• Effective January 22, 2024, every privately held corporation registered under the CBCA must prepare and maintain a register of individuals with significant control over the corporation (“ISC Register”) and file that information with Corporations Canada. Federal private corporations should begin to review existing corporate records and procedures to prepare for the new information reporting requirements.

• Effective January 1, 2023, every privately held corporation registered under the OBCA must prepare and maintain an ISC Register. Ontario private corporations should begin to review existing corporate records and procedures to prepare for the new information reporting requirements.

• Effective October 19, 2021, Ontario-registered corporations must file their mandatory annual returns using the Ontario Business Registry (“OBR”). They can no longer file their annual returns through the Canada Revenue Agency using their corporate accountant.

1. Meeting the New Individuals with Significant Control Disclosure Requirements

• Registered shareholdings;
• Beneficial ownership;
• Direct or indirect control over shares;
• Direct or indirect influence that, if exercised, would result in control-in-fact of the corporation; and
• Interests or rights prescribed by regulations under the CBCA or OBCA, as applicable.

1. The name and date of birth of each individual with significant control;
2. The country (or countries) where the individual with significant control of the corporation is considered a resident for income tax purposes;
3. The address for service of each individual with significant control of the corporation;
   1. In the context of federal corporations, due to proposed legislation under Bill C-42 that would make some personal information from the register public, a preferred address for service should be provided. If no address for service is provided, Corporate Canada may make the individual’s residential address public in its place.
4. The day on which each individual became or ceased to be an individual with significant control;
5. A description of how each individual qualifies as an individual with significant control including, as applicable, a description of their interests and rights in respect of the corporation’s shares; and
6. A description of the steps that the corporation has taken during its financial year to ensure that:
   1. It has identified all individuals with significant control over the corporation; and
   2. The information in the register is accurate, complete, and current.

2. Meeting the New Annual Filing Requirements

The post Important Updates on Federal and Ontario Corporate Compliance Requirements appeared first on Sotos LLP.

Required Closure Dates

Generally, the Ontario Retail Business Holidays Act (the “Act”) requires retail businesses to close on the following nine public holidays every year:

1. New Year’s Day,
2. Good Friday,
3. Victoria Day,
4. Canada Day,
5. Labour Day,
6. Thanksgiving Day,
7. Christmas Day,
8. Easter Sunday, and
9. Any other public holiday declared by proclamation of the Lieutenant Governor to be a holiday for the purposes of this Act.

However, some exceptions may apply depending on the type and size of the retail store, what the store sells, the number of employees normally working, as well as other criteria.

Tourism Exemption By-Law 

If your store is not already included in an exemption under the Act, it may be beneficial to apply for a tourism exemption, through the council of the municipality where your business is located.

To be eligible under the Regulations to the Act (the “Regulations”), your retail business must be located within two kilometres of a tourist attraction and be directly associated with the tourist attraction or rely on tourists visiting the attraction for business on a holiday. The requirements may not be as onerous as they first appear:

•  The two-kilometre restriction may not apply to retail businesses located in more rural areas. The Regulations provide that the 2 kilometre requirement does not apply to a local municipality located in a district or regional municipality (or the County of Oxford) having a population of less than 50,000.
• A “tourist attraction” is defined quite broadly, as a natural attraction or outdoor recreational attraction, historical attraction, cultural, multi-cultural or educational attraction.  Successful applications have referred to outlet malls, hiking trails, natural parks, recreational and cultural centres and local wineries as potential tourist sites warranting the tourist exemption.

In terms of establishing an association with a given attraction, that can be as simple as establishing to the council’s satisfaction that the tourists who visit the attraction account for a considerable amount of the grocery store’s sales. Grocery stores often provide a wide range of products that are popular among tourists. For example, tourists to a nearby attraction often stop at the nearest grocery store for pre-packaged meals, snacks, beverages, pharmacy services, general merchandise such as sunscreen or insect repellent and first aid equipment. Tourists coming to the store to obtain these items can be sufficient to show a direct association.

