Evaluation of the Federal Business Immigration Program — Appendix E: Glossary of Economic Concepts

Business income – gross:

Gross business income is the entire income of the taxfiler's unincorporated business (e.g. dentist, accountant, physician, etc.), before costs and expenses are deducted. If the enterprise is a partnership, each partner reports the income of the whole operation.

Until 1994, reporting of self-employment income was on a fiscal year basis and the fiscal year end was the end of the taxation year for reporting this income. Beginning in 1995, most individuals are required to report self-employment income on a calendar year basis. However, eligible individuals may be able to use an alternative method of reporting whereby the fiscal period does not end on December 31. Due to this rule change, individuals reporting self-employment income in 1995 may have reported more than one fiscal year‘s income (i.e. more than 12 months).

Capital gains/losses, net taxable:

A capital gain or loss occurs when there is a disposition or deemed disposition of capital property, only a fraction of net capital gains are taxable.
The following is the percentage of capital gain that is taxable:

  • 50%, 2001 to 2007;
  • Three different percentages in 2000;
  • 75%, 1990 to 1999;
  • 37.5%, 1997 for certain property donated to charity;

For the year 2000, taxfilers include in their income 75% of capital gains realized before February 28, 66.67% of gains realized from February 28 to October 17 and 50% after this date. The cumulative capital gains deduction limit is $250,000.

Commission income – gross:

Gross commission is the entire income of the taxfiler's unincorporated business, where commission is earned, before costs and expenses are deducted. If the enterprise is a partnership, each partner reports the entire gross commission income of the operation.

Until 1994, reporting of self-employment income was on a fiscal year basis and the fiscal year end was the end of the taxation year for reporting this income. Beginning in 1995, most individuals are required to report self-employment income on a calendar year basis. However, eligible individuals may be able to use an alternative method of reporting whereby the fiscal period does not end on December 31. Due to this rule change, individuals reporting self-employment income in 1995 may have reported more than one fiscal year‘s income (i.e. more than 12 months).

Deductions:

As per Canada Revenue Agency, businesses can deduct any reasonable current expense paid or that will have to be paid to earn business income. Personal expenses or expenses incurred to buy capital properties cannot however be claimed. The following business expenses can be deducted: advertising; allowance on eligible capital property; bad debts; business start-up costs; business tax, fees, licences, dues, memberships, and subscriptions; business-use-of-home expenses; capital cost allowance; current or capital expenses; delivery, freight, and express; fuel costs (except for motor vehicles); insurance; interest; legal, accounting, and other professional fees; maintenance and repairs; management and administration fees; meals and entertainment (allowable part only); motor vehicle expenses; office expenses; prepaid expenses; property taxes; rent; salaries, wages, and benefits (including employer's contributions); supplies; telephone and utilities; travel; other expenses. In addition to those businesses expenses, individuals can claim: Employee home relocation loan deductions; stock option and shares deductions; other payments deductions; Limited partnership losses of other years; non-capital losses of other years; net capital losses of other years; capital gains deductions; northern residents deductions and additional deductions on their income tax report.

Dividends:

Dividends are, for tax purposes, defined as a share of the profits of a Canadian corporation, which are distributed to its shareholders. Dividends should be reported as income on the T1 Tax Form in the year they are received.

Employment income:

Employment income is the sum of total employment income from T4 slips (which includes all paid-employment income, i.e. wages, salaries, and commissions, before deductions) and other employment income (which is comprised of any taxable receipts from employment other than wages, salaries and commissions). For example other employment income includes tips, gratuities, or director's fees that are not reported on a T4 slip, and some other components that have changed through time. Employment income excludes self-employment income.

For the purpose of the evaluation, individuals were considered to have employment income if they declared more than $1000 for that type of income.

Employment insurance benefits:

Employment insurance (EI) benefits, other than payments related to the cost of a course or program destined to facilitate re-entry into the labour force, are included in Taxable income. Employment insurance is income paid to individuals experiencing paid-employment income interruptions. There are also Employment insurance benefits for persons who stop working because of sickness, injury, pregnancy, birth, or adoption of a child. If a taxfiler receives EI benefits and his or her net income before adjustments (Line 234, not available on IMDB) is more than the specified limit, the individual must pay back part of these benefits (see Employment insurance repayment (EICRP)). Note that prior to 1996 these benefits were referred to as Unemployment insurance benefits.

Farming income – gross:

Gross farming income is the total income from the taxfiler's unincorporated farming operation, before costs and expenses are deducted. If the enterprise is a partnership, each partner reports income from the entire operation.

