RC66 is the Canada Child Benefit Application. A newcomer to Canada, a new landed immigrant, or a returning resident needs to fill out this application and submit it to the CRA for the CRA to determine your child and family benefits and credits in Canada.
Based on this submission, CRA will determine your eligibility for the Canada Child Benefit and other benefits you may be entitled to.
You need to provide the following information:
As a newcomer or returning resident of Canada, the information provided on this form will be used to calculate your entitlement, if eligible, for the Canada child
benefit, the goods and services tax/harmonized sales tax (GST/HST) credit, the Canada Carbon Rebate, and any other related provincial or territorial programs
administered by the CRA.
To continue receiving benefits and credits, you need to do your taxes on time every year so that the CRA can calculate your payments, even if you had no
income in the year. If you have a spouse or common-law partner, they also need to do their taxes every year.
Resources used: Canada Revenue Agency
Underused Housing Tax (UTH) was implemented in Canada effective January 01, 2022. Under this implementation, foreign nationals and some Canadians were asked to report and pay 1% tax on the ownership of vacant or unused houses in Canada. The major was taken to bring down the housing prices in Canada by penalizing the foreign investors of vacant or unused houses in Canada.
All the owners of the residential properties affected by this new legislation were given until April 30, 2024, to report and pay the tax without penalties and interest for the tax years 2022 and 2023.
You can file a separate Underused Housing Tax (UHT) return or include it with your annual income tax return. You can pay tax, which is equal to 1% of the value of your property. If you are an excluded owner of vacant or unused houses in Canada, you do not have to file an annual UHT return or pay the UHT.
Since 2023 and subsequent tax year an individual who is a citizen or permanent resident of Canada has included in the list of excluded owner.
Resources used: Canada Revenue Agency | Income Tax Act of Canada
Disclaimer: Information in the post has been presented for a broad and straightforward understanding. This is not a legal advice. RKB Accounting & Tax Services does not accept any liability for its application in any real situation. You need to contact your accountant or RKB Accounting for further information.
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Canada Workers Benefit(CWB) – is a tax benefit that every individual and family gets from the Government of Canada if his/her or the family income is low. This is a refundable tax credit. A refundable tax credit is a credit that is either deducted if you have an income tax balance owing or refunded to you by cheque or direct deposit to your bank account.
Learn about Deductions and Tax Credits
You do not need to apply for the Canada Workers Benefit. Your accountant does an estimated calculation on Schedule 6 when preparing your income tax return. When your return is filed with CRA, CRA verifies this calculation and issues a refund to you if you have no more taxes payable.
The benefits paid to you are classified into two parts:
Are you eligible for Canada Workers Benefit?
Eligibility for Basic amount, major criteria:
Eligibility for Disability supplement:
How much you can get?
The amount you can get depends on your income level. The maximum amount you can get is $1,518 for Single and $2,616 for family. The moment your income reaches the above income threshold, your eligibility will become $0.00.
Do you know you can file your tax return online for free?
Resources used in this article: Canada Revenue Agency
Disclaimer: Information in the post has been presented for a broad and straightforward understanding. This is not legal advice. RKB Accounting does not accept any liability for its application in any real situation. You need to contact your accountant or us for further information.
Every Canadian resident must file an income tax return in Canada every year and pay, if any income tax payable or get a refund. The income tax filing is also important since based on the income reported on your tax return, the Canada revenue agency determines the eligibility of your benefits that you may entitled to. You may be eligible for the Canada child benefits, Canada carbon rebates, Trillium benefits, GST/HST credits, and more, but CRA will hold on to these benefits if you have not filed your income tax return.
If you have income tax payable and if you have not filed your tax return, you will be subjected to various penalties and interest. Apart from later filing penalties, you will also pay penalties for taxes due and installments due.
Paying Income tax by installments
The above rules also applies to Corporate Income tax installment payments. However, a corporation may pay income tax installments on a monthly or quarterly basis. A corporation may not have to pay income tax installments in the year of its incorporation.
We file an individual income tax return in Canada after the end of every calendar year. As a resident of Canada, you need to report your worldwide income. We report income from January to December in the tax return, subject to the following exceptions.
New immigrant-
A new immigrant report the taxable income from the date they have landed to Canada until December 31st. You are also required to report your income from January 01 till the date of landing but that is only for calculating your basic personal amounts and other benefits. The same rules apply to an individual when he/she becomes a resident of Canada in a tax year.
Non-resident of Canada-
A non-resident of Canada only reports income that are sourced from Canada. Generally, a withholding tax applies at the source of your income. That means income tax deducted at source and remitted to the Canada Revenue Agency. The non-resident has the option that they may not file a tax return since they already withholding tax remitted. They can also file an income tax return and claim refund if any.
Leaving Canada –
You need to report your world wide income from January 01 to the date you left Canada. If you assets left in Canada, a deemed disposition may apply and you may have to report capital gain or loss.
All residents of Canada reports their worldwide income on their income tax return. The form you use to report your income and deductions for the federal income tax purposes is T1 General and related provincial form for example in Ontario you use form ON428.
Personal income tax that you pay in Canada on your annual income have two components.
Each province in Canada levy income tax on the taxable income of a resident of that province. A province also levies income tax on a non-resident of Canada if the source of income is in that province. You are considered a resident of the province based on your residency status as of Dec 31st.
The income tax rates that a province levies on your personal income vary from province to province.
The province of Nunavut has the lowest income tax rate that a resident of Nunavut pays. The 2024 income tax rates and brackets are as follows:
| Tax rate | Taxable income threshold |
|---|---|
| 4% | on the portion of taxable income that is $53,268 or less, plus |
| 7% | on the portion of taxable income over $53,268 up to $106,537, plus |
| 9% | on the portion of taxable income over $106,537 up to $173,205, plus |
| 11.5% | on the portion of taxable income over $173,205 |
Like other provinces, Nunavut also have benefits for individuals and families.
If you were the resident of Nunavut, you file an income tax return in Nunavut and report your income and deductions on Form NU428.
Every resident of Canada needs to file an income tax return in Canada every year and report their worldwide income. On your income tax return, you not only report your income but also provide some information about your foreign assets and foreign ownership.
If you are late in filing your income tax return, which is T1 General Individual Income Tax and benefit return, CRA will charge you a late filing penalty. The late filing penalty usually applies when you have an income tax owed. Apart from your T1, you may also need to file T1135 for your foreign assets and T1134 for your foreign ownership. If you are late in filing this information return, CRA will charge you a $2,500 penalty. This penalty applies whether you owe any taxes or not.
