>> Steve: AS CANADIANS SIT DOWN TO STRUGGLE OVER THEIR T4s, T5000s AND ALL THE OTHER Ts
FOR THEIR INCOME TAX RETURNS, THEY'LL LIKELY BE FOCUSED ON THE DOLLARS AND CENTS.
THREE DECADES AGO, A SUPREME COURT OF CANADA RULING RAISED A MUCH BIGGER SET OF ISSUES: HOW
THOSE TAX DEDUCTIONS REFLECT WHAT SOCIETY CONSIDERS VALUABLE.
WITH US NOW TO EXPLAIN, AND HIGHLIGHT A FEW OTHER THINGS YOU MIGHT WANT TO KNOW ABOUT
CANADIAN TAX POLICY: LET'S WELCOME: BHUVANA RAI, WHO IS A LAWYER AT
MORS & TRIBUTE TAX LAW.
NICE TO HAVE YOU HERE.
>> Bhuvana: THANKS FOR HAVING ME.
>> Steve: FIRST TIME EVER, RIGHT?
>> YEAH.
>> Steve: GOOD STUFF.
WE'RE GOING TO GO THROUGH FIVE THINGS PEOPLE SHOULD KNOW ABOUT CANADIAN TAX POLICY.
READY?
HERE'S NUMBER ONE.
THIRTY YEARS SINCE THE SUPREME COURT CASE OF SYMES VERSUS CANADA.
WHAT WAS THAT CASE ABOUT?
>> IN SOME WAYS IT'S A CASE ABOUT BUSINESS DEDUCTIONS AND WHAT'S A PERMISSIBLE BUSINESS
DEDUCTION.
THE MEAT OF THE CASE, THOUGH, IS THAT IT'S ABOUT A LAWYER WHO WENT TO THE SUPREME COURT
ARGUING THAT HER CHILD CARE EXPENSES SHOULD BE DEDUCTIBLE FROM HER BUSINESS EXPENSES.
THAT'S GROUNDBREAKING BECAUSE BEFORE THAT, NO ONE HAD EVER REALLY TRIED TO LITIGATE THIS
ISSUE AND THINK ABOUT WHETHER OR NOT CHILD CARE EXPENSES ARE A VALID BUSINESS DEDUCTION.
CHILDREN AND BUSINESS DON'T ALWAYS MIX, SO MAYBE I'LL TAKE A STEP BACK AND EXPLAIN WHY THAT
MIGHT MAKE SENSE.
>> Steve: SURE.
>> SHE WAS A LAWYER, A PARTNER AT A LAW FIRM, AND SHE ARGUED THAT SHE COULD NOT BE A PARTNER
AT A LAW FIRM, SHE COULDN'T GO TO HER JOB, SHE COULDN'T RUN THIS BUSINESS WITHOUT ACTUALLY
HAVING A NANNY AT HOME TO CARE FOR HER CHILDREN.
>> Steve: WHO WAS THEREFORE A LEGITIMATE BUSINESS EXPENSE.
>> AND THAT WAS HER ARGUMENT.
SO THE TEST IS, YOU KNOW, IS THIS SOMETHING THAT IS CONNECTED WITH YOUR BUSINESS AND DOES IT
ALLOW YOU TO MAKE A PROFIT FROM YOUR BUSINESS.
AND SO SHE ARGUED, WITHOUT THIS NANNY, I COULD NOT HAVE GONE TO WORK, I COULD NOT HAVE BEEN A
LAWYER, AND I COULDN'T CONTINUE TO RUN A BUSINESS AND EARN INCOME FROM MY BUSINESS SO IT
SHOULD BE DEDUCTIBLE.
>> Steve: WHAT DID THE COURT SAY ABOUT THAT?
>> THERE WERE, AT THE TIME, AS NOW, THERE WERE NINE JUDGES ON THE SUPREME COURT.
SEVEN MEN, TWO MEN.
THE MEN SAID IT SHOULD NOT BE DEDUCTIBLE, THE WOMEN SAID IT SHOULD.
>> Steve: No kidding.
>> That's still the law today.
>> Steve: THAT'S STILL THE LAW TODAY?
>> YES.
