UPDATE – Tax Measures Targeting Privately Held Corporations On July 18, 2017, the Department of Finance released a set of proposals to amend the Income Tax Act (the “July 18 Proposals”). The position taken by the Department of Finance and the rhetoric surrounding the July 18 Proposals were that the proposed tax measures were designed to “improve the fairness of Canada’s tax system by closing tax loopholes and amending existing rules to ensure that the richest Canadians pay their fair share of taxes and that people in similar circumstances pay similar amounts of tax”. The July 18 Proposals were roundly criticized by the tax and business communities, with town hall meetings, conferences and consultations held across the country. In addition, over 21,000 written submissions were made to the Federal Government during the consultation period, which ended October 2, 2017. The key elements of the July 18 Proposals were based on changes to the following 4 key areas: Lifetime Capital Gains Exemption (“LCGE”) The LCGE exempts holders of qualified small business corporation shares and holders of qualified farm or fishing property from tax on capital gains of up to million arising from a sale or disposition. The Federal Government was concerned that methods to multiply the LCGE, using family trusts, for example, unfairly permit more than one taxpayer to claim the LCGE and thereby reduce the tax payable on the disposition of private company shares, or qualified farm or fishing property. The July 19 proposals sought to significantly restrict the availability of the LCGE. Income Splitting Income splitting refers to the practice through which income earned through a corporation is “sprinkled” among family members, rather then all paid to one individual. This practice allows a taxpayer to reduce his family’s overall tax bill by shifting income from higher-income taxpayers to lower-income taxpayers. Passive Investment Income Active business income earned in a corporation is taxed at a much lower rate than employment income earned by an individual. Because of the tax deferral available when retained earnings are kept in a corporation, there is more after-tax income available to invest in a corporation than if that same amount of income was earned personally. As such, Finance perceives this to be an inherent unfair “advantage” to private company shareholders. Converting Income into Capital Gains The Government’s proposals seek to address certain transactions that they consider to be abusive, specifically certain post-mortem transactions, which convert income which would otherwise be taxable at higher corporate tax rates to capital gains, which are taxed at significantly lower rates. On October 3, 2017, the Department of Finance issued a Press Release, in which Finance Minister Bill Morneau acknowledged the concerns regarding the July 18 Proposals raised by the public, the tax community, and business owners, and suggesting that the Government may take steps to make amendments to the proposed legislation based on feedback Finance had received. On October 16, 2017, the Department of Finance issued an announcement of changes to the July 18 Proposals in light of the consultations and further to its October 3rd announcement. The highlights of the proposed changes are: 1. Reduction in the federal small business tax rate from 11% to 10% effective January 1, 2018 and to 9% effective January 1, 2019. 2. No changes to the LCGE. Finance stated that “the Government will not be moving forward with the measures that would limit access to the Lifetime Capital Gains Exemption”. 3. Income Shifting. Finance confirmed that it will continue with its proposals to terminate income shifting to lower-income family members who do not contribute to the business. However, Finance stated that it will introduce “reasonableness tests” for adult family members who will be asked to demonstrate their contribution to the business. On October 18, 2017, the Department of Finance issued a further announcement targeting passive income earned within private corporations. In this Press Release, the Government stated that it will continue with its intended measures to limit the tax-deferral opportunities related to passive investments; however, it will provide some relief by allowing business owners to build savings for business purposes or for retirement. The Government has announced that businesses can continue to save for contingencies or future investments based on a threshold of $50,000 of passive income per year. Any income above this threshold will presumably be subject to higher rate of taxation as set out in the July 18 Proposals. Draft legislation implementing these proposed changes will be released as later this fall or as part of Budget 2018. We can help. Tax planning opportunities are available to assist Canadian taxpayers in optimizing their affairs to obtain a favourable tax outcome. Contact DSF’s Tax Planning Group for advice and assistance. “This article is intended to inform. Its content does not constitute legal advice and should not be relied upon by readers as such. If you require legal assistance, please see a lawyer. Each case is unique and a lawyer with good training and sound judgment can provide you with advice tailored to your specific situation and needs.” By Fauzan SiddiquiBlog, TaxOctober 19, 2017July 5, 2023
