Tax & Trade Blog

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AUTOMOTIVE REPORT: TARIFF HEADING 9966

CBSA'S VERIFICATION AUDITS TARGET RESTORATION INDUSTRY

A good part of our Tax and Trade practice involves advising Clients in the Automotive Industry on matters involving the application of Canadian taxation and customs duties to motor vehicles and parts.

Recently, we have seen an increase in audits and assessment of automotive restoration businesses, which seem to be currently targeted by the Canada Border Services Agency (“CBSA”).

One focal point seems to be the application of Tariff Concessionary Item 9966.00.00 (“Concessionary Code 9966”), which allows for the duty-free importation of certain vintage vehicles and repair parts.

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STAFFING AGENCIES CAUGHT BY EHT!

EMPLOYER HEALTH TAX: THE SMALL TAX WITH THE BIG PUNCH!

As discussed here, our recent file experience demonstrates that provincial governments, like Ontario's Ministry of Finance (“MOF”), are ramping up audits for Employer Health Tax (“EHT”) liability.

One area of recent audit activity has been on Staffing Agencies, temporary employment and similar entities that procure workers for many Canadian and US businesses, contracting them out as effective out-sourced employees.

In an almost counter-intuitive result, recent assessments appear to be targeting Staffing Agencies for EHT due on remuneration paid to remote workers residing outside of the taxing province! (Think of an Ontario Staffing Agency assessed on the wages paid to remote workers residing in BC, with ABSOLUTELY NO connection to Ontario's or its health care services!)

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EHT FOR "RELATED" EMPLOYERS

GETTING THE FULL EXEMPTION AMOUNT

Employer Health Tax (“EHT”) is a part of our overall Indirect Tax practice, and a common EHT question we get is whether two corporations are “associated employers” for the tax.  Being associated is problematic, as it essentially makes each employer pay more than if they were unrelated. 

While this may seem like a straightforward bedrock question (is "Aco" associated with "Bco"), there is some confusion as to how the technical rules apply (even, it appears, at the Ontario Ministry of Finance (“MOF”) – at least based on some recent Ontario assessment positions that we have seen). 

After 35 years of practice in Tax and Trade, one thing I am sure of is that there are no “magic” answers for dealing with administrative delay by the Canada Revenue Agency (“CRA”) or the Canada Border Services Agency (“CBSA”).  

A recent decision of the Canadian International Trade Tribunal (“CITT”) underscores this problem, and leaves taxpayers and importers in some potentially hard situations when faced by governmental inaction.

Many travelers, including seasoned and sophisticated travelers, misunderstand the fundamental obligation to declare all goods being imported into Canada.

The most common misconception is often that “I’m within my exemption limits” and therefore “I don’t have to tell anybody what I’m bringing in”.

A recent case from the Federal Court of Appeal (“FCA”) demonstrates that this is far from the truth!

Staffing agencies (as well as Employment Agencies, Temporary Labour, Placement Agencies and other similar entities – “Agencies”) play a growing role in connecting businesses with Canadian workers, but these models can come with unexpected tax “strings attached”.

For example, did you know that in some cases, Agencies hiring workers classified as independent contractors can still be required to make Canada Pension Plan (“CPP”) and Employment Insurance (“EI”) contributions (as if the workers were their employees)?  This tax quirk can be difficult to understand, especially when the Canada Revenue Agency (“CRA”) views one’s workers to be non-employees!

As we have blogged about here and here, the CRA is after a whole swath of residential homeowners who are finding themselves being taxed on the sale of their new or used residential properties, after substantially renovating them.

A recent decision of the Tax Court of Canada (“TCC”) in Bryan v. The King, 2024 TCC 108 highlights the problems that homeowners face when going into these ventures with possible “dual motivations”. 

As we have previously reported on here and here, Canada has continued to expand its economic sanctions on Russian nationals, following Russia’s invasion of Ukraine, targeting individuals and entities believed to be linked to the Russian regime.

Canada’s sanctions have been primarily imposed under the Special Economic Measures (Russia) Regulations (the “Russia Regulations”), the Special Economic Measure Act (“SEMA”), and through other similar regulations targeting persons in Belarus, Ukraine and most recently Moldova.  In total these sanctions include asset freezes and financial prohibitions, and even apply to certain listed persons set out in the Schedules within the regulations.  These lists change frequently, are hard to get off of, and have impacted more than 2,900 individuals and entities.

Over the past several years, the Canada Revenue Agency (the “CRA”) has been in the midst of a digital service transformation.  Like the CBSA’s “CARM” project, which we previously discussed here, this initiative appears to be a response to the Canadian government’s “digital first” policy, which aims to build digital delivery into government operations and services.

While the CRA now provides Notices of Assessment electronically through online portals including “My Account” and “My Business Account”, access to such documents remains difficult for many, especially non-Canadian residents who may be unfamiliar with the Canadian tax system.

When a person (whether a corporation or natural individual) crosses a border to perform services, Canada and the US have detailed taxing rules, aimed at ensuring that the person entering the other country properly reports those activities.  These rules often come with mandatory “withholding taxes“ on the payer of the services resident in the country where the services are being performed.

Canada has recently fine-tuned its position on Regulation 105 withholding, which may come as a surprise to many involved in the cross-border provision of services.