COURTS HAVE HELD THAT CHILD CARE EXPENSES ARE NOT LEGITIMATE BUSINESS DEDUCTIONS EXCEPT TO
THE EXTENT THAT YOU GET A SMALL CHILD CARE CREDIT WHETHER OR NOT YOU'RE AN EMPLOYEE OR A BUSINESS
OWNER, BUT YOU DON'T GET TO DEDUCT A NANNY'S SALARY, WHICH WOULD BE A SUBSTANTIAL PART OF
YOUR INCOME.
>> Steve: LET ME DO A LITTLE SPECULATION HERE.
THERE WAS A TIME NOT THAT LONG AGO WE HAD FOUR WOMEN AND FIVE MEN ON THE COURT AND THE CHIEF
JUSTICE WAS FEMALE.
NOBODY THOUGHT ABOUT TAKING A NEW CASE BEFORE THE COURT ON THIS GIVEN THAT CHANGE IN
DEMOGRAPHIC?
>> I MEAN, MAYBE THAT CASE WOULD HAVE BEEN DECIDED DIFFERENTLY TODAY, PARTLY BECAUSE, YOU KNOW,
WE RECOGNIZE FOR A LOT OF OTHER TYPES OF EXPENSES THAT THERE ARE PERSONAL ELEMENTS AND BUSINESS
ELEMENTS.
AND SO TO THE EXTENT THAT THERE'S A PERSONAL ELEMENT, WE OFTEN LOOK AT IT IN THE CONTEXT
OF HOW MUCH DOES IT RELATE TO YOUR BUSINESS.
SO MAYBE IT WOULD HAVE BEEN DECIDED DIFFERENTLY TODAY.
>> Steve: LET ME GET THIS STRAIGHT, THOUGH.
THIS IS 30 YEARS AGO.
YOU COULD NOT WRITE OFF CHILD CARE EXPENSES.
>> YES.
>> Steve: BUT YOU COULD WRITE OFF A MEMBERSHIP AT A GOLF CLUB.
>> IT DEPENDS.
SO A GOLF MEMBERSHIP, IF YOU JUST HAD THE GOLF CLUB MEMBERSHIP, THAT'S NOT
DEDUCTIBLE.
IF YOUR GOLF CLUB WAS USING NOT QUITE MORE THAN 50% OF ITS ASSETS TOWARDS GOLF AND THAT
KIND OF ENTERTAINMENT, THEN NO PROBLEM, YOU WRITE IT OFF AS A BUSINESS EXPENSE.
>> Steve: IS THAT STILL THE CASE TODAY?
>> YES.
YOU ARE NOT ALLOWED TO DEDUCT GOLF CLUB DUES IF YOU ARE ONLY PAYING THEM TO AN ENTITY THAT IS
JUST A CLUB OR A GOLF COURSE THAT IS ONLY PROVIDING THOSE SERVICES.
BUT IF IT'S A BUSINESS CLUB THAT HAPPENS TO HAVE A GOLF COURSE AS 40% OF ITS ASSETS, THEN YOUR
CLUB MEMBERSHIP WOULD PROBABLY BE DEDUCTIBLE.
>> Steve: WELL, I SHOULD ASK YOU.
DO YOU THINK IT'S PASSING STRANGE THAT YOU CAN'T DEDUCT CHILD CARE BUT YOU CAN DEDUCT
PART OF A GOLF MOURN?
>> WELL -- MEMBERSHIP?
>> WELL, I MEAN, THAT'S THE QUESTION THE SUPREME COURT HAD TO CONSIDER.
IT'S NEVER GOING TO BE EASY TO DECIDE WHETHER SOMETHING THAT IS A PERSONAL EXPENSE SHOULD BE
DEDUCTIBLE, BUT WE'VE COME TO TERMS WITH A LOT OF THE OTHER PARTS OF THIS, RIGHT?
WE'VE SAID WHEN IT COMES TO MEALS OR CLIENT ENTERTAINMENT, FINE, THERE'S A PERSONAL ELEMENT
BUT THERE'S ALSO A BUSINESS ELEMENT.
SO WE LET YOU DEDUCT HALF.
BUT YOU CAN'T DEDUCT HALF OF CHILD CARE EXPENSES.
>> Steve: YOU CAN'T CUT THE KID IN HALF, CAN YOU?
>> APPARENTLY NOT.
BUT YOU COULD CUT THE EXPENSES IN HALF.
>> Steve: YES.
