The Liberal government delivered their federal budget on February 27, 2018.  Their goal is to tighten perceived loopholes and reduce inequalities in our tax system.  For the average person, there are not a lot of changes that will impact personal taxation.  The biggest impact is for those who have private corporations (CCPC).  Please see below for highlights from the budget: 

• There were no changes to personal or corporate income tax rates, however the budget did clarify measures related to corporations with passive income (see below).
• Personal Tax Implications:
  • New reporting requirements for certain trusts to identify all of its beneficiaries, trustees and settlors.  These proposed reporting requirements are to start in 2021.  Trusts holding less than $50,000 in assets in a tax year may be exempt.
  • Introduce a new EI Parental Sharing Benefit to be available in June 2019.
  • Registered Disability Savings Plan - extend temporary measures, set to expire at the end of 2018, allowing qualifying family members to be a plan holder of an RDSP for an incapacitated individual.
  • Extend eligibility for the mineral exploration tax credit for one year.
• Private Corporations Tax Implications:  
  • The Government is going to reduce access to the small business tax rate for private corporations (CCPC) that have passive income over $50,000.  This differs to what was proposed by the Liberal government in 2017.  Previously the Liberals indicated that new passive income above $50,000 would be taxed at a much higher rate, implying that existing passive investments could be grandfathered.  There will be no grandfathering of existing corporate investment accounts earning passive income.
    • CCPCs receive a preferential tax rate on the first $500,000 of eligible income. This $500,000 limit will be reduced by $5 for every $1 of passive investment income above $50,000. When investment income exceeds $150,000 the CCPC will lose the preferential tax treatment on it's active business income and will be taxed at the general federal corporate rate of 15% 
    • This may apply to combined passive income from all your corporations if they are related.
    • If your corporation (or associated corporations) do not have active income then these changes do not apply.
  • Limiting refundable taxes in connection with the payment of eligible dividends
    • Propose to have two RDTOH accounts (eligible and non-eligible) and CCPC's will be required to obtain a refund from its non-eligible RDTOH account first, before it can obtain a refund from the eligible RDTOH with respect to non-eligible dividends.
• International Tax Changes
  • Propose to prevent tax free distributions by Canadian corporations to non-resident shareholders through the use of partnerships and trusts.
  • Changes to reporting and reassessments for foreign affiliates of a taxpayer resident in Canada.

Please refer to 2018 Federal Budget for more details related to these proposals and more.  This article can also be found on our Website under Our Resources.

Thank you

Hayes Vickers Private Wealth

 

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