We have called upon the contribution of tax experts from the Raymond Chabot Grant Thornton network for a series of articles providing answers to questions raised by our clients doing business abroad.

A tax specialist is a professional who specializes in the application and interpretation of tax rules and regulations. These often complex rules are constantly evolving. The tax specialist’s role is to advise clients so that their tax burden is minimized to the extent permitted by law. The courts in all jurisdictions have long recognized that, unless otherwise  provided by law, taxpayers are entitled to arrange their affairs to attract the minimum amount of tax.

Q: If I spend more than 130 days per year in the U.S., am I liable to U.S. taxes?

A: A non-resident of the U.S. is liable to U.S. taxes if he passes the substantial presence test, that is, if he is present in the U.S. for more than 183 days over a three-year period. For the purposes of the application of this test, the number of days in the U.S. is calculated as follows:

Number of days in the U.S.
in the current year X 1

+

Number of days in the U.S.
in the previous year X 1/3

+

Number of days in the U.S.
in the second preceding year X 1/6

Example for 2017:

2017: 1 X 130 days                     =                     130 days

2016: 1/3 X 130 days                  =                       43 days

2015: 1/6 X 130 days                  =                       22 days

Total:                                                                195 days


Q: If the result of this calculation is greater than 183 days and I pass the substantial presence test, do I have to file a U.S. tax return as a U.S. resident and be taxed in the U.S. on my world income?

A: There is an exception (closer connection exception) that allows a taxpayer to be considered a non-resident of the U.S.. To take advantage of the closer connection exception, the taxpayer must meet the following conditions:

  • During the current year, the taxpayer was present in the U.S. for less than 183 days;
  • During the current year, the taxpayer’s tax home is not in the U.S.;
  • During the current year, the taxpayer maintained closer economic and social ties with the country of his tax domicile than with the U.S.

If the taxpayer meets these criteria, he must complete and send to the IRS Form 8840 (Closer Connection Exception Statement for Aliens).

Q: If during the current year I spend more than 183 days in the U.S., and I do not qualify for the closer connection exception, am I liable for U.S. taxes?

A: Yes. Under U.S. domestic law, you will qualify as a U.S. resident for tax purposes and will therefore be liable to U.S. taxes on your world income. Fortunately, Canada and the U.S. signed a tax treaty that overrides this U.S. law. Under Section IV of this treaty, you may be considered a Canadian resident for tax purposes. In such a case, you will simply have to file a $0 U.S. tax return (1040NR, U.S. Nonresident Alien Income Tax) along with a form that will allow you to avail yourself of the provisions of this tax treaty. You will also have to provide information regarding your assets outside of the United States.

Do you have questions relating to U.S. tax issues? The tax experts of Raymond Chabot Grant Thornton can help you!

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Maximilien Larivière
Advisor | ing. jr, M. Ing. | Tax

Electric cars are certainly a positive addition to the world of automobiles in the current ecological and economic context: reduced greenhouse gas emissions, public health benefits, and, for the consumer, no need to fill up at the gas station.

Despite these benefits, there are still a number of obstacles to the mass use of electric cars. The most significant challenges are the limited range compared to internal combustion vehicles and the long refuelling time.

Additionally, at this time, a fully electric car costs considerably more than an internal combustion vehicle, due in particular to the high cost of an electric vehicle battery. A study by the major automobile manufacturers reveals that the following criteria must be met for an electric vehicle to directly replace an internal combustion model:

  1. Have a range of 320 km;
  2. Have a battery with a cost under $100/kWh;
  3. Refuel in under 10 minutes.

To achieve these objectives, several initiatives have been taken in recent years to provide greater refuelling flexibility and reduce the purchase price differential with an internal combustion vehicle.

The Tesla Supercharger Network and the Electric Circuit

As of mid-2017, there were only four Tesla Superchargers in Québec. Tesla plans to open ten more locations during 2018, bringing the total to about 15 across the province. Tesla also has a network of Destination Charging Partners, that is, businesses having obtained two Tesla dedicated charging stations (8 kW or 16 kW) at a low price that allow Tesla owners to refuel at these locations. Since mid-2017, 59 stations have been in operation, providing Tesla with a total of 63 refuelling locations in Québec.

The Electric Circuit has been constantly expanding since it was introduced on March 30, 2012. There are currently 961 charging stations in Québec, including eighty-one 400-volt fast-charge stations. Businesses, municipalities and institutions install charging stations on their premises at their expense, with the assistance of the Québec government, and collect the revenues.

