TICO - Industry Info

Industry Info

Financial Requirements

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One of the requirements of being registered under the Travel Industry Act, 2002 is to meet certain financial criteria.   Sections 22 – 29 of Ontario Regulation 26/05 detail the specifics of the financial criteria. All registrants must file financial statements with TICO at least annually, maintain minimum working capital, trust accounts and make contributions to the Compensation Fund based on their sales.

Filing Financial Statements

Pursuant to Section 22 of the Regulation, every registrant must file financial statements with TICO at least annually.

The type of financial statement report depends upon the sales level of each registrant.  But the only acceptable form of annual financial statement is accompanied by either a Review Engagement or an Audit Opinion Report prepared by a licensed public accountant.

If the registrant's sales were less than $10,000,000 annually, based on the previous fiscal year's financial statements filing, the registrant is required to file financial statements for their year end under a review engagement. These statements are due within three months of the registrant’s year end.

If the registrant's sales were greater than $10,000,000, but less than $20,000,000 annually, based on the previous fiscal year's financial statements filing, the registrant is required to file financial statements for their year end under an audit report. These statements are due within three months of the registrants year end. In addition, a registrant who only reports retail sales, is also required to file semi annual interim financial statements within 45 days of the end of the semi annual period. If a registrant is a wholesaler with wholesale sales greater than $10 million, they are required to file quarterly interim financial statements. These interim financial statements do not need to be prepared by a licensed public accountant and can be the company's internal financial statements.

If the registrant's sales are greater than $20,000,000 annually, based on the previous fiscal year's financial statements filing, the registrant is required to file financial statements for their year end under an audit report. These statements are due within three months of the registrants year end. In addition, the registrant is also required to file quarterly financial statements within 45 days of the end of the quarter. These interim financial statements do not need to be prepared by a licensed public accountant and can be the company's internal financial statements.

The financial statements should be complete and include a balance sheet, income statement, disclose the Ontario gross sales either in the income statement in the notes to the financial statements and a reconciliation of funds held in trust including disclosure of trust account(s) balance(s) and customer obligations and liabilities.

TICO's financial inspectors, review the financial statements to ensure that the Registrant is meeting certain financial requirements. Specifically the statements indicate whether the registrant is maintaining the minimum level of working capital and trust accounts. This review of the financial statements often is the basis for TICO's on site inspection program.

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Working Capital Requirements

Registrants are required (pursuant to section 24 of the Regulation) to maintain minimum working capital levels. Working capital is defined as the ability to meet current obligations as they come due and is calculated by subtracting current liabilities from current assets. Working capital is calculated in accordance with generally accepted accounting principles with the exception that related party balances are excluded as well as the value of security that TICO holds in relation to the $10,000 security from all new registrants. 

Note: Effective July 1, 2016, a working capital exemption exists for lower risk businesses that promote tourism and are closely tied to the government.  For more information, contact TICO.

The working capital levels are as follows:

Sales in Ontario During the Previous Year

Minimum Working Capital

$500,000 or less

$5,000

More than $ 500,000 but not more than $750,000

$10,000

More than $ 750,000 but not more than $1,000,000

$15,000

More than $1,000,000 but not more than $2,000,000

$20,000

More than $2,000,000 but not more than $5,000,000

$25,000

More than $5,000,000 but not more than $10,000,000

$35,000

More than $10,000,000 but not more than $20,000,000

$50,000

More than $20,000,000

$100,000

 

For Useful Tips on Working Capital - click here

 

Trust Accounting Requirements

All registrants are required to maintain trust accounting, pursuant to Section 27 of the Regulation. This means that the registrant must maintain a Travel Industry Act trust bank account and have the bank specifically acknowledge that the trust account is properly designated. All consumer funds must be deposited into this account and all payments to suppliers for which those consumer funds have been collected by the registrant must be paid out of this account. No overhead expenses can be paid from this account, such as rent, payroll, phone etc.

The trust reconciliation is required to be prepared at a minimum when the Registrant wishes to make a transfer of surplus from the Trust Account to the General Account.

If a registrant has been registered and operating continuously for at least one year, the registrant may provide security in lieu of trust accounting, pursuant to section 28 of the Regulation.  The amount of security required is 1/6 of the annual “cash sales”.  Cash sales for the purpose of this section, means the money that the registrant has actually received from the consumer and would otherwise have to be deposited to the trust account.  Cash sales would not include those sales where the consumer has paid by credit card directly to the supplier and the registrant does not handle any funds.  In order to provide security in lieu of trust accounting, the “cash sales” figure must be disclosed by the accountant in the year end financial statement.

It should also be noted that the calculation of sales received from the consumer is only for the purpose of providing security in lieu of trust accounting under section 28 and not for any other section of the Regulation.

"Trust Accounting" recognizes this purpose by considering that all customer monies received for travel services are deemed to be held in trust to be used only for the purchase of the travel services contracted for by the customer. Monies in a Trust Account do not belong to the travel agent or wholesaler.

For more detailed information, please refer to the following Trust Accounting Guidelines:

 Trust Accounting Guidelines
 


Compensation Fund Contributions (Form 1 Remittance)

In accordance with the Travel Industry Act, 2002 and TICO's Payment Schedule every travel agent and travel wholesaler registered in Ontario is required to pay into the Ontario Travel Compensation Fund (the "Fund) twice a year within 90 days after the end of the registrant’s fiscal year and fiscal half year. The payments are based on Ontario gross sales.  Gross sales include all travel services such as transportation or sleeping accommodation for the use of a traveller, tourist or sightseer or other services combined with that transportation or sleeping accommodation. 