Learn more about Foreign assets reporting
Learn more about Foreign ownership reporting
CRA gives you a chance in certain situations to come forward, and file under the voluntary disclosure program.
Voluntary Disclosure Program (VDP) encourages taxpayers when they have not filed their tax returns and any information returns on time.
If you have overdue returns, which may incur huge penalties and interest, you apply and file your returns under the Voluntary Disclosure Program. If you are eligible and if your VDP application is accepted by CRA, you may get relief from penalties and interest.
Voluntary disclosure program is used when you have your income tax return or any information returns that are over due a year.
Learn more…..
Canada Pension Plan (CPP) is the amount deducted from your each pay cheque subject to the annual limit. Your employer also contributes an equal amount to your CPP. Your contribution and your employer’s contributions both go to investment funds for growth. When you reach the age of 65, you are eligible to apply for your CPP benefit and get paid. The amount paid to you every year will depend on how much total you have contributed through your employment and self-employment.
Old Age Security (OAS) is funded by the Government of Canada. You do not contribute to your Old Age Security. You are eligible to apply for your OAS after the age of 65. The amount you will get every year from your OAS will depends how long have you lived in Canada after the age of 18.
Your Pension (CPP) and Old Age Security (OAS) payments are taxable for the income tax purposes in Canada.
At the end of the year, the Government of Canada reports your CPP and OAS on T4(P) and T4(OAS) to CRA and mails you a copy of the same.
If you get a pension from a foreign country, it will also be taxable in Canada if you are the resident of Canada.
Your Old Age Security (OAS) is funded by the government of Canada. You or your employer do not contribute to your Old age security. You are eligible to apply for your Old Age Security after the age of 65. You do not have to work in Canada to be eligible for Old age security. Your Old age security payments are based on your stay in Canada after the age of 18. Generally, based on your stay in Canada, which is 10+ years or 20+ years. Your stay in Canada will still be counted if you were temporarily out of Canada for vacation, etc. or working for a Canadian employer outside Canada or your working in a country that has an arrangement with Canada.
Normally, people receive their Old Age Security (OAS) after the age of 65. You can also request to delay your Old Age Security until the age of 70.
You get your Old Age Security at the age of 70, and you get the maximum monthly amount. There is no further benefit after the age of 70.
CRA may also send you letter that that you will be receiving your OAS or asking you to apply for your OAS.
You may also be eligible for the Guaranteed Income Supplement” if you are eligible for your Old age security payments.
Canada Pension Plan (CPP) – is your retirement planning. You contribute to your CPP either through your employment or through your self-employment. Your employer also contributes to your CPP an equal amount every year. When you are self-employed, you contribute both the amounts for yourself and as an employer. You can only contribute to your CPP up to the annual limit. This annual limit is revised and adjusted for inflation. You can also make an enhanced contribution to your CPP.
You are eligible to apply for your CPP if you have reached the age of 60.
Normally people apply for their pension (CPP) at the age of 65. However, you can apply for your pension as early as at the age of 65. You can also wait to apply for your pension at the age of 70.
When you apply for your pension At the age of 70 you get the maximum monthly amount. There is no further benefit if you apply for your pension after the age of 70.
You can apply for your CPP either online or by a paper application.
Goods and Services Tax/Harmonized Sales Tax (GST/HST)
Generally, you must register for GST/HST in Canada if your sales of taxable supplies in Canada exceed $30,000 in four consecutive quarters. You can also register voluntarily for GST/HST even if your sales have not exceeded the threshold.
If you are self-employed, you can call CRA to register for a GST/HST program account. CRA will give you a nine-digit business number with the extension “RT0001”. If you are incorporated, and once you register for GST/HST, you just need to use your nine-digit business number and replace the extension “RC0001” to “RT0001”.
Once you are registered for GST/HST, you must charge GST/HST on all your taxable supplies and mention the GST/HST number on all your invoices to your customer.
Your supplier charges you GST/HST if the supplier is registered for the GST/HST. The supplier must have a GST/HST number if he/she is registered for GST/HST with CRA. The supplier must state the GST/HST number on all invoices to the customer. Sometime you may want to validate the GST/HST number of your supplier.
Sometime your customer can also present you a GST/HST exemption certificate. In this case it is your responsibility to very the exemption document and validate the GST/HST Number.
A Canadian-controlled private corporation pays income tax only approx. 12.5% on its income. A Canadian-controlled private corporation is a corporation that is incorporated in Canada, and its majority of shareholders are residents of Canada. A Canadian-controlled private corporation has the advantage of using the small business deduction.
Small business deduction to a Canadian-controlled private corporation, allows to reduce effective tax rate to approx. 12.5% on its taxable income. The lower tax rate of a Canadian-controlled private corporation focuses on reinvesting its after tax profits into the business.
So the idea is that the after lower taxed money should remain the corporation. Any withdrawal or distribution from the corporation becomes taxable in the hands of the shareholders.
If you want to learn more about the corporate income tax, please click the below link or contact RKB Accounting.
When you are doing business in Canada you may need a CRA program account business number. This is only applicable when you are a self-employed. If you are doing business as incorporated your corporation must have business number for the corporate income tax program account. If you are self-employed, you only need the CRA program account business number when you hire an employee or when you want to register for GST/HST or you want to import-export a taxable goods.
The most common CRA program accounts are:
Your 9 digit CRA business number remains the same for all program account, however at end of the business number an extension of “xx-001” is added for the different program account. For example your GST/HST program account number will look like – 9 digit Business Number and RT 0001, for payroll “RT” will change to “RP.”
Once you are registered with a particular program account with CRA, you need to file the applicable tax return on or before the due date. For example you need to file a GST/HST return if you are registered for GST/HST. You also have the option to close this program account, suppose you have closed your business. Once you close the particular program account with CRA you will not require to file any returns. Again in future if you want to register for the same program account then CRA will reinitiate this program account and last 4 digit extension which was originally “0001” will change to “0002.”
You need to contact CRA if you need a business number. You can also obtain the business number online. Please click the link below to get a business number or contact RKB Accounting.
BIN stands for Business Identification Number. It is a nine-digit number that identifies your business with the Ontario Ministry of Government Services. The service Ontario issues this number when you register your business with Service Ontario to obtain a Master Business License.
