notice in advance of the effective date of the new terms. You agree that the CRA may notify you of these changes by emailing either the new terms, or notice of where the new terms can be found, to the email address that you provided. You agree that your use of the service after the effective date of any change to these terms constitutes your agreement to the new terms. If you do not agree to the new terms, you must remove the email address provided and no longer use the service.

Corporation Income Tax

2018 – Federal

 Voluntary Disclosures Program

Changes have been made to the Voluntary Disclosures Program to narrow its eligibility criteria and ensure greater fairness to taxpayers. To have your application considered under Information Circular IC00-1R5, the CRA must have received your application, including your name, on or before February 28, 2018. After that date, use Information Circular IC00-1R6.

[2018-02-27 Federal budget]

Artificial losses using equity-based financial arrangements

Certain aspects of the synthetic equity arrangement rules and the securities lending arrangement rules will be clarified to prevent corporations from realizing artificial tax losses by using equity-based financial instruments to get around these rules. These measures will apply to dividends that are paid or become payable after February 26, 2018. They will also apply to dividends compensation payments paid or payable, or received or receivable after February 26, 2018, unless they are paid or payable, or received or receivable before October 2018 and made according to a written arrangement entered into before February 27, 2018.

At-risk rules for tiered partnerships

For tax years that end after February 26, 2018, the budget reinstates the Canada Revenue Agency’s long-standing position that the at-risk rules apply to a member of a limited partnership that is itself a partnership and that, as a consequence, its share of the limited partnership’s losses cannot be flowed up to its own members to the extent they exceed its at-risk amount in respect of the limited partnership. This budget item was made necessary following a contrary recent court decision. Also, a corporation’s non-capital loss and limited partnership loss carryforward balances for preceding tax years are adjusted to what they would be, had the proposed at-risk rules applied to partnerships in those preceding years (where the corporation has calculated these balances according to the court’s decision).

Capital cost allowance

Currently, class 43.2 provides an accelerated capital cost allowance at a rate of 50%, on a declining-balance basis, for specified clean energy generation and energy conservation equipment for property acquired before 2020. The eligibility is extended to property acquired before 2025.

Cross-border surplus stripping using partnership and trusts

For transactions or events that occur after February 26, 2018, the application of an existing anti-surplus stripping rule is generally expanded to prevent a non-resident shareholder of a Canadian corporation from extracting (either now or in the future), without withholding tax, the corporation’s retained earnings that exceed the amount of capital that has been contributed to the corporation by the shareholder. The rule is expanded by including a look-through rule where a partnership or trust is used to avoid the purposes of the anti-surplus stripping provision.

Foreign affiliates

For tax years of a corporation that begin after February 26, 2018, new rules are introduced to address corporate structures where entities are put in place to avoid the investment business rule and accrual basis taxation. Also, the reassessment period is extended by three years for income arising in connection with a foreign affiliate of a corporation.

For tax years that begin after 2019, Form T1134, Information Return Relating to Controlled and Not-Controlled Foreign Affiliates, has to be filed within 6 months after the end of the corporation’s tax year, rather than 15 months.

Passive investment income

For tax years that begin after 2018, the business limit of a Canadian-controlled private corporation (CCPC) will be phased-out on a straight-line basis if the CCPC, and any other corporation with which it is associated, earn combined income from passive investments between $50,000 and $150,000. Currently, the business limit is phased-out based only on the taxable capital employed in Canada. The reduction in the CCPC’s business limit will be the greater of its taxable capital business limit reduction and its passive income business limit reduction for the year.

For tax years that begin after 2018, the dividend refund rule will be changed so that a private corporation will get a refund of its refundable dividend tax on hand (RDTOH) only where it pays non-eligible dividends, or eligible dividends that are derived from portfolio dividends it received from non-connected corporations. A transitional rule will preserve the refundability of a corporation’s pre existing RDTOH.

Reassessment periods

The reassessment periods are extended that relate to:

  • foreign affiliates
  • non-resident non-arm’s length persons
  • requirements for information and compliance orders

Non-resident non-arm’s length person

For losses incurred in a particular tax year that ends after February 26, 2018, the reassessment period for a preceding tax year to which those losses are carried back is extended by six years if both of the following apply:

  • the losses are reduced as a result of a reassessment made to the particular tax year beyond the normal reassessment period for the year
  • the reassessment to the particular tax year is made as a consequence of a transaction involving the corporation and a non-arm’s length non-resident person

Requirements for information and compliance orders

For challenges instituted after royal assent, a “stop-the-clock” rule is introduced for requirements for information served to corporations and for compliance orders. This rule will extend the reassessment period of a corporation by the period of time during which the requirement or compliance order is contested. The period will generally start the day on which the challenge is started and will end on the final disposition of the application (including any appeals). Previously, similar rules applied only to situations involving foreign-based information.

