Simon Gareau
Senior Manager | Lawyer, D.E.S.S. Fisc. | Tax

Did you know that, under certain circumstances, you can claim a tax deduction for purchasing Canadian works of art?

Whether they are individuals, partnerships, corporations or trusts, taxpayers who acquire an eligible work of art can claim an annual capital cost allowance equal to 20% of the amount paid for federal purposes and 33 1/3% of the amount paid for Quebec purposes.

Eligible works of art

Eligible works of art are:

  • Prints, etchings, drawings, paintings and other similar works of art whose cost is not less than $200;
  • Hand-woven tapestry or carpets, or handmade appliqués, whose cost is not less than $215 per square metre;
  • Engravings, lithographs, wood engravings, or maps made before 1900;
  • Antique furniture or any other antique object, produced more than 100 years before it was acquired and whose cost is not less than $1,000.

Conditions

  • The work of art must have been created by an artist who was a Canadian citizen or permanent resident at the time it was created;
  • The work of art must have been acquired from a person with whom the purchaser was dealing at arm’s length;
  • The work of art must have been acquired solely for the purpose of generating business income, for example, to decorate the reception area, a conference room, hallway or a shareholder’s office, and be visible to the enterprise’s clients.

In the future, taxpayers who sell an eligible work of art that subsequently appreciates in value, must pay tax on the taxable capital gain and, as necessary, add the recapture of the capital cost allowance claimed over the years to the their business income.

Lastly, taxpayers also have the option to donate works of art to charitable organizations and obtain a charitable contribution credit.

Do not hesitate to contact us if you have any questions regarding the owning works of art as part your business activities, or for all other inquiries.

20 Jul 2012  |  Written by :

Mr. Gareau is your expert in taxation for the Sherbrooke office. Contact him today!

See the profile

Next article

Jean-François Boudreault
Partner | Management consulting

In recent years, businesses have been trying every which way to reinvent themselves to become more competitive. Some have optimized their processes to reduce operating costs, while others have improved their management processes. However, as the pool of competent resources grows smaller, effective and optimal human resource management has become a common goal.

Businesses have been dealing with this issue for many years, and it will only worsen as time goes on. Managers will need to invent a whole array of strategies to attract and retain the best human resources. A research report by human resource specialist, Mercer, has revealed that half of Canadian workers are indifferent about their employer. This trend is a serious issue that does not bode well for business productivity. As such, how can you, as an employer, make sure that your employees are giving their all? There is one simple, easy-to-apply tactic that can optimize employee productivity: recognition.

A growing practice

A 2011 Conference Board of Canada study of employee rewards and recognition programs in Canadian organizations indicated that 97% of these organizations have such a program in place. The average annual amount spent on recognition is $123 per employee in the public sector and $208 per employee in the private sector.

If you recently conducted an organizational climate or satisfaction survey in your organization, the results may have shown that recognition is a strong motivator, perhaps even more so than salary. Human resource specialists and experienced managers all agree that recognition is a very powerful management and mobilization tool. In fact, an international survey by another human resources specialist, Aon Hewitt, revealed that employee recognition is a strong engagement driver that ranks far ahead of compensation.

In light of these findings, how can employers use recognition efficiently and consistently so that employees feel involved, accountable, motivated and valued and actively contribute to the organization’s success?

Recognition program: a few questions

Before an organization introduces a recognition program, it must consider three points. It needs to:

  1. Define the initiative’s objectives: does it want to recognize behaviour, competencies, effort or results?
  2. Determine how employees will be recognized: individually or as a group; with a monetary or a non-monetary reward?
  3. Determine the type of recognition, based on the context:
  • Informal: If employees have done their work very well, if client meetings have gone well or if employees have done a very good job of representing the company at an event, management or supervisor recognition would be informal (pat on the back, word of thanks, forwarding of an acknowledgement email from a client. etc.),
  • Formal: the employer sets up a structure – ideally with some employee participation – to recognize special employee work or initiatives. This could be done with a breakfast meeting, a “happy hour” event, the presentation of an award in an informal setting, provided it’s been organized by management. Such events provide an opportunity to recognize individuals or groups before their peers or even clients or business partners.

There are many small ways to recognize employees and promote their commitment, for example:

  • Personalized thank you notes;
  • Acknowledging significant life events (birth, marriage, etc.);
  • Authorizing some time off after a particularly intense work period;
  • Inviting employees for dinner;
  • Forwarding praise about employees from clients or business partners.

To improve success

Once these methods have been clarified, it’s important that all managers be informed of the guidelines so that the various initiatives selected by managers are standardized and fair. Additionally, recognition and reward programs implemented by employers should be consistent with employee wishes.

However, a number of prerequisites are key to ensuring that these initiatives actually achieve their intended objective. Here are a few that will bolster the effect:

  • The recognition must be sincere. A stock greeting or thank you card, as nice as it may be, could have the opposite effect. The employee will feel that he or she is not even worth the effort of a few personal words of praise;
  • Act immediately. Recognizing someone days (or weeks) after the fact has much less impact;
  • Be positive and do it in person. Managers should talk to employees directly rather than sending an email.

