# Proposed Crackdown on Corporate Taxes 2017



## heyjude (May 16, 2009)

I've received the following message from my tax preparer:
_*
"On July 18, 2017 the Government released draft legislation that will have a significant impact on tax planning for private corporations and their shareholders. The draft proposals invite public consultations by October 2, 2017 and, due to the nature of the proposals, will undoubtedly result in significant feedback and (possibly) some amendment. However, whatever the result of the consultations, the Government has made their intentions clear and all private businesses should be prepared for significant changes."*_

The proposed changes fall into four categories:

1. Income Splitting
It appears that the days of paying discretionary dividends to family members is over. They will all be taxed at the highest marginal tax rate. 

2. Lifetime Capital Gains Exemption
Family businesses and trusts will incur a higher tax burden.

3. Passive Investment Inside a Corporation
Tax deferral by retaining income in a private corporation will disappear (details TBA). Taxation on dividends received from a private corporation may change, depending on whether the corporation was using its funds for operations or investment.

4. Conversion of Income into Capital Gains
Disposition of shares to a related will be treated as dividends and taxed as such. 
_*
"Tax planning for private corporations and their shareholders will look very different post 2017."*_

If fully implemented, these proposals will put a damper on small family businesses trying to get ahead. They will also restrict the ability of self employed professionals to save for retirement. It remains to be seen whether this will be applied to holding companies. If so, the sustainability of my retirement will be in question. Dammit!

Edited to add: here is the original document.

http://www.fin.gc.ca/activty/consult/tppc-pfsp-eng.pdf


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## Mechanic (Oct 29, 2013)

Well the government needs to squeeze more money from Canadians and their small businesses to give to all the people holding their hands out, and of course the ever increasing refugees


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## andrewf (Mar 1, 2010)

The government should be careful with these changes. #3 sounds dangerous.


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## AltaRed (Jun 8, 2009)

I think the gov't primarily wants to level the playing field between an employee and someone who uses the CCPC for passive income taX reduction. There really shouldn't be a loophole vis-a-vis investment income.


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## heyjude (May 16, 2009)

AltaRed said:


> I think the gov't primarily wants to level the playing field between an employee and someone who uses the CCPC for passive income taX reduction. There really shouldn't be a loophole vis-a-vis investment income.


It's not so much reduction as deferral. The tax system is integrated so that the sum of the taxes on corporate income followed by the taxes on personal dividend income is more or less equivalent. 

http://www.mondaq.com/canada/x/434550/Corporate+Tax/Small+Business+Tax+Deferrals+Not+Tax+Savings


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## andrewf (Mar 1, 2010)

The safer thing might be to allow individuals to smooth taxable income over time, rather than clamping down too hard on CCPCs.


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## tygrus (Mar 13, 2012)

My accountant is also saying big changes are coming and they are still working through the impacts.

Should doctors and lawyers and other professionals be allowed to incorporate and shelter money at 10%? They dont take risk like regular businesses so I would say no.


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## heyjude (May 16, 2009)

Taxtips.ca already has updates and a video discussion about this.

http://www.taxtips.ca/federalbudget/budget-2017.htm#proposed-tax-changes-private-corporations

https://vimeo.com/226079341


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## andrewf (Mar 1, 2010)

At least the passive income thing is intended to apply on a go-forward basis. I could imagine a lot of panic ensuing had they applied it to existing passive investments.


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## Jaberwock (Aug 22, 2012)

andrewf said:


> At least the passive income thing is intended to apply on a go-forward basis. I could imagine a lot of panic ensuing had they applied it to existing passive investments.


It is applied to existing passive investments. Part IV taxes apply to passive investments in a corporation, they are taxed at the highest personal tax rate, not the small business rate.

The advantage to the corporation is that there is more money to invest. If you earn $1 in a corporation, you pay 15 cents tax and have 85 cents left to invest. If you earn the $1 as income, you have as little as 47 cents left to invest after tax.


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## heyjude (May 16, 2009)

andrewf said:


> At least the passive income thing is intended to apply on a go-forward basis. I could imagine a lot of panic ensuing had they applied it to existing passive investments.


