Canada’s tax system is very complex and tends to become more complex over time. Amendments to tax laws in recent years have not simplified our tax system, quite the contrary. The introduction of various intention tests in tax laws has also further increased tax authorities’ discretion as to the application of such laws. In this context, it is often a good idea to obtain the Canada Revenue Agency’s (“CRA”) advice on the application of tax laws to proposed transactions. Given that the CRA is responsible for applying the Income Tax Act (the “ITA”) and other legislation, some Canadian taxpayers would be well advised to ensure that the CRA will agree with their interpretation of the ITA in the context of a proposed tax plan or transaction. Getting the CRA’s opinion will help to steer clear of differences in opinion that could lead to lengthy and costly debates. The CRA has long offered Canadian taxpayers the opportunity to consult it before proceeding with tax plans or transactions. The two best known mechanisms for doing so are requests for a Technical Interpretation and requests for a Ruling. As a request for a Technical Interpretation is made anonymously, the resulting interpretation as to the application of the ITA is not binding on the CRA, and it requires a considerable amount of time to obtain. A request for a Ruling, on the other hand, requires identification of the parties and details of the proposed tax plan or transaction, and the resulting Ruling will bind the CRA to certain conditions. It is also faster to obtain. The CRA charges a fee to render a Ruling, but does not charge one for a Technical Interpretation. There is, however, a third, lesser-known mechanism available to taxpayers: a Pre-ruling Consultation. Some of its advantages include: Faster feedback for taxpayers as to the likelihood that the CRA will render the Ruling sought. Lesser preparation costs, as a Pre-ruling Consultation request requires less information than a request for a Ruling. Lower fees to be paid to the CRA in cases where the CRA believes that it cannot render the Ruling a taxpayer is seeking. The use of the Pre-ruling Consultation service will often be the best way to begin the request for a Ruling process. By using the service, taxpayers can quickly determine, at a relatively low cost, whether they should engage in the request for a Ruling process. The service isn’t a substitute for obtaining such a Ruling, however, as a Ruling has the advantage of binding the CRA with respect to the tax consequences of a proposed tax plan or transaction. Our taxation team can guide you and answer your questions regarding the services that the CRA offers in connection with tax compliance.
- Québec, 2020
Etienne C. Laplante is an associate in Lavery’s Tax Law group. He acts for domestic and foreign private corporations and their shareholders, private equity groups, labour-sponsored funds and tax-exempt entities on the structuring of mergers and acquisition and corporate reorganizations.
He has developed expertise in both income tax and consumption tax aspects of fund formation and fund manager remuneration in the private equity and real estate sectors. He also acts as trustee and executor of estates for his clients.
- “Le régime québécois des crédits d’impôt remboursables : impacts chez les personnes à faibles revenus”, on the invitation of professor Marie-Thérèse Dugas (2019) and professor Lucie Lamarche (2018) for the course JUR7240 - Régimes de protection du revenu et solidarités sociales, Université du Québec à Montréal, 2018, 2019
- “A Brief Introduction to the History of Quebec”, on the invitation of Helena Fedotkina, director of the department of foreign languages, Russian University of Transport, Moscow, 2014
- Dompierre, Marie-France., Parent, Jessica., C. Laplante, Étienne., " Important Changes to the CEWS announced: will you now be eligible, and what should you consider? ", July 22, 2020
- Pariseau, Luc., Gélinas, Éric., C. Laplante, Étienne., " Sale of a Business: New Tax Planning Option ", June 26, 2020
- Dompierre, Marie-France., C. Laplante, Étienne., A. Clavet, Laurence., " COVID-19: Support for Agriculture and Agri-Food Businesses in Quebec and Canada ", June 9th, 2020
- Dompierre, Marie-France., C. Laplante, Étienne., " Bill C-14 has become law: Are you eligible for the Canada Emergency Wage Subsidy? ", April 15, 2020
- Dompierre, Marie-France., C. Laplante, Étienne., " COVID-19: Summary of Quebec and Federal Tax Measures and Financial Assistance ", April 08, 2020
- Pariseau, Luc., Gibeault, Audrey., C. Laplante, Étienne., " COVID-19: How to adapt your current tax planning? ", March 30, 2020
- Gaignard & Associés Award for excellence in the Taxation IV - FIS 734 (tax planning) course, Masters degree program in taxation, Université de Sherbrooke, 2021
- Honour Roll of the Faculty of Law (UQAM), 2019
- Pierre-Basile-Mignault moot court competition: Bâtonnier Cup for the best team (oral arguments and factums); A.P.D.Q. Cup for best factum; SOQUIJ Cup for second best factum, 2019
- Master's degree in Taxation, Université de Sherbrooke, 2022 (current)
- Professional education courses, École du Barreau
- LL.B., Université du Québec à Montréal (Faculty Honour Roll), 2019
Boards and Professional Affiliations
- Member of the Association de planification fiscale et financière (APFF)
