Thread: Canadian Tax Laws

Originally Posted by nventr

To Cdn Scrouge: If you search the AB tax laws you will find that the AB income tax (personal) is currently 10% and reducing to 8% next year. Another tax condition in AB is that there is no capital gains tax. This is also the case in BC and SK. I further believe that each of us can declare a once-in-a-lifetime tax free capital gain of 500 000.00 CAD. In my family's situation the marginal tax rates are incidental if the reval is near 1:1 or better as we are well into 8 figures of IQD so I simply referred to the maximum tax rate. I believe most (hopefully all) of us do not desire to circumvent taxes but to simply ameliorate the amount of the taxes by using statute law as advantageously as possible. I will, however, still discuss this with my friend who is very active in my church with me who works at CRA.

You are correct about the Alberta provincial tax rate. It is a flat rate unlike the federal rate which is graduated. However, I cannot find anywhere any reference to there being no capital gains tax (provincially) for Alberta. I went back to my test return in the software, changed the province of residence to Alberta and calculated the tax with and without a capital gain. The result was that it calculated provincial tax of 10% on the full amount of the taxable portion of the gain. There is nowhere that I can see on the form or in the calculation for an exemption of capital gains tax. So either you are mistaken or my tax software has a flaw in the program. I also did a quick search on the Alberta government web site and could not find a reference there.

As far as the one time capital gains exemption is concerned, it was phased out in 1994 and was 100,000 at the time. I don't ever remember a 500,000 amount (other than for the qualified items I mentioned earlier), but in that I could be mistaken. It was many years ago and the capital gains rules have changed many times since capital gains first became taxable income in 1972.

Please get back to us after you talk to your friend. I will be the first to admit that the tax act and all it's regulations and interpretation bulletins are somewhat confusing to wade through. Many times I have compared notes with another accountant in trying to sort out some of these grey areas, and many times they have approached me for my opinion on something they were struggling with. Most of my experience in calculating capital gains has been in connection with stock/commodity trading and real estate properties. I personally have not had much experience with foreign exchange transactions, but from what I can gather it is treated the same way as commodity futures such as gold, silver, wheat, etc traded on the Chicago markets through brokers, and that has been the basis of my comments to this point.

I have talked to my friend today and he will get back to me by wednesday, oct 25. You might want to check http://www.finance.gov.ab.ca/publica...et/2006.html#5
The link doesn't enter properly. Between ca/------------/---get should be the word 'publications/bud'. That site shows the capital gains tax for Alberta is 0%.

Thank you for this info, I'm certain that tax laws are NOT meant to be clearly understood. Just ask your local tacs man

On a side note; does anyone know what if any documentation would be required upon cashing in? I.D.?, family history, 1st born, .... you get the point.
Does anyone know if I would be required to provide proof of purchase or anything like this?

Thank you all

seanscott

please rv now

Originally Posted by nventr

I have talked to my friend today and he will get back to me by wednesday, oct 25. You might want to check http://www.finance.gov.ab.ca/publica...et/2006.html#5
The link doesn't enter properly. Between ca/------------/---get should be the word 'publications/bud'. That site shows the capital gains tax for Alberta is 0%.

I went to that page an here is what I found.

