Benoit Turcotte
Partner | M. Fisc. | Tax

What is the Tax Cuts and Jobs Act?

It’s the most important tax reform since 1986 and was voted on by the U.S. House of Representatives and Senate in December 2017.

Do you do business in the United States? Are you wondering how this new reform will impact you?

Listen to our free webinar. Topics discussed include:

  • Changes to U.S. tax rates and the tax system;
  • Changes to interest deductibility, amortization and using operating losses;
  • New restrictions on using hybrid instruments and entities;
  • New rules for foreign corporations controlled by a U.S. corporation or citizen.

This information session is courtesy of Raymond Chabot Grant Thornton and is given in French.

You can download the presentation below.

Watch online here (in French)
Password: rcgt2603

26 Mar 2018  |  Written by :

Mr. Turcotte is a partner at RCGT. He is your expert in taxation for the Montréal office. Contact...

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Complementary summaries of the Canadian provincial budgets are posted online, or will be in the coming weeks, thanks to an initiative in association with Grant Thornton Canada.

New Brunswick

On January 30, 2018, New Brunswick Finance Minister, The Hon. Cathy Rogers, tabled the province’s 2018–19 budget. The province will continue to focus on the following three areas: health care, education and jobs.

The province has revised the projected deficit for 2017–18 to $115.2 million and has projected a deficit of $188.7 million for 2018–19. The province, however, is projecting a surplus of $69 million by 2021–22. Yet the province’s debt will continue to increase and is projected to reach $14.5 billion by the end of 2018–19.

There are no new tax measures or tax increases included in this budget. The budget contains relatively few taxation changes other than a decrease in corporate tax rates for small businesses.

British Columbia

February 20, 2018, Finance Minister Carole James tabled British Columbia’s 2018–19 budget. This is the first full budget presented by the province’s new government; it outlines an overall plan to increase affordability for residents of BC, with a primary focus on the need for affordable housing solutions and the demand for more affordable, available childcare.

Building on the legacy that was set by the previous government, the government has delivered the province’s sixth balanced budget in a row, and continues to project surpluses over the next three years.

Debt levels, however, are expected to increase and are projected to reach $77 billion by the end of 2020–21.

Manitoba

On March 12, 2018, Finance Minister Cameron Friesen tabled Manitoba’s 2018-19 budget (Budget 2018). This budget reduces taxes for small business corporations and individuals by increasing the corporate small business limit and basic personal amount.

Budget 2018 also reconfirms the government’s commitment to reducing the province’s deficit and returning Manitoba to fiscal balance.

 

Nova Scotia

On March 20, 2018, Finance and Treasury Board Minister Karen Casey tabled Nova Scotia’s 2018-19 budget (Budget 2018). This budget represents the third balanced budget in a row that has been presented by Nova Scotia’s Liberal government and, while it provides no major tax changes at the personal or corporate levels, it outlines the province’s commitment to investing in health care, education, early years, communities and inclusive economic growth.

Alberta

On March 22, 2018, Finance Minister Joe Ceci tabled Alberta’s 2018-19 budget. This budget sees the province emerging from a time of economic recession with a focus on diversifying its resource-based economy to one that is resilient, stable and less vulnerable to future changes in the price of oil.

To accomplish its goals, the province’s NDP government has outlined three main areas of focus: diversifying the economy, protecting vital public services and returning the province to fiscal balance. It has been announced that the province will focus on controlling spending, eliminating waste and finding efficiencies in order to balance the budget by 2023, and then begin to focus on reducing the net debt levels.

Newfoundland and Labrador

On March 27, 2018, Minister of Finance Tom Osborne tabled Newfoundland and Labrador’s 2018-19 budget. This budget sees the province’s Liberal government focusing on reducing expenditures as part of an overall approach to address the province’s economic, social and fiscal challenges.

The government has indicated that these challenges need to be addressed in a balanced manner, without massive job reductions or cuts to services, to avoid a compounding effect on an already challenged economy. The province plans to work towards fiscal balance over the next five years by reducing the government’s overall footprint, achieving operational efficiencies through the use of technology and shared services, and continuing to focus on expenditure control.

Ontario

On March 28, 2018, Finance Minister Charles Sousa tabled Ontario’s 2018-19 budget. As a result of the province’s strong economic performance over the 2017-18 fiscal year, the government has announced through this budget that it has achieved its target of fiscal balance for the year.

While previously it was projected that the province’s Liberal government would present balanced budgets over the next two fiscal years, recent policy changes have indicated that the government intends to make large strategic investments in infrastructure and social programs with the goal of creating conditions for a more robust economic expansion

Notable investments include the expansion of the OHIP+ (free prescription) program so that it applies to people aged 65 and above commencing August 2019, as well as investing $2.2 billion over three years to provide free, licensed child care, beginning in 2020, to children aged 30 months and above.

Saskatchewan

 

Available soon.

 

Prince Edward Island

 

Available soon.

 

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Over time, strong growth periods have always been characterized by major revolutions, particularly in the manufacturing industry.

Whether it’s called manufacturing 4.0, industry 4.0, digital transformation or smart manufacturing, the most recent industrial revolution provides Quebec businesses with a multitude of opportunities… until 5.0 makes its appearance. Industry 4.0 is not an end in and of itself, it’s an evolution to increase competitiveness and maintain added value in the marketplace.

Considered to be the fourth industrial revolution, following mechanization, mass production in the 19th century and production automation in the 20th century, industry 4.0 integrates digital technologies into the manufacturing process.

Undertaking the digital shift can provide numerous benefits to businesses, from improved process agility and data usage to cost reductions. It may even become a necessity to remain competitive and maintain business relationships with clients.

