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On February 27, 2018, the Federal Government announced details of Budget 2018. Here are the Business Income Tax Measures proposed in this Budget, starting with the business limit reduction on passive investment income. Small Business Deduction - Business Limit Reduction on Passive Investment Income: Canadian controlled private corporations or CCPCs can avail of the lower tax rate on the first $500,000 (which is the federal business limit) of active business income. When retained earnings taxed at the small business rate are used to invest passively rather than in the active business, significant tax deferral advantages can be realized. Budget 2018 proposes...
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In this blog, we will continue our detailed review of the approaches that the Government is considering with regards to the tax treatment of passive investment income.  We’ve already touched on the first approach which is the 1972 approach.  Here is the 2nd one. 1.    Deferred Taxation – As an alternative to the 1972 approach, the current regime of refundable taxes on passive investment income could be replaced with one that will maintain a tax rate on the passive investment income of private corporations equal to the top personal tax rates, as is the case under current rules, but which would...
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Last week, we took a detailed look at the proposed measures of the Government to address income sprinkling.  This week, we’ll focus on the proposed measures to address the holding of passive investments inside a private corporation.  According to the Department of Finance, holding passive investments inside a private corporation provides the business owner with a significant tax deferral advantage – an advantage not available to most Canadians.  In addition to this, the Department of Finance says that the current system does not achieve its objective of removing incentives to hold passive investments within a corporation in a broad range of...
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