Alberta has no general sales tax, no payroll tax, no capital tax, and low personal and corporate income taxes. If Albertans and Alberta businesses lived or were located in any other province, they would pay an additional $7.2 billion in taxes. In addition, over $1.3 billion was provided to Albertans earlier this year through the Alberta 2005 Resource Rebate. Our low tax environment means more money to spend and invest, helping to sustain the strongest economy in Canada.
The government has focused on building Alberta's tax advantage. From 1999 to 2001, the government phased in substantial cuts to personal taxes, including the introduction of the single rate tax and the highest income exemptions in Canada. We indexed our tax system in 2001, ensuring that the benefits of those cuts would not be eaten away by inflation. In 2005, the Alberta Family Employment Tax Credit was enhanced, increasing benefits to working families. The government has provided assistance to seniors, exempting them from health care insurance premiums and protecting them from any increases to school property taxes.
After making the large cuts to personal taxes, the government began to take steps to create a more competitive tax environment for business. Between 2001 and 2004, we reduced our general corporate income tax rate from 15.5 per cent to 11.5 per cent. The small business rate was cut in half, to 3 per cent, and the small business income threshold was doubled to $400,000.
Budget 2006 further strengthens the Alberta tax advantage. It includes measures to address emerging competitive pressures and to further enhance the fairness of the tax system, while meeting the government's commitment to reduce taxes in a sustainable, fiscally responsible manner.
The government undertook an internal review of the province's tax system in 2005 to assess whether our tax system remains competitive and fair and encourages economic growth. The review examined a wide range of issues, including our competitiveness with other jurisdictions, ongoing revenue needs, priorities for future tax cuts and whether certain taxes should be eliminated entirely.
The review concluded that, for the most part, our tax system serves Alberta well. We are competitive within North America in attracting investment and skilled workers. Alberta's tax system is also fair, with the highest basic and spousal amounts in the country, allowing people to earn more money before paying any provincial income tax. Last, our tax system is simple and transparent, resulting in lower administrative and compliance costs for taxpayers and improved accountability to Albertans.
However, with no general sales tax, payroll taxes or capital taxes, Alberta's tax base is relatively narrow compared to other jurisdictions. While this is a benefit to Albertans, it also comes with some risks. A broader range of taxes means more stable revenues. With relatively fewer revenue sources, predictable funding for key public services is at more risk in the event of an economic slow-down. Consequently, it is inadvisable to eliminate or dedicate more taxes.
The review identified priorities for future tax cuts. A top priority for the government should be to reduce the general corporate income tax rate. While Alberta’s economy is strong now, cutting corporate income taxes will benefit the province for years to come. On the personal side, the focus should be on providing tax relief that is directed primarily towards lower and middle income Albertans. Our low-rate, broad-base policy provides a level playing field, letting the market, not government, determine the best places to spend and invest. The tax review reaffirmed that this approach to tax policy is the best way to attract investment and promote economic growth.

Please note the highlighted parts that state "capital tax" not "capital gains tax". There is a big difference between the two. Capital tax is paid by corporations based on their shareholder equity and accumulated earnings retained in the company. It is not income tax on capital gains. I could not find anywhere in that budget review where it stated that capital gains are exempt from income tax.

When your friend gets back to you on Wednesday you may want to clarify this with him.

Originally Posted by seanscott

Thank you for this info, I'm certain that tax laws are NOT meant to be clearly understood. Just ask your local tacs man

On a side note; does anyone know what if any documentation would be required upon cashing in? I.D.?, family history, 1st born, .... you get the point.
Does anyone know if I would be required to provide proof of purchase or anything like this?

Thank you all

seanscott

please rv now

For purposes of calculating your capital gain for tax purposes, proof of purchase would be a handy thing to have on file if the government decides to audit your return. From a banking standpoint it would probably be easier to cash them in a bank where you have an account. I don't know for sure but I think the banks have to report any large cash transactions. I know when I purchased my dinars at the Bank of Nova Scotia (not a bank I have an account with), even though it wasn't a large cdn dollar transaction I had to produce 2 pieces of ID, at least one of which had to be photo ID. I used my drivers licence and BC health card. How and who they report it to I have no idea, but i think there is a procedure. If so, then some sort of proof of ID would be required.

Thank you for drawing attention to the Capital Tax/Capital Gains Tax issue. I will need to check this but with someone other than my friend as he works in the federal system.
He has notified me that federally our exchange gain would be viewed as a capital gain if we acquired our IQD as speculators and not by way of an established business activity.
I will still get an opinion from my friend whether the 500 000.00 once-in-a-lifetime exemption would apply to our situation.

Just thought I'd revive this thread for all my Canadian friends. There alot of good Info in here and it may keep some out of trouble "with the evil taxman"

Remember, pay your taxes and move on.

Gloribee

From Calgary with love. Alot (and not much) has happened since this threads inception. I am quite ready to move on . Not without the horse heads though.

I was wondering if any one has any pertinent info for Canadians regarding the Dong, as I have started to move in that direction.

all the best

seanscott

Originally Posted by seanscott

From Calgary with love. Alot (and not much) has happened since this threads inception. I am quite ready to move on . Not without the horse heads though.

I was wondering if any one has any pertinent info for Canadians regarding the Dong, as I have started to move in that direction.

all the best

seanscott

Any gains on the dong would be treated the same way as the NID or any other currency for that matter. It is a capital gain for people like us speculators.

If you realize a gain in the ordinary course of business; ie selling goods to people/companies in a foreign country, then any gains are treated as regular business income and not capital gains.

It is cheaper tax-wise if it's a capital gain.