CAN YOU GIVE US ANOTHER EXAMPLE OF SOMETHING THAT MAYBE IN THE LIGHT OF TODAY MIGHT SEEM KIND
OF OFF OR ODD IN WHAT YOU CAN OR CAN'T DEDUCT?
>> SURE.
I MEAN, IN THE PAST, I MEAN, THE COURTS HAVE LONG HELD THAT, YOU KNOW, GOLF MEMBERSHIPS, EVEN IF
THEY'RE JUST FOR GOLF, EVEN IF THEY'RE GREEN FEES, SHOULD BE DEDUCTIBLE, AND IT WASN'T UNTIL
SOMETHING CALLED THE CARTER COMMISSION CAME INTO PLACE EVALUATING THE FAIRNESS OF
VARIOUS TYPES OF TAX CREDITS THAT THE GOVERNMENT CHANGED THE LAW -- NOT THE COURTS, THE
GOVERNMENT CHANGED THE LAW AND SAID, OKAY, WE'RE NOT GOING TO LET YOU DEDUCT GREEN FEES NOW.
BUT, YOU KNOW, ALL SORTS OF OTHERWISE PERSONAL SEEMING THINGS, WHETHER IT'S AN
EXPENSIVE CAR, RIGHT?
A FLASHY ROLLS ROYCE.
OR SOME SORT OF EXTRAVAGANT CLIENT ENTERTAINMENT VENUE.
ALL SORTS OF THINGS ARE DEDUCTIBLE, WHETHER OR NOT YOU'RE GETTING REALLY JUST
BUSINESS BENEFIT OUT OF IT.
NOT SOMETHING THE SUPREME COURT MENTIONS, RIGHT?
THE DISSENTING WOMEN MENTIONED THESE EXAMPLES AS THINGS THAT THEY PERCEIVED AS UNFAIR ABOUT
THE MAJORITY REASONING.
>> Steve: THAT'S ONE THING ABOUT CANADIAN TAX POLICY.
WE'RE GOING TO GO ON TO THE SECOND THING, AND THAT'S MORE TO DO WITH WRITE-OFFS.
WHO DECIDES WHAT'S ELIGIBLE FOR A TAX WRITE-OFF AND WHAT'S NOT?
>> OKAY.
WELL, TECHNICALLY, THE INCOME TAX ACT DECIDES WHAT'S ELIGIBLE FOR A TAX WRITE-OFF.
BUT THE WAY THAT IT DECIDES IS BY TELLING YOU THAT YOU CAN DEDUCT IF YOU'RE A BUSINESS,
RIGHT? -- EMPLOYEES HAVE DIFFERENT RULES.
IF YOU'RE A BUSINESS YOU CAN DEDUCT EVERYTHING THAT YOU USE IN THE COURSE OF LEGITIMATELY
PRODUCING INCOME FROM A BUSINESS EXCEPT FOR A FEW THINGS, ONE OF WHICH MIGHT BE EXPENSES THAT ARE
PRIMARILY PERSONAL.
SO THAT LEAVES A LOT OF ROOM FOR INTERPRETATION.
>> Steve: A LOT OF DISCRETION THERE.
>> YEAH.
AND SO THE THEORY IS ADMINISTRATIVE POLICY, GENERAL RULES OF ACCOUNTING, ALL OF
THOSE THINGS GO INTO DETERMINING WHETHER OR NOT SOMETHING IS A LEGITIMATE BUSINESS EXPENSE.
BUT THE ULTIMATE RULE IS, DOES IT LEAD YOU TO MAKING A PROFIT FROM YOUR BUSINESS?
IS IT ACTUALLY REASONABLY CONNECTED?
AND DOES IT HAVE A SUBSTANTIAL PERSONAL ELEMENT, AND DOES IT FALL INTO OTHER VARIOUS RULES
THAT ARE ALL ENUMERATED IN SUBCLAUSES ABOUT WHAT PART OF SOMETHING MIGHT BE DEDUCTIBLE OR
NOT.
BUT THAT'S THE GENERAL RULE.
>> Steve: I GUESS I'M WONDERING IF, AT THE END OF THE DAY, IT'S A BUREAUCRAT AT CANADA
REVENUE AGENCY THAT MAKES THE DECISION OR IS IT AN ELECTED PERSON, LIKE, FOR EXAMPLE, THE
MINISTER OF FINANCE, WHO ULTIMATELY DECIDES?
>> IT'S AN ELECTED PERSON.