Provisional Application of CETA For Canadian businesses that are growing insecure about the potential consequences resulting from the re-negotiation of NAFTA, CETA may be an opportunity to diversify ties to the international market. Any changes to NAFTA could have significant consequences to Canadian industries, as the United States is Canada’s largest trading partner. Trump’s America First/Buy American domestic policies are evident in the recent release of the American agenda driving the renegotiations. Trump’s immigration policies have also created uncertainty with respect to issuing work permits and their recognition by border officers. However the growing uncertainty about the future of NAFTA and what it means for Canadian businesses may be mitigated by a different Agreement. Just two days prior to commencement of the third round of NAFTA renegotiations, Canada entered into a comprehensive trade agreement with the world’s second largest economy, and Canada’s second largest trading partner: the EU. CETA, the Canadian-European Union Comprehensive Economic Trade Agreement, is a progressive trade deal that aims to reduce or eliminate tariffs by a substantial amount. Presently, only 25% of Canadian goods enter the EU as duty-free. Once the Agreement is in full force, 99% of Canadian goods will be imported as duty-free goods to the EU. Bilateral trade is expected to increase by 20%. What might be most exciting about CETA is how it will facilitate labour mobility as the Agreement streamlines the process for work permits between the two signatories. CETA has enhanced the ability of temporary workers to enter Canada. For four categories of workers a LMIA will no longer be necessary: Key Personnel: including business visitor for investment purposes, investors and intra-corporate transferees Contractual Service Providers Independent Professionals: including self-employed workers Short-Term Business Visitors Eliminating the requirement for an LMIA will mean that employers are no longer required to advertise their positions in the domestic market for a prolonged period of time. Further, CETA’s elimination of the requirement of a LMIA for these key categories creates certainty for employers that they will be able to hire workers who meet the requirements. There is no limit to the workers that can come to Canada without an LMIA in these categories. The different categories a employee or professional falls under determines how the long work permit will be granted for, whether it can be extended, and if there is a limit to how many times per year an individual can be a recipient. Once CETA is fully established Canadian employers will be able to recruit European workers with certainty, and less costs and expedited processes. It is important to note that while CETA has come into force, the national parliaments of all EU member states must still ratify the Agreement in accordance with their domestic requirements. By: Samantha Hamilton, Student-at-Law “This article is intended to inform. Its content does not constitute legal advice and should not be relied upon by readers as such. If you require legal assistance, please see a lawyer. Each case is unique and a lawyer with good training and sound judgment can provide you with advice tailored to your specific situation and needs.” By Fauzan SiddiquiBlog, Corporate LawOctober 19, 2017June 18, 2020
Bill to increase Minimum Wage hotly debated in Ontario Legislature Bill 148, Fair Workplaces, Better Jobs Act, 2017, is in the midst of being debated by members of the Ontario Legislature. The Bill proposes changes to Ontario’s Employment Standards Act, which include an increase of the minimum wage to $14 per hour by January 1st, 2018 and again to $15 per hour by January 1st, 2019. Political parties are split over the effect the changes will have on businesses and workers. One of the Bill’s sponsors, Hon. Peter Milczyn, said: “the reality is that one out of 10 workers in our province earns the current minimum wage of $11.40. Meanwhile, three out of 10 workers earn less than $15 an hour. This includes millions of people, many of whom are supporting a family, making car payments, trying to save for an education and paying their daily bills. They work very hard every day to try to get ahead, but they feel they’ve been left behind. Increasing the minimum wage will make a real difference in their lives”. Opposition MPP Bill Walker, spoke to the Bill, saying: “the business community is certainly not suggesting, and we’re not supporting, that people don’t need a good living wage. Certainly, at the end of the day, we support a $15 minimum wage. But it has to be done in a timely manner. It has to give people the ability to adjust their business. At the end of the day, the fiscal accountability officer has just come out with a report suggesting that there could be 50,000 jobs lost because of the speed at which they’re going to implement this. So this isn’t just us, Mr. Speaker. This is a third-party resource of this Legislature that is suggesting that.” In any case, the effects of the new rules, if passed, on both employers and employees will be profound. Until then, we will have to wait to see how the changes take shape in their final form. If you are in need of a labour or employment lawyer, please visit our employment page and contact one of our lawyers today. For any other legal services or inquiries, please contact Devry Smith Frank LLP directly at 416-449-1400 or visit our website for more information. By: Stuart Clark, Student-at-Law “This article is intended to inform. Its content does not constitute legal advice and should not be relied upon by readers as such. If you require legal assistance, please see a lawyer. Each case is unique and a lawyer with good training and sound judgment can provide you with advice tailored to your specific situation and needs.” By Fauzan SiddiquiBlog, Employment LawOctober 18, 2017June 18, 2020
