Tax Update-Toronto
Canada
Hellenic Republic
March 18, 2014
TORONTO (by appointment only)
658 Danforth Ave.
Toronto, Ontario M4J 5B9
Tel. (416) 477-8993 Fax. (647) 317-9339
MONTREAL
750 av. Ste.-Croix Ave.
Saint-Laurent, Québec H4L 3Y2
Tel. (514) 747-3413 Fax. (514) 747-0799
www.kromida.com jamesk@kromida.com
www.greecetaxes.com
With associate offices in 11 cities throughout Greece and Cyprus
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Outline of Presentation
1- Tax update- Canada
2- Canada- Hellenic Republic Tax Treaty
Effective January 1, 2011
3- Residency and Non-Residency rules- Canada
4- Seniors’ benefits
5- Tax update & common errors- Hellenic
Republic
6- Property Issues- death
7- Termination of Greece pensions
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1. Tax update- Canada
•Deadline April 30, 2014.
•Registered Retirement Savings Plan (RRSP
Deadline March 1, 2014; $23,820 (2014- $24,270),
•First-time Home Buyer Tax Credit (Έκπτωση Φόρου γιά αγορά Πρώτης Κατοικίας)
Non-refundable, after January 27, 2009; 15% expenses, $750 maximum.
•Tax-Free savings Account (TFSA)- ΛΟΓΑΡΙΑΣΜΟΣ ΑΦΟΡΟΛΟΦΗΤΩΝ ΚΑΤΑΘΕΣΕΩΝ
•$5,500 per year earned tax-free and tax-free upon withdrawal if student
attends.
• Child tax credit (Federal only) (Φοροαπαλλαγή Τέκνων)
Non-refundable tax credit of $2,234 per child under 18.
•Child art tax credit* (Federal only) (Φοροαπαλλαγή Καλλιτεχνικής Απασχόλησης)
Non-refundable tax credit of $500 per child under 16.
Artistic, cultural, recreational or developmental at least 8 wks, 1
session/ wk.
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1. Tax update- Canada
•
ADOPTION EXPENSES (ΔΑΠΑΝΕΣ ΥΙΟΘΕΣΙΑΣ)
– Non-refundable tax credit 15% child under 18. Maximum $11,669 per adoption
•
INCOME TAX INSTALMENTS (ΔΟΣΕΙΣ ΦΟΡΟΥ ΕΙΣΟΔΗΜΑΤΟΣ )
– If individual's combined federal and provincial income tax payable exceeds any amounts
deducted or withheld at source by more than $3,000 in both current year and either of
the two preceding years,
•
FOREIGN REPORTING
– Persons/ partnerships, owning specified foreign property, with total cost over $100,000,
cash, stocks, bonds, investments, and real estate.
– T1135
•
SUBMIT RECEIPTS FOR: Medical, donations, tuition fees, RRSP, public transit (ΠΙΣΤΩΣΗ ΚΑΡΤΑΣ ΔΗΜΟΣΙΩΝ
ΣΥΓΚΟΙΝΩΝΙΩΝ), etc.
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2.Canada- Hellenic Republic Tax Treaty
Rates of Tax
INCOME
HELLENIC REPUBLIC
CANADA
TREATY
Interest
25%
25%-Non-arm’s length
0%- Arm’s length
10%
Dividends
10%
25%
5% (own >25%)
15% (own = <25%)
Royalties
20%
25%
10%
Residency (NOT citizenship) of taxpayer determines which jurisdiction pay tax on WORLD
INCOME.
Residency- conditions- person
 Domicile, residence, place of management; Permanent home/personal & economic relations;
Habitual abode; Nationality; If none of above, the two states shall agree.
Residency- conditions- company
Place of effective management- Permanent Establishment:
Fixed place of business through which business wholly/partly carried on:
-place of management; branch; office; factory; workshop; and mine, an oil or gas well, quarry or
any other place relating to exploration for or the exploitation of natural resources
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2. Canada- Hellenic Republic Tax Treaty
Where income is taxed
Type of income
Property income
Immovable
location
Perm.