THESE RULES ARE VERY MUCH DECIDED BY THE DEPARTMENT OF FINANCE.
CRA MIGHT INTERPRET THEM.
BUT IT IS VERY MUCH DECIDED BY WHOEVER IS WRITING TAX LEGISLATION.
THE PROBLEM IS THEY'VE LEFT IT SO OFTEN THAT OFTEN THE COURTS HAVE DECIDED WHETHER OR NOT A
HAIRCUT IS DEDUCTIBLE, WHETHER OR NOT, YOU KNOW, THESE TYPES OF OUTFITS ARE DEDUCTIBLE BUT NOT
OTHER ONES.
WHICH, BY THE WAY, IS WHY ABBA HAS CRAZY COSTUMES; IT'S FOR TAX REASONS.
>> Steve: Come on.
They spent all that extra money on clothing so they could write off more?
>> They revealed that their crazy costumes were because of taxes, because they said that,
look, we knew that ordinary clothing wasn't deductible.
That's what our accountant said.
And so we decided to get over-the-top costumes that you couldn't wear on the street
because those are deductible.
>> Steve: YOU REALLY CAN'T WEAR THOSE ON THE STREETS, CAN YOU?
>> YOU REALLY CAN'T.
SO I THINK THEY HAD A GOOD ARGUMENT.
>> Steve: DOES THE TAX SYSTEM -- WELL, I KNOW IT DOES.
TELL US HOW IT ADVANTAGES SOME PROFESSIONS AND/OR JOBS OVER OTHERS?
>> WELL, I MEAN, I THINK ONE EXAMPLE THAT I THINK HAS BEEN VERY CONTROVERSIAL LATELY IS,
YOU KNOW, CERTAIN TYPES OF PROFESSIONALS ARE ALLOWED TO INCORPORATE AND HAVE
SHAREHOLDERS WHO ARE NOT PART OF THAT PROFESSION.
SO DOCTORS, FOR EXAMPLE, CAN DO THAT, WHICH ALLOWS THEM TO DISTRIBUTE THE EARNINGS WITHIN
THEIR CORPORATION WITHIN THEIR FAMILIES.
AND THAT'S A PUBLIC POLICY CHOICE.
LAWYERS AND ACCOUNTANTS USUALLY CAN'T DO THAT.
SO THAT'S -- I SUPPOSE THAT'S ONE EXAMPLE OF THAT.
BUT, I MEAN, ON THE OTHER HAND, THESE ARE SPECIFIC AND PURPOSEFUL PUBLIC POLICY
DECISIONS WHICH MIGHT MAKE UP FOR OTHER BARGAINING CHIPS THAT, YOU KNOW, AREN'T IN PLAY FOR
LAWYERS AND ACCOUNTANTS AS OPPOSED TO DOCTORS.
>> Steve: I WELL REMEMBER BILL MORNEAU, FORMER FINANCE MINISTER, TRIED TO MAKE SOME
CHANGES TO THE WAY DOCTORS SELF-INCORPORATE, AND OH, MY GOODNESS, THE BLOW-BACK HE GOT
TO THAT AND EVENTUALLY HE HAD TO STAND DOWN ON IT, RIGHT?
>> YEAH.
LOOK, IT'S A HARD DECISION TO MAKE FEDERALLY BECAUSE THE PROVINCE ARE NEGOTIATING WITH
DOCTORS.
THE PROVINCES HAVE MADE CONCESSIONS ABOUT WHAT KINDS OF BUSINESSES INCORPORATE AND HOW,
AND SO FOR THE FEDERAL GOVERNMENT TO STEP IN, I MEAN, I THINK THAT'S A LITTLE BIT OF A
DIFFICULT POSITION TO BE IN.
>> Steve: WELL, 'CAUSE I THINK IF THE DEPARTMENT OF FINANCE FEDERALLY WAS GOING TO CLAW BACK
MORE MONEY FROM DOCTORS BY REFUSING TO ALLOW THEM TO INCORPORATE, YOU KNEW THEY WOULD
GO AFTER THE PROVINCES THEN TO GET HIGHER FEES FOR THE SERVICES THEY PERFORM.
>> YES, EXACTLY.
>> Steve: SO THEY WEREN'T JUST GOING TO HAVE A BIG FIGHT WITH THE DOCTORS, THEY WERE GOING TO
HAVE A BIG FIGHT WITH THE PROVINCES AS WELL.
