As 2017 draws to a close, Canadian businesses are making plans to celebrate another year with their employees and clients.
Scott Klein, CPA, CA, LPA and Partner at Millards Chartered Professional Accountants in Brantford says that the end of the year is also a good time for companies to review their fiscal plan for minimizing tax.
“While taxation can be complicated and most businesses trust the long-term tax strategy guided by their professional accounting team, we encourage our clients to stay informed about changing tax rules and to look for new or missed tax saving opportunities.”
Here are 4 year-end tax tips that offer timely tax advice for Canadian companies.
1. Deductible Holiday Parties
While the deductibility of business meals and entertainment expenses is generally 50%, social events provided for your employees are 100% deductible.
There are some caveats.
“You must not exceed six events per year and the event must include all of your employees.”
Another major consideration is the cost of the event per person.
“You’ll want to keep the cost below $100 per individual as any event with a cost of more than $100 per employee is viewed by the CRA as a taxable benefit and must be declared in the employee’s income.”
Ancillary costs like the cost of transportation home must be included in the sum so make sure you factor in all of the event costs per employee to remain under the $100 total.
2. Maximize Income Splitting In 2017
As Millards has reported previously, the Department of Finance released proposals on July 18th targeting income splitting through the use of a private company. Income splitting, sometimes known as “income sprinkling,” is a tax-planning arrangement that provides for a redistribution of income between members of the same family.
“The draft legislation is pending but we anticipate that the revisions will limit the current and widely adopted strategy of business owners splitting income with their family members. This change will most likely occur in 2018 so you should consider maximizing income splitting in 2017.”
One way to do so is to pay dividends from your private company to adult family shareholders.
3. Buy Capital Assets Before The End Of The Year
Are you planning on purchasing capital assets for your business soon? If so, consider making the purchase before year-end.
“You are entitled to claim one-half the usual amount of tax depreciation to reduce your business’ income in this fiscal year providing assets are acquired and in use before your fiscal year-end.”
You might consider purchasing capital assets even if your business is in a loss position this year. Buying the asset before year-end will let you claim a full year’s CCA in 2018.
4. Delay The Sale Of Accrued Gain Assets Until After Your Year-End
Consider delaying the sale of capital assets with accrued gains until after your year-end.
“This strategy has two benefits. First, you’ll be able to claim one additional year of CCA. Secondly, delaying the sale of accrued gain assets will let you postpone the inclusion of any recaptured CCA and capital gains in taxable income by one year.”
If capital gains are expected on the sale of property or investments, we would suggest that you consider deferring any planned dispositions to the beginning of the following year.
“This will also postpone the related tax by a full year.”
For over 20 years, Scott Klein has been assisting clients with bringing clarity to accounting requirements, personal corporate tax filings and Business/Technology planning. His practice areas include accounting & audit services, corporate & personal tax services as well as estate planning.