Changes to your company activities may lead the Canada Revenue Agency to question your compliance strategy, such as engaging in international trade, e-commerce sales or changes in employment patterns.
There are key factors that may increase revenue risks and the complexity and volume of service, audit and other compliance interventions by revenue authorities.
These factors include the growth in international trade, e-commerce transactions and changes in employment patterns.
- Foreign trade
While conducting business with organizations in other countries is a positive sign of growth, it may carry negative consequence in that revenue authorities may take a closer look at your tax compliance strategies.
The introduction of international transactions to your company may raise questions concerning:
- Collection and remittance of appropriate sales tax.
- Local tax issues.
- Import and export duties, as applicable.
Import/export activity “changes the ball game” as they say, and revenue authorities may want to know how your organization plans to continue playing under new rules.
- Engaging e-commerce
As online business explodes (Forester research predicts Canadians will spend $39 billion online by 2019), revenue authorities may take a closer look at companies that were once practicing a more traditional business model but now earn income from online sales.
Issues of concern to revenue authorities include:
- Assigning appropriate domestic sales tax on purchases.
- Online sales to foreign customers and collecting relevant tax.
It’s an issue most companies will need to address considering the considerable proliferation of e-commerce across every category of industry. Revenue Authorities will be struggling to keep up with these changes.
- Employment patterns
To satisfy increasing demands for “just-in-time labour” many companies today are hiring “contract workers.” These modern workers may not be employed in the traditional sense, but rather hired under a temporary contract that may span a week, a month or a year depending on the employer’s requirements. Because of the temporary nature of the work, contract positions may not receive the usual employee treatment involving payroll source deductions and employee benefits.
Naturally, when an employer significantly changes the way it engages its workforce, numerous accounting and tax issues emerge:
- Is the employer responsible for pension contributions to contract workers?
- When is a contract worker an “employee” or a “supplier?” (The Personal Services Business designation may apply, complicating tax issues).
- Is the employer collecting and remitting appropriate taxes relating to this transient workforce?
These three significant changes to the way your organization conducts its affairs may attract the attention of revenue authorities, who rightly want to know how your organization will remain compliant to a stated strategy.
Consult with a qualified tax specialist to determine the best approach when dealing with Canada Revenue Agency on this important issue.
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