Separate from and in addition to the exemption set out above, retail business establishments in a municipality may be exempted for up to five holidays a year during which a fair, festival or other special event is being held in that municipality (other than parades). If your location is close to fairgrounds or the sites of other holiday festivities, it may be worth applying for an exemption on those grounds.

It is important to note that each municipality may limit the application of the Act to establishments located in their municipality and define their own requirements for holiday closures and exemptions if they pass a by-law providing that the Act does not apply to their municipality. Toronto’s Bylaw, outlined below, is an example of this practice. You should review or request that your counsel reviews the Bylaws of your particular municipality to ensure the Act applies to your establishment.

Toronto tourism exemption

Tourism exemptions from mandatory closures on public holidays in Toronto are unique. Toronto is exempt from the requirements of the Act and instead determines its own requirements under its Holiday Shopping By-Law. The designated holidays are largely the same, but requirements for the tourism exemption may vary.

Currently, Toronto has made certain areas designated tourist areas where retailers may remain open without making an individual application. Specifically, businesses located in the following tourist areas are exempt from Toronto’s Holiday Shopping By-Law:

• Queens Quay West;
• Toronto Eaton Centre and the Hudson’s Bay Company (Yonge & Queen location);
• Downtown Yonge Street Business Improvement Area;
• Bloor-Yorkville Business Improvement Area; and
• Distillery Historic District.

Exemption application 

An application for a tourist exemption under the Regulations must include the following:

1. a description of the area or the retail business establishment for which the exemption is sought;
2. the justification, in relation to the seasonal nature, if any, of the tourist attraction for the time period sought in the exemption; and
3. information establishing that the tourism criteria set out in the Regulation are met.

The base fees required to submit applications are determined by the individual municipalities and can vary between municipalities. Refunds from the municipality for a portion of the application fee may be available for unsuccessful applications. Due to required statutory notice periods, an application will take a minimum of 4 months to process.

Enforcement of mandatory closures if a store opens improperly

Failure to comply with the Act may lead to fines, so obtaining a valid tourist exemption is recommended for grocery retailers who wish to serve customers on statutory holidays.  The minimum fines for retailers who open businesses on prohibited days are $500 for the first offence, $2,000 for a second offence and $5,000 for a third or subsequent offence. However, these are minimums only.  The Act states that retail outlets may be fined up to $50,000 or the total amount of gross sales for the holiday, whichever is greater.

At Sotos LLP, we have decades of experience advising clients on retail grocery issues. Here are three ways that Sotos can help retail grocery businesses:

1. Assistance in obtaining a tourism exemption: Sotos can provide guidance on the criteria for obtaining a tourism exemption and help retail grocery businesses prepare a successful application.
2. Compliance with the Act: Sotos can advise retail grocery businesses on the requirements of the Act and help them ensure that they are compliant to avoid fines.
3. Review of municipal bylaws: Sotos can review the bylaws of your particular municipality to ensure compliance with its requirements for holiday closures and exemptions.

This article was initially published in Canadian Grocer.

The post Don’t miss out on profits: How grocery retailers can capitalize on tourism exemptions appeared first on Sotos LLP.

Background on the Claim

Class actions were started in Canada claiming that certain banks, Visa, and Mastercard conspired to set higher interchange fees and to impose rules restricting merchants’ abilities to surcharge or refuse higher-cost Visa and/or Mastercard credit cards. Interchange fees are fees paid by merchants and collected by banks for transactions involving credit cards.

The settlement for these claims has received court approval, and there is a total of $131 million in compensation available for distribution to eligible class members.

Who can receive payment under these Class Actions?

Merchants who accepted payments by Visa and/or Mastercard credit cards as payments for goods or services in Canada between March 23, 2001, and September 2, 2021 (the “Class Period”) and incurred merchant discount fees, including interchange fees, are eligible to participate in the settlement (“Settlement Class Members”). The settlement payouts are broken into three groups of Settlement Class Members as listed below:

• Small Merchants – If you collected less than $5 million in average yearly annual revenue by credit cards over the Class Period, you are considered a Small Merchant. You could be entitled to receive $30 a year for each year you accepted qualifying credit card payments, up to a maximum of $600. As a Small Merchant, you do not need to provide proof of your claim.
• Medium Merchants – If you collected $5 million to $20 million in average yearly revenue by credit cards over the Class Period, you are considered a Medium Merchant. You could be entitled to receive $250 a year for each year you accepted qualifying credit card payments. As a Medium Merchant, you must provide proof of at least one agreement entered with an acquirer[1].
• Large Merchants – If you collected more than $20 million in average yearly revenue by credit cards over the Class Period, you are considered a Large Merchant. A Large Merchant has the option of filing a simplified or documented claim.
• Simplified Claim – To make a Simplified Claim, Large Merchants must provide proof of at least one agreement entered with an acquirer. Under this claim, you are eligible to receive $250 for each year you accepted Visa or Mastercard credit cards during the Class Period.
• Documented Claim – To be eligible to receive more than $250 per year, Large Merchants must provide documents showing credit card sales volume or payment of interchange fees.

To Submit a Claim

If you would like to submit a claim online, we encourage you to do so by visiting the Canadian Credit Card Class Action Settlement Online Claim System, here. For information on other ways to submit a claim, please refer to the form here.

Disclaimer:

Please note that Sotos LLP is not associated with this class action and settlement. For additional information about this settlement visit www.creditcardsettlements.ca  or direct your inquiries to info@CreditCardSettlements.ca.

[1] An acquirer, also known as a payment processor, is a financial institution that maintains a merchant’s account in order to accept credit cards.

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This package shed some light on uncertainties regarding unenacted trust beneficiary reporting rules announced in 2018 that were originally intended to apply for taxation years of trusts that ended after December 30, 2021. After some confusion regarding its implications for the current year, the Canada Revenue Agency (CRA) has since clarified that the proposed changes to trust reporting will apply to taxation years of trusts that end after December 30, 2022, but the exact date these changes will come into effect has not yet been specified. If the legislation is enacted as and when currently predicted, the first T3 tax returns in which additional disclosures would have to be reported to the CRA are those to be filed in early 2023 for the 2022 taxation year. For now, trustees and others engaged in trust tax compliance have another year to collect the required personal information on beneficiaries and other required persons.

Current Trust Reporting Requirements (as of March 2022)

At present, a trust that does not earn income or make distributions in a year is generally not required to file an annual (T3) return of income. A trust is required to file a T3 return if the trust has tax payable or it distributes all or part of its income or capital to its beneficiaries. Even if a trust is required to file a return of income for a year, there is no requirement for the trust to report the identity of all its beneficiaries.

Given the above, the Government perceives that there are gaps in the information they currently collect with respect to trusts and seeks to close such gaps. Budget 2017 announced the Government’s intention to examine ways to expand information collected with respect to trusts.

Proposed Federal Trust Filing and Reporting Measures

The draft amendments to the Income Tax Act (ITA) and related regulations were first released in July 2018, and provided that:

1. trusts resident in Canada will be required to file a tax return every year regardless of whether the trust has tax payable or distributes a portion of its income,
2. trusts resident in Canada and non-resident trusts that are required to file a return will be required to list each person who at any time in the year was a trustee, beneficiary or settlor or had the ability to exert control over trustee decisions over the allocation of trust income or capital, and to provide certain personal information about those persons (name, address, date of birth (for individuals), the jurisdiction of residence and social insurance number or other applicable taxpayer identification number) (“Beneficial Ownership and Control Information”),
3. new penalties will be introduced for failure to file a return containing trust Beneficial Ownership and Control Information — including, notably, a penalty of no less than 5% of the highest fair market value of the trust property during the year where the failure to file was done knowingly, or due to gross negligence.

Pursuant to the draft legislation released on February 4, 2022 (see sections 14-18), disclosure of Beneficial Ownership and Control Information on a T3 return is not required if the information is subject to solicitor-client privilege.

The draft legislation also provides that bare trusts, which are arrangements under which a trust can reasonably be considered to act as agent for all the beneficiaries under the trust with respect to all dealings with all of the trust’s property, are now explicitly subject to the new trust filing and reporting measures. Previously, bare trusts were generally not required to file T3 returns.

For more information please reach out to a member of our team.