September Home Prices and The National Index There has been a lot of discussion lately around the recent slow downs to the real estate markets in Toronto and surrounding areas. A number of factors can be said to be contributing to the changes in these previously hot markets, including a number of measures introduced by the Ontario government earlier in the year intended to have just such an effect. These include the new foreign buyers tax – under the Non-Resident Speculation Tax (NRST) there is now a 15% tax on the purchase or acquisition of an interest in residential property located in the Greater Golden Horseshoe Region by individuals who are not citizens or permanent residents of Canada or by foreign corporations and taxable trustees. Changes to the mortgage market introduced last year have also affected the market by increasing the qualification requirements for buyers with a down payment of less than 20%, effectively reducing the size of mortgage that these buyers are able to qualify for. Changes to the financing market have also hindered the ability of many non-bank lenders to compete in the mortgage market, thus stifling overall competition in the financing sphere. We have also seen increases to interest rates offered by lenders in conjunction with the recent Bank of Canada rate increases. The icing on the cake appears to have come today with OSFI releasing its revised final guidelines setting out new mortgage qualification requirements which are set to take effect January 1, 2018 and will affect all borrowers. Details can be found here. With so many recent changes factoring into the market in a relatively short period of time, it is difficult to predict how the market will react in the longer term. There has not been enough time to adjust to one change before the next one is being implemented, making it impossible to gauge how significant the cumulative effect will be. For now however, the market in Toronto (and surrounding areas) has clearly cooled off and the national composite house price index has suffered due to the falling home prices in Toronto. According to the Toronto Star, the national index fell 0.8% compared with the previous month – the largest month over month drop since September 2010. In the month of September the price indexes of the 11 cities included within the national index moved as follows: Toronto (fell 2.7%) Quebec City (fell 2.3%) Hamilton (fell 1.9%) Halifax (fell 0.4%) Ottawa-Gatineau (up 0.3%) Calgary (up 0.7%) Montreal (up 0.3%) Winnipeg (down 0.3%) Victoria (flat) Vancouver (up 1.3%) Edmonton (up 0.2%) Devry Smith Frank LLP has experienced Real Estate lawyers in Barrie. If you require a real estate lawyer or have any questions, call us directly at 705-812-2100. “This article is intended to inform. Its content does not constitute legal advice and should not be relied upon by readers as such. If you require legal assistance, please see a lawyer. Each case is unique and a lawyer with good training and sound judgment can provide you with advice tailored to your specific situation and needs.” By Fauzan SiddiquiBlog, Real EstateOctober 17, 2017June 18, 2020
Ontario Legislature moves to regulate Life Leases in bid to protect Seniors Bill 155, introduced in the Ontario Legislature on September 20, 2017, proposes a new law to regulate, so-called, ‘life leases’, a type of lease arrangement that lasts for no less than 50 years. Life leases are a form of leasing arrangement that has become increasingly popular in Ontario thanks to a rapidly growing seniors population. A life lease is similar in concept to condominium ownership, whereby a group of people own units in a community or building and pay fees for the use of common areas and maintenance. Unlike a condominium however, a life lease does not confer an ownership stake in the property; rather, the lessee owns an ‘interest’ in the property that allows them the right to live in the unit. A prospective lessee typically enters into a life-lease by paying a lump-sum up front followed by monthly fees for amenities and maintenance. This is an attractive arrangement for seniors, who can still live independently but are not able to maintain a single family home. The Bill proposes certain payments in respect of life leases and requires the disclosure of information relating to life leases. Under the proposed rules, the landlord is required to disclose to a prospective tenant the estimated entrance fee, the projected completion date, information regarding governance and management of the residential complex, the estimated amount of other