On December 13, 2017, the Department of Finance ("Finance") released revised draft legislation, together with a technical backgrounder, simplifying the income sprinkling proposals first announced on July 18, 2017. At the same time, the Canada Revenue Agency ("CRA") provided guidance on how it intends to administer the new rules. Although the legislation will be enacted later in 2018 as part of the 2018 Budget process, it is intended to apply as of January 1, 2018.

The original income splitting proposals from July met with significant opposition from business owners. Details of the original proposals can be found in our bulletin, Impact of the Proposed Private Corporation Tax Changes.

The draft legislation released on December 13 attempts to address concerns relating to the complexity, compliance burden, subjectivity and unintended tax consequences (including with respect to intergenerational business succession) of the original proposals. Some of the key highlights of the new proposals are discussed in our bulletin.