NOTE:  The Board of Directors of the Travel Industry Council of Ontario (TICO) has approved an increase to the Compensation Fund Contribution Rate. Effective July 1, 2016, the Board has approved a phased-in increase over the next two years as follows:

Phase 1 – The Compensation Fund Contribution Rate will increase from $0.15 to $0.20 per thousand dollars of Ontario sales effective July 1, 2016.

Phase 2 – The Compensation Fund Contribution Rate will increase from $0.20 to $0.25 per thousand dollars of Ontario sales effective April 1, 2017.
 

The Compensation Fund Assessment Rates are as follows:

For sales MADE BETWEEN July 1, 2016 and March 31, 2017:  Retail rate is 20 cents per $1,000 of  retail sales and the wholesale rate is 20 cents per $1,000 of wholesale sales.  Note: There is a minimum assessment payment of $25 plus applicable taxes (PST) per filing period ($25 + $2 PST=$27.00).

For sales MADE ON OR AFTER April 1, 2017:  Retail rate is 25 cents per $1,000 of  retail sales and the wholesale rate is 25 cents per $1,000 of wholesale sales.  Note: There is a minimum assessment payment of $25 plus applicable taxes (PST) per filing period ($25 + $2 PST=$27.00).

Form 1 and Explanatory Notes:

To obtain a Form 1 and Explanatory Notes - click here


To assist with the calculation of Form 1 Assessments during the transition period of the assessment rate from 20 cents (for sales up to March 31, 2017) to 25 cents (for sales on or after April 1, 2017) the following chart has been provided:


2017 Time Table for Form 1 Remittance:

Fiscal Year or Half Fiscal Year End

Remittance Due Date

Remittance Rates per $1,000 of Gross Sales

January 31, 2017

April 30, 2017

6 months @ .20₵ per $1,000 gross sales

February 28, 2017

May 31, 2017

6 months @ .20₵ per $1,000 gross sales

March 31, 2017

June 30, 2017

6 months @ .20₵ per $1,000 gross sales

April 30, 2017

July 31, 2017

5 months @ .20₵ per $1,000 gross sales and 1 month @ .25₵ per $1,000 

May 31, 2017

August 31, 2017

4 months @ .20₵ per $1,000 gross sales and 2 months @ .25₵ per $1,000

June 30, 2017

September 30, 2017

3 months @ .20₵ per $1,000 gross sales and 3 months @ .25₵ per $1,000 

July 31, 2017

October 31, 2017

2 months @ .20₵ per $1,000 gross sales and 4 months @ .25₵ per $1,000 

August 31, 2017

November 30, 2017

1 months @ .20₵ per $1,000 gross sales and 5 months @ .25₵ per $1,000 

September 30, 2017

December 31, 2017

6 months @ .25₵ per $1,000 gross sales

October 31, 2017

January  31, 2018

6 months @ .25₵ per $1,000 gross sales

November 30, 2017

February 28, 2018

6 month  @ .25₵ per $1,000 gross sales

December 31, 2017

March 31, 2018

6 months @ .25₵ per $1,000 gross sales

 

The Form 1 shall be certified by the registrant or an authorized officer or partner of the registrant as to the accuracy of the information contained in the return. The Form 1 does not need to be completed by a public accountant.

Even if you have zero sales for a period, a Form 1 must be submitted along with the minimum payment of $25.00 plus PST (a total of $27.00).

One Form 1 should be completed for the head office and all branch locations.

Extensions will not be granted. It is the responsibility of each registrant to ensure that the Form 1 filing is completed by the appropriate deadline.   All Form 1 filings are entered into TICO's database and remain part of the permanent history of each registrant. These filings may be reviewed to determine whether the registrant is in compliance with the Travel Industry Act, 2002 and Regulation 26/05 with respect to it's payments to the Fund.

Failure to file Form 1 is a contravention of the Regulation and the Registrar appointed under the Act may initiate administrative action, including revocation of registration under the Act.

Sales for the Purpose of Contributions to the Ontario Travel Industry Compensation Fund

Contributions to the Ontario Travel Industry Compensation Fund are made in accordance with the Travel Industry Act, 2002 and TICO's Payment Schedule set under clause 12 (1)(c) of the Safety and Consumer Statutes Administration Act, 1996 by every registrant. The Regulation defines sales in Ontario, when used in reference to a period of time to mean:

(a) in the case of a registered travel agent, the amount paid or to be paid to or through the travel agent for all travel services sold in Ontario during the relevant period, or

(b) in the case of a registered travel wholesaler, the amount paid or to be paid to or through the travel wholesaler for all travel services sold in Ontario during the relevant period.

The following details what is included in the calculation of Ontario Sales for retailers and wholesalers.

Retail Sales

Included:
Sales include all travel sales to a consumer including taxes, (except for GST/ HST), that are invoiced to a consumer that include trips, accommodations and transportation, billed individually or in a package. Travel Insurance is included as sales and a registrants service fees are included in sales.

It should be noted that the method of payment does not matter when calculating what is included in sales. For example, if the consumer pays by cash or cheque directly to the travel agent, this is considered a sale. Likewise, if the consumer pays by credit card which is passed directly to the supplier, this is also included in sales.

Not Included:

  • Travel Merchandise, such as luggage is not included in sales.
  • Override commissions are not included in sales.

Wholesale Sales

Included:

Sales include all travel sales to registered retail agencies in Ontario. Sales include all taxes except for GST/HST.

Not Included:

Sales made to retail agencies not located in Ontario.