Presumably as a result of over 21,000 submissions on the “Tax Planning Using Private Corporations” released on July 18, 2017 (the “Consultation Paper”), the Federal Government of Canada announced certain changes to the proposed tax reform presented in the Consultation Paper. While we do not provide advice on tax law, we wanted to ensure that you are aware of these changes.

Some of the changes to what we have previously reported on include:  

  1. With respect to the taxation of passive income inside a private corporation, up to $50,000 earned by a corporation in a taxation year will not be subject to the increased taxes previously announced. The increase in taxation would apply to passive income over $50,000 retained in a private corporation.
  2. Simplifying the new “dividend sprinkling rules” announced in the Consultation Paper. The Federal Government has not yet provided details on how such rules will be simplified. The details are expected to be included in the revised draft legislation.
  3. Abandoning the proposed restrictions to the Lifetime Capital Gain Exemption as set out in the Consultation Paper.
  4. Proposing to lower the small business tax rate to 10% from the current rate of 10.5% effective January 1, 2018, and to 9%, effective January 1, 2019.