fees, including monthly occupancy fees, and the estimated refund that a tenant would receive upon termination of the lease. Landlords are also required to maintain a reserve fund to pay for any unforeseen major repair to or replacement of assets of the complex, and to hold adequate insurance for such. It is unclear what effect the rules this will have on the life lease market, but new regulations could well increase costs that are ultimately passed on to seniors. The Bill’s sponsor, MPP Ann Hoggarth, said: “This bill provides that life leases be given protection, similar to renters and condo owners, by providing clear disclosure to leaseholders and improving communication with their sponsors”. Are you thinking of purchasing or selling a life lease? We can help. If you are in need of a real estate lawyer, please visit our real estate page and contact one of our lawyers today. For any other legal services or inquiries, please contact Devry Smith Frank LLP directly at 416-449-1400 or visit our website for more information. By: Stuart Clark, Student-at-Law “This article is intended to inform. Its content does not constitute legal advice and should not be relied upon by readers as such. If you require legal assistance, please see a lawyer. Each case is unique and a lawyer with good training and sound judgment can provide you with advice tailored to your specific situation and needs.” By Fauzan SiddiquiBlog, Real EstateOctober 16, 2017June 18, 2020
Colleges and Faculty to Continue Contract Discussion to Avoid Strike In a previous blog post, we discuss the call for a strike that Ontario’s colleges faculty members will vote for in the fall, after rejecting a 7.5% wage hike offered by the Ontario government. Now, they are back to negotiating after the Thanksgiving weekend. Ontario’s colleges are back at the bargaining table today, as the strike deadline of October 15th approaches. The talks have been put on hiatus at the end of September after no progress was made. The union represents “full-time professors as well as “partial load” instructors who teach between seven and 12 hours a week, as well as college counsellors and librarians,” and the last offer that was received from the colleges provided a 7.5 per cent raise over four years, as well as improvements to benefits and a lump-sum payment which they did not accept. CEO of the college council, Don Sinclair, has reassured students that the colleges are concerned and will provide updates as they become available. In this case, the government has indicated that, before any strike vote, that the faculty union members vote on the last offer they have received. Employers usually have this right, stored under s. 42 of the Labour Relations Act, which says: (1) Before or after the commencement of a strike or lock-out, the employer of the employees in the affected bargaining unit may request that a vote of the employees be taken as to the acceptance or rejection of the offer of the employer last received by the trade union in respect of all matters remaining in dispute between the parties and the Minister shall, and in the construction industry the Minister may, on the terms that he or she considers necessary direct that a vote of the employees to accept or reject the offer be held and thereafter no further such request shall be made. The ability for the employer to call for a vote is a tactic of last resort—and can only be done once. In fact, in 2010, when the current collective agreement was signed, colleges used s. 42 to call for a vote, which approved the agreement with a slim majority. Only time will tell to see if this strategy will pay off for a second time, or if both parties will be forced to return to the bargaining table. Devry Smith Frank LLP is a full service law firm that has a very experienced group of lawyers within our employee and labour law groups. If you are in need of representation, please contact one of our lawyers today or call us directly at 416-449-1400. By: Nicolas Di Nardo “This article is intended to inform. Its content does not constitute legal advice and should not be relied upon by readers as such. If you require legal assistance, please see a lawyer. Each case is unique and a lawyer with good training and sound judgment can provide you with advice tailored to your specific situation and needs.” By Fauzan SiddiquiBlog, Employment Law, Labour LawOctober 10, 2017June 18, 2020
If My Guests Drive Drunk/Stoned, Am I Responsible? October is here, and over the next few months, there will be a number of family gatherings and work events that may involve the consumption of alcohol/drugs. When your guest leaves your house and drives while impaired, can you be held responsible if they injure themselves or others? Being a host, you should always be concerned about how your guests are getting home, who is the designated driver, and always be ready to offer up your couch or blow-up mattress for the night. Luckily, we have options like Uber, taxis, and even a service called Safe-T-Ride that will pick you up and drive you home (IN YOUR OWN CAR!) so that you and your vehicle arrive home safely. Morally, as responsible and caring hosts, we should ensure the safety of our guests while in our care in or around our home. The case law is fairly clear about that but once