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Personal Tax Return Filing for 2018

T1 tax returns and T1135 filing for 2018 will start from Monday, February 18, 2019, at 8:30 a.m. (Eastern Time). Any prior year filing (i.e., for 2015, 2016, 2017) including T1 Amendments must be completed before 11:59 p.m. local time on Friday, January 25, 2019. During this period CRA’s EFILE and ReFILE services will stop transmission of return in order to convert its system to prepare for the next filing season.





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Federal Tax Rates for 2018

2018 Taxable Income 2018 Tax Rates 2017 Taxable Income 2017 Tax Rates
Up to $46,605 15% Up to $45,916 15%
In excess of $46,605 $6,991 + 20.5% on next $46,603 In excess of $45,916 $6,887 + 20.5% on next $45,916
In excess of $93,208 $16,544 + 26% on next $51,281 In excess of $91,831 $16,300 + 26% on next $50,522
In excess of $144,489 $29,877 + 29% on next $61,353 In excess of $144,489 $29,436 + 29% on next $60,447
In excess of $205,842 $47,670 + 33% on reminder In excess of $202,800 $49,966 + 33% on reminder





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How to avoid double taxation in Canada?

Foreign Tax Credit

Canadian resident for tax purposes or deemed Canadian residents who were present in Canada for 183 days or more in a taxation year are taxed on their worldwide income. So, they have to report their foreign income on their tax return in Canada and may be subject to double tax on foreign income. In almost all the countries except some places in the middle east, there are taxes on income generated by anyone. So, foreign income may have been subject to foreign taxes, accordingly, in order to avoid double taxation on the same income, a foreign tax credit is available to Canadian taxpayers who have paid foreign income taxes. Taxpayer gets the credit for the foreign taxes they paid in the foreign country and it reduces their overall tax payable in Canada. By granting a foreign tax credit, double taxation is avoided. Foreign business income tax credit if not needed in the current year then it can be carried back 3 years or carried forward for 10 years.




Tax Treaties

The Canadian government has signed tax treaties with several countries to avoid double taxation. Treaties are very specific to a particular country. So, use the provisions of the tax treaty whenever it is favorable to reduce overall taxes.


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Separate Entities for Tax Purposes

Understanding the legal entities for the purpose of income taxation is very important. Separate legal entities can enter into contracts, buy assets, borrow money, and sue or be sued in court.

Individual

An individual is a separate legal entity because they can do all of these things and must file a return and pay taxes. An individual must file their return and pay taxes before April 30 for the last fiscal year. For example, for the fiscal year-end on Dec 31, 2017, the due date for the return filing will be April 30th, 2018.

Corporation

A corporation is a separate legal entity because they can do all of these things and must file a return and pay taxes. A corporation can choose any fiscal year-end as long as the does not exceed 53 weeks. Corporate can file their tax return within six months from the end of the fiscal year. For example, for the for the fiscal year-end on Dec 31, 2017, the due date for the return filing will be June 30th, 2018.




Partnership

A partnership can be considered a legal entity because it can enter into a contract, buy assets, borrow money and sue or be sued in court. However, for tax purpose, a partnership is not a person and hence not subject to tax. A partnership firm does not file a tax return, instead, the profit and losses of the partnership are allocated to partners based on their share and partners pay the tax.

General partners (i.e., not limited partners) are personally liable for the losses or liabilities of the partnership firm. Because of this reason partnership is not fully a separate legal entity. General partners unlimited liabilities is the reason to prefer corporations over the partnership to conduct business operations. A partnership must have Dec 31 year-end if any of the partners are individuals.

Trusts

Trusts are not separate legal entity because the trust property is owned by the trustee (i.e., not the trust). But for tax purposes trust is a taxpayer and must file a tax return. Trust must have calendar year-end and are taxed as individuals. Trust must file their return within 90 days after the trust’s year-end.


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