You need to obtain a master business license from Service Ontario:
The service Ontario charges you a fee for issuing the master business license. The license is valid for five years, expiring which you will need to renew it again.
The BIN should not be confused with the BN (business number). These two numbers are completely different. The BN (business number) is issued by the Canada Revenue Agency and you use this number when filing and paying taxes.
BN stands for a business number. This number is issued by the Canada Revenue Agency. You have to contact the Canada Revenue Agency to issue a business number for your business. BN (a 9 digit business number) identifies your business as a separate entity with the federal and provincial government of Canada. You use this number when filing your GST/HST/QST returns or when you pay sales tax or CRA payroll remittances, or other taxes.
When you file your personal income tax return you use your social insurance number. Similarly when a corporation files its corporate income tax return it uses BN which is provided by the Canada Revenue Agency. If you are a self-employer and want to register for GST/HST or want to hire an employee, that’s where you need to contact CRA to issue you a BN.
When do you need a BN:
You can also get a BN online from the CRA website. Please click the link below or contact RKB Accounting.
All successful businesses have the challenge of doing succession planning. One of the tax tolls available is the Lifetime Capital Gains Exemption. This allows a qualified individual to transfer his/her qualified shares without paying income tax on capital up to a certain limit. Since this deduction is only available on the transfer of the qualified shares, a sole proprietor or partnership will not qualify for this deduction. One of the benefits of incorporating your business in Canada is to avail the Lifetime Capital Gains Exemption.
The Lifetime Capital Gains Exemption (LCGE) is a provision in the Income Tax Act of Canada that allows Canadian residents to shelter a certain amount of capital gains from taxation when they sell qualified small business corporation (QSBC) shares, qualified farm property, or qualified fishing property. Its main aim is to encourage entrepreneurship, investment in small businesses, and the preservation of family farms and fishing businesses.
There is a limit on this exemption which is adjusted for inflation every year. The limit for the 2024 tax year is $1,016,836. Since only half of the capital gain is taxable, hence effectively you get $508,418 as deduction from your taxable capital gain.
To learn more, please click the link below or contact RKB Accounting.
All the residents of Canada need to file an income tax return in Canada every year. In that return, you report your income and deductions; apart from that, you are also responsible for reporting your foreign assets and foreign ownership by the due date of your return.
If your business is incorporated, the corporation also reports, as stated above. The one difference between an individual tax return and a corporate tax return as to the tax year. An individual always reports on a calendar year basis. A corporation can choose any date as the year-end, which is also called the fiscal year-end.
When you have a cross-border business and investments, the foreign assets and foreign ownership reporting criterion may apply whether those assets and investments are under your personal name or under the corporate name.
In Canada, a foreign affiliate is a corporation that is located in a country outside of Canada and is directly or indirectly controlled by a Canadian corporation. Canadian corporations having foreign affiliates may have to follow particular rules and regulations regarding the reporting and taxation of income earned by these foreign affiliates. The objective of taxing foreign affiliates is to prevent the deferral of Canadian tax on income earned abroad by ensuring that the income of foreign affiliates is accounted for correctly in the Canadian tax system.
To learn more about the foreign affiliate reporting requirements, please click the link below or contact RKB Accounting.
When you file your tax returns, information returns, pay taxes, etc., information is stored on the CRA server. Once you authorize an individual (who can be your family member, an employee, a lawyer, a bookkeeper, or an accountant), he/she will have access to your tax information with CRA. The authorized representative can access your information either online or in a call with CRA.
When you hire an accountant to do your taxes or bookkeeping, you need to authorize your accountant on your CRA personal and or on your CRA business program accounts. Once you authorize your accountant, your accountant will have access to the account with CRA. Depending on the level of authorization you provide to your accountant, your accountant can view online your information stored on the CRA server, can discuss it with CRA, and or make changes to your returns and information.
The authorized representative – need to register with CRA and get his Rep ID and a user ID and password, before he/she can have an authorization to represent the client.
An accountant – Usually an account must already have a Rep ID and a user ID and password. In addition, if the accountant filing your tax and information return with CRA he must also have Efiler ID and password. The accountant has to pass a CRA screening for data privacy and security check to obtain this ID and has to renew this every year.
To learn more please click the respective link below or contact RKB Accounting.
if you are a fist time home buyer in Canada you can take the benefit of Fist Home Saving Account and also RRSP. First Home Saving Account has been introduced since 2022. RRSP has been available since many years. RRSP is a tax deferral program, used for retirement planning purposes, can also be used for buying your first home in Canada. First Home Saving Account program has been introduced exclusively for the first time home buyer.
It is always advisable to use the room of your First Home Saving Account and then RRSP if you are qualified first home buyer.
To learn more please click the link below or contact RKB Accounting.
The Canadian federal government implemented the FHSA program in 2022 to assist first-time home buyers in the country. The program is somewhat similar to RRSP, and you can now avail of it alongside RRSP starting from the tax year 2022. Under this program you can invest $8,000.00 in a year and use this money for the down payment of you first qualifying home in Canada.
To learn more about this program, please click the link below or contact RKB Accounting.
Every paid tax preparer in Canada must register with the Canada Revenue Agency and must pass the screening test of CRA.
A paid tax preparers in Canada help individuals and businesses prepare and file their income tax returns accurately and on time. They are knowledgeable about the Canadian tax system and regulations. Paid tax preparers include certified accountants, tax consultants, and specialists. They help clients gather financial information, maximize eligible deductions, and ensure compliance. Hiring a reputable tax preparer is advisable for accurate and complete tax filing.
HST stands for Harmonized Sales Tax. When we purchase a taxable goods or services in Canada, we pay to the seller, the price for the goods and services plus the applicable GST/HST. The seller of the goods and services, collects the GST/HST form us and remit these to the Canada Revenue Agency. Hence HST is basically an indirect tax which paid by us but CRA collects this through the seller. HST has two component. One is GST (Goods and Services Tax) which is a federal sales tax and the provincial sales tax. Instead of charging separately, many provinces have joined the Federal government program which is a Harmonized Sales Tax program. So when you pay 13% HST in Ontario, 5% GST goes to the Federal Government and 8% sales tax goes to the funds of the Ontario government.
QST stands for Quebec Sales Tax. Quebec has signed the Harmonized Sales program of the Federal government and hence we pay GST and QST separately when we buy a taxable goods or services in the province of Quebec.
If you want to learn more about GST/HST, please click the link below or contact RKB Accounting.
