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What formats of documents and records does CRA accept?

We frequently get questions regarding acceptable formats for retaining documents and records that may later be requested by Canada Revenue Agency.

Paper formats are always acceptable, and electronic or imaged versions are acceptable under certain conditions.

For more information, including:

  • What is an acceptable format?
  • What is imaging?
  • Destroying imaged paper documents
  • Backing up electronic files

 

see https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/keeping-records/acceptable-format-imaging-paper-documents-backing-electronic-files.html.


Death Benefits – Tax-Free Employment Benefit

A death benefit is a payment received subsequent to the death of an employee, in recognition of the deceased employee’s services. Up to $10,000 can be received by the Estate or beneficiaries of the deceased as a death benefit on a tax-free basis. As an employment-related cost, this would generally be deductible to the payer.

A March 14, 2017 Technical Interpretation, addressed several questions related to these payments following the death of an owner-manager.

CRA noted that the determination of whether an individual is an employee is a question of fact. The fact that an owner-manager received salaries for several years but was only paid dividends in the two years prior to death would not automatically mean that no death benefit could be received. It would be more difficult to support an employment relationship where the individual never received employment income from the corporation.

The existence of a formal commitment, such as a contract or a Directors’ Resolution, prior to the date of death is not a requirement for an amount to be a death benefit. Finally, a death benefit could be paid out over time, but the $10,000 exclusion applies only once, not once for each year.

Consider this tax-free employment benefit.


Return of a Gifted Property – Charitable Organizations Beware!

In a March 31, 2017 Technical Interpretation, CRA commented on the tax consequences of a charity returning a donated property to the donor. This could occur, for example, when a donation was made specifically for a project that had been halted.

Donor – Where the property is returned to the donor, the taxpayer is deemed not to have disposed of the property nor to have made the gift. As such, the portion of the original charitable donation tax credit or deduction related to the property may be disallowed.

Donee – Before returning a gifted property, the charity should review other provincial and federal legislation as it might affect their ability to legally return donated property. CRA also noted that returning property could be regarded as making a gift to a non-qualified donee or providing an undue benefit which could result in revocation of charitable status.

A qualified donee that issued an official donation receipt and later returns donated property must file an information return with CRA if the fair market value of the property is greater than $50 when it is returned, and the property is returned after March 21, 2011.

If a charitable organization returns a gift to a donor, they should do so very carefully so as to avoid revocation of their charitable status.


Withholdings on Remuneration to Non-Resident: Get your CRA Filings Correct

In a March 9, 2017 Technical Interpretation, CRA commented on the tax filing and withholding requirements related to a non-resident individual providing services to a Canadian company.

If an individual is employed solely outside of Canada, and is not, and has never been, a resident of Canada, no withholdings on payments are required. However, the corporation would generally be required to file a T4 in respect of the non-resident individual’s total remuneration. One exception to this rule, would be where the total remuneration for the year is less than $500. This requirement to file a T4 is not conditional upon the payee being taxable in Canada.

CRA also opined that participation in meetings using the Internet or telephone from outside of Canada would not constitute performing the services in Canada.

Ensure you are filing T4s in respect of non-resident employees providing services outside of Canada.