Update on Proposed Private Corp Tax Changes

Nov 03, 2017 | Dan Rudisuela


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The discussion around changes to private company taxation is one that I have been following closely as many of our clients will likely be affected by the changes. While there are still many questions surrounding what exactly the changes will look like, we do know now which proposals the government is going forward with and which ones are being scrapped.

Here are the highlights:

  • No changes to the Lifetime Capital Gains Exemption
  • Not going forward with talk of converting regular income to capital gains
  • Small business tax on the first $500,000 of active income is being decreased from the current 10.5% to 10% (Jan 2018) and then to 9% (Jan 2019)
  • The "Tax on Split Income" rules are being expanded. This is one to watch - greater clarity will be coming out later this fall. The new, expanded rules will be effective January 1, 2018
  • Limits on the deferral benefits of holding passive investments within the corporation are going ahead. The actual impact of this is going to be relatively small; there will be no tax increase on $50,000 of passive income earned annually and only 3% of corporations currently earn more than that now. Greater detail on this change will be coming with the 2018 budget.

Here is a link to an article that explains the changes, their impact and what to consider for planning going forward.

I will continue to follow this closely as it unfolds; feel free to reach out to me directly if you are concerned about how this may impact you, your business and your family. 902-424-1078 or by email at dan.rudisuela@rbc.com