UPCOMING SEMINAR – REGISTRATION NOW OPEN
On July 18, 2017 the Department of Finance released a white paper for commentary. This white paper contains proposed changes to the Income Tax Act including draft legislation and explanatory notes.
All told, these documents combine for 137 pages of text. While the government has requested feed back, they have only allowed for a 75 day consultation period. The purpose of the white paper and associated draft legislation is to close perceived deficiencies in the Income Tax Act as it relates to Canadian Controlled Private Corporations, which make up a majority of the small businesses in Canada.
These proposals target:
Income sprinkling using corporations: The use of corporations and by extension family trusts, for
spreading taxable income across the family unit. The proposals suggest that only those family
members actively working in the business should be eligible for receiving any level of income.
Passive investments inside a corporation: Corporations may accumulate after corporate tax
profits, and should they wish to receive a return on that capital it is invested in the market. The
government is proposing that such accumulation is abusive unless it can be shown to be
specifically for business purposes and not potentially for ‘personal gain’ of the owners, such as
accumulating for an owner’s retirement.
Converting a private corporation’s regular income into capital gains: Complex series of
transactions can be undertaken which can conceivably allow shareholders of private
corporations to receive cash in the form of capital gains instead of dividends. Unfortunately, the
proposed legislation overshoots the problem and would create significant issues in passing a
family business to a successive generation on death, or possibly even with every day
transactions such as repayment of shareholder loans.
These proposed changes impact every small business owner, whether they are currently incorporated or considering becoming incorporated. In many cases the proposed ruled changes will invalidate tax plans that have been in place for years, designed under rules that have been in place for over four decades.
DSK LLP invites you to join us on Monday September 25th at 6pm in the Preston Room at the Galt Country Club from 6 – 8 pm to learn more.
**The consultation period is open until October 2, 2017. It is very important that small business owners, the backbone of the Canadian economy, make their voices be heard in this important issue. Please email firstname.lastname@example.org if you will be attending. Refreshments provided.
HAVE YOUR SAY
Below is a link to a Parliamentary petition calling on the government to drop these proposed
amendments. We would recommend signing the petition either now or after the information session.
(Our upcoming DSK newsletter will focus primarily on this topic, and will be posted to our website available)