your guest leaves your home does that duty end? The short answer is probably (but don’t take chances and keep your guest and the public safe!). The Supreme Court of Canada in Childs v. Desormeaux confirmed that social host liability probably does not exist in Canada. The homeowner that has a party serving alcohol may have no duty of care to members of the public who may be injured by the activities of the impaired guest after they have left the care of the host. This reasoning may also apply with parties where marijuana or other drugs are used. Regrettably we may see an increase in impaired driving with legalization of marijuana use for non-medicinal purposes. According to Marc Spivak, lawyer and managing partner of Devry Smith Frank LLP’s personal injury group, the Supreme Court of Canada decision may leave open liability on the host if: all of the alcohol that was served was supplied by the host and consumed there and there was some sort of relationship between the host of the party and the guest whereby the host would have control over the extent of the alcohol consumption and whether the guest was intoxicated upon leaving the home. Social host liability cases can take years to litigate with appeals to higher courts by the upset loser of the litigation. These cases cost hundreds of thousands of dollars to litigate and reflect the loss of life or loss of enjoyment of life that nobody should have to experience. If you are hosting a party this season, be prudent and take steps to avoid such possible accidents. Plan before your guests arrive and ensure your guests have safe transportation home. Judgment ability may change during your festivities. Make sure that won’t affect your guest’s safety and what happens after leaving your home. “This article is intended to inform. Its content does not constitute legal advice and should not be relied upon by readers as such. If you require legal assistance, please see a lawyer. Each case is unique and a lawyer with good training and sound judgment can provide you with advice tailored to your specific situation and needs.” By Fauzan SiddiquiBlog, Criminal Law, Personal InjuryOctober 6, 2017June 18, 2020
Toronto Zoo Strike Costs Toronto $4 Million Last spring, the Toronto Zoo saw a strike over wages for its workers, which caused the Zoo to remain closed for 5 weeks while an agreement was reached. The agreement gave the workers a 1.25-per-cent wage hike in each of the four years of their contracts and the non-union staff will be closely watched as the Zoo board will decide on what they will receive as a result. Figures were released in a report on attendance and revenue which revealed: The Zoo expected 218,012 visitors Net forecast loss of $3.99 million After they re-opened, they still saw a decrease in attendance of 65,125 due to cancellations of group trips and camps. With the addition of the pandas, attendance hit 1.3 million and is expected to dip once they are transported to Calgary. Overall, August attendance levels were below target, but, still above 2016 levels with a rebound happening in September. Devry Smith Frank LLP is a full service law firm that has a very experienced group of lawyers within our employee and labour law groups. If you are in need of representation, please contact one of our lawyers today or call us directly at 416-449-1400. By: Nicolas Di Nardo “This article is intended to inform. Its content does not constitute legal advice and should not be relied upon by readers as such. If you require legal assistance, please see a lawyer. Each case is unique and a lawyer with good training and sound judgment can provide you with advice tailored to your specific situation and needs.” By Fauzan SiddiquiBlog, Employment Law, Labour LawOctober 4, 2017June 18, 2020
Toronto Home Sales Continue to Tank This Fall Data shows that September continued to be a month of decline for the Toronto real estate market, with sales falling between 38 and 45 per cent compared to a year earlier. This marks the fifth month in a row of declining sales, which not too long ago had high home values and crazy sales numbers. Once the government stepped in to try and cool the market with new housing rules, such as the 15-per-cent foreign buyers’ tax, May was the beginning of the decline. In the current market, depending on the value of the home and the neighbourhood, some are selling quickly while some continue to sit there. Lauren Haw, CEO of Zoocasa says that “homes around $500,000 are on fire and selling very quickly,” while things are slower in the higher price ranges in the city. In the current market, Haw suggests, if you “miss the mark with your initial pricing, your house will go stale.” Haw also believes that the next 6 months will continue to be slow in Toronto, with no price collapse in Toronto’s future. Haw sees prices stabilizing, while other analysts see pressure on Toronto’s housing market due to rising interest rates, mortgage rule tightening which would require borrowers who put 20 per cent down or more to go through a “stress test” to see if they can afford their mortgage if rates were to increase by two percentage points. If you are in need of a real estate lawyer, please visit our Real Estate Page and contact one of our Real Estate Lawyers today. For any other legal services or inquiries, please contact Devry Smith Frank LLP directly at 416-449-1400 or visit our website for more information. By: Nicolas Di Nardo “This article is intended to inform. Its content does not constitute legal advice and should not be relied upon by readers as such. If you require legal assistance, please see a lawyer. Each case is unique and a lawyer with good training and sound judgment can provide you with advice tailored to your specific situation and needs.” By Fauzan SiddiquiBlog, Real EstateOctober 4, 2017June 18, 2020