This is not new. Passive income earned inside a corporation has always been taxed at higher rates. Only operating income is taxed at the lower corporate rate.


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## Sm5 (Nov 2, 2014)

There is so much wrong with these proposed measures. I can see items (2) and (3) being worth looking into. Converting dividends to capital gains does feel abusive (though until now perfectly legitimate) and using trusts to multiply the LTGE again, was perfectly legitimate, but does on the face of it seem 'unfair'.

However the other two measures are simply punitive and pandering to the unwashed masses. To limit dividend income to any shareholder on the basis of the value of the work they provide to a corporation is simply destructive to the very concept of shareholders' being the owners of the corporation and distinct from its employees/directors. Income splitting is an artifact of this -- but is an _intended_ artifact. TO change this goes against centuries of corporate law principals. 

Similarly, applying a punitive surtax on retained earnings being invested is going to be an administrative nightmare and discourage growth. Corporations often hold and invest retained earnings for a period for all sorts of legitimate purposes. The net effect of all this will be a reduction of investment in Canada and a near instant inflation of professional fees for those affected with this change -- as someone who will be 'hit' by these changes, I have no intention of accepting such an increased tax burden and will undoubtably be passing on through fee inflations the entire net effect of the adverse taxation changes to my clients. Everyone else I've discussed this change with is of a similar position. Hardly the intent, but clearly what 95% of people who have had their tax burden increase substantially will do. 

However contrived the examples in the consultation paper are, and no matter what the results of the consultation end up being, this is likely coming as a purely political decision (you can tell, in my opinion, this given the paltry net effect - $250 billion anticipated revenue - verses the significant departure from accepted corporate law principals and general common sense given the USA's articulated position of wanting to lower taxes on corporations).

This is not going to be pretty.


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## OnlyMyOpinion (Sep 1, 2013)

Sm5 said:


> There is so much wrong with these proposed measures... two measures are simply punitive and pandering to the unwashed masses... I have no intention of accepting such an increased tax burden and will undoubtably be passing on through fee inflations the entire net effect of the adverse taxation changes to my clients...


Gee, for a moment I thought you were just a self-entitled whiner. But since the impact can be passed on to the unwashed masses so that neither you nor your clients will face any pain or suffering, there is clearly no problem to complain about.


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## heyjude (May 16, 2009)

OnlyMyOpinion said:


> Gee, for a moment I thought you were just a self-entitled whiner. But since the impact can be passed on to the unwashed masses so that neither you nor your clients will face any pain or suffering, there is clearly no problem to complain about.


Professionals such as physicians, whose billing is regulated, will not have the option of increasing charges. Instead, they may just walk with their feet.


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## OnlyMyOpinion (Sep 1, 2013)

heyjude said:


> Professionals such as physicians, whose billing is regulated, will not have the option of increasing charges. Instead, they may just walk with their feet.


I suspect those who became doctors driven by the income splitting and tax saving advantages of incorporating are already in the US.


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## heyjude (May 16, 2009)

OnlyMyOpinion said:


> I suspect those who became doctors driven by the income splitting and tax saving advantages of incorporating are already in the US.


No, you suspect wrongly. There are many physicians who depend on incorporation to fund their retirement. Because, you see, most physicians are not salaried. They don't have pensions, because they are independent contractors running small businesses.


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## OnlyMyOpinion (Sep 1, 2013)

Lots of us don't have pensions. And I realize that contributing to CPP and paying out earnings to allow RRSP contribution room is not the norm these days. In sm5's case it might even make a person feel unwashed.


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## Mechanic (Oct 29, 2013)

Not very smart to introduce plans to make it even more difficult for us to keep our doctors in Canada, it's tough already to find a doctor. Many self employed and small business owners are in the same boat, using their CCPC to fund their own retirement. The Canadian government needs to start looking after it's own and not trying to squeeze everything they can from Canadians to fund helping everyone except Canadians.


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## rl1983 (Jun 17, 2015)

I see this as an attack on small businesses. I've made my mind up, for the first time in my life I'm voting conservative next election.


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## Sm5 (Nov 2, 2014)

OnlyMyOpinion said:


> Gee, for a moment I thought you were just a self-entitled whiner. But since the impact can be passed on to the unwashed masses so that neither you nor your clients will face any pain or suffering, there is clearly no problem to complain about.