A tax treaty is an agreement or a memorandum of understanding between two countries to avoid double taxation. When a treaty is in place, you can claim a foreign tax credit for taxes paid in another country and when you are reporting the same income on your own country. Based on the tax treaty you can decide where the income be primarily taxed and taxes to be paid. If you report the same income in other country then you can claim credit for foreign taxes paid.
For example, Canada and USA has a tax treaty in place. If you are a resident of Canada and you also has a rental property in the USA, then you report your rental income primarily in USA, pay taxes in USA and when you report the same rental income on your Canadian income tax return, you can claim a credit for the taxes paid in the USA. As per the tax treaty between Canada and USA, the income from a immovable property is primarily taxed in the county where the property is located. Under the same tax treaty income tax paid in either country can be claimed as a foreign tax credit for the taxes paid in other country.
Please note that, both Canada and USA taxed the resident of their country for the world wide income. So in the above example if you have rental income in USA, you have to report that income on your Canadian income tax report. However to avoid the double taxation a treaty between Canada and USA has been signed and based on this you can claim a foreign tax credit.
If you want to learn more about the Canada-USA tax treaty, please click the link below or contact RKB Accounting.
A T2 is a corporate income tax return (form).
Every corporation registered in Canada must file an annual corporate income tax return after its year-end. As opposed to a personal income tax return where the income is reported on a calendar year basis, a corporation reports its net income based on its own selected year-end basis. A corporation can choose any day as its year-end and continue to report net income based on the chosen year-end and every year after that. A corporation can request that CRA change the year-end date.
A Corporate Income tax return (T2), generally includes the following information:
There are various other information that you may need to provide depending on the type of corporation and the nature of transactions.
You can file your T2 corporate income tax return either electronically or download the T2 form from the CRA website.
If you want to know more about corporate taxation in Canada, please click the link below or call RKB Accounting.
Every person resident in Canada, for income tax purposes, must file an income tax return every year. This return is prepared based on a calendar year.
A T1 is a form on which you report your income, report deductions to reduce your taxable income, calculate your income tax payable, and report credits to reduce your income tax liability. A T1 is called a Personal income tax and benefit return.
If you are a resident of Canada, you report your worldwide income on your T1. You also report your foreign assets and foreign ownership if that applies to you. T1 also includes your provincial income tax return, and you file your T1 with your provincial income tax return. If you are a resident of the province of Quebec, you file your Quebec provincial income tax return separately.
Your T1 General Income Tax and Benefit Return includes information that help CRA to determine your various benefits that you may be entitled to. If you are married or in common law, it is advisable that you file your T1 along with your spouse. You may need to note that most of your benefits are based on your family income. Your T1 also includes information about your dependents.
You can file your T1 General Income Tax and Benefit Return either electronically or in paper form.
If you want to learn more about your personal income tax in Canada, please click the link below or contact RKB Accounting.
A T5 stands for Statement of Investment Income. Usually this document is issued by a bank or a corporation to report interest income or dividends paid in a calendar year. This documents contains the information, including issuer’s and recipients name and address and recipients social insurance number or business number. A T5 contains boxes where the issuer has to fill up the information as indicated below.
T4A stands for Statement Pension, Retirement, Annuity, and Other income Paid. This document states the income paid to a person, other than an employee. This document contains information, including name and address of the payer and payee, payer’s business number, payee’s social insurance number, and the amount of income paid in a calendar year are reported in the appropriate box. This document is very common in real estate business. The brokerage or the realty, reports the commission paid to the real estate broker on box 048. This document is issued by the payer after the calendar year, mailing a copy to the payee and a copy to the Canada Revenue Agency.
The payee needs his/her copy of T4A after end of the calendar year to report his income on his/her personal income tax return. Usually when a payee receives fees for services render, he/she can claim certain business related expenses to reduce his/her taxable income. If you want learn about the most common expenses that you can deduct, please click the link below or contact RKB Accounting.
The most common income reported on a T4A, includes:
T4 stands for Statement of Remuneration Paid.
It is the responsibility of the employer to issue a T4. When an employer hires an employee, the employer deducts CPP, EI, and taxes from each employee’s pay cheque. After the end of the calendar year, the employer prepares the T4.
After the end of a calendar year, your employer issues T4, mailing a copy to the employee and a copy to the Canada Revenue Agency. This document (T4) states the name and address of the employee and the employer, the employee’s social insurance number, the total salaries and wages paid to the employee in the calendar year, CPP or QPP deducted, Employment insurance deducted, and Income tax deducted. This document also states the employee’s insurable and pensionable earnings. There are various other boxes on this form that are used for other reporting, such as if you have an employer’s employer-sponsored pension plan or any benefits paid to the employee.
An employee needs a copy of his T4 after the end of a calendar year to report his income on his personal income tax return. For both, the employee and the employer, this document is not shared with a third party unless required, as it contains confidential information.
The deadline to file the copy of T4 with CRA is 28th or 29th Feb of the following year. You can prepare a T4 in QuickQooks or any other payroll software if that software has that provision. You can also download the T4 pdf copy from the CRA website, a fillable copy.
To view a sample copy of T4, please click the link below or contact RKB Accounting.
A chatbot is a program mostly integrated with artificial intelligence (AI) or in other words ChatGPT. This program has the capabilities to interact with human. Chatbot can understand human inputs and provides answers as if written by a human. Since Chatbot uses artificial intelligence (AI) it can provide answers based on its own knowledge. As of today December 02, 2023 all of us know what is ChatGPT. Simply to understand a Chatbot, is another platform where you can seek answers instead of asking at ChatGPT url. Chatbot are platforms generally we have implemented on our website or on our specific software which are available to general public. You have the ability to ask questions hear instead on going to ChatGPT url.
If you have a website, you create and integrate a chatbot, which can answer questions to your website visitors based on either the information what you have on your website or using the artificial intelligence (AI), as of today commonly known as ChatGPT.
Made in Canada is an example of TaxGPT. Please visit our blog “Can ChatGPT help in my personal income tax planning in our blog/Canada or click the link below.
This is really important. You might have been using search engines like Google or Bing, etc. to ask your tax related questions. These search engines have been providing you links where someone has already posted an article or blog to your questions. ChatGPT is different and it answers your questions not based on what someone has posted so far but it answers based on its own knowledge. It is like the answer is provided a professor or an expert.