Drug Evidence Excluded in Strip Search Case In a recent decision from the Ontario Court of Justice (R. v MacPherson, 2017 ONCJ 615 (CanLII)), an accused was facing charges of possession of crack cocaine for the purpose of trafficking and simple possession of marijuana under the Controlled Drugs and Substances Act. However, Justice Sheila Ray decided to throw out all drug evidence against him. Her ruling comes after a critical review of the events that took place prior to his arrest, the evidence given by the officers involved, and a close look at the right to not be subjected to an unreasonable search under the Canadian Charter of Rights and Freedoms. The lead up to the unreasonable search and seizure began with the police receiving a call regarding a car that had been driving erratically. Justice Ray states in her ruling that, the police “had good reason to speak with MacPherson at that point, in order to check his sobriety and documents, and if there was no issue, to let him continue on his way.” However, after seeing movement in the vehicle before they made their way to the car, officers believed the accused may have been hiding a weapon. As a result they searched the accused at the scene, pulling back his pants and boxers to expose his skin, where they located drugs stashed near his tailbone. In her decision, Justice Ray concluded that this search was in fact a strip search. She also stated that a simple pat down in the field would have been sufficient to verify if the accused had been hiding a weapon, and that there was no need to conduct a strip search, especially outside of the police station. In her words, “there was no urgency. Nothing in Mr. MacPherson’s pants was running away.” The Toronto Police Service does have a policy with respect to search of persons, and categorizes them as level 1 to level 4. Justice Ray noted that she felt at least one of the officers in the MacPherson case was not aware of the policy and that the officers believed their actions were appropriate at the time, and that the search was not a strip search. Search levels under the policy are defined as: Level 1: Frisk or a pat-down search of clothing, pockets, and does not include the removal of any clothing except outerwear such as jackets, hats and/or gloves/mittens Level 2: More thorough search that involves removing clothing that does not expose a person’s undergarments or the areas of the body covered by them. Removal of belts, footwear, socks, shoes, sweaters, extra layers of clothing, or the shirt of a male are included in Level 2 Level 3: Removal of some or all of a person’s clothing and a visual inspection of the body. More specifically, the removal of clothing that full exposes the undergarments or an area of the body normally covered by undergarments (genitalia, buttocks, women’s breasts) Level 4: Body cavity search conducted by a qualified medical practitioner See the full policy on “Search of Persons” here. In the 2001 case, R v Golden, the Supreme Court of Canada provided guidance with respect to strip searches by police and when they may be appropriate. The Supreme Court ruled that strip searches should only be conducted when there are reasonable grounds, as they are “inherently humiliating and degrading.” Such searches will only be reasonable where they are conducted as an incident to a lawful arrest for the purpose of discovering weapons in a detainee’s possession, in order to ensure the safety of the police, the detainee and other persons, or for the purpose of discovering evidence related to the reason for the arrest, in order to preserve it and prevent its disposal by a detainee. Strip searches should generally only be conducted at the police station except where there are exigent circumstances requiring that the detainee be searched prior to being transported there. In the MacPherson case, Justice Ray concluded that the strip search of the accused was an unreasonable search and seizure and that his Charter right had been violated. As a result, she excluded all evidence of the drugs seized by the police. This is one of a number of cases recently reported in the media, where police have been criticized for conducting strip searches. The issue has gotten so serious that the Office of the Independent Police Review Director is conducting a province wide review of police strip search practices. “This article is intended to inform. Its content does not constitute legal advice and should not be relied upon by readers as such. If you require legal assistance, please see a lawyer. Each case is unique and a lawyer with good training and sound judgment can provide you with advice tailored to your specific situation and needs.” By Fauzan SiddiquiBlog, Criminal LawOctober 2, 2017June 18, 2020