TaxMatters@EY – May 2012

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Tax issues affect everyone. To help you get up to speed on the latest hot topics, the May issue of Canada’s TaxMatters@EY is now available. There are new rules on prohibited investments in RRSPs and RRIFs that could mean you have to pay more tax, and fast-approaching deadlines to apply for relief.

This monthly bulletin includes recent tax news highlights, resources and publications.

The May issue also features:

  • Customs valuation and transfer pricing — is concordance coming?
  • Compensating volunteers could expose them to tax.
  • A recent Tax Court decision on whether the general anti-avoidance rule applied to case where the taxpayer was looking to avoid the “kiddie tax.”

You’ll find all this and more in the latest edition of TaxMatters@EY.

Do you have prohibited investments in your RRSP or RRIF?
The deadline for transitional relief is fast approaching
Maureen De Lisser, Toronto North, and Teresa Gombita, Toronto

A series of new anti-avoidance rules for registered retirement savings plans (RRSPs) and registered retirement income funds (RRIFs) became law on 15 December 2011, with retroactive effect to 22 March 2011. These rules impose a penalty tax on both prohibited investments and non-qualified investments held by an RRSP or RRIF, as well as a separate penalty tax on certain “advantages” from transactions that exploit the tax attributes of an RRSP or RRIF. Similar rules already exist for tax-free savings accounts.

Here we take a look at the application of these new rules to prohibited investments and offer a reminder of some important filing deadlines that are fast approaching.

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Securing a more valuable carve-out – the role of tax planning

In a recent publication, Securing a more valuable carve-out – the role of tax planning, our Global Transaction Tax group reports that the number of carve-out transactions is expected to rise significantly over the next two years. This will be critical for tax planning because the earlier a company can analyze the associated tax issues, the better able it will be to maximize value from the deal.

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Customs valuation and transfer pricing: closer to concordance?
First published in Commodity Tax News, March 2012, Volume 19 Issue 3
Werner Kreissl, Montreal

Multinational companies have historically struggled with the divergent laws and regulations concerning transfer pricing and customs valuation. While tax authorities typically seek to keep import values low, so that domestic profits are as high as possible and the tax payable (and therefore tax revenue) on those profits increases, customs authorities typically seek to increase the cost of goods sold (COGS), on which import duties are imposed, to generate higher duty revenue.

As a consequence, what may be acceptable for transfer pricing and income tax purposes may not be acceptable for customs valuation purposes, and vice versa.

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