Investor Presentaiton
CORPORATE LAW
BY ALAIN RANGER
BRAZIL - CANADA COMPARATIVE LAW
(G) Foreign Tax Credits
To alleviate the effect of double taxation, Canada provides a mechanism
of foreign tax credit. Foreign tax credits reduce tax by allowing resident
taxpayers to claim a credit for the amount of foreign taxes paid on foreign-
source income. The credit allowed is generally the amount of tax actually
paid up to the amount of Canadian tax payable on the foreign-source
income, and is available as a reduction of Canadian tax.
(H) Goods and Service Tax
Harmonized Sales Tax
The Canadian Goods and Services Tax (GST) / Harmonized Sales Tax
(HST) is a value added tax that is levied on the supply of most property or
services at each stage in the production and distribution chain. Although
GST/HST is a multi-stage tax, imposed on purchasers of taxable
property or services at all levels of the production and distribution
chain, the ultimate tax liability is intended to be borne entirely by the
final consumer. To achieve this result, businesses that purchase taxable
property or services that are consumed, used or supplied in the course
of their commercial activities are permitted to claim a refund of the GST/
HST they paid on the property or services they consume.
This credit, referred to as an "input tax credit", is available to qualifying
GST/HST registrants (those persons either required to registered or
those who have registered voluntarily). The ultimate consumers of
the property or services are not entitled to claim input tax credits and,
accordingly, must bear the full GST/HST liability. The application of
GST/HST can be contrasted with the single stage provincial retail
sales taxes (as described below in the section entitled Provincial
Sales Taxes) that are levied only at one stage in the production/
distribution chain (generally at the retail level).
The federal GST is levied at a rate of 5% in those provinces and territories
that either do not have a provincial sales tax or have not fully harmonized
their sales tax with the federal GST. These provinces and territories are
British Columbia, Alberta, Manitoba, Saskatchewan, Québec, Yukon,
Northwest Territories and Nunavut. The remaining Canadian provinces
are referred to as "participating provinces" as each has entered into an
agreement with the Federal Government regarding the harmonization
of their provincial sales taxes with the federal GST. Pursuant to these
agreements the Canada Revenue Agency collects HST at the rate of
13% in Ontario and 15% in New Brunswick, Newfoundland and Labrador,
Nova-Scotia and Prince-Edward Island (i.e. 5% federal GST harmonized
with a 8% or 10% provincial tax component).
The GST/HST is levied on nearly all supplies of property and services
that are either made or deemed to be made in Canada. The limited
categories of supplies on which GST/HST is not levied are either
referred to as "exempt" or "zero-rated". The principal distinction
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