Small business deduction

The small business deduction increases to 18% effective January 1, 2018, and to 19% effective January 1, 2019, resulting in small business tax rates of 10% and 9%.

Stop-loss rule on share repurchase transactions

For a share repurchase occurring after February 26, 2018, the rules related to shares held as mark-to-market property are amended so that the tax loss otherwise realized on a share repurchase is generally decreased by the dividend deemed to be received on that repurchase when that dividend is eligible for the inter-corporate dividend deduction. Previously, in certain circumstances, the dividend stop-loss rule generally denied only a portion of the tax loss realized on a share repurchase.

2018 – Provinces and territories

British Columbia

[2018-02-20 Budget]

British Columbia book publishing tax credit – This credit, which was scheduled to end March 31, 2018, is extended three years to March 31, 2021.

British Columbia corporate tax avoidance – The BC government introduced updates to its anti-avoidance rule and other amendments that require corporations in BC to disclose aggressive tax avoidance transactions to the Canada Revenue Agency. This parallels the federal approach on reportable transaction rules and applies to a reportable transaction entered into after February 20, 2018, or a reportable transaction that is part of a series of transactions completed after February 20, 2018.

British Columbia farmers’ food donation tax credit – This credit, which was scheduled to end December 31, 2018, is extended to December 31, 2019.

British Columbia film and television tax credit – This credit is expanded to include a new scriptwriting tax credit. This new refundable credit is equal to 35% of eligible scriptwriting expenditures directly attributable to the development of script material for a production. This includes salary, wages, and other remuneration and reimbursements. The expenses have to be incurred after February 20, 2018, maximum two years before the date principal photography begins, and before the end of the final script stage. The amounts have to be paid no later than 60 days after the end of the tax year in which principal photography began.

British Columbia interactive digital media tax credit – This credit, which was scheduled to end August 31, 2018, is extended five years to August 31, 2023.

Manitoba

[2018-03-12 Budget]

Manitoba book publishing tax credit – This credit, which was scheduled to end on December 31, 2018, is extended to December 31, 2019.

Manitoba business limit – Effective January 1, 2019, the Manitoba business income limit eligible for the small business deduction will increase from $450,000 to $500,000.

Manitoba child care centre development tax credit – A new refundable income tax credit is introduced for the creation of licensed child care centres. The tax credit is available for taxable private corporations that create, after March 12, 2018 and before 2021, new child care centres. The credit can reach $10,000 over five years per infant or preschool space created. The corporation must not be primarily engaged in child care services.

Manitoba credit unions special deduction – Credit unions and caisses populaires in Manitoba are eligible for an additional deduction for income over the business limit that is not eligible for the small business deduction. This additional deduction will be phased out beginning January 1, 2019, as follows: 80% for 2019, 60% for 2020, 40% for 2021, 20% for 2022, and 0% after 2022.

Manitoba cultural industries printing tax credit – This credit, which was scheduled to end on December 31, 2018, is extended to December 31, 2019.

Manitoba rental housing construction tax credit – Effective January 1, 2019, this credit will be eliminated. Projects currently under provincial review or with provincial approvals are not affected. No new project applications will be processed after 2018 and any future projects must be available for use before 2021.

Manitoba small business venture capital tax credit – Effective March 12, 2018, the minimum investment to be eligible for the credit is lowered from $20,000 to $10,000. Also, the $15 million maximum revenue that applies to an eligible corporation is eliminated.

Ontario

Ontario general election took place June 7, 2018.

[Bill 31, R. A. 2018-05-08]

Ontario interactive digital media tax credit – The eligibility of the Ontario interactive digital media tax credit is extended to film and television websites that are purchased or licensed by a broadcaster and embedded in the broadcaster’s website. This change applies to products that had not received a certificate of eligibility or a letter of ineligibility as of November 1, 2017.

Prince Edward Island

[2018-11-06 News Release]

Lower rate of Prince Edward Island corporation income tax – For tax years ending after December 31, 2018, the lower rate of Prince Edward Island corporation income tax decreases from 4% to 3.5%.

[2018-04-06 Budget]

Lower rate of Prince Edward Island corporation income tax – For tax years ending after December 31, 2017, the lower rate of Prince Edward Island corporation income tax decreases from 4.5% to 4%.