Jean-François Boudreault
Partner | Human resources consulting

Teleworking is inevitable for many organizations in this period of reorganization due to COVID-19. Here are some best practices to implement for ensuring a successful transition.

We are experiencing an exceptional situation due to the spread of the coronavirus and, in order to contribute to maintaining the health and safety of all, many organizations are opting to telework. These new work habits require some adjustments, and entrepreneurs and managers must take several factors into consideration.

Reaping the benefits of teleworking

If you are still hesitant or doubtful about this necessary change, you should know that there are many benefits to telework and, if you adapt your management methods judiciously to this new practice, you will be able to take advantage of them. Among the recognized advantages, you will find:

  • Better productivity due to reduced travel time and more flexible schedule management;
  • Greater employee engagement through reduced stress and improved quality of life;
  • A decrease in absenteeism;
  • Reduced long-term costs for the organization.

Assessing the nature of the work

Obviously, not all jobs lend them themselves to telework. You may need to re-evaluate certain roles and, in some cases, provide additional equipment to ensure that everything goes smoothly. Proceed in stages:

  • Identify individual tasks that are more intellectual in nature;
  • Validate the computer systems used as well as the technology recommended by the organization, such as the speed of the internet connection and access to a secure internal network;
  • If your organization has a union, involve it in the process;
  • Plan for flexibility and other benefits for employees who will not be able to telework.

Offseting the disadvantages

This change may cause some discomfort, including more difficult access to resources, professional isolation and lack of direct contact with one’s team. In addition, it can become difficult to draw the line between one’s personal and professional life.

It is also necessary to ensure that the technological equipment used at home makes it possible for operations to function properly and preserves the security and confidentiality of the organization’s data.

Your managers and employees will need coaching and training in order to function well in such a context.

Stayin in touch with your teams

  • Provide regular updates by conference call with your team members;
  • Enquire about their well-being and cultivate interpersonal relationships;
  • Use all the technologies at your disposal to follow up and support your staff’s needs in the performance of their tasks.

Maintaining data confidentiality

  • Transmit information technology (IT) instructions well;
  • Remind your employees and business partners of the rules they must follow;
  • Ensure secure access to the necessary platforms;
  • If necessary, provide additional equipment to ensure that productivity is maintained in complete security;
  • Validate insurance coverage for the equipment provided.

Setting objectives to be achieved

  • If this is not already the case, ask your employees to provide you with timesheets to better track the hours spent on different tasks;
  • Measure the progress of the work by objectives to be achieved;
  • Reinforce the bond of trust with your employees;
  • Define a team operating mode and work routine (frequency of virtual meetings, prioritization of tasks and objectives, expectations of each person, etc.);
  • Ensure proper communication and that everyone understands the work to be accomplished;
  • Be flexible and adapt to circumstances as necessary to better achieve objectives.

Remember that, as an employer, you are responsible for ensuring the health and safety of your workers, even when their workplace is at home. It is to your advantage to have a written policy in place regarding health and safety in the home workplace.

Our experts can advise you and provide you with all the necessary support in order to better equip you for this unexpected situation. Teleworking can be an effective and beneficial solution if you set everything in motion for its success.

This article was written with the collaboration of Katy Langlais, Manager of Human Resources Consulting.

16 Mar 2020  |  Written by :

Jean-François Boudreault is a partner at Raymond Chabot Grant Thornton. He is your expert in human...

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On March 10, 2020, Finance Minister Ernie Steeves tabled New Brunswick’s 2020-21 budget.

The budget projects a $92.4 million surplus in 2020-21 and sees the province’s net debt decrease futher.

The net debt is currently estimated at $13.9 billion, and is expected to decline by $129.3 million in 2020-21.

The estimates provided in Budget 2020 show that the province projects a surplus of $97.7 million for the 2019-20 fiscal year, an improvement of $74.6 over the $23.1 million surplus projected for the same fiscal year in the previous budget.

Tax measures

No changes to the corporate tax rates, or the $500,000 small business limit, are proposed.

Sales and excise taxes

Budget 2020 proposes no changes to the current 15% HST rate, which is composed of a federal component of 5% and a provincial component of 10%.

The gasoline tax will decrease by 4.63 cents/L from 15.5 cents/L to 10.87 cents/L.

The motive fuel (diesel) tax will also decrease by 6.05 cents/L from 21.5 cents/L to 15.45 cents/L.

Provincial property taxes

New Brunswick’s provincial property tax rates will begin decreasing over a four-year period from 2021 to 2024.

Consult our document below for more details.

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Annie Poitras
Lead Senior Manager | CPA, CA, M. Fisc. | Tax

There are several aspects to consider when determining whether it is advantageous to create an American entity separate from your Canadian business.

As a matter of fact, in addition to taxation, which has become more competitive in the United States since the December 2017 tax reform, other various considerations can considerably influence your decision.

First, your decision depends on your company’s situation, its development stage and your projects. As a general rule, it is important to consider incorporating a U.S. entity when your company has certain activities in the United States. For example:

  • if you export a lot of products or services to the United States;
  • if you have a certain physical presence in the United States (representatives, American employees, warehouses, etc.);
  • if a good proportion of your clients are American.

Each case is unique. For a manufacturing company, it’s usually best to wait until it has made a breakthrough in the U.S. market, while a high-tech company may find it advantageous to quickly set up an entity in the United States.