The COVID-19 pandemic has changed Canadian workplaces. For many organizations, the pandemic and its containment measures have fast-tracked the shift to teleworking. In this context, the Canada Revenue Agency (the “CRA”) and the Agence du Revenu du Québec (the“ARQ”) have published administrative positions regarding deductible expenses for employees working from home as well as for their employers. Eligible expenses for an EMPLOYEE The first condition for claiming employment expenses related to teleworking involves being obliged to work from home. The CRA has announced some flexibility in this regard, to the effect that if an employer did not require an employee to work from home but gave them the option to do so because of the COVID-19 pandemic, the CRA will consider the employee to have worked from home as a result of the pandemic. Temporary flat rate method: Federal and Quebec deduction of $2 per day without Form T2200 On December 15, 2020, the Government of Canada announced that employees who worked from home more than 50% of the time for at least four consecutive weeks in 2020 will be able to deduct $2 from their incomefor each day worked during that period and for each additional day worked outside that period, for a maximum of $400. The temporary flat rate method only applies to the 2020 taxation year. To qualify, the employee must only deduct only home office expenses and no other employment expenses. Details of expenses incurred for with teleworking or Form T2200 will not be required to claim this deduction. On December 16, 2020, the Government of Quebec followed the Government of Canada’s lead by announcing that taxpayers would be allowed to deduct $2 per day for each day worked from home, up to a maximum of $400, without supporting documents or a TP-64.3 form. Detailed method In general, an employee (whether a tenant or a homeowner) may deduct reasonable expenses directly related to the use of space in the home for work if and only if at least one of the following two conditions is met: (i) The space devoted to work in the home is “the place where the individual principally (interpreted by the courts to be more than 50% of the time) performs the office or employment duties”; or (ii) The workspace in the home is “used exclusively [...] to earn income from the office or employment and, on a regular and continuous basis, for meeting customers or other persons in the ordinary course of performing the office or employment duties.” The period used to assess eligibility criteria for 2020 must be at least four consecutive weeks. This period may last more than a month. If the workspace is part of a residence rented by the individual, a reasonable portion of the rent may be deductible. However, an individual may not claim any deduction for the rental value of the workspace in a home owned by the individual or for amortization, taxes, insurance or mortgage interest in respect of that home. Notwithstanding the above restrictions, the Income Tax Act provides that employees remunerated by commissions may deduct a reasonable portion of the taxes and insurance paid for the home they own, if one of the above criteria is met. It is important to note that these expenses are eligible only to the extent that they are not otherwise reimbursed by the employer. In order to determine the amount that can be deducted in this way, it is important to use a reasonable basis for calculation.For example, the calculation can be based on the area of the workspace in proportion to the total area of the home. Other possible uses of space must also be considered. The use of 100% compared to 75% of the space by an employee is an important factor in the calculation. For example, a kitchen table used as office space by an employee will have mixed use, which will have a direct impact on the amount of deductible expenses. Eligible expenses(salaried employees and those remunerated by commission) Electricity Heating Water Utility portion (electricity, heat and water) of the employee’s condominium fees Home internet service costs Maintenance and minor repair costs Rent paid for the house or apartment where the employee lives Eligible expenses(employees remunerated by commission only) Home insurance Property taxes Rental of a cell phone, computer, laptop, tablet, fax machine, etc. that is reasonably related to commission income Ineligible expenses(salaried employees and those remunerated by commission) Mortgage interest Mortgage payments Internet connection fees Furniture Capital expenses (replacement of windows, floors, furnace, etc.) Wall decorations Note that if an employee can deduct an expense in calculating taxable income for income tax purposes, they may also qualify for a refund of the Goods and Services Tax / Quebec Sales Tax (“GST/QST”) paid. GST and QST refunds are taxable and must be included in the employee’s income tax return the following year. It is also important for the employee to keep supporting documents. The CRA recently developed an expense calculator to simplify calculating eligible expenses. An employee will have to complete the following forms to deduct expenses and obtain GST and QST refunds: a) T777 – Statement of Employment Expenses; b) TP-59 – Employment Expenses of Salaried Employees; c) GST370 – GST/HST Rebate Application; and d) VD-358 – QST Rebate for Employees. In order to deduct employment expenses from income, including certain expenses related to space devoted to working from home, the employee must have received two forms from the employer: a) Form T2200 - Declaration of Conditions of Employment (“T2200”); and b) Form TP-64.3 General Employment Conditions (“TP-64.3”) (Quebec employee only). Considerations for the employer On December 15, 2020, the CRA announced the launch of a simplified process to claim home office expenses for the 2020 tax year. Accordingly, a simplified version of Form T2200 was made available as Form T2200S. The form may be found here. In order for an employee to be able to deduct the expenses described above, Form T2200S must indicate: If the employee worked at home because of the COVID-19 pandemic; If the employer reimbursed or will reimburse the employee for some of the home office expenses; and If the amount was included on the employee’s T4 slip. Finally, the employer will have to certify that “this employee worked from home in 2020 due to