Proposed Tax Changes Update

We wish to inform you that the government has provided an update in regards to the proposed tax changes announced July 18, 2017.

The updates are as follows:

1.      The Federal small business tax rate will be lowered:

·        0.5% decrease from 10.5% to 10%, effective January 1, 2018
·        A further 1% decrease from 10% to 9%, effective January 1, 2019

As a result of the above, the combined Federal and the Ontario provincial corporate tax rate for taxable income up to $500,000 will decline from the current rate of 15% to 14.5% effective January 1, 2018 and 13.5% effective January 1, 2019 for all professional, hygiene or technical corporations. If your corporation’s fiscal year-end is other than December 31, then the new corporate rate will be pro-rated based on the period before and after these effective dates.

2.      The government will move forward with measures to limit income sprinkling (i.e. introduce reasonableness tests for dividends paid to adult family members) using private corporations.  However, the government has committed to making some changes to simplify the original proposals; details are not yet available at this time.  It still appears, at this time, that dividends paid to family members after December 31, 2017 will be subject to reasonableness tests.

3.      The government will NOT be moving forward with measures that limit access to the Lifetime Capital Gains Exemption.  It still appears that you could introduce new family members into your corporation to take advantage of the LCGE and that existing family m ember shareholders should be entitled to claim the LCGE when their shares are sold.

For more information, please click here. More information is forthcoming during the week.

Information provided by DCY PROFESSIONAL CORPORATION CHARTERED ACCOUNTANTS. This post is intended to present tax saving and planning ideas, and is not intended to replace professional advice.