Establishment
Ship
Register
Direct/
Indirect
Control
Residence
Recipient
√
Associated enterprises
√
Dividends
√
Interest
√
Royalties
√
√
Ind. Personal services
√
Dep. personal services
√
Entertainers/athletes
√
√
Government service
√
Students
√
Director’s fees
Other income
Residence
company
√
Int’l shipping/air transport
Pensions/annuities
Residence
student
√
Business profits
Capital gains
Income
earned
√
√
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2. Canada- Hellenic Republic Tax Treaty
Hellenic Republic and Canada, double taxation shall be avoided by a tax deduction for
income and capital taxes paid in the other jurisdiction.
Exchange of Information
Competent authorities of both States shall exchange such information as is foreseeably
relevant for carrying out the provisions of this Convention or to the administration or
enforcement of the domestic laws concerning taxes of every kind.
Members of Diplomatic Missions and Consular Posts
 No change from present- deemed resident of sending State if individual liable in
sending State to same obligations (total tax) as residents of sending State.
Voluntary Disclosures
 Available to provide relief on penalties and interest, not unpaid tax
 Unlimited time frame, usually 10 years, administratively 6 years
 Disclosure must be voluntary to be valid (ie. not under audit or investigation)
 No names basis for unreported income
 Name must be disclosed for unfiled information returns
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2. Canada- Hellenic Republic Tax Treaty
Note for rental properties in Canada, expenses incurred may be deducted, which in
many cases taxpayers are not aware of:
• Airfare
• Hotel accommodation
• Food
• Car rental
• Operating expenses
• Administration fees
• Insurance, taxes
This is very significant, particularly if the gross rental income from the property is low,
and related expenses are high. Joint ownership with one’s spouse multiplies the
potential benefit. This may be a tax saving that has not been taken advantage of.
In law, tax minimization is a taxpayer’s right. Tax evasion is a
crime. Knowledge of tax laws is the key to planning to take
maximum advantage of the rules for one’s benefit.
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2. Canada- Hellenic Republic Tax Treaty
Example: Mrs. X, presently a resident of Greece earning regular income of €15,000, plus a
Canadian pension of $5,000 with withholdings of $1,250 (25%), plus earns consulting income
for Canada of $3,000, less expenses of $500. The following would be required to be declared
under present tax laws (assume €1= $1) :
Description
Hellenic
Rep. 2010
Canada
2010
Hellenic
Rep. 2011+
Canada
2011+
Regular income
15,000
0
15,000
0
Canadian pension
5,000
5,000
5,000
5,000
Canadian consulting
income
3,000
3,000
3,000
3,000
Canadian consulting
expenses
(500)
0
(500)
0
22,500
8,000
22,500
8,000
4,500
1,600
4,500
1,600
Tax paid
0
(1,250)
(1,600)
(1,250)
Net tax
4,500
350
2,900
350
Tax (assume 20%)
Total
4,850
3,250
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2. Canada- Hellenic Republic Tax Treaty
Example- rental income (husband and wife):
Description
Canada
Hellenic
Republic
Gross rental incomeHellenic Republic
5.000
5.000
Airfare (2)
(3.700)
0
Hotel accommodation
(2.000)
0
Food
(1.500)
0
Car rental
(1.500)
0
Operating expenses
(1,500)
0
Administration fees
(2.000)
0
Insurance, taxes
(2.000)
0
Net rental income
(9.200)
5.000
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3. Residency – Individuals
Residential Ties in Canada
Other Ties
1. Home
Canadian driver’s license
2. Spouse/partner/dependents
Medicare card ****
3. Personal property
Residential ties in another country
4. Social/economic ties
Canadian bank accounts/credit cards
When do you become a non-resident?
Latest of the following dates:
• the date you leave Canada;
• the date spouse or common-law partner and dependents leave Canada;
• the date become a resident of the country to which immigrating.
