University Canadian Tax Calculation - ACCT-3610 Summer 2019

This document presents a comprehensive solution to a Canadian tax calculation assignment for the 2018 tax year. It begins by calculating the employment income of Art Vandelay, detailing various components such as salaries, commissions, employer contributions, and employment allowances. The calculation includes adjustments for taxable and non-taxable benefits, such as automobile benefits, and deductions for items like registered pension plan contributions and charitable donations. The assignment also determines the HST rebate to be claimed. Furthermore, it explores the tax implications of a signing bonus, moving allowances, interest-free loans, and non-compete agreements. The solution references the Income Tax Act and relevant Canadian Revenue Agency publications, providing a thorough understanding of the tax calculations and their underlying principles.

Running head: CANADIAN TAX CALCULATION
Canadian Tax Calculation
Name of the Student:
Name of the University:
Authors Note:

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CANADIAN TAX CALCULATION
Contents
Section A:........................................................................................................................................2
Computation of employment income:.........................................................................................2
Reasons:.......................................................................................................................................6
HST rebate to be claimed:...........................................................................................................8
Section B:.........................................................................................................................................8
References..................................................................................................................................10

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CANADIAN TAX CALCULATION
Section A:
Computation of employment income:
Computation of employment income of Art Vandelay for tax purposes in 2018 is provided in the
table below.
Calculation of taxable income of Mr.Vandeley
Particulars Amount
($)
Amount
($)
Salaries 82,000.
00
Commissions 20,000.
00
Employer's contributions:
Canada pension plan premium 2,594.
00
Employment insurance premium is not subjected to income tax -
Extended health care taxable 1,450.
00
Dental plan premium 1,385.
00

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CANADIAN TAX CALCULATION
Employers' health tax levy is not subjected to income tax
Life insurance premium not to be considered as withdrawal from payroll
Workers' compensation is a type of employment and taxable 1,135.
00
Registered pension plan defined 7,000.
00
Automobile benefits provided Stand by charge 2,809.
00
Employment allowances:
Meals and entertainment 15,000.
00
Car 4,200.
00
Clothing 540
.00
Membership fees paid for the Web wood golf club is not taxable as it is specifically for
business purpose
Employee stock option benefit (500 x 3) 1,500.
00

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CANADIAN TAX CALCULATION
Interest benefit due to loan at concessional interest rate (Note II) 135
.00
Discount provided on purchase of company products is not below the cost to the company
HST rebate is taxable for the year of receipt 980
.00
Gross taxable income from employment office 140,728.
00
Less: Deductions
Registered pension plan defined benefit contribution by the employee 7,000.
00
Canada pension premium plan below 5.5% of salary 2,594.
00
Donation to registered charity is allowed as deduction 600
.00
Reimbursement for office car already adjusted in computing automobile benefit
Insurance premiums paid by employee are not allowed as deduction
Life insurance premium paid is also not allowed as deduction
Travelling and accommodation costs (Reasonable) allowed as deduction:

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CANADIAN TAX CALCULATION
Meals 7,600.
00
Entertainment 4,000.
00
Accommodation 10,000.
00
Car, gas and oil 5,900.
00
Car, maintenance 2,000.
00
Legal fees paid to recover unpaid salary successfully by the
employee
1,500.
00
Professional association fees is allowed as deduction 350
.00
Accounting fees is not allowed as deduction
Personal motivation fees is not allowed as deduction
Clothing expenses not allowed as this was not related to his job
41,544.
00

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CANADIAN TAX CALCULATION
Net employment income 99,184.
00
HST rebate to be claimed:
HST to be claimed
Items on which HST can be claimed Amount ($) Amount ($)
Meals 7,600.00
Accommodation 10,000.00
Car, gas and oil 5,900.00
Car, maintenance 2,000.00
Legal fees paid to recover unpaid salary successfully by the employee 1,500.00
Total amount 27,000.00
HST rate 13%
HST rebate to be claimed (27000 x 13/113) 3,106.19
Section B:
I. The signing bonus of $7500 to be paid to Mr. Vandelay would be subjected to income
tax as per the Income Tax Act 1985 and will have to be included in computing his

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CANADIAN TAX CALCULATION
taxable income in the year of receiving such bonus. It will be included in computing
taxable employment income.
II. Moving allowance as well as moving expenses paid by an employer are both taxable
and to be included in computing taxable income from employment income as per the
provision fo the Income Tax Act in Canada. However, the loss on sale of house of the
employee if made good by the new employee will not be included to compute taxable
income of the employee as it is only making good the loss on sale of property and not
a profit on sale of property. Thus, $25,000 will not be subjected to income tax in the
hands of the employee.
III. The interest free loan will attract income tax liability. The employee, i.e. Mr.
Vandelay in this case will have to pay tax on the amount of prescribed interest on
such loan provided by the new employer (Agency, 2019).
In addition if Mr. Vandelay signs a non-competitive agreement to not sale for his new employer
for 10 years and received compensation for the same then the amount of compensation shall be
considered in computing the taxable income of his. Thus, $10,000 will be included to compute
the taxable income of Mr. Vandelay (Agency, 2019).

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CANADIAN TAX CALCULATION
References
(2019). Retrieved from
https://www.canada.ca/content/dam/cra-arc/formspubs/pub/rc4033/rc4033-18e.pdf
Agency, C. (2019). Employee GST/HST rebate - Canada.ca. Retrieved from
https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/about-your-tax-
return/tax-return/completing-a-tax-return/deductions-credits-expenses/line-229-other-
employment-expenses/employee-gst-hst-rebate.html
Agency, C. (2019). Group term life insurance policies – Employer-paid premiums - Canada.ca.
Retrieved from https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/
payroll/benefits-allowances/group-term-life-insurance-policies-employer-paid-
premiums.html
Agency, C. (2019). GST/HST rebates - Canada.ca. Retrieved from
https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/gst-hst-
businesses/gst-hst-rebates.html