"Unwashed masses" is just a euphemism, in case that isn't patently obvious. The point I was trying to make is that all this will do is decrease supply by the 'evil' 'rich' lawyers/doctors/dentists/accountants as they leave and increase costs will ultimately be passed on to the ultimate consumers creating inflation on costs of their services. Doctors may not be able to pass on these costs immediately, but dentists, lawyers, accountants, etc. sure will (as will other non-professional corporation small businesses). Doctors will undoubtably lobby for higher billing rates to the government in response to this in due course.

This says nothing of the 'social contract' being broken from when the rights of the professions to incorporate were originally given. But hey, since they are getting rid of the tax advantages of incorporation for professionals to make it 'fair', why not make it 'fair' by giving the professions the non-tax advantages of incorporation that every other corporation gets -- limited professional negligence liability (for obvious reasons, a non-starter).


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## andrewf (Mar 1, 2010)

Jaberwock said:


> It is applied to existing passive investments. Part IV taxes apply to passive investments in a corporation, they are taxed at the highest personal tax rate, not the small business rate.
> 
> The advantage to the corporation is that there is more money to invest. If you earn $1 in a corporation, you pay 15 cents tax and have 85 cents left to invest. If you earn the $1 as income, you have as little as 47 cents left to invest after tax.


But there is no change there. Accumulated passive investments won't be retroactively taxed to account for the small business tax rate differential.


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## Mechanic (Oct 29, 2013)

rl1983 said:


> I see this as an attack on small businesses. I've made my mind up, for the first time in my life I'm voting conservative next election.


There will be lots voting with you. Maybe we can "Make Canada Great Again" .......before it's too late, haha


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## CalgaryPotato (Mar 7, 2015)

I think there are better ways to promote small businesses rather than these kind of tax loopholes. I know many people who are basically employees but work as incorporated contractors. They get these exact tax loopholes mentioned in this thread, but are not providing the small business benefits to the country of creating any jobs other than their own.

Retaining doctors in Canada is an important issue, but that is one situation out of many. Again that can be addressed independently of this.


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## Mechanic (Oct 29, 2013)

Yes, I think that is the bigger issue. There are lots of independent contractors in that situation. I don't know how they get away with having all their income from one source though. Some of the AB companies will only hire independent contractors, that way they can release them easily if the person is not suitable. Perhaps they should look at the employment laws ? If it were easier to end an employment for the employer, their would be a lot less of these one person corporations in existence.


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## CPA Candidate (Dec 15, 2013)

I have no issue with any of the changes. The small business deduction was meant as policy tool to promote expansion, hiring and cap-ex spending by small business by allowing them to have a lower tax rate on funds that remained in the corporation. Basically, it allowed more internally generated cash to remain such that it could be used for investment in growth, rather than having to obtain outside financing of some sort.

The actual use of the SBD became something quite different in reality. It has been used to create what amounts to extra RRSP room in very small businesses that don't contribute to economic policy aims (they employ very few, if anyone, besides the owner, they have minuscule cap-ex).


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## kcowan (Jul 1, 2010)

What I worry about is the side-effects that the government will create. yes they might eliminate some unexpected behaviour, but, because they do not understand entrepreneurs, they will get unintentional consequences that we will all pay for. I want my doctor to be motivated to work for the government, no matter how they do it!

Yes I enjoyed the benefit of the CCPC for 10 years as an independent executive IT contractor, and another 7 years after retirement as a tax shelter. It was great. They even insisted that I keep filing GST rebates. My partner and I also claimed SR&ED credits for the first 10 years in another CCPC in which we were partners.

The thing is that the government makes the rules and then we take advantage of them. That is what every Canadian has an obligation to do.


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## PerfectElement (May 22, 2013)

After working 80-hour weeks making hardly any money, and finally seeing my tech business succeed after 5 years, I now feel betrayed. Specially after refusing several offers to go work in Silicone Valley and make 5x more than the average Canadian during these years. Now I'm 40 and have no retirement plan other than betting in my business. If I knew I wouldn't be able to use the business as a retirement strategy I would have left this country a long time ago.