>> EXACTLY.
>> Steve: GOT IT.
THAT'S TWO.
ON TO NUMBER 3.
THREE THINGS WE NEED TO KNOW ABOUT TAX POLICY.
THERE HAVE BEEN SEVERAL NEWS STORIES RECENTLY ABOUT THE IN ABILITY OF CANADIANS TO CREATE
LARGE SUCCESSFUL BUSINESSES.
WE'VE GOT A LOT OF SMALL BUSINESSES IN THIS COUNTRY.
ALMOST TWO-THIRDS OF THE CANADIAN LABOUR FORCE IS APPARENTLY EMPLOYED BY SMALL
BUSINESSES.
IN TERMS OF TAX POLICY, DO YOU KNOW WHY SO FEW SMALL BUSINESSES END UP BEING BIG BUSINESSES IN
CANADA?
>> WELL, THAT'S A REALLY COMPLICATED QUESTION AND I HAVE A LITTLE BIT OF INSIGHT BUT I
CAN ALSO TELL YOU THAT THE RULES ARE IN FLUX, THEY'RE CHANGING WITH DOMESTIC AND INTERNATIONAL
PRESSURES.
SO, I MEAN, WE'RE TAPING THIS TODAY.
IT MIGHT CHANGE OVERNIGHT.
BUT ALL THAT SAID, I THINK ONE OF THE CONCERNS THAT I HEAR FROM SMALL BUSINESS OWNERS,
PARTICULARLY THOSE IN THE I.T.
SPACE, IS A LOT OF THE CREDITS AND A LOT OF THE HELP THAT WE GIVE BUSINESSES IN CANADA OFTEN
STOPS WHEN A BUSINESS GETS BIG.
SO WHEN A BUSINESS IS A SO-CALLED CCPC OR CANADIAN-CONTROLLED PRIVATE
CORPORATION, IT QUALIFIES FOR CERTAIN TAX CREDITS AND DEDUCTIONS THAT IT DOES NOT
QUALIFY FOR IF IT BECOMES TOO LARGE BY HAVING TOO MUCH TAXABLE CAPITAL EMPLOYED IN CANADA.
THAT'S ONE REASON THAT IT MIGHT MAKE SENSE AS A SMALL BUSINESS OWNER TO ENSURE THAT YOU KIND OF
STAY SMALL FOR MAYBE LONGER THAN YOU WOULD OTHERWISE AND THEN MAYBE YOU DECIDE TO GO
INTERNATIONAL BY GOING TO THE STATES.
>> Steve: SHOULD THEY CHANGE THE TAX CODE TO CONTINUE THOSE ADVANTAGES EVEN WHEN YOU BECOME
A BIG BUSINESS?
>> I MEAN, I THINK THAT IF THEY DID THAT, RIGHT, THEN WE WOULD JUST GET A LOT LESS REVENUE IN
TAXES FROM BUSINESSES, RIGHT?
SO IT'S A DIFFICULT DECISION.
AND I THINK THAT ULTIMATELY THESE ARE QUESTIONS OF PUBLIC POLICY AND CANADIANS GET TO VOTE
ON IT.
>> Steve: THEY DO.
YOU KNOW, THERE USED TO BE AN OLD JOKE.
DO YOU KNOW HOW TO START A SMALL BUSINESS IN CANADA?
>> GO AHEAD.
>> Steve: YOU START A BIG ONE AND THEN YOU JUST WAIT A WHILE.
>> FAIR.
>> Steve: BECAUSE THINGS USED TO BE TOUGH.
>> YEAH.
>> Steve: IS IT STILL THAT WAY?
DOES THAT JOKE STILL WORK IN TAX CIRCLES?
>> I MEAN, I THINK THERE'S A RECESSION, SO WHO KNOWS?
>> Steve: THERE'S LOTS TO COMPLAIN ABOUT.
>> YEAH.
>> Steve: THAT'S NUMBER THREE.
WE'RE GOING TO DO FIVE.
HERE COMES NUMBER FOUR, FOUR THINGS PEOPLE SHOULD KNOW ABOUT TAX POLICY.
THE CRA IS NOT BOUND BY ITS OWN REPRESENTATIONS.
>> THAT'S CORRECT.
>> Steve: WHAT DOES THAT MEAN?