Notes:
• If fair market value of all property owned when emigrated is more than $25,000,
must include list of worldwide property holdings with tax return- critical to file if
upon return may recover taxes paid.
• If owe more than $14,500 (Québec-$12,107) may defer tax owing on deemed
disposition by providing acceptable security. Must arrange before return is due to
be filed.
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4. Seniors benefits
•For full pension: must be Canadian citizen or legal resident for at least 40 years after 18. Lower
pension given for living here 10 to 40 years. Residence in Canada for at least 20 years entitles
person to receive OAS anywhere in the world.
•Years of residency after age 65 will not increase amount of the pension. Residents in Canada for
less than 20 (minimum 10) years must be resident in Canada when their application is approved.
•May still qualify for Old Age Security from another country, from Canada, or from both countries
if have:
•lived in one of the countries with which Canada has established a social security
agreement, or
•contributed to the social security system of one of the countries with which Canada has
established a social security agreement.
•If leave Canada for longer than six months, and not been Canadian resident for at least 20 years,
benefits shall be suspended until return.
•In addition to basic pension, spouses aged 60 to 64 entitled Spouse’s Allowance, based on the
income of low-income pensioners who qualify for the Guaranteed Income Supplement (GIS).
Widowed spouses aged 60 to 64 may also apply for the allowance.
•Claw back of 15% of the excess of net income over $70,954; spouse’s income is not included.
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4. Seniors benefits
Example- Seniors’ benefits- Old Age Security (OAS):
Kosta and Anna are married and live in their home in Montreal for 13 years. Anna develops severe arthritis and she
leaves to live in Greece to help her condition. The couple still are married but live apart. Kosta stays behind for
another 10 years and still lives, works and earns a salary, while owning a fur business. During this period, he
maintains a car, credit cards, bank accounts, etc.
Question- what are both entitled to regarding OAS?
Description
Kosta
Anna
Residency prior to Anna’s move
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13
Residency after Anna’s move
10
0
Total years resident
23
13
Residency prior to Anna’s move
13
13
Residency after Anna’s move
10
0
Deemed residency- Family ties
0
10
23
23
OAS eligibility:
Total deemed years resident
It appears, at first glance, that Kosta would be entitled to a full pension, given the 20 year minimum
residency for full OAS benefits, but Anna only to partial benefits. However, given the family ties rules,
Anna is deemed to be a resident of Canada for the 10 years following her departure. Thus, she also is
eligible for the full OAS benefits, as is Kosta. Spousal deduction claimed?
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5. Tax update- Hellenic Republic
•
•
•
•
•
•
•
•
•
Deadline- June 30; E9 electronic filing June 30; E9- May 30, 2014 only when there are changes.
Certification of residency AND application. CRA- 1 (800) 959-8281.
ΕΝΦΙΑ (Ενιαίου Φόρου Ιδιοκτησίας Ακινήτων) changed February 15,2014.
Residency counts on where declare world income
Canada- Greece Tax Treaty effective January 1, 2011.
Basic differences
– Recognition of tax paid in other country- avoid double- taxation.
– Exchange of information between countries.
Who files: E1 Income taxes; E2- property income; E9- property information
– Canadian- resident with Greece income,
– Canadian- resident with Greece property (NEW)- deemed income- TEKMIRIO.
Canadian- resident with Greece automobile- with Greece plates, NOT TEMPORARY PLATES received at customs
Required items for prompt ON PREMISES completion of personal tax returns:
1.
ΑΦΜ (Αριθμού Φορολογικού Μητρώου)
2.
ΑΜΚΑ (Αριθμού Μητρώου Κοινωνικής Ασφάλισης )
3.
ΚΛΕΙΔΑΡΙΘΜΟ (access code)
4.
User name
5.
Password
6.
ΔΕΗ number- if have property with electricity
7.
If new client, copy of previously files tax return
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5. Tax update- Hellenic Republic
Issues:
•
Tekmirio
– started 2010 (Greece 2011) deemed income,
– even on barren land,
– even when no income,
– if non-resident builds, MUST disclose fact of such and file returns,
– MUST prove transfer of funds- pink slips upon bank transfer. Watch out for monies brought into country in person.