Financial incentives to purchase an electric car

The Transportation Electrification Action Plan provides for the addition of 100,000 electric vehicles in Québec by 2020. To achieve this objective, purchase rebates of up to $7,000 have been provided and charging station installation support is offered for individuals and on the road network.

Electric vehicle charging stations

Ford recently undertook a study to resolve the issue of refuelling time. The solution is obvious: increase the power of charging stations. Their study related to 400 kW stations (eight times more powerful than current stations). There are a number of technical issues with charging stations this powerful: activating the station uses up considerable energy in the electrical network and there is an overheating problem.

A number of technologies are currently being studied, such as backup batteries in a trailer, that could be used when needed and charging the rest of the time. This could address the problem of energy consumption peaks due to high voltage charging stations.

Raymond Chabot Grant Thornton - image
Raymond Chabot Grant Thornton - image

Québec’s place in the electrical transportation industry

Québec is in the niche vehicle sector of the electrical transportation industry, that is, school (Autobus Lion) and city (Novabus) buses and work vehicles (Hydro-Québec bucket trucks and industrial assembly line vehicles). These are ideal applications for electric technology, since work cycles make it easier to recharge vehicles.

There are potentially significant financial gains for operators, given that fuel-related operating costs are so high. Consumers can be sure of one thing, while they may not plan to purchase an electric car, this technology will have an impact on their daily lives in the near future.

Despite the initiative, the general public is slow to adopt electric vehicles. The number of charging stations may be increasing, but the fact remains that refuelling takes far too much time for most people (best case scenario: 30 to 60 minutes, often much longer).

Hybrid cars for the general public?

According to many car manufacturers, plug-in hybrids will likely be the route taken at this time. They believe that a fully electric vehicle will be a hard sell to the general public, but selling plug-in hybrids will be easier. With a 40-50 km range, many such vehicles are already available from some manufacturers, who are targeting this market for the near future.

This strategy is based on extensive studies showing that, for the average North-American driver, a range of 75 km meets 75% of the needs for individual transportation. Most manufacturers are therefore opting for this compromise in order to offer a less costly solution with a smaller battery. In the Montréal region, for example, such a solution would make it possible to travel back and forth from the suburbs to the city centre on a daily basis, without using any gas, at an initial purchase price that is far more affordable than an electric vehicle with a range of a few hundred kilometres.

There are still many unanswered questions about the general public opting for fully electric cars. Would consumers be inclined to adopt this technology if the charge time were reduced and the range increased? What if it were just a matter of rethinking how we see transportation, would consumers be prepared to compromise on some things to take advantage of the many benefits of electric cars? Is the solution plug-in hybrids?

And what about you, are you prepared to use an electric vehicle as your means of transportation?

Drafted with the assistance of Pierre-Luc Lapointe, Eng., Project Manager, Innovative Vehicle Institute, Saint-Jérôme.

24 Jan 2018  |  Written by :

Mr. Larivière is an advisor at Raymond Chabot Grant Thornton. He is your expert in taxation for the...

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Tax News – December 14, 2017

On July 18, 2017, the Finance Minister tabled a tax reform plan with several measures designed to abolish certain tax planning strategies using private corporations. The legislative proposals published at that time provided for measures to limit the possibilities for an individual (entrepreneur-shareholder) from splitting his or her income with family members taxed at a lower rate by transferring certain income from a private corporation.

To counter this type of planning, the July 2017 proposals proposed to extend the rules governing the tax on split income (TOSI) currently applicable to minors, to make them applicable to some income earned by individuals aged 18 and over.

Last October, the federal government did an about-face on several aspects of its overall reform plan, but confirmed its intention to maintain measures to counter family income splitting, in a simplified version.

It is with this in mind that amended legislative proposals were published on December 13, 2017. These proposals reiterate the general structure of the TOSI amendments proposed last July, with some relief.

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Welcome to IFRS Newsletter – a newsletter that offers a summary of certain developments in International Financial Reporting Standards (IFRS) along with insights into topical issues.

 

We begin this final edition of the year by looking at a Global Public Policy Committe (GPPC) paper which aims to promote the implementation of accounting for expected credit losses under IFRS 9 Financial Instruments to a high standard. We then go on to consider amendments to two IFRS, including an important one to IFRS 9, and further, two recent Exposure Drafts.

Further on in the newsletter, you will find IFRS-related news at Grant Thornton and a general round-up of financial reporting developments. We finish with a summary of the implementation dates of newer standards that are not yet mandatory, and a list of International Accounting Standards Board (IASB) publications that are out for comment.