>> WELL, IF YOU CALLED CRA AND YOU ASKED THEM FOR HELP WITH A PROBLEM, THEY WILL TRY TO HELP.
EVERY AGENT THERE IS TRYING TO DO THEIR BEST AND TRYING TO GIVE YOU THE CORRECT ANSWERS.
BUT IF THEY DON'T GIVE YOU THE CORRECT ANSWERS, THEY'RE NOT ACTUALLY BOUND BY THAT.
AND WHEN I SAY THAT, I MEAN IF THEY DON'T UNDERSTAND YOUR SITUATION OR TELL YOU TO DO
SOMETHING THAT THEY BELIEVE IS CORRECT BUT THEY DON'T ACTUALLY UNDERSTAND YOUR SITUATION AND IT
TURNS OUT TO BE WRONG, YOU CAN'T TELL THEM, "WELL, YOU TOLD ME TO DO IT THIS WAY SO I'M HOLDING
YOU TO ACCOUNT."
TAX LAW IS SOMETHING WHERE YOU JUST HAVE TO GET TO THE CORRECT ANSWER.
AND SO THE CRA CAN COME BACK AND SAY, "LOOK, WE MIGHT HAVE TOLD YOU THAT BUT IT IS WRONG AND WE
ARE REQUIRED BY LAW TO ASSESS CORRECTLY."
>> Steve: DOES THAT MAKE ANY SENSE?
>> WE VOTE ON IT.
>> Steve: OKAY.
SO AT SOME POINT SOME POLITICIAN ACTUALLY SAID THAT'S THE CASE.
IT MAY SOUND UNFAIR, BUT TOUGH LUCK, THAT'S THE WAY IT IS.
>> SO IN FAIRNESS, I'M BEING A BIT GLIB.
THE COURTS HAVE SAID THAT, YOU KNOW, THE MINISTER OF FINANCE AND THE MINISTER OF NATIONAL
REVENUE ARE REQUIRED TO WORK TOGETHER SO THAT FINANCE WRITES THE LAWS, MINISTER OF NATIONAL
REVENUE IS RESPONSIBLE FOR ADMINISTERING THEM, AND THAT THEY MUST ADMINISTER IT IN
ACCORDANCE WITH THE ACT, WHICH THEY'VE TAKEN VERY LITERALLY.
SO EVEN IF THE CRA MAKES AN INCORRECT REPRESENTATION, THEY'RE STILL REQUIRED TO
ADMINISTER THE LAW AS IT IS AND NOT AS THEY READ IT.
>> Steve: WHEN YOU HAVE CLIENTS COME TO YOU AND THEY SAY, "YEAH, BUT I CALLED CRA AND
THIS IS WHAT THEY TOLD ME," AND YOU SAY, "WELL, THEY TOLD YOU WRONG SO, I'M SORRY, WE HAVE TO
DO THE OPPOSITE OF WHAT YOU JUST DID," WHAT KIND OF REACTION DO YOU SOMETIMES GET FROM CLIENTS?
>> I THINK PEOPLE GENERALLY EXPECT THAT WHEN THEY GET INFORMATION FROM A PUBLIC
AGENCY, THAT IT'S GOING TO BE CORRECT.
>> Steve: NO KIDDING.
>> BUT THE TAXPAYERS' OMBUDSMAN DISAGREES.
I MEAN, THEY'VE DONE AUDITS OF THE CRA'S PHONE SERVICES AND I THINK AT ONE POINT IT WAS
60-SOME PERCENT OF THE ANSWERS THAT WERE BEING GIVEN OUT WERE CORRECT, WHICH MEANS OVER
30 PERCENT OF ANSWERS WERE INCORRECT.
SO THERE'S A LOT TO LEARN FROM.
THE TRUTH IS IT'S A GIANT AGENCY WHICH IS TASKED WITH DOING ALMOST EVERYTHING THAT RELATES
TO MONEY, RIGHT?
THAT'S REALLY HARD.
IT'S HARD WHEN YOUR BUDGET INCREASES SUDDENLY AND YOU'RE HIRING A LOT OF NEW PEOPLE TO
TAKE ON ROLES.
I GUESS I WOULD LIKE TO WAIT TO SEE HOW THEY DEAL WITH THESE ISSUES AS THEY GROW.
>> Steve: GOTCHA.
OKAY.