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Key Takeaways

1. “Individuals with Significant Control” Must Be Disclosed – Starting January 1, 2023, privately-held Ontario corporations will be required to create and maintain a register of “individuals with significant control” (ISCs) over those corporations. Ontario private corporations should begin to review existing corporate records and procedures to prepare themselves and their shareholders for the new information reporting requirement.
2. Annual Returns Must Be Filed with the Ontario Business Registry (OBR) – Effective October 19, 2021, Ontario Corporations must file their Annual Returns using the Ontario Business Registry. They can no longer file through the Canadian Revenue Agency as part of their T2 Corporation Income Tax Return. Affected corporations should ensure they have their company key to file their Ontario CIA return directly through the OBR or arrange for an intermediary who can file without a company key.

Disclosure Update

On January 1, 2023, amendments to the Ontario Business Corporations Act (OBCA) addressing continuing disclosure requirements for privately-held Ontario corporations will come into effect. From that date forward, Ontario corporations will be required to create and maintain a register of ISCs. Although new to Ontario, similar recordkeeping requirements have previously been adopted federally and in many other Canadian jurisdictions to address tax evasion and financial crime concerns.

Who is an Individual with Significant Control?

A person will be considered an ISC requiring disclosure if the person:

• is the registered or beneficial owner of, or has direct or indirect control or direction over, a “significant number of shares”.
• has any direct or indirect influence that, if exercised, would result in “control in fact” of the corporation.
• is an individual to whom prescribed circumstances apply.[1]

A “significant number of shares” is defined as owning, controlling, or directing 25% or more of the voting rights attached to the corporation’s outstanding voting shares or 25% or more of all of the corporation’s outstanding shares based on the fair market value of the shares.[2]

The phrase “control in fact” is determined by considering all relevant factors in the circumstances; however, the legislation does not state those relevant factors.[3]

Two or more individuals may be connected through their interest in the corporation so as to be considered to be a single ISC, requiring the details of both to be included on the register.[4] This is because an individual meets the definition of ISC if they own or control a significant number of shares with one or more individuals. For example, an individual may individually own less than 25% of a corporation’s shares, but has an agreement with other shareholders to vote o the shares the same way.  If this group of individuals collectively owns 25% or more of a corporation’s shares, each member of the group is considered an ISC and needs to be recorded in the register.

What Must be Disclosed in the Register?

There is no proscribed form for the register. It can be created as a logbook, database or spreadsheet. For each ISC, the register of ISCs must include;

• name,
• date of birth,
• address,
• country (or countries) where the ISC is considered a resident for tax purposes,
• the date when control started (for example, when the ISC purchased 25% or more of the corporation’s shares),
• the date when control ended,
• a description of how the ISC has significant control (for example, a description of their interests and rights in respect of shares of the corporation),
• a description of each step taken to identify all ISCs.[5]

New information is required to be recorded in the register within 15 days of the corporation becoming aware of it. This register should be kept with the corporation’s minute books at the registered officer or at another place in Ontario designated by the directors.

The corporation, officers, directors and shareholders could all be found guilty of offences for failure to uphold their new disclosure obligations. Corporations that fail to uphold their record-keeping and disclosure requirements in regard to ISCs are guilty of an offence and could be liable to multiple fines of $5,000. Directors and Officers who knowingly authorize, permit or acquiesce in the contravention of the corporation’s disclosure requirements, or in the recording or provision of false or misleading information are guilty of an offence and could be liable for fines of up to $200,000 or imprisonment up to 6 months, or both. Shareholders who fail to meet their disclosure obligations may likewise be found guilty of an offence and could be liable for similar fines.

Annual Returns Update

Filing Annual Returns with the OBR

On October 19, 2021, Ontario launched the OBR. The OBR is intended to provide instant, 24-hour fulfillment of search and registration requests.

This is a major change from the previous registry system in which, for over 20 years, Ontario corporations were required to file a Corporations Information Act Annual Return (CIA return) with the Canada Revenue Agency (CRA). Accountants would routinely complete and file the CIA returns with the CRA on behalf of their clients – but this is no longer possible under the new system.  Commencing October 19, 2021, corporations must file their CIA returns directly online using the OBR or through an authorized third-party service provider (they can no longer be filed through the CRA).