Positive results

Recognition is a simple concept that is sometimes trivialized by senior management and some human resource specialists. Yet, it has a proven track record with employees. Additionally, it can easily be adopted by all managers in an organization. It’s everyone’s responsibility to adopt simple but telling ways of showing recognition on a daily basis. The best way is to instil recognition practices in the corporate culture. With such an approach, managers will see higher staff retention levels and, perhaps even improved organizational competitiveness.

09 May 2012  |  Written by :

Mr. Boudreault is a partner at RCGT. He is your expert in human resources for the Québec office....

See the profile

Next article

Steeve Vachon
Partner | CPA, CGA, M. Fisc. | Tax

Several mechanisms exist to reduce tax on capital gains. The capital dividend account (CDA) is particularly efficient. However, company shareholders do not seem to use it as much as they could. All it takes is sound planning.

The CDA is a mechanism provided under the Income Tax Act. It enables private companies (not public companies) to distribute tax-exempt amounts to shareholders. Though it is very efficient, use of the CDA must follow certain criteria.

The CDA in detail

The CDA is a type of account solely used for tax purposes. It is not a bank account and does not appear on the company balance sheet. This account contains a certain number of elements, including the following main ones:

• Excess of the non-taxable portion (50%) of capital gains over the non-deductible portion (50%) of the company’s capital losses;
• Dividend from other company CDAs;
• The proceeds from the company’s life insurance that exceeds the adjusted cost base (ACB).

Acting at the right time

The CDA is only useful if the company realizes gains, as shareholders may only receive payments when such is the case. If the company has losses, the amounts accumulated in the CDA will be reduced by the amount of these losses. This is why it is important to verify the CDA balance periodically because, from one year to the next, base on the company’s profitability, shareholders could withdraw tax-sheltered amounts.

The CDA and company life insurance

The CDA can also be used if the death benefit is paid to a company under a life insurance policy. In such cases, the amount payable to the CDA corresponds to the amount of the life insurance contract of which the company is a beneficiary that exceed the ACB. Significant amounts can therefore be tax-exempt through the use of this mechanism.

To take full advantage of this mechanism, appropriate planning is necessary, especially if share transfer is planned. Major amounts are at stake in such cases and the CDA can facilitate the transition between the seller and the buyer.

Lastly, it is important to fill out the required forms before proceeding with paying out the CDA dividends. Do not hesitate to call on our experts to determine the best strategies. They know the details of various programs well and can easily use them to your advantage.

30 Apr 2012  |  Written by :

Mr. Vachon is a partner at RCGT. He is your expert in taxation for the Sainte-Marie office. Contact...

See the profile

Next article

Pierre Fortin
Partner | CPA, CA | Management consulting

Although they often work in the background, municipal general managers play an essential role. This is particularly true for small municipalities that rely on reduced administrative teams and elected officials that often only work part-time.

Municipal general managers ensure that municipalities are managed consistently and continuously, which makes their role all the more important. Whether their work involves liaising with the municipal council and administrative team, providing strategic information so that the mayor can make informed decisions, or ensuring, alongside the team of civil servants, that actions are carried out in compliance with the multiple laws that apply to the municipal sector, general managers play a major role. For efficient municipal management, roles and authorities must be clearly defined, particularly for elected officials, civil servants and the general manager.

Complex Issues and Multiple Solutions

Managing a municipality is no simple task. There are often complex issues, numerous stakeholders and conflicting interests. The needs of citizens and businesses are becoming more costly, while municipal funding sources are lacking and closely tied to property tax revenue. It’s worthy to note that general managers in smaller municipalities often carry out more than one role; some even take on secretary-treasurer and public works manager tasks, among others.

As municipalities are given greater powers, their management becomes increasingly complex, yet the expertise required to carry out such tasks is not systematically available. This can represent a major challenge.

Although municipalities may have multiple issues, solutions must be adapted to each specific situation. However, it’s impossible for municipal administrative teams, under the leadership of a general manager, to be specialists in all areas. Solutions are developed on a case-by-case basis and often rely on examples from other municipalities, or even other countries.

Under the Spotlight

Indeed, few Quebec organizations are subject to as many audits as municipal authorities. In addition to all of the legislation and regulations municipalities must comply with, they must also report to various government authorities, and have a close relationship with their citizens who legitimately expect high-quality local services and unfailing management of public funds.

In light of this context, municipal managers need people they can count on. They must be supported, be able to count on a team of specialists who can provide appropriate information, and occasionally must call upon external or more knowledgeable resources so that decisions can be made in the interest of citizens and the municipality.

Major municipal projects must be carried out in close collaboration with municipal authorities, the general manager and civil servants. While municipal general managers often work in the background, their role and teams are indispensable for the long-term development of local municipalities and communities.

Article paru dans Magazine SCRIBE en 2012.

16 Apr 2012  |  Written by :

Mr. Fortin is a partner at RCGT. He is your expert in Management Consulting for the Montréal...

See the profile