NUMBER 5, LAST ONE: IF YOUR TAX RESIDENCE IS CHANGING, LET'S SAY, FOR EXAMPLE, YOU WANTED TO
MOVE TO THE UNITED KINGDOM FOR A YEAR OR TWO, YOU SHOULD CLOSE OUT ALL OF YOUR REGISTERED
ACCOUNTS, SO SAY THE EXPERTS.
EXPLAIN.
>> SO, YEAH.
A LOT OF PEOPLE THINK YOU SHOULD DEFINITELY CLOSE YOUR ACCOUNTS AND YOUR RSP RIGHT AWAY.
THAT MAY OR MAY NOT MAKE SENSE.
IF YOU THINK IT'S DEFINITELY GOING TO BE A TEMPORARY STAY, YOU'RE GOING ABROAD, YOU INTEND
TO COME BACK RIGHT AWAY OR AT A FIXED TIME, YOU'RE NOT ESTABLISHING TAX RESIDENCY
ELSEWHERE.
THAT'S ONE SCENARIO.
BUT IF YOU THINK YOU ARE LEAVING FOR AN INDEFINITE PERIOD OF TIME, YOU SHOULD REALLY CONSIDER
DOING IT.
IF YOU'RE LEAVING CANADA PERMANENTLY AND YOU HAVEN'T MADE CONTRIBUTIONS TO YOUR RSP WITHIN
THE LAST TWO YEARS, YOU'RE ALLOWED TO CLOSE IT AND TAKE THE MONEY OUT.
AND THAT PROBABLY MAKES SENSE FOR YOU TO DO IF YOU DON'T THINK YOU'RE COMING BACK, RIGHT?
BECAUSE OTHERWISE YOU JUST HAVE A REGISTERED ACCOUNT LOCKED IN THIS COUNTRY THAT YOU CAN'T EVEN
USE OR ACCESS WHILE YOU'RE IN THIS OTHER COUNTRY, RIGHT?
IT DOESN'T REALLY MAKE SENSE.
WHEN IT COMES TO A TFSA, THOUGH, YOU MIGHT HAVE BIGGER ISSUES.
>> Steve: TAX-FREE SAVINGS ACCOUNT.
>> THAT'S RIGHT.
BECAUSE THE OTHER COUNTRY MIGHT NOT RECOGNIZE A TAX DEFERRAL.
IT'S A PRETTY UNIQUE TYPE OF ACCOUNT IN THIS COUNTRY.
AND SO YOU MIGHT JUST GET TAXED ON IT IN THE OTHER COUNTRY.
SO THE TSFA IS THE MORE PROBLEMATIC ACCOUNT TO TRY AND KEEP IF YOU ARE LEAVING AND YOU
MIGHT HAVE DUAL RESIDENCY OR JUST GET RESIDENCY ABROAD.
THE OTHER PROBLEM THAT PEOPLE HAVE IS THEY HAVE REGULAR CONTRIBUTIONS TO THEIR RRSPs
AND TFSAs AND THEY MIGHT GET ASSESSMENTS FROM THE CRA SAYING, HEY, YOU NOW, YOUR CONTRIBUTION
ROOM HAS INCREASED BY SO AND SO.
WELL, THE CRA DOESN'T KNOW YOU'RE TAKING A NON-RESIDENCY FOR THAT YEAR AND IT TAKES THEM
A WHILE TO ADJUST THAT.
SO IF YOU ACTUALLY CONTRIBUTE UP TO THAT LIMIT WHEN YOU ARE OUT OF THE COUNTRY AND YOU'RE NOT
PLANNING TO BE A TAX RESIDENT OF CANADA, IT MIGHT TAKE YEARS FOR THE CRA TO REALIZE THAT YOU HAD
LESS ROOM THAN THEY TOLD YOU YOU HAD AND THAT YOU ACTUALLY OWE A LOT IN TAX RIGHT NOW.
>> Steve: THERE WE GO.
WE PROMISED PEOPLE FIVE THINGS THEY SHOULD KNOW ABOUT CANADIAN TAX POLICY AND HOW MANY DID WE
DELIVER?
>> FIVE.
>> Steve: WE DID INDEED.
BECAUSE WE ALWAYS DELIVER HERE.
I WANT TO THANK BHUVANA RAI FOR COMING IN TODAY TO OUR STUDIO AND HELPING US OUT WITH THIS.
THANK YOU SO MUCH.
>> THANK YOU FOR HAVING ME.