To access the OBR, corporations must have a company key. For new corporations, a company key is automatically assigned through the OBR when businesses and not-for-profit corporations are incorporated or when non-Canadian corporations file an Initial Return for an Extra-Provincial Corporation. For pre-existing corporations in Ontario, a company key must be requested through the OBR, which will be mailed to the corporation’s registered address.

Note that corporations may still use intermediaries, such as lawyers and authorized service providers, to file their CIA returns and otherwise transact on the OBR. Law firms, through authorized service providers, are able to file documents on the OBR without a company key. If you do not have a company key and do not have much time to wait for one to come in the mail, you may need to request your law firm to submit the required documents on the OBR for you.

For more information on these or other corporate responsibilities please reach out to a member of our team.

[1] OBCA s 1.1(2)

[2] OBCA s 1.1(1)

[3] OBCA s 1.1(5)

[4] OBCA s 1.1(4)

[5] OBCA s 140.2

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1. Virtual witnessing of Wills and POAs is now permanent.

Remote signing of wills and powers of attorney (“POAs”) was first introduced as a temporary measure during the original COVID-19 emergency order in 2020. The AAJA makes virtual signing a permanent option and tweaks some of the definitions from the original measures.

As of January 1, 2022, wills may be formally signed and witnessed virtually provided that (1) at least one person who acts as a witness is a lawyer or a paralegal, (2) the testator’s and witnesses’ signatures are made at the same time, and (3) the electronic method of communication used allows participants to see, hear and communicate with one another in real time[1]. It is however important to note that Ontario still requires wet signatures on wills (i.e. with a pen). Electronic signatures on wills have not been approved.

A complementary amendment to the SDA now permanently permits the same virtual witnessing for powers of attorney.[2]

2. Marriage no longer revokes an existing will.

As of January 1, 2022, the AAJA repeals subsection 15(a) and section 16 of the SLRA thereby changing the law so that if someone with an existing will marries, their existing will is not automatically revoked.[3]

3. Separated spouses lose entitlements and appointments.

The AAJA amends section 17 of the SLRA to provide that, if at the time of the testator’s death the testator was separated from his or her spouse, then any gifts to the separated spouse in the will of the testator will be revoked and the will of the testator will be construed as if the separated spouse predeceased the testator (subject to any contrary intentions in the will).[4] This will effectively extend the existing provision to treat separated spouses the same as divorced spouses under section 17 of the SLRA.

The AAJA also provides that the intestacy rules in the SLRA will no longer apply to separated spouses. This means that if a testator had no will and was separated from their spouse at the time of their death, the spousal entitlements provided for under the SLRA will no longer apply.[5]

The definition of ‘separated’ in the AAJA provides for a number of scenarios, but will likely most often apply when, before the testator’s death, the testator and their spouse lived separately for 3 years due to the breakdown of their marriage and in cases where parties have entered into a separation agreement.[6]

4. Improperly signed wills are now treated more flexibly.

Effective January 1, 2022, the Superior Court of Justice is now authorized, on application, to make an order validating a document or writing that was not properly executed in complete compliance with the formal requirements for the execution of wills if the Court is satisfied that the document or writing sets out the testamentary intentions of the deceased or the deceased’s intention to revoke, alter or revive their will.

This is a significant change as previously the court had no discretion in determining whether a  document purporting to be a ‘will’ satisfied the strict legislative requirements to constitute a valid will. Several provinces have already enacted similar legislation and the Ontario courts are likely to look to the decisions of the courts in those provinces when considering the application of this new power.

The AAJA expressly excludes electronically executed documents from the scope of this power.[7] This means that the new authority of the court to validate testamentary documents is not intended to allow the court to declare a document or writing valid if that document or writing bears an electronic signature. Wet signatures are still required on the documents that are submitted for validation.

These beneficial changes are important to note for married, separated and long-term common-law couples alike but proper estate planning advice is still necessary to be sure appropriate provisions have been made for individuals and their family members.  For more information on your estate planning needs please reach out to Lou Alexopoulos at lalexo@sotos.ca, 416.977.5024.