Until 1994, reporting of self-employment income was on a fiscal year basis and the fiscal year end was the end of the taxation year for reporting this income. Beginning in 1995, most individuals are required to report self-employment income on a calendar year basis. However, eligible individuals may be able to use an alternative method of reporting whereby the fiscal period does not end on December 31. Due to this rule change, individuals reporting self-employment income in 1995 may have reported more than one fiscal year‘s income (i.e. more than 12 months).

Fishing income – gross:

Gross fishing income is the total income from the taxfiler's unincorporated fishing operation, before costs and expenses are deducted. If the enterprise is a partnership, each partner reports income from the entire operation.

Until 1994, reporting of self-employment income was on a fiscal year basis and the fiscal year end was the end of the taxation year for reporting this income. Beginning in 1995, most individuals are required to report self-employment income on a calendar year basis. However, eligible individuals may be able to use an alternative method of reporting whereby the fiscal period does not end on December 31. Due to this rule change, individuals reporting self-employment income in 1995 may have reported more than one fiscal year‘s income (i.e. more than 12 months).

Interest and investment income:

Interest and investment income is an income that is earned from interest and other investments during the tax year. This type of income can be received as a result of Canada Savings Bonds, corporate bonds, trusts, bank or other deposits, mortgages, notes, foreign interest, foreign dividend income and other property.

Investment income:

Investment income is composed of capital gains/losses (net), dividends and interest and investment income.

For the purpose of the evaluation, individuals were considered to have investment income if the investment income was above $2 or below -$2.

Professional income – gross:

Gross professional income is the total income from the practice of an unincorporated profession (e.g. dentists, accountants, doctors, etc.) before costs and expenses are deducted. If the enterprise is a partnership, each partner reports the income of the entire operation.

Until 1994, reporting of self-employment income was on a fiscal year basis and the fiscal year end was the end of the taxation year for reporting this income. Beginning in 1995, most individuals are required to report self-employment income on a calendar year basis. However, eligible individuals may be able to use an alternative method of reporting whereby the fiscal period does not end on December 31. Due to this rule change, individuals reporting self-employment income in 1995 may have reported more than one fiscal year‘s income (i.e. more than 12 months).

Self-employment income – gross:

Self-employment income (gross) is the sum of all gross income earned from self-employment. Sources of self-employment income are: business, professional, commission, farming, and fishing income.

Until 1994, reporting of self-employment income was on a fiscal year basis and the fiscal year end was the end of the taxation year for reporting this income. Beginning in 1995, most individuals are required to report self-employment income on a calendar year basis. However, eligible individuals may be able to use an alternative method of reporting whereby the fiscal period does not end on December 31. Due to this rule change, individuals reporting self-employment income in 1995 may have reported more than one fiscal year‘s income (i.e. more than 12 months).

For the purpose of the evaluation, an individual was considered as drawing income from self-employment if he/she declared at least $1,000 on either one of the sources of self-employment (business, professional, commission, farming, or fishing income).

Self-employment income – net:

Self-employment income (net) is the sum of all net income earned from self-employment. Sources of self-employment income are: business, professional, commission, farming, and fishing income. Only the taxfiler's share of active self-employment partnership income is included.

Social assistance income:

Social assistance is designed to provide income to meet the cost of basic requirements of either a single person or a family when all other financial resources have been exhausted. Line 145 includes social assistance income provided by a provincial or municipal program. If applicable, the spouse with the higher net income (line 236) must report the social assistance payments.

Taxable income:

Taxable income is total income (Canada Revenue Agency‘s definition, TIRC) minus deductions reported on the tax return.

Taxes paid:

Taxes paid is the sum of the federal tax, provincial tax and other taxes paid. The federal taxes paid equals to the net federal tax (the amount of income tax that the taxfiler is required to pay the Federal Government of Canada), minus the amount of Quebec abatement (a rebate on federal tax that individuals are given) and the goods and services tax (GST) credit that the taxfiler received. The provincial tax is the amount of income tax that a filer is required to pay to a provincial government after deducting various provincial tax credits. Other taxes include the amounts paid for the Canada Pension Plan and Quebec Pension Plan, Employment Insurance and Social benefits repayment.

Total income:

Are included in the total income definition: Total earnings from T4 slips, other employment income, self-employment net income, Old Age Security pension, CPP/QPP benefits, pension and superannuation income, employment insurance benefits, dividend income from T4, interest and investment income, limited partnership income net, rental income net, capital gains/losses calculated, alimony or support income, RRSP income, other income, non-taxable income.

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