NEED WRITTEN PROOF, even with cost of commission on transfer- ie source of funds.
– if deemed resident, requirement to file receipts, depending on amounts
•
Automobile
– deemed income,
– the larger the engine, the higher the levy,
– if over 2,000 cc, extra tax,
– cannot be insured by Greece insurance company if do not have Greece license plates.
•
E1 errors found
– ΔΟΥ location,
– Address on E1- watch out! Deemed income if address in Greece!
– Box 319
•
E9 filing requirements
– When required by Government,
– Good business practices (see also above)
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5. Tax update- Hellenic Republic
ΠΡΟΣΤΙΜΟ ΔΙΑΦΟΡΑ
ΔΑΠΑΝΩΝ
ΠΡΟΣΤΙΜΟ ΔΙΑΦΟΡΑ ΔΑΠΑΝΩΝ
(DEEMED INCOME)
ΠΡΟΣΤΙΜΟ ΔΙΑΦΟΡΑ
ΔΑΠΑΝΩΝ
ΠΡΟΣΤΙΜΟ ΔΙΑΦΟΡΑ ΔΑΠΑΝΩΝ
(DEEMED INCOME)
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5. Tax update- Hellenic Republic
2
3
1
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6. Property Issues- death
There is a process to follow as follows:
•If will, then property is transferred as per terms of will,
•If no will, then 75% to children and 25% to spouse.
Either way, there are legal procedures to follow thereafter:
1. Lawyer must make motion in court to make public death of individual and proving relationship of remaining
person(s) to deceased. Requires proof of parent’s’ death, beneficiary’s birth and relation to deceased; this to
ensure that beneficiaries are genuine.
2. Complete search is made of deceased’s filing requirements not done. May require filing late returns and
penalties and interest to pay.
3. Takes 3-6 months to complete and get preliminary judgement.
4. Once done, another legal motion required to final probate- ΑΠΟΔΟΧΗ ΚΛΗΡΟΝΟΜΙΑΣ.
5. Takes about 3-6 months to get final release and rendering of final judgement. Then beneficiaries are free to do
with property(ies) as they wish.
This seems very complicated but should not be, as long as all documents required are available. That could be a
challenge at times due to burned documents in small villages, for example, which adds to time and fees required,
but that we see as we go. Any extra time is then advised to the client who then decides if they want to continue.
Without the “final probate- ΑΠΟΔΟΧΗ ΚΛΗΡΟΝΟΜΙΑΣ”, the property can NEVER be sold, transferred or donated
by anyone. THIS IS GREEK LAW! Thus, this must be taken care of now, or it will be an issue certainly in future.
We can handle this without your having to go to Greece to handle. It takes time but is professionally done.
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7. Termination of Greece pensions
We can assist you in restoring your suddenly terminated pension (ΙΚΑ.
ΟΓΑ. ΤΕΒΕ, ΝΑΤ, etc.). The following is required for us to do so on your
behalf:
Do you have an antiklito (your tax representative) in Greece?
If not, we need a Ξισιουδοτηση (limited power of attorney) to be drawn from the
Consulate, for the following items:
·
ΑΝΙΚΛΙΤΟ (AS ABOVE),
·
ΚΛΕΙΔΑΡΙΘΜΟ (ACCESS CODE),
·
ΙΚΑ/ ΟΓΑ/ ΤΕΒΕ/ ΝΑΤ/ΤΣΑ (ΟΑΕΕ), etc. numbers- THE Greek pension
board to get the exact numbers.
•
AMKA number
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For more information, please contact:
James Kromida, CPA, CA
Tel: (416) 477-8993
Fax: (647) 317-3993
E-mail: jamesk@kromida.com
Website: www.kromida.com
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TORONTO
ΣΑΣ ΕΥΧΑΡΙΣΤΩ•THANK YOU•MERCI
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