Entrepreneurs who want to undertake this shift are often hindered from doing so because of myths or concerns they’ve heard that impact how they perceive such a project. Here are some of them.

Myth no. 1: integrating 4.0 is an intimidating task

What you hear:
Many of the entrepreneurs we meet tell us they’re uncertain about undertaking the digital shift because, in their minds, it’s a colossal task. Despite its advantages, the process seems arduous because of the major changes involved, the significant investments in time and money required in the short term and because the overall transformation process is misunderstood.

What you should know:
The biggest mistake you can make in a digital shift is wanting to do it all at once, as this often leads to failure. The transformation must be carefully prepared, with each step progressively planned. Conducting an in-depth analysis of the company with an industry 4.0 audit and reviewing the objectives provide a clearer understanding of the projects to be implemented in an industry 4.0 transformation.

This analysis will also help define a project hierarchy to capitalize on the results and impact of each step and ensure greater control by spreading costs over time. This action plan will maximize the return on the investments in the medium term.

What you should do:

Our experts can assist all types of businesses (transport, services, manufacturing, etc.) in their digital transformation and they are now accredited by the Ministère de l’Économie et de l’innovation (MEI) as part of the program Audit industrie 4.0. Investissement Québec acts as the agent for this program and grants are available for businesses for all industries, including cooperatives and social economy enterprises, to enable them to begin the process and to benefit from the support of accredited experts.

Raymond Chabot Grant Thornton - image

Myth no.2: Industry 4.0 only applies to technology

What you hear:
While the foundation of the fourth industrial revolution may be the connectivity of data and objects, technology is not the only consideration in such a transformation.

What you should know:
The digital shift impacts a business’s entire value chain progressively and has major repercussions on many factors:

  • Service delivery and product manufacturing processes;
  • Cross-border tax;
  • Commodity taxes;
  • Client and supplier relationship
    management;
  • Innovation and technological
    development financing;
  • Performance indicators;
  • Business financing;
  • Business processes;
  • Skill sets required;
  • Etc.

What you should do:
As with any industrial transformation, the digital transformation must be part of a strategically thought-out corporate project and rigorous deployment and monitoring process. Industry 4.0 applies to management, tax and financing as well as technology.

Myth no. 3: Industry 4.0 involves artificial intelligence

What you hear:
In recent months, industry 4.0 and artificial intelligence (AI) have been talked about in various media and may even be mistaken for each other. On a scale of maturity, AI is the highest use of data within an organization that serves to automate decisions and processes, among others.

What you should know:
It’s important to understand that you don’t necessarily need to use AI to reap the benefits of industry 4.0. There are various ways to exploit data, depending on operating maturity, that will provide significant added value. These include:

  • Descriptive analysis: observing what has happened;
  • Diagnostic analysis: understanding what has happened;
  • Predictive analysis: predicting what will happen.

What you should do:
An analysis of your data will help determine the value to be derived from applying these data to optimize your activities.

Myth no. 4: The 4.0 revolution is the answer to labour shortage

What you hear:
Some business owners undertake this process in the belief that automating certain processes will provide the same results with fewer resources and help resolve the labour shortage problem.

What you should know:
Automation will certainly change processes and procedures and may lead to some job cuts. However, it will not make jobs per se disappear—rather, it will change the nature of the work. Tomorrow’s worker will have a different profile. New positions will be created and new skills developed. Businesses will have a number of challenges to meet. The organizational structure will have to be reviewed to reflect new needs and employees trained so they can grow in their roles. Considering that people often resist change, an additional challenge will be to properly manage the shift to industry 4.0 so that key employees at the heart of the transformation are engaged and stay on.

What you should do:
Despite these challenges, industry 4.0 creates jobs with considerable added value to be performed by more competent employees. You need to take the time to assess the project’s repercussions for employees and manage the change proactively.

In short, sooner or later, you’ll need to look into the repercussions of industry 4.0 on your industry and business. How you undertake the process is up to you.

The experts at Raymond Chabot Grant Thornton can provide support for various aspects: reviewing your business processes, selecting an enterprise resource planning (ERP) system or using advanced analytics for your data, so that you can undertake the industry 4.0 shift while optimizing resource engagement and the return on invested capital.

 

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Trusts are a tax option with numerous benefits to plan the transfer of assets to family successors.

A business transfer is a process that should be initiated several years in advance and generally includes the transfer, first, of knowledge, then power then equity.

Benefits of a trust

Using a trust can be an interesting alternative from a legal perspective. Because equity is separated, it provides better protection. The trust terms include instructions for replacing trustees and identifying the beneficiaries, which is not the case with a company’s shareholders.

When using a trust in a business transfer to family successors, the owner-manager can transfer future value to the children without having to immediately determine how and to whom shares will be attributed.

A trust can be useful if the shareholder is ready to transfer the future appreciation in value to his or her children who are too young to have an interest in managing the business. It can also be a good option if the children aren’t sure yet about whether they want to take over the family business.

Looking at the options

If an owner-manager plans to withdraw from the business and his or her child will be taking over its operation, there are two options:

  • The family trust allocates common shares to the child and there are no tax consequences on the transfer;
  • The business exchanges common shares held in the family trust for non-participating shares and the child subscribes for the business’s new common shares.

There are a number of prerequisites to setting up a family trust in an organizational structure, which include:

  • Analyzing the current organizational structure;
  • Evaluating the shares of the company where the trust will be integrated;
  • Setting up the trust;
  • Preparing any tax forms required;
  • Reviewing the various legal documents.

Our team of tax specialists can advise you on setting up a trust as part of the transfer of a business to family successors. Contact us today for personalized support in this initiative.