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docs(nexa-coa): treat Westin & Divine as associated corps

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Restructure Section 9 to handle Westin Healthcare Inc and Divine Mobility
Inc as Gurpreet's associated corporations (ITA s.256):
- Future intercompany flows go through normal AR/AP with partner records
  tagged 'RP-Associated', not slush 'Due to/from' GL buckets
- 'Due to/from Associated Corporations' now reserved only for true
  intercompany loans (no invoice)
- Surface SBD $500k sharing and SR&ED $3M sharing rules; Schedule 23
  allocation drives major annual tax decisions
- Manpreet account archived (employee of another corp, not Nexa-related)
- Add transfer-pricing risk flag (ITA s.247, 10% penalty)
- Add multi-company Odoo as future sub-project

Co-Authored-By: Claude Opus 4.7 (1M context) <noreply@anthropic.com>
This commit is contained in:
gsinghpal
2026-05-12 13:18:52 -04:00
parent 6c6fb8d2a4
commit 3d4f003aba
1 changed files with 47 additions and 24 deletions
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71
docs/superpowers/specs/2026-05-12-nexa-coa-design.md
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@@ -304,19 +304,24 @@ Tax Liabilities
216300 Corporate Tax Instalments Paid (contra)
```
## 9. Shareholder & Related Party (1xxxxx + 2xxxxx + 3xxxxx)
## 9. Shareholder, Associated Corporations & Equity
**Associated corporations** (Gurpreet >25% owner of each → ITA s.256 associated group):
- Nexa Systems Inc (this company)
- Westin Healthcare Inc
- Divine Mobility Inc
**Treatment**: Westin and Divine are **regular Customers and Vendors of Nexa**, NOT slush accounts. Their transactions flow through normal AR/AP. They get partner records tagged `Related Party — Associated Corporation` for disclosure tracking. The "Due To/From Related Party" GL buckets exist only for true intercompany loans (cash moved between the corps' bank accounts without an invoice).
```
Due From — Assets
115100 Due From Shareholder — Gurpreet
115200 Due From Related Party — Westin Healthcare
115900 Due From Related Parties — Other
115900 Due From Associated Corporations (intercompany loans only — NOT customer AR)
Due To — Liabilities
221100 Due To Shareholder — Gurpreet (short-term)
221200 Shareholder Loan — Gurpreet (long-term)
222100 Due To Related Party — Westin Healthcare
222900 Due To Related Parties — Other
221100 Due To Shareholder — Gurpreet (short-term, <1 year)
221200 Shareholder Loan — Gurpreet (long-term, with commercial terms)
222900 Due To Associated Corporations (intercompany loans only — NOT vendor AP)
Equity
311100 Share Capital — Common Shares
@@ -327,10 +332,25 @@ Equity
321900 Dividends Declared (contra)
```
**Compliance flags**:
- Subsection 15(2): shareholder loans >1 year past fiscal year-end → taxable to shareholder.
- Related-party transactions must be at arm's length pricing (transfer-pricing rules).
- T2 Schedule 50 lists all >10% shareholders.
**Partner setup** (under Contacts, not GL accounts):
- `Westin Healthcare Inc` → partner with both Customer and Vendor flags; tagged `RP-Associated`
- `Divine Mobility Inc` → partner with both Customer and Vendor flags; tagged `RP-Associated`
- Nexa invoices Westin/Divine like any client → AR in 112xxx, revenue in 4xxxxx, HST 13% (Ontario)
- Westin/Divine bill Nexa → AP in 211xxx, expense in 6xxxxx / COGS in 5xxxxx
**Intercompany compliance flags (CRITICAL — drives major tax decisions)**:
1. **Small Business Deduction (SBD) sharing — ITA s.125(5.1)**: The $500k federal SBD limit is **shared across all associated corporations**. If Nexa, Westin, and Divine are each profitable, they collectively get **one** $500k pool, not three. The corps must file Schedule 23 (T2) allocating the limit. Strategy: allocate the limit to whichever corp has the highest taxable income each year.
2. **SR&ED expenditure limit shared — ITA s.127(10.2)**: The $3M expenditure limit for the 35% refundable ITC is also shared across the associated group. Same Schedule 23 mechanism. Nexa being the dev shop probably consumes most/all of it.
3. **Transfer pricing — ITA s.247**: Services between related corps must be priced at fair market value. Nexa invoicing Westin at $50/hr while billing arm's-length clients $150/hr will be scrutinized. Document the rate methodology. Penalty for non-compliance is 10% of the adjustment.
4. **Subsection 15(2) shareholder loans**: outstanding >1 year past FY end → taxable to Gurpreet personally.
5. **T2 Schedule 9** (Related and Associated Corporations) must be filed by Nexa listing Westin and Divine.
6. **GAAR risk**: aggressive intercompany pricing or loan arrangements designed primarily for tax benefit can be challenged under general anti-avoidance rules.
