The IASB has published IFRS 16, completing its longrunning project to overhaul lease accounting.

IFRS 16 will require lessees to account for leases “on-balance sheet” by recognizing a “right-of-use” asset and a lease liability.

For many businesses, however, exemptions for short-term leases and leases of low value assets will greatly reduce the impact. IFRS 16 also:

• changes the definition of a lease;

• sets requirements on how to account for the asset and liability, including complexities such as non-lease elements, variable lease payments and option periods;

• changes the accounting for sale and leaseback arrangements;

• largely retains IAS 17 Leases’ approach to lessor accounting;

• introduces new disclosure requirements.

 

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More robust measures to spur business growth would have been desirable

Provincial budget, March 17, 2016

This third budget of Philippe Couillard’s government is balanced, like the previous one. While it is commendable to have a balanced budget which seeks to align living within our means and stimulating economic growth, more weight should have been given to the latter option to avoid further hampering the growth potential of Quebec and its wealth creators.

Raymond Chabot Grant Thornton would have liked to see more new measures to support the development of wealth creators, such as an innovation tax credit or elimination of income tax on SMEs (on the first $500,000 in income).

Education: at the heart of priorities

Raymond Chabot Grant Thornton is pleased to see additional investments in education. Improving student services by some $500M over the next three years is an effective way to support the success of future generations and tomorrow’s leaders who’ll be heading our economic drivers, our businesses.

Good measures for businesses but no reduction in the general tax rate

Starting this year, SMEs will receive payroll tax relief amounting to $94M. In 2020-2021, the relief will amount to $385M, which is $101.5M more than previously announced. We applaud the additional reduction in the Health Services Fund (HSF) contribution, for example, as well as the following measures:

  • $135M in relief by 2021 for companies that market a Quebec-developed innovation. This represents a reduction to 4% of the tax rate on revenue attributable to a patent, which otherwise would have been 11.8%. This deduction is intended to encourage businesses entitled to tax credits for research and development to market their innovations in Quebec;
  • $65M in resources is earmarked for the 2016-2021 period to recapitalize or fund three funds specialized in innovative business start-ups, for a global capitalization of $125M;
  • $96M increase in the capitalization of Fonds Teralys Capital Innovation;
  • $162M for implementation of the Québec digital strategy over the 2016-2021 period;
  • $32.5M over three years to support exporting SMEs that want to bring their innovation activities to fruition;
  • Immediate implementation of the tax relief for transfers of family businesses in the primary and manufacturing sectors rather than January 2017. Raymond Chabot Grant Thornton continues to focus on the issue of tax equity for business transfers in its representations, since the problem remains, particularly for service enterprises.

There is no doubt these measures are of interest to businesses, but reducing the income tax rate is the best approach to helping them be more competitive. For this reason, Raymond Chabot Grant Thornton still considers it necessary to eliminate income tax on the first $500,000 of an SME’s income.

As for the tax system in general, the first recommendation of the Godbout report to initiate a major tax system reform could have been announced. This process must be started quickly, not only in the interest of businesses, but for all Quebec taxpayers.

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For several years now, the Internal Revenue Service (IRS) has been engaged in a vigorous campaign against international tax fraud and failure to declare bank accounts outside the U.S., including Canada. As a U.S. citizen or resident alien (including green card holders) residing in Canada, what are your U.S. tax obligations and what solutions are available to you?

U.S. income tax return filing requirements

U.S. citizens and resident aliens residing outside the United States are required to annually file a U.S. income tax return and declare worldwide income to the IRS, insofar as this income is equal to or greater than the personal exclusion amount and the applicable basic deduction.

The application of specific U.S. deductions combined with the foreign tax credit and the exemptions of the Convention Between Canada and the United States of America will, in the majority of cases, makes it possible to avoid double taxation.

 

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Since March 1, 2016, a new obligation may apply when entering into a private construction contract or a contract with an employment agency: it may be necessary to obtain an Attestation from the Agence du revenu du Québec (ARQ).

Application

  • Construction contracts carried out in Quebec where the contractor and subcontractor are both required to hold a licence issued under the Building Act and where the total value before taxes of all construction contracts concluded between them after February 29, 2016 exceeds $25,000;
  • Contracts signed between employment agencies and a client (other than a public body) to alleviate workforce shortages where the total value before taxes of all contracts concluded between them after February 29, 2016 exceeds $25,000;

Subsequently, the obligation will then apply to any other contract between the parties during the calendar year or in a subsequent calendar year, regardless of the amount of the contract. However, as long as an Attestation remains valid, the parties will not have to repeat the process for a new contract.