If you think it makes sense to set up a U.S. entity, you should then consider whether there are more advantages than disadvantages to setting up a U.S. entity. There are various considerations.

Advantages

Tax

U.S. corporations can take advantage of tax consolidation, a benefit that does not exist in Canada. In summary, a corporation with one or more subsidiaries can file a single tax return for all of its entities. This allows it to offset the losses of some entities against the profits of others, thereby reducing its total tax bill.

Furthermore, it’s currently possible to deduct 100% of the value of capital investments for several types of tangible assets, such as machinery and computer equipment, but not buildings. All sectors of activity can benefit from this measure. However, the capital cost allowance will be reduced to 80% in 2023, and will gradually decrease thereafter until it reaches 20% in 2026, the last year of the measure.

In some cases, where U.S. operations become relatively large in relation to those in Canada, incorporating an entity with operations in the U.S. has the additional benefit of ensuring that Canadian shareholders will continue to be entitled to Canadian capital gains relief on the sale of their shares.

Legal

Incorporation in the United States ensures shareholders’ limited legal liability with respect to U.S. operations. It can also make it easier to obtain work visas.

Commercial

This can make you more attractive to U.S. clients, as most of them prefer to purchase their goods and services from a U.S. company.

You should also be aware of restrictive measures such as the Buy America provision which requires, in certain areas such as transportation, that goods sold to government agencies contain a certain percentage of U.S. content.

Financial

U.S. incorporation facilitates access to capital from U.S. investors. They prefer to acquire an interest in a U.S. company because it makes their lives easier, particularly in terms of taxes. Opening a bank account in the United States is simpler, making it easier to do business with your U.S. partners.

Disadvantages

Financial

Incorporating a U.S. company creates additional administrative costs, particularly for the production of financial statements and tax documents. However, the costs of incorporating a company are low.

Tax

This factor has less weight since the U.S. tax reform of December 2017, which lowered the federal corporate tax rate from 35% to 21%. Adding the tax levied by the states (from 2.5% to 12% depending on the state), the combined U.S. rate is about 25% on average in 2020, considering that state tax is deductible from federal tax.

This is still higher than the combined tax rate of 15% (federal and Quebec in 2019) for Canadian-controlled private corporations (CCPCs) eligible for the small business deduction (SBD).

Without the SBD, the combined rate was 26.6% in 2019, which is comparable to that of the United States.

In addition, the United States is less generous than our governments in terms of tax credits, particularly those for research and development (R&D), which are never refundable at the U.S. federal level. Few U.S. states have R&D credits: they mainly offer tax credits related to job creation and to areas that are being revitalized.

Finally, developing a new market and starting up new activities usually generates high expenses and even losses at the beginning of operations. By keeping the losses related to the American business in your Canadian company, you will be able to deduct them against your other Canadian income and thus increase your financial flexibility.

Do you have tax questions about your business? Contact our experts.

12 Mar 2020  |  Written by :

Annie Poitras is a tax expert at Raymond Chabot Grant Thornton. Contact her today!

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Mylène Tétreault
Senior Manager | M. Fisc., B.B.A. Fin. | Tax

Do you own or rent real estate in the United States? Are you aware of your tax liabilities? Here are the answers to the FAQs asked to our American tax experts on this topic.

Q: If I rent out real property located in the U.S. (condo/house), do I have to file a U.S. tax return?

A: A non-resident of the U.S. who receives rental income from property located in the U.S. is technically subject to a U.S. withholding tax of 30% on the gross rental income. To avoid this holdback, the taxpayer must make an election to file a U.S. tax return and pay U.S. tax on the net rental income. The net rental income is also taxable in Canada. A foreign tax credit will be granted to avoid double taxation.

Q: If I rent out real property located in Florida for less than six months, do I have to collect the Florida sales tax?

A: Yes, and you must remit it within the required deadlines. The Florida State tax is 6% plus any applicable discretionary sales tax (for example 1% for the Broward, Miami-Dade and Palm Beach counties).

In addition, individual counties in Florida may impose a tax for tourism development in the region, in addition to the 6% state sales tax. Most counties require that the property owner register in order to file and remit the development tax directly to the county.

Q: If I sell real estate located in the U.S., do I have to file a U.S. tax return?

A: Yes you do in order to report the capital gain earned, and, if applicable, to pay U.S. tax on this gain.

Q: Must I also report this capital gain in my Canadian income tax return?

A: Yes, it is also taxable in Canada for a Canadian tax resident. You will get a foreign tax credit for the U.S. tax paid on the capital gain.

Q: I sold real estate in the U.S. and a 10% or 15% U.S. withholding tax was applied to the proceeds of sale. Is this right?

A: The sale of U.S. real estate by a non-resident is subject to a 10% or 15% withholding tax on the gross proceeds of sale under Foreign Investment in Real Property Tax Act rules. The buyer may not be required to deduct the withholding if both of the following conditions are satisfied:

  • The property is sold for less than $300,000 US; and;
  • The buyer intends to use the property for personal purposes.

Do you have questions relating to U.S. tax issues? Our tax experts can help you.

12 Mar 2020  |  Written by :

Mylène Tétreault is your expert in taxation for the Québec office. Contact her today!

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