RKB Accounting strongly reccomends that taxpayer should take help of ChatGPT whenever they may need it. We are not discouraging that you should not ask you accountant, but our reccomendations are based on the ease that you may have when asking ChatGPT. We also recommends that before using the answer in your tax situation you need to consult your accountant for various reason.
If you want to learn more about ChatGPT which can help you in your tax planning, please refer to the link below.
The section 85 election allows you to transfer your personal property to your corporation, without triggering a capital gain transaction in which case if you have an income tax liability, it can be avoided
Most commonly this situation arises when you incorporate your self-employed business into a corporation.
If you want to know what are the benefits of incorporating you business, please click the link below.
When you are self employed, you are a legal entity, who owns the assets and liabilities of your self employed business. Once you incorporate, your corporation becomes a separate legal entity. Now if you want to transfer your assets and liabilities of your self employed business to your corporation, it triggers a sale or deemed sale of assets to your corporation and hence may trigger a taxable event. Unless you take the advantage of the Section 85 election, you may have capital gain income taxes payable.
To learn more about section 85 election, please refer to the link below or contact RKB Accounting.
The answer is Yes. You can include some of your income tax deductions and income tax credits in your personal income tax planning. A careful planning can save your on your personal income tax bill for a short term and for a long term.
Weather you are a salaried employee, self-employed, or have an incorporated business, a careful tax planning of your short and long term income tax deductions and credits can save you lots of taxes.
To learn about the most common tax deductions and credits, please refer to the link below or contact RKB Accounting.
Income tax deduction: Income tax deductions reduces your taxable income. Generally, your gross worldwide income minus eligible deductions is considered your taxable income. On this taxable income amount, your income tax liability is computed. The end result shows you the total income tax payable or refund after this step.
Income tax credit: Income tax credits are the credits that you may be eligible to, and reduces your total income tax liability. There are two types of income tax credits. 1. Non-refundable tax credits, and 2. Refundable tax credits.
A non-refundable tax credit is a credit which reduces your total income tax payable. You may be able to use this credit if you have an income tax payable. If you do not have an income tax payable then you can not use this credit.
A refundable tax credit is a credit, which first reduces your total income tax liability. If you do not have an income tax payable then CRA pays you the amount of your refundable tax credits.
For a list of most common income tax deductions and income tax credits, please click the link below or contact RKB Accounting.
When you hire an employee, you need to run payroll when you pay you employee. You can use the CRA online payroll calculator to run your payroll. This is available for free. However this could be complicated when you want to provide year to date information to your employee or want to prepare T4 at the end of the year.
There are several paid software available to do this job, like Quick Books online and desktop, sage 50, Fresh Books, etc. There are also several payroll service providers, like ADP, Wagepoint, Humi, etc. These providers also provide facilities where they can pay your employees through direct deposit and pay CRA remittances on your behalf.
You may have certain other obligations, if you want to learn more please click the link below.
The answer is Yes. You can file it paper based or use any software to prepare your T1 and file it electronically. You should also be aware of the deadlines. If you miss the deadline and you income tax payable or you have some other reporting requirements, you may end up paying interest and penalties.
You can also take help, if you have any questions from ChatGPT.
Please visit the link below to learn more.
You may need to file your income tax return with the Canada revenue agency every year due to several reason.
Please click the link below to understand the most common reasons that may apply to you.
A Canadian Controlled Private Corporation is a corporation who has more than 50% shareholders who are residents of Canada. A Canadian Controlled Private Corporation is a corporation pays lower income tax on its profits as opposed to a foreign corporation. A Canadian Controlled Private Corporation claims small business deductions which allows them to pay lower income tax and hence reduces their income tax liability.
To learn more about Corporate Income Tax in Canada, please click the link below.
Every business incorporated in Canada or foreign corporation doing business in Canada has to pay income tax on it’s profits derived from the business in Canada for the year. In order to determine the income tax liability you have to prepare a T2 which is the Corporate income tax return and file with the Canada revenue agency. A corporation incorporated in Canada and controlled by the residents Canada pays lower taxes then a corporation controlled by foreign persons.
Please click the link below to learn more about the Corporate Income Tax in Canada.
When you file your income tax or gst/hst returns with CRA, CRA issues you a notice of assessment. In this assessment CRA may assess your tax liability or refund as you filed or there might be a difference. If you do not agree with the assessment done by CRA, you may file a notice of objection with CRA.
Please visit our blog “Do you have an objection” for more details.
Yes. In both the cases you need to charge gst/hst if you are registered for gst/hst. You need to charge gst/hst at the earliest of the invoice date or the payment date.
A consignment sale occurs when you send the goods to your customer and your customer will sale these goods to the final customer or consumer. The ownership of the goods remains with you until certain conditions are met.
Under the installment sale you send the goods to your customers and your customer pays in installment. The ownership of the goods passes to your customer immediately.
When you receive deposits from your customers towards purchase of a taxable supplies, you do not charge gst/hst on deposit collected from your customers.
However, when your customer does not make the purchase and under your right you forfeit the deposit amount, you need apply (pay) gst/hst on the forfeited amount. In this case the forfeited amount is considered inclusive of gst/hst.
Tips or gratuity you earned directly from your customers are added to your income and these are taxable for the income tax purposes. When you get tips through your employer, your employer need to add that amount on your T4.
If you are registered for gst/het, you need to collect gst/hst on all your taxable goods and services. A tips or gratuity that is freely given to you by your customers are not subject to gst/hst. However, when you add tips or gratuity on the bills to your customer as mandatory or advised are taxable under gst/hst.
Usually, when many Canadians look to expand their business, the first thing that comes to their mind is the United States of America. This could be true for those who are close to the border. The next step is to form an entity in the United States. Generally, we choose to create an LLC or a C. Corporation in the USA. However, these forms of entities in the USA may be better for a Canadian resident from the cross-border tax perspective. However, once the decision is made, Canadians will have a significant reporting requirement on the Canadian side of the border.
A Canadian resident Individual, a corporation incorporated in Canada, or a partnership or a trust in Canada must disclose their ownership in the foreign entities. If that applies to you and you have failed to report, the penalty may range from $2,500 per year to $12,000.
The reporting will/may include basic information about your foreign affiliate and all of your foreign affiliate’s financial information. In this case, the foreign affiliate is referred to as an entity registered in the United States, of which you have direct or indirect ownership.
RKB Accounting, a cross-border tax expert, can help comply with these critical tax issues.
Please visit our blog “Reporting Requirements for Foreign Affiliates” for more information.
