December 31 is fast approaching. If you haven’t already began to think about your tax planning strategies, there’s still time to take advantage of the opportunities before the year-end.

Businesses

1. Consider accruing bonuses or declaring dividends before the business’ fiscal year-end. Consult with your DMCL advisor about how this strategy could be used to reduce or recover tax, or repay some shareholder loans.
2. Are you selling your business? There may be some pre-closing steps we can advise you on to reduce tax.
3. It may be strategic to immediately expense certain equipment. Consider accelerating purchases to fit within the business’ fiscal year-end.
4. Consider deferring sales of investments (if possible) to fit into the next fiscal year. But, be sure to do so before the next 2022 Federal Budget should the Liberals raise capital gain inclusion rates.
5. Take advantage of COVID relief programs. Apply for the BC PST rebate (purchase and pay for equipment by March 31 2022) and BC’s Increased Employment Incentive (deadline Dec 31 2021).
6. Be aware of accelerated foreign reporting deadlines! If you have investments in foreign affiliates there’s a new expanded T1134 form and it is now due (i) 12 months after the year-end for year-ends that begin in 2020 and (ii) due 10 months after year-end if the year-end began in 2021.

Read our 2021 Owner-Managed Enterprise Tax Tips and Year-End Planning for more information and stay-tuned for our next blog on the extension of COVID subsidies and new credits announced December 14, 2021 in the Federal government’s Economic and Fiscal Update.

Additional year-end planning tips for mining and natural resource companies

Individuals

1. The prescribed rate loan to family members is at a historic low of 1%. Consider income-splitting with a family member to lower your income tax bill.
2. Dec 31, 2021 deadlines:
   • Loss selling (must be by December 20, 2021 for market trades)
   • Charitable giving (consider donating appreciated gains or flow-through shares understanding the risks)
   • Medical expenses
   • Interest expense (including for student loans), investment counsel and advisory fees
   • Contributions to your RRSP if you turned 71 in 2021 (and wind-up)

3. Buying a luxury vehicle if over $100,000 (or a boat and aircraft if over $250,000) before the new proposed Federal 2022 luxury tax of the lesser of (i) 10% of the purchase price or (ii) 20% of the purchase price in excess of $100,000 for vehicles and $250,000 for boats and aircraft; pending draft legislation to be released in early 2022 with details (will they delay it coming into force?).

4. January 30, 2022 deadlines:
   • Interest on family loans between members including loans to a family trust (see Item 1 above). Remember to report the interest income received and interest expense paid—refer to our previous blog post for more information.
   • A loan (whether vehicle, shares, etc.) by an employer to an employee may result in a deemed taxable benefit being included in the income of the employee.

Read our 2021 Owner-Managed Enterprise Tax Tips and Year-End Planning for more information.

Trusts

Watch the new expanded trust reporting rules for 2021

If you are a trustee, remember to review your list of beneficiaries by December 31 and start gathering information (names, address, SIN for the settlor, all beneficiaries, trustees) now. We’re still waiting on more details from Finance and the CRA, but you can read more about the New 2021 Trust Reporting Rules to the CRA in our past blog.

As per Wolters Klewer’s December 14, 2021 CCH Tax Topics®:

“Since Budget 2018 provided the CRA with funding to implement these measures and develop a platform for electronically processing T3 returns, it seems that the delay in passing legislation may be to allow the CRA to enhance its systems accordingly. However, with the effective date being this year and 2021 rapidly drawing to a close, it is becoming increasingly likely that if the Department of Finance still intends to proceed with the proposals, we might see the effective date delayed. Practically, the alternative would be to pass legislation next year with retroactive effect, which is generally frowned upon and has caused significant criticism of the Department of Finance on the rare occasions when it has done this in the past. However, there are still some days left in 2021, so stay tuned!”

A reminder to trustee(s) to resolve and to distribute or make payable any income or taxable capital gains to beneficiaries by December 31, 2021.

A reminder to pay any interest on loans made to the trust from non-arm’s length/related persons no later than January 30, 2022.

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Article written by Lori Oliver, CPA, CA and Stewart Bullard, CPA, CA.