## 10. Analytic Plans
@@ -404,9 +424,9 @@ Equity
|---|---|
| 1400 Transferred to Gurpreet | 221100 Due To Shareholder — Gurpreet |
| 1505 Sent to India | 612200 Contract Labour — Foreign |
| 1580 Transferred to Westin | 222100 Due To Related Party — Westin Healthcare |
| 1590 Transferred to Divine | If shareholder: 221xxx Due To Shareholder — Divine; if related party: 222xxx (requires Gurpreet to confirm relationship before cleanup) |
| 1600 Transferred to Manpreet | If shareholder: 221xxx Due To Shareholder — Manpreet; if related party: 222xxx (requires Gurpreet to confirm relationship before cleanup) |
| 1580 Transferred to Westin | ARCHIVE — Westin is an associated corp, future transactions go through normal AR/AP via partner record `Westin Healthcare Inc` |
| 1590 Transferred to Divine | ARCHIVE — Divine is an associated corp, future transactions go through normal AR/AP via partner record `Divine Mobility Inc` |
| 1600 Transferred to Manpreet | ARCHIVE — Manpreet is an employee of another company, not a related party of Nexa; historical transactions to be re-classified by accountant during reconciliation |
| 1500 Food & Entertainment | 671200 Meals & Entertainment — 50% Deductible |
| 1501 Office Expenses | 621500 Office Supplies & Consumables |
| 411000 Inside Sales | ARCHIVE (replaced by 412xxx) |
@@ -484,23 +504,26 @@ Already installed. Use for SaaS/Hosting/Support contracts: recurring invoices, S
## 15. Tax-Saving Opportunities Enabled
| Opportunity | Mechanism | Estimated Annual Value |
|---|---|---|
| SR&ED ITC | Analytic SR&ED tag + T661 filing | $30k–$100k (refundable, depends on dev spend) |
| Zero-rated exports | Fiscal position for US/international | $5–15k recovered HST on inputs |
| Small Business Deduction (SBD) | Federal 9% on first $500k taxable income | ~$30k/yr if hitting threshold |
| CCA Class 50 + AccII | 82.5% Y1 deduction on computers/servers | Time-value, but front-loads deductions |
| Quick Method GST/HST | If <$400k sales, simpler method | $500–2k/yr cash if eligible |
| OIDMTC (Ontario Interactive Digital Media) | If building interactive media products | 35–40% of eligible labour |
| Opportunity | Mechanism | Estimated Annual Value | Notes |
|---|---|---|---|
| SR&ED ITC | Analytic SR&ED tag + T661 filing | $30k–$100k (refundable) | **$3M expenditure limit SHARED across Nexa/Westin/Divine — allocate to Nexa via S23** |
| Zero-rated exports | Fiscal position for US/international | $5–15k recovered HST on inputs | Per-company |
| Small Business Deduction (SBD) | Federal 9% on first $500k taxable income | ~$30k/yr if hitting threshold | **$500k limit SHARED across associated group — allocate to highest-income corp via S23** |
| CCA Class 50 + AccII | 82.5% Y1 deduction on computers/servers | Time-value, front-loads deductions | Per-company |
| Quick Method GST/HST | If <$400k sales, simpler method | $500–2k/yr cash if eligible | Per-company |
| OIDMTC (Ontario Interactive Digital Media) | If building interactive media products | 35–40% of eligible labour | Strict eligibility test; need to verify product fits |
| Apprenticeship Job Creation TC | 10% of eligible apprentice wages, max $2k/yr per apprentice | Per apprentice hired | Activates when first apprentice T4 employee hired |
| Intercompany cost recovery | Bill associated corps for shared services (back-office, hosting, IT) | Allocates expenses to highest-tax-rate corp | Requires arm's-length pricing documentation |
## 16. Risks & Open Questions
1. **The "Transferred to Divine/Manpreet" accounts** — relationship unconfirmed. Need user input before final mapping.
2. **Westin Healthcare relationship** — common-ownership? Same shareholder? Drives transfer-pricing compliance.
1. **Associated corporation tax planning** — Westin Healthcare Inc, Divine Mobility Inc, and Nexa Systems Inc share the $500k SBD limit and the $3M SR&ED expenditure limit. Yearly Schedule 23 allocation decision needs accountant input. Recommendation: allocate SR&ED limit primarily to Nexa (dev shop); allocate SBD to whichever corp has highest taxable income each year.
2. **Transfer pricing on intercompany services** — Nexa billing Westin/Divine must be at fair market value. Document hourly rate methodology and apply consistently across all clients. Penalty: 10% of any adjustment.
3. **Past data backposting** — once accountant records arrive, mapping old transactions into new structure requires care to avoid breaking the post-2025-12-31 lock.
4. **BC PST on software services** — BC PST exempts custom software developed for a specific customer; off-the-shelf software and certain SaaS subscriptions ARE taxable. For Nexa's mix (most work is custom dev = exempt; SaaS sold off-the-shelf to BC customers = taxable at 7%), each BC customer/product combo needs review. Default to "GST only" for custom dev; flag SaaS-to-BC for review at first sale.
5. **Quebec QST registration** — required if Nexa has QC customers and revenue >$30k. Confirm registration status.
6. **Specified employee SR&ED math** — Gurpreet's salary cap is 75%, no bonus inclusion. Accountant must apply at T661 time.
7. **Multi-company Odoo (future sub-project)** — Westin and Divine currently run on separate Odoo databases (odoo-westin, odoo-mobility). Future option: migrate all three into one multi-company nexamain database to enable auto-mirrored intercompany invoices (Nexa invoices Westin → auto-creates Bill in Westin's books). Major data-migration effort; only worth it once intercompany volume justifies the effort.
## 17. Acceptance Criteria