You get a 20% tax credit on your accommodation expenses when you book a vacation rental in Ontario in 2022. The maximum credit you can claim is $200 which is 20% of your $1,000.00 vacation rental expense. This was introduced by the honorable Doug Ford government to boost the Ontario truism industry affected by COVID restrictions.
Some major refundable tax credits are….
Non-refundable credits are credits that only reduces your income liability. If you do not have any income tax payable left on your tax return, you loss any unapplied balance in your non-refundable tax credit. This could be an example of a good tax planning tool that when you want to invest in your RRSP, you need to make sure that first your are using all your non-refundable tax credits.
Refundable tax credits you get as a refund or it paid to you if you are eligible even though you do not have any income tax payable on your tax return.
December 15, 2022, Department of Finance, Ottawa introduces the Multigenerational Home Renovation tax credit with effect from January 1, 2023. When you establish a secondary suit in your house to accommodate a senior or an adult who is disable in your family and spent up to $50,000, you can get 15% of this amount which is up to $7,500.00 as tax credit. This is non-refundable tax credit.
If your business name is different than your legal full name, you are required to register your business name with the province and obtain a master business license for a term. You may need to renew this license after the expiry of the term. You may also choose to incorporate your business name either provincially or federally in which case you need not to obtain a master business license.
If you are starting new, you may also follow the links below to learn more….
Basic personal amount is a threshold amount for individual income tax purposes and income up to this amount is exempt from income-tax. This federal and provincial threshold are normally different. Each province has its own threshold amount.
Provincial
For the tax year 2023 if you have income up to $11,865.00 in Ontario, you do not have to pay provincial income tax. This threshold amount for 2023 income-tax is $21,003.00 if you live in Alberta.
Federal
The federal threshold for 2022 tax year was $14,398.00, for the tax year 2023 it was $15,000.00 and for tax year 2024 it is going to $15,705.00. The federal and provincial threshold amount is adjusted every year for inflation. Please follow our NEWS CANADA for an update.
Also when you hire an employee, the employee need to provide you Form TD1 for the federal and provincial. The basic personal amount exemption limit applies to each individual filing taxes in Canada. However, it is important to note that you can transfer your basic personal amount exemption limit to your spouses income tax return if your income is below these thresholds. Either you can transfer all your BPA limit to your spouse if your income is nil or you can transfer the balance if your income is above zero but below the threshold.
Yes, you can but you may have to pay tax. A non-resident of Canada can invest in TFSA (Tax Free Saving Account) if he/she is 18 years of age or above and has a valid Social Insurance Number (SIN) in Canada. However, you have to pay tax every month which is 1% of the amount that you have invested in your TFSA (Tax Free Saving Account) as long as you are a non-resident of Canada.
The options to invest in your TFSA (Tax Free Saving Account) is limited. You can only invest in Cash, mutual funds, stocks and securities that are listed on a stock exchange, government or corporate bonds, guaranteed investment certificates (GIC), and certain shares of small business corporations.
If you have received a collection notice or a collection call, or if you are not able to pay your personal or business taxes, arrears or balance owing to CRA, we can talk to CRA on your behalf, to negotiate and make arrangement.
Only if you own more the $100k properties outside Canada. If you fail to declare the penalty is $2,500.00 every year. This applies to all Canadian residents for tax purposes. To learn more please visit “Reporting more than 100k properties outside Canada.”
If you have build your new house or have substantially renovated or have made a major addition, you my be entitled to claim the Federal HST Rebate. You claim is limited to the amount of federal HST that you have paid on the land, construction materials, labour, and to the contractors.
However, to be eligible to claim the federal HST rebate the fair market value of your house should not exceed $450,000.00. If the fair market value of your house exceed $450,000.00, you still be eligible to claim Ontario GST Rebate if your house is in Ontario.
If you are eligible, the maximum Ontario GST you can claim are limited to $24,000.00 if you have paid HST on the purchase of your land otherwise the maximum claim is limited to $16,080.00.
If you have build your new house or have substantially renovated or have made a major addition, you my be entitled to claim the Federal HST Rebate. You claim is limited to the amount of federal HST that you have paid on the land, construction materials, labour, and to the contractors.
However, to be eligible to claim the federal HST rebate the fair market value of your house should not exceed $450,000.00. If the fair market value of your house exceed $450,000.00, you still be eligible to claim Ontario GST Rebate if your house is in Ontario.
CRA is responsible for maintaining a fairness and integrity in the Canadian tax system. You need to respond to CRA on a timely basis with the appropriate, books and records and documents. CRA ensures that you have paid the right amount of taxes and the appropriate amount of taxes have been refunded to you that your are entitled to. Please follow the link Business audits to know about the process, your rights and responsibilities.
You can get information about all the following program account that you have registered with CRA. You can view your filing status and the balances owing
or the payments made.
You can sign up for CRA My Account or CRA My Business Account.
Once you sign up for CRA My Account, you will be able to access about your personal tax information. Your personal tax information includes your personal income tax, RRSP, TFSA, etc.
If you sign up for CRA My Business Account, you will be able to access your business tax information, which includes your payroll program account and GST/HST program account.
You can sign up for CRA My Business Account through this link on the CRA website. You need to provide your social insurance number, your date of birth, your postal code, and some information from your last filed income tax return. You will also create your user ID and password and answers some security questions. CRA has made it mandatory for multi factor authentication, hence either you need to provide your mobile number or download a passcode grid.
Once you signed up for CRA My Business Account then you can add your business number that you manages. If you have multiple business numbers for your self employment account as well as your corporate tax accounts. At this portal you will be able to access all your business that you are authorized.
You can sign up for CRA My Account through this link on the CRA website. You need to provide your social insurance number, your date of birth, your postal code, and some information from your last filed income tax return. You will also create your user ID and password and answers some security questions. CRA has made it mandatory for multi factor authentication, hence either you need to provide your mobile number or download a passcode grid.
Once you signup for the CRA My Account, log in and authorize your tax representative. You will need your tax representative Rep. ID. You add or remove your tax representative any time once you have the access to CRA My Account.
You can sign up for CRA My Account through this link on the CRA website. You need to provide your social insurance number, your date of birth, your postal code, and some information from your last filed income tax return. You will also create your user ID and password and answers some security questions. CRA has made it mandatory for multi factor authentication, hence either you need to provide your mobile number or download a passcode grid.