COVID-19, and was required to pay some or all their own home office expenses used directly in their work while carrying out their duties of employment during that period.” It is expected that a large number of employees will meet the criteria for this deduction, at least as long as the workplace access restrictions attributable to COVID-19 remain in place. The ARQ, for its part, has announced that, exceptionally, an electronic signature of the employer on the TP-64.3 form would be permitted. In addition, on December 16, 2020, the Government of Quebec announced that it will launch, in early 2021, an online service for generating a large number of TP-64.3 forms to be sent to teleworkers. This service aims to reduce the administrative burden on medium and large companies. More information on the online platform is expected in 2021. Other eligible expenses for an employee An employee will also be able to deduct certain expenses for supplies consumed directly in the course of their duties to the extent that they are not reimbursed by the employer, such as: a) Paper, pencils and ink cartridges; b) Internet costs, if they are charged based on usage. To this end, the CRA has announced that for the 2020 taxation year, it will exceptionally accept monthly residential internet service costs (the cost of the plan must be reasonable). Expenses reimbursed by an employer Normally, an amount received from an employer to reimburse an expense is considered a benefit to the employee and must be added to the employee’s employment income, unless such expenses are necessary for the performance of the employee’s duties. Employees may not deduct reimbursed expenses. In addition, in the current context, the CRA and the ARQ have announced that the reimbursement of $500 by an employer to an employee to offset the cost of acquiring personal computer equipment or office equipment required for telework does not constitute a taxable benefit to the employee. For example, if the purchase is a $1,000 desk, the taxable benefit included in the employee’s income will be $500. The CRA has recently announced that this amount will not be increased. Allowance paid by an employer Some employers will prefer to pay an allowance directly to their employees who are teleworking to cover the additional costs they incur. In this context, the employer will be able to deduct this allowance in the calculation of its taxable income, provided that it is a reasonable amount. Normally, the amount of this allowance will be treated as a taxable benefit to the employee and will have to be included in employment income for the taxation year in which the employee receives it, except in the situation covered by the exception mentioned above. Other considerations for the employer It is also important for the employer to consider the tax implications—particularly with respect to source deductions—of the location where the employee primarily works during the pandemic if it differs from the location of the employer’s establishment where they normally report for work. The CRA and the ARQ have announced relief in this respect for the 2020 taxation year. For example, the province of work will not change for employees who work from home because of the COVID-19 pandemic. The province for the purpose of calculating source deductions will continue to be the province of the normal place of work. However, if the employee performs their work in a foreign country, certain tax implications for both the employee and the employer should be considered. Lavery’s tax law team can guide you and answer your questions regarding your company’s tax compliance. Technical interpretation IT-352R2.
In the recent decision in Agracity Ltd. v. The Queen1, the Tax Court of Canada (the “Court”) endorsed the Canadian tax consequences of business transactions between a Canadian corporation (“Agracity”) and its Barbados affiliate (“NewAgco-Barbados”) within a group of companies operating in the agrochemical industry (the “Group”). NewAgco-Barbados is an offshore company established for the purpose of negotiating and purchasing a particular herbicide (the “Herbicide”) internationally for resale in Canada. All of NewAgco-Barbados’s profits were generated by the resale of the Herbicide, which were subject to Barbados’s low tax rate. Agracity was in charge of receiving and filling orders for the Herbicide from Canadian consumers, under a service agreement with NewAgco-Barbados for the logistics, storage and transportation of the Herbicide from abroad to Canadian consumers. The Canada Revenue Agency (the “CRA”) attempted to allocate all of NewAgco-Barbados’s profits to Agracity, relying primarily on sham transaction rules and secondarily on transfer pricing rules under subsection 247(2) of the Income Tax Act2 (the “Act”). The Court held that the negotiation and procurement of the Herbicide by NewAgco-Barbados constituted a legitimate commercial objective and a genuine function within the Group. It ruled in favour of Agracity in this case and confirmed that the transactions between Agracity and NewAgco-Barbados were not deceptive and did not warrant any adjustment to Agracity’s profits under transfer pricing rules. This case sheds new light on how to interpret the business role of foreign subsidiaries and the limits of the CRA’s remedial authority with respect to transfer pricing provided for in the Act, making it easier for domestic businesses to implement international business structures. When properly set up and operated, these structures can provide substantial tax savings. The decision in Agracity v. The Queen has not been appealed. Our taxation team can assist you with national and international tax planning for your business transactions. 2020 CCI 91 R.S.C. 1985, c. 1 (5th suppl.);