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## kcowan (Jul 1, 2010)

Yes every time some uninformed politician tinkers with the tax system, everyone suffers except the accountants.


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## Sm5 (Nov 2, 2014)

kcowan said:


> Yes every time some uninformed politician tinkers with the tax system, everyone suffers except the accountants.


Actually, most senior accountants practice through corporations. They're suffering too :-(


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## ian (Jun 18, 2016)

I am in favour of the change. Yes, it may cause some other issues that have to be dealt with but the tax code should not be used to resolve those issues. Today I heard someone say that they do not think it is fair that their MD's tax shelter may disappear. I asked them about a lawyer's tax shelter and they said absolutely, take that away! Go figure, just points out why we need to change. The changes will not hurt me but it will certainly hurt my daughter and SIL. 

My guess it that the result will be some typical Canadian milk toast tweek of the tax system that can be sold as change to those who want it and sold as status quo to those who currently have it. I am hoping that the Government will show some spine and move forward with this because I think it is the right thing to do.


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## Nerd Investor (Nov 3, 2015)

Raising the general corporate tax rate and/or reducing the small business limit would have been a much better way to accomplish what they are trying to achieve without crushing small business owners in the process. 
Basically, go back to making it a no-brainer to bonus down to the small business deduction limit. Some of these rules, as they are being proposed, will be an administrative nightmare.


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## Mechanic (Oct 29, 2013)

A real slap in the face to all the small business owners that built their own pension plan in their company. I'll bet it won't hurt the politicians' pension funds though. Meanwhile, I guess we just wait it out till the next election.


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## gardner (Feb 13, 2014)

Mechanic said:


> A real slap in the face to all the small business owners that built their own pension plan in their company.


Although I am generally in agreement with the governments approach, this is the area where I see genuine unfairness. Folks who have structured their business and savings strategy around this method of retirement savings for years or decades rather than taking the income/RRSP route do need to have some transitional mechanism.


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## AltaRed (Jun 8, 2009)

gardner said:


> Although I am generally in agreement with the governments approach, this is the area where I see genuine unfairness. Folks who have structured their business and savings strategy around this method of retirement savings for years or decades rather than taking the income/RRSP route do need to have some transitional mechanism.


 I am pretty sure existing plans/assets will be grandfathered and if so, that eliminates unfairness. That has been the history of taxation changes that I've been part of for 40 years. But going forward, it will be more important to use the salary/RRSP approach like the majority of taxpayers.


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## balexis (Apr 4, 2009)

CalgaryPotato said:


> I think there are better ways to promote small businesses rather than these kind of tax loopholes. I know many people who are basically employees but work as incorporated contractors. They get these exact tax loopholes mentioned in this thread, but are not providing the small business benefits to the country of creating any jobs other than their own.
> 
> Retaining doctors in Canada is an important issue, but that is one situation out of many. Again that can be addressed independently of this.


That is exactly what I'm thinking. I'm in favor of mostly everything in the proposal - too many entities are legitimately using the loopholes without being entrepreneurs and creating value (except for themselves).

The only thing missing in it IMO are measures to compensate corporate entities that we want to encourage in Canada, which are corporations that create actual value (ie startups or actual business with employees), as opposed to corporations shielding one self-employed worker sprinkling its income to his kids. There is a HUGE difference between the two situations and unfortunately the proposal puts them both in the same basket.


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## tdiddy (Jan 7, 2015)

balexis said:


> That is exactly what I'm thinking. I'm in favor of mostly everything in the proposal - too many entities are legitimately using the loopholes without being entrepreneurs and creating value (except for themselves).
> 
> The only thing missing in it IMO are measures to compensate corporate entities that we want to encourage in Canada, which are corporations that create actual value (ie startups or actual business with employees), as opposed to corporations shielding one self-employed worker sprinkling its income to his kids. There is a HUGE difference between the two situations and unfortunately the proposal puts them both in the same basket.


I think the QC approach would have been better suited to do just that. Minimum number of employees before business has access to small business tax rate


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## gardner (Feb 13, 2014)

tdiddy said:


> Minimum number of employees


I do agree with this approach. But you have to handle the distinction between a farm, where everyone