CRA, The Canada Revenue Agency, is the administering body of the ministry of finance under the Government of Canada or the Federal Government or Provincial Government. The federal and provincial government imposes taxes on citizens, residents, and businesses, and CRA administers them. The national and local governments also provide benefits, and CRA issues them.
Algeria – Argentina – Armenia – Australia – Austria – Azerbaijan – Bangladesh – Barbados – Belgium – Brazil – Bulgaria – Cameroon – Chile – China (PRC)1 – Colombia – Croatia – Cyprus – Czech Republic – Denmark – Dominican Republic – Ecuador – Egypt – Estonia – Finland – France – Gabon – Germany – Greece – Guyana – Hong Kong – Hungary – Iceland – India – Indonesia – Ireland – Israel – Italy – Ivory Coast – Jamaica – Japan – Jordan – Kazakhstan – Kenya – Korea, Rep of – Kuwait – Kyrgyzstan – Latvia – Lithuania – Luxembourg – Madagascar – Malaysia – Malta – Mexico – Moldova – Mongolia – Morocco – Netherlands – New Zealand – Nigeria – Norway – Oman – Pakistan – Papua New Guinea – Peru – Philippines – Poland – Portugal – Romania – Russia – Senegal – Serbia – Singapore – Slovak Republic – Slovenia – South Africa – Spain – Sri Lanka – Sweden – Switzerland – Taiwan2 – Tanzania – Thailand – Trinidad & Tobago – Tunisia – Turkey – Ukraine – United Arab Emirates – United Kingdom – United States – Uzbekistan – Venezuela – Vietnam – Zambia – Zimbabwe
Signed but not yet adopted – Belgium – Lebanon – Namibia
Under negotiation – Australia – Brazil – China (PRC) – Germany – Malaysia – Netherlands – San Marino – Switzerland
Enhanced financial account information reporting is a program under which the Canada Revenue Agency shares your information with the United States, and the Internal Revenue Service in the United States shares with Canada. Under this program, all financial institutions must provide information and have certain reporting obligations.
If you are considered a resident of Canada for tax purposes, you need to report your worldwide income on your Canadian income tax return. You need to report income from other countries outside Canada. Canada has tax treaties with several countries in the world, and based on that, your income in those countries may not be taxable in which that country may ask you to provide a “Certificate of residency” or proof of your residency in Canada.
The CRA issues a notice of assessment (NOA), which shows the CRA assessment of your tax return filed. Usually, CRA mails you the notice of assessment after few weeks of your filing. However, you can obtain your notice of assessment from CRA “My Account.” Please follow the link either to register for my account to sign in with CRA. CRA My Account. A tax professional or a authorize representative can also help you getting your Notice of Assessment.
A notice of assessment shows your tax payable or refund status, this notice also explains the amount you can invest into your RRSP in the next year and the amount you can contribute to your TFSA. CRA will also explain if they have made any adjustments to your income or on your deductions.
Usually the bank asks you to provide a notice of assessment when you apply or renew your mortgage. A notice of assessment helps you plan your next years RRSP and TFSA.
Yes, you can if your spouse helps you in the business or helps you manage the office and administration, etc. for your business. You can pay a reasonable amount from the business. You can pay that either as a part-time or full-time employee or as a self-employed contractor. If you are paying as an employee then you do not need to deduct EI as your spouse will not be able to claim employment insurance. The income your spouse receives, he/she needs to report on his/her annual income tax return.
Exempt supplies means those supplies are never taxable for GST/HST purposes. Zero-rated means the supplies are taxable, but in specific circumstances like “export,” they are zero-rated. If you are supplying goods and/or services that are exempt for GST/HST purposes, you can not claim input tax credit (ITC) even if you are registered for GST/HST in Canada. If you are supplying goods and/or services that are taxable but in your case it is zero rate as you are exporting them, you should be able to claim input tax credit (ITC) on the expenses that you have incurred. Please visit our Canada blog for “GST/HST” for more information.
You must register for GST/HST if your business is providing taxable goods or services within Canada and your revenue from all taxable supplies exceeds the threshold in four consecutive months. If you are exporting your taxable goods and services outside Canada, you do not need to register for GST/HST even if you exceed the threshold.
Please visit our Canada blog for “GST/HST” for more information.
When you exceed the above threshold you must register for GST/HST in Canada and charge GST/QST/HST to your customer as per the applicable rates. As recently announced by CRA, you must register for GST/HST if you are providing ride share, taxi, limousine, etc. services in Canada irrespective of the threshold.
You can also register for GST/HST “voluntarily” if you supplying taxable goods or services in Canada even if you have not crossed the threshold.
We encourage our clients to register for GST/HST.
Our services include helping you registering for GST/HST and QST.
You do not have to pay WSIB when you are paying salaries and wages to senior management. Senior management is not covered by WSIB. WSIB, as it stands for “Workers Safety and Insurance Board” provides insurance benefits to a worker who is injured during his employment hours. If you are a self employed person, you can contact WSIB if they can cover you for the accidental benefits, in which case they will ask you to pay the premium. For further information please visit “Hiring an employee.”
WSIB stands for “Worker Safety Insurance Board. The Worker Safety Insurance Board provides accidental insurance to your employees and workers.
The employer needs to report the gross insurable earnings and pay the premium as per the prescribed rate every month, quarter or annually. To learn more, please visit our Canada Blog for “Hiring an employee.”
Once your employee meet with an accident or injured while working, you need to report this to Worker Safety Insurance Board. WSIB also helps employer how to improve safety at your work place and educate employees for safety standards.
CPP is the Canadian Pension Plan contribution that an employer is responsible for deducting from each employee’s pay cheque and contributing employer share. To learn more, please visit our Canada Blog for “Hiring an employee.”
When a employee retires usually at the age of 65, he can apply for CPP and will receive CPP for the rest of his/her life. CPP is a taxable benefit. If an employee is eligible for CPP he can receive his CPP amount any where in the world. The employee may also apply and qualify for further benefits.
If you are paying salary and wages to your spouse, you do not need to deduct and pay employment insurance. Service Canada will not cover your spouse for an EI claim. To learn more, please visit our Canada Blog for “Hiring an employee.”
EI is the employment insurance premium that an employer is responsible for deducting from each paycheque of the employee and contributing employer share. Employer stop deducting employment insurance in a year when the employees gross wages has reach the maximum limit. To learn more, please visit our Canada Blog for “Hiring an employee.”
Employment insurance provides benefits to employees when they loss their job without their own fault. Employment insurance Canada also assists employees who loosed their jobs in getting further education and training which can help employee in finding a new job or starting a new carrier or become a self-employed.
No. That is your personal use. You can only claim mileage when using the vehicle for business purposes. For e.g., visiting customers, suppliers, accountants, etc. Please visit our Canada blog “Motor Vehicle Expenses CRA” to learn more about this topic.
Yes. You can write off your down payment over the period of the lease term. Under the financing arrangement, you claim amortization hence you can not write off the down payment. Please visit our Canada blog “Motor Vehicle Expenses CRA” to learn more about this topic.
Assuming you will be parking the vehicle at your residence over the night, it is not advisable to buy the saloon car under the corporation. Stand charge may apply, which will be added to your income. Please visit our Canada blog “Motor Vehicle Expenses CRA” to learn more about this topic.
No. You can claim it as a medical expense on your personal income tax return. For further information please visit our Canada blog for “36 small business expenses you can claim.”
No. You can only write off as your business expenses if the policy was required as per the financing agreement for the business finance. For further information please visit our Canada blog for “36 small business expenses you can claim.”
Yes. You can take loan from the corporation, but you have to repay within 365 days otherwise that will be added to your income as Dividend.
Yes, however, the corporation does not have to deduct EI and contribute; the corporation does not have to pay WSIB.
Yes, the shareholder and the corporation have to file an election under section 85 of the Canada Income Tax Act. To know more please visit our Canada blog “Transfer of assets between the Shareholder and the Corporation.”
The dividend is the corporate profit declared by the corporation from its retained earnings and paid to the shareholder. The shareholder includes dividends as income on their tax return and pays tax on that. Dividend is not a tax deductible expense on corporation’s income statement. The corporation pays dividends to its shareholder from the after tax profits.
Hence, Dividends are tax twice. Once the corporation pays tax on its income and then the shareholder reports as dividend income on his tax return and pays income tax on it. However, when the shareholder is reporting the Canadian dividends as income he also get “Dividend Tax Credit” on his tax return.
While structuring and planning for your corporate tax, you may need help from a tax professional. Our tax services include a proper tax planning since the begging of the corporate fiscal year.
No, an annual return is filed with Corporation Canada if it is a federal corporation, and with the province in which your business is located. The income tax return is filed with CRA only for income tax purposes. Failure to file an annual return may result in dissolution of your corporation.
The best province is the province in which your business is located. However, the following provinces allows a non-resident Canadian to incorporate. These provinces are British Columbia, Nova Scotia, New Brunswick, Quebec and Ontario.
Depending on your situation, in general, federal incorporation is better than provincial. To learn more, please visit our Canada blog “What are the primary business structures in Canada?”
Major benefits are limited liability protection, name reservation, and lower taxes for a Canadian Controlled Private Corporation. To learn more, please visit our Canada blog “What are the primary business structures in Canada?”
No. You may continue as self-employed. However, if you want to take advantages of incorporation get in touch with your accountant for further advice or to learn more please visit our Canada blog “What are the primary business structures in Canada?” https://www.rkbaccounting.ca/what-are-the-primary-business-structures-in-canada/
You need to have at least 25% of your Board of Directors resident in Canada to incorporate a Federal Corporation in Canada. There are few provinces, including Ontario allow a non-resident to incorporate provincially. To learn more, please visit our Canada blog “What are the primary business structures in Canada?” https://www.rkbaccounting.ca/what-are-the-primary-business-structures-in-canada/
Only if you own more the $100k properties outside Canada. If you fail to declare the penalty is $2,500.00 every year. This applies to all Canadian residents for tax purposes.
Foreign tax credit is the deduction from your total taxes payable on your Canadian tax return. You can claim foreign tax credit if you have paid income tax to another country with whom Canada has a tax treaty.
If Canada has a tax treaty with another country, you will be eligible to claim foreign tax credit to avoid double taxation issues.
It depends on your tax residency status. If it is determined that you are resident of Canada for tax purposes, you file your income tax return in Canada.
All residents of Canada, for tax purposes, have to report their worldwide income in their income tax return, irrespective of their citizenship or immigration status. If your residency status is determined as a non-resident of Canada for tax purposes, then you do not have to report your worldwide income.
The CRA issue a notice of assessment (NOA), which shows the CRA assessment of your tax return filed.
By the 60th day of the following year unless it falls on weekend or a nation holiday in which case the next business day will be the deadline.
This is a tax deferral retirement saving plan. When you contribute to your RRSP within your allowable limit, the amount you contributed is deducted from your total taxable income. The year you withdraw money from your RRSP, the amount you withdraw is added to your total taxable income. To learn more, please visit our Canada blog “RRSP Tax Planning.”
No. You contribute to fund your children university education as per the specified limit and the Government of Canada also contribute as a government grant to your children RESP. The amounts contributed by the Government of Canada as a grant will be taxable in the hand of your child when they withdraw.
Bonus can be a very good corporate tax planning tool, when the shareholders wants to withdraw profits from their corporations in Canada. You can avoid the penalties and interest on late payment of withholdings taxes on the bonuses paid to your shareholders. On the regular salaries and wages paid to the shareholders, you need to withheld tax cpp, match the cpp employers contribution, pay the CRA payroll remittances on a regular basis. Usually, for a monthly remitter, the payroll remittances are due by the 15th of the following month. If you do not pay by the due date CRA will charge a penalty and interest. The amount of penalty increase as you repeat you defaults. If you are paying bonus to your shareholder you can the withholding taxes within the six months from the date of the bonuses declared to your shareholders.
Withdrawing profits from the corporation involves proper tax planning. You should consult with a tax professional. We provide corporate tax planning services to our corporate clients since the beginning of their corporate fiscal year.
You may need to plan before you fall into double taxation or loss some benefits and exemptions. Your tax status may change from resident to non-resident. However, you will still be responsible for paying income tax on your income from Canadian sources. You may be subject to non-resident withholdings taxes.
TFSA is your “Tax Free Saving Account.” You can open an account with a financial institution to deposit the money within your contribution limit and room for the year. Any income generated in this account is tax-free throughout your life time. However, you have to be 18 Years of age and a with a valid Social Insurance Number (SIN). The amount you can contribute to your tax free savings account is based on your contribution limit which is communicated to you by Canada Revenue Agency every on your notice of assessment. If you contribute more than your limit, Canada Revenue Agency will charge you a penalty.