The current crisis caused by the COVID-19 pandemic has already caused, and will continue to cause, significant liquidity problems for some businesses. Companies whose financial difficulties threaten their very existence will have to restructure in order to avoid bankruptcy, either by availing themselves of the protection of the Companies' Creditors Arrangement Act1 (the "CCAA") or by using the proposal mechanism of the Bankruptcy and Insolvency Act2 (the "BIA"). Tax considerations related to an arrangement or a proposal accepted by creditors Making use of the provisions of the CCAA or the BIA entails tax considerations for the debtor corporation that directors and owner-operators need to consider. Some of these tax considerations are discussed below. In the context of the restructuring of a debtor company, creditors may accept a partial settlement of their claim or a conversion of their claim into shares in the debtor company. If a corporation is not bankrupt within the meaning of the Bankruptcy and Insolvency Act, the settlement of a debt for an amount less than its principal will have tax consequences for the debtor corporation. For example, certain tax attributes of the debtor corporation such as the balance of loss carryforwards, the undepreciated portion of the capital cost of depreciable property or the adjusted cost base of capital assets will be reduced by the amount of the reduction in the receivable, if any. In certain cases, if the tax attributes of the debtor corporation are insufficient to absorb the amount of debt forgiven, inclusion in the calculation of its taxable income may occur, creating a tax liability. Several strategies can be adopted to limit undesirable consequences in the context of a restructuring under the Companies' Creditors Arrangement Act. As mentioned, it may be possible, among other things, to convert the debt into shares of the debtor company without causing adverse consequences, if the fair market value of the shares issued upon conversion of the debt is equal to the principal of the debt. In some cases, a debt held by a shareholder of the debtor company could be written off without consideration and without the need to issue shares. Finally, it may be possible, in certain situations, to avoid inclusion in the income of the debtor corporation through the use of certain reserve mechanisms or through tax deductions. Insolvency is a delicate situation for any business. Proper tax planning will allow the debtor company to maximize the effectiveness of the restructuring process offered by the CCAA. Our taxation team can help you set up effective planning in this context. R.S.C. 1985, c. C-36 and amendments R.S.C. 1985, c. B-3 and amendments
Lavery is pleased to announce that it has hired nine of its articling students as lawyers. Marc-Antoine Bigras joins the Administrative Law group. Before beginning his legal studies, Marc-Antoine completed a Bachelor’s degree in History and a Certificate in German, which allowed him to study in Germany and Austria. During his legal studies, Marc-Antoine developed a passion for constitutional and administrative law. As part of his professional training, Marc-Antoine had the opportunity to work at the Mile End Legal Clinic as an articling student. Frédéric Boivin Couillard joins the Business Law group. He also holds a Bachelor of Commerce with a specialization in Finance from the John Molson School of Business at Concordia University. Upon completing this degree, he participated in an academic exchange at the University of New South Wales in Australia. As a student, he worked in portfolio management for an independent firm in Montréal. Frédéric passed all three levels of the CFA Program and may be awarded the charter upon completion of the required work experience. Laurence Clavet joins the Business Law group. During her law studies, Laurence was involved as an articling student at the Mile End Legal Clinic. Prior to her legal studies, Laurence developed expertise in communication and worked in a post-production studio specializing in advertising, dubbing and original music composition. Renaud Gravel joins the Litigation and Conflict Resolution group. During these studies, he also worked as a clinician at the Clinique juridique corporative de l’UQAM. Being committed to diversity and inclusion, Renaud served for over two years on the executive committee of Fier Départ/Start Proud as chair of the Montréal chapter. Emma-Sophie Hall joins the Labour and Employment Law group. Concurrently with her university studies, Emma-Sophie was coordinator of the Centre d’entraide à l'étude in the Sherbrooke law faculty. In the fall of 2017, she conducted a clinical activity at the Court of Québec in Sherbrooke with the Honourable Justice Aubé. Étienne Laplante joins our Taxation group. The research he participated in during his studies and the passion he developed for tax policy issues have led him to give a lecture at the graduate level in law, since 2018, on the Quebec refundable tax credit system. Solveig Ménard-Castonguay joins the Administrative Law group. She also holds a Bachelor’s degree in Political Science with a concentration in international relations and foreign policy from Université Laval. During her law studies, she had the opportunity to volunteer with the national Pro Bono Network. Solveig has also been a speaker for the SEUR project, which promotes student retention among high school students. Louis Morin joins the Litigation and Conflict Resolution group. Before beginning his legal studies, he completed a Bachelor’s degree in Applied Political Studies, which allowed him to complete a semester of study at the University of Vilnius in Lithuania. Catherine Voyer joins the Business Law group. She joined Lavery’s team in 2018 for her second co-op placement. In the fall of 2019, she conducted a clinical activity at the Court of Québec in Sherbrooke with the Honourable Justice Gagnon.