[1] Schedule 9, section 1(2) of the AAJA
[2] Schedule 8 of the AAJA
[3] Schedule 9, section 2 and 3 of the AAJA
[4] Schedule 9, section 4(1) and (2) of the AAJA
[5] Schedule 9. section 6 of the AAJA
[6] Schedule 9, section 4(2) of the AAJA
[7] Schedule 9, section 5 of the AAJA

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Ontario is fundamentally restructuring its recycling system. Ontario’s municipalities set up the world’s first curbside recycling systems in Kitchener in 1981. Since 2002 producers of recyclable blue box materials have been required to fund up to 50% of municipal net operating costs. Now, 40 years after the initial conception of a curbside recycling system, Ontario is adopting an even more aggressive blue box program that will push 100% of the cost and physical administration of recycling eligible materials onto producers of those materials.

In 2016, the Government of Ontario created the Resource Productivity and Recovery Authority (the “Authority” or “RPRA”) to support Ontario’s transition to individual producer responsibility (“IPR”). On June 3, 2021, Ontario released the finalized O. Reg. 391/21: Blue Box (the “Regulation”) under the Resource Recovery and Circular Economy Act, 2016 (the “RRCEA”). Under the new Regulations, and enforced by the Authority, brand holders that produce eligible packaging (“Producers”) will be responsible for designing and fully funding the collection and end-of-life management of the blue box materials they supply to consumers in Ontario. At the option of Producers, they may partner with Producer Responsibility Organizations (“PROs”) to take on the collection, management, and administration of the program on behalf of Producers.

The guiding principle behind this initiative is that the parties responsible for deciding on packaging should be the ones responsible for the cost of recycling it after consumers throw it away.

This program will replace the current Stewardship Ontario Blue Box Program with the first group of blue box programs transferring the responsibility for the collection, management, and administration of recycling eligible packaging to Producers in July 2023. By December 2025, Producers will be fully responsible for providing blue box services across Ontario.

Franchisors face additional consideration when compared to other industries falling under these new Regulations. They should be mindful that any changes to their business that significantly impact franchisees, such as additional fees for administering the blue box program, must be disclosed in their Franchise Disclosure Document (“FDD”).

Who is a Producer of blue box materials?

A person or company is considered a Producer under the Regulations if they supply blue box materials (such as packaging, paper products, or packaging-like products) comprised of paper, glass, metal, or plastic, or a combination of these materials to consumers in Ontario (collectively, “eligible packaging”).

When there is a franchisor-franchisee relationship, the regulations provide that for the purposes of the blue box program, if the franchisor has franchisees that are resident in Ontario, then the franchisor will be considered the Producer and be required to uphold all obligations imposed by the Regulations.

More broadly, the hierarchy for determining who bears the responsibility as Producer is listed below in descending order;

• Firstly, the Canadian resident brand holder of a product (such as a person/company who owns or licenses a brand or who has rights to market a product under the brand) is responsible for the packaging they added to the product.
• Secondly, any resident of Ontario who imported the product into Ontario is responsible for the packaging they added to the product.
• Thirdly, where there is no brand holder that is a resident of Canada, or the importer is outside of Ontario, the retailer that sold the product to the consumer will be responsible for the cost of recycling the packaging.

It’s important to note that packaging materials that are not supplied to consumers (such as materials used to transport products to stores) are not captured by these Regulations.

If you are unsure of whether you are captured by these regulations, it may be helpful to contact RPRA at registry@rpra.ca or call 647-496-0530 or toll-free at 1-833-600-0530.

Who Needs to Register?

Any person or company who meets the definition of Producer must register with the Authority unless they fall under one of the two exemptions to registration under the Regulations. You are exempt from registering as a Producer if:

• Small Producers Exemption (s 73) – You have gross revenue of less than $2 million from all products and services. Producers that fall under this exemption must still maintain records for audit purposes, but do not need to report or pay.
• Minimum Requirements (s 42) – You generate less than all of the following weight amounts annually:
  • Paper – 9 tonnes
  • Rigid plastic (molded plastic, such as a food or product container) – 2 tonnes
  • Flexible plastic (unmolded plastic, such as a plastic bag, film, wrap, pouch, or laminate) – 2 tonnes
  • Glass – 1 tonne
  • Metal – 1 tonne
  • Beverage containers – 1 tonne

How to Register with the Authority and Due Date for Registration

Producers of blue box materials were obligated under the Regulations to register and report their 2020 supply data to the Authority by October 1, 2021. If Producers have not registered yet, Producers must complete this Registration Form and email it as an attachment to registry@rpra.ca as soon as possible.

For more information on the registration requirements and FAQs, you can refer to the RPRA website here. For more information on the process for completing the registration form, you can refer to the step-by-step instructions for the registration process provided by the Authority.

If you have further questions about the registration process or the regulation more generally, contact RPRA’s Compliance and Registry Team at registry@rpra.ca or call 647-496-0530 or toll-free at 1-833-600-0530.

Enforcement of the Regulations by the Authority

The Authority will be taking steps to ensure enforcement of the new regulations. Although not finalized, the Ontario government is consulting on monetary penalties for companies not complying with the Regulations.

Fees

To fund the administrative operation of the Authority, Producers of eligible packaging are required to submit fees based on the amount of eligible packaging they supplied to consumers. The 2021 fees (based on 2020 supply data) are

• a $75 flat fee for the first 50,000 kg of paper/packaging supplied, and
• an additional 38 cents for each additional kg supplied.

Do not submit your fees with the registration forms. After registering, Producers will receive an invoice from the Authority with their required fee amount.

What is a Producer Responsibility Organization?

Under the Regulations, 100% of the cost and administration for implementing recycling in Ontario is put onto Producers. A PRO is a third-party business established to contract with Producers to provide collection, management, and administrative service to Producers so they can meet their obligations under the Regulations, including:

• Representing a Producer for the purposes of rule creation
• Arranging, establishing, or operating a collection or management system
• Arranging, establishing, or operating a promotion and education system
• Preparing and submitting reports

One PRO will likely service many Producers and it is intended that, by pooling their efforts, costs of administrating the new system will be reduced for each Producer.

It is important to note that Producers are not required to sign up with a PRO. It is a business decision if a producer chooses to work with a PRO.

Takeaways for Franchisors

Large Franchisors with business models that produce eligible packaging are likely to fall under the Regulations as Producers. If not already registered, such Franchisors should immediately register with the RPRA.

Franchisors that qualify as Producers will also have to make decisions in the coming weeks and months about whether to contract with a PRO and, if so, which PRO they wish to partner with in order to meet their new obligations.

Finally, depending on the industry, many FDDs already contain a stewardship section that outlines the fees under the current Stewardship Ontario blue box system. If these new obligations on Franchisors significantly affect any aspect of the franchisee’s business such as additional fees or administrative burdens on the franchisee, then franchisors must update their FDDs accordingly.

The post Are You Registered? The New Blue Box Scheme and its Impact on Franchisors; An Overhaul of Ontario’s Blue Box System Shifts 100% of Costs on Producers of Packaging appeared first on Sotos LLP.

I. What is a Canadian Amateur Athletic Trust (“AAT”)?

These are specialized trusts permitted by the Canadian government since 2008 in order to provide a financial solution for amateur athletes who needed to maintain their amateur status for their athletic careers but also needed to plan for a financially viable future.

These trusts allow amateur athletes to defer the realization of qualifying income until after their amateur athletic careers in order to maintain their amateur athletic status while still creating tax-deferred investment income for the future.

II. Who is eligible for a Canadian Amateur Athletic Trust?

To be considered an ‘amateur athlete’ for the purposes of these trusts, and be eligible to create a trust, the athlete must meet all three of the following criteria defined in s 143.1(1) of the Income Tax Act (“ITA”):

1. be a member of a registered Canadian amateur athletic association;
2. have qualified to compete in an international sporting event sanctioned by an international sports federation as a member of a Canadian national team; and
3. not be a professional athlete.

In practice, the first requirement means being a member of the right sporting club. Many private sporting clubs are also registered Canadian Amateur Athletic Associations. To see if your sporting club is registered, visit the Government of Canada website here for an up to date list of registered Canadian Amateur Athletic Associations.

The second requirement is more difficult to meet. It requires an amateur athlete to have already qualified to compete in a narrowly defined muster of sporting events sanctioned by an international sports federation. For reference, the international sports federations are international non-governmental organizations recognized by the International Olympic Committee (“IOC”) as administering one or more sports at the world level. For example, the International Golf Federation is the international federation recognized by the IOC as the world’s governing body for golf. To be eligible for an amateur athletic trust, you must first have qualified to compete in an international sporting event sanctioned by one of these federations.

Finally, the third requirement is somewhat circularly defined as necessitating an amateur athlete not to be a professional athlete. The ITA defines a professional athlete under s 143 as:

professional athlete means an individual who receives income that is compensation for, or is otherwise attributable to, the individual’s activities as a player or athlete in a professional sport.

But with this clear-as-mud definition, athletes can often be uncertain as to what money they can accept without jeopardizing their amateur status. The safest practice is to take a case by case approach and confirm that each source of income does not qualify as income from activities in a professional sport before you accept it.

III. What funds are eligible to go into a Canadian Amateur Athletic Trust?

It is important to note that the types of funds eligible to go into an AAT are quite limited. Income that will qualify to be placed into an AAT under the ITA is defined under s 143 as:

income that

• is received by the individual in a taxation year in which
  1. the individual was, at any time, an amateur athlete, and
  2. the individual was not, at any time, a professional athlete;
• may reasonably be considered to be in connection with the individual’s participation as an amateur athlete in one or more international sporting events referred to in the definition amateur athlete; and
• is endorsement income, prize money, or income from public appearances or speeches.

In practice, this means only income that can be reasonably connected with participating in sporting events organized by international sports federations can qualify. These world level sporting events recognized by the International Olympic Committee, or their regional federations, are rigidly scheduled and difficult to enter, and what constitutes a reasonable connection to these events is not open to wide interpretation.

IV. Who can hold the trust money on your behalf?

An AAT can receive funds based on one of two types of arrangements outlined under s 143(1) of the ITA. In practice, athletes can either arrange a trust with their national sports organization or they can set up a trust independently with a qualifying financial institution. If the athlete organizes the AAT individually,

1. an outside institution must be involved, usually a bank; and
2. an arm’s-length party must be involved as a mandatory signatory on any payment from the account – this must be someone who is not related to the athlete and is not a close personal connection.

V. This seems like a lot of effort. Why should I want an Amateur Athletic Trust?

It is important to note that an AAT may not be for everyone. Athletes who are just breaking even with their expenses may not have a substantial amount of residual qualifying income to pay into a trust. In addition, there will be legal fees associated with setting up a trust as well as ongoing management fees. Amateur athletes looking into AAT’s should review their financial position to evaluate if it is financially advantageous at that time.

For those athletes who have income that exceeds their expenses, the ability to defer tax on income, interest, capital gains, and dividend income is a significant way to create wealth over the course of one’s amateur athletic career.

The main income tax benefits realizable when eligible income is contributed and retained within an AAT are:

1. Deferral of income tax on income from endorsements, prize money, income from public appearances etc. for eight or more years;
2. Deferral of income tax on investment income earned within the trust for eight or more years; and
3. The ability to generate RRSP contribution room with respect to income contributed to the trust.  This is as a result of changes to the ITA in 2014 which allow income contributed to the AAT to qualify as earned income of the athlete for RRSP purposes, even though those amounts are retained in the AAT.

It is important to note that deferral of tax on this income ends upon distribution of funds to the athlete. The funds in the amateur athletic trusts (contributions plus investment income) are included in income for tax purpose upon distribution to the athlete or, at the latest, eight years after the later of the last year in which the athlete competed as a Canadian national team member and the year in which the trust was created. If any property remains in the trust at the end of the eight-year period, it is deemed to have been distributed to the amateur athlete.

At Sotos LLP, our team of experts has been advising businesses and individuals in innovative estate planning for decades. For information on how you can financially plan for an amateur athletic career and what comes after please contact John Sotos (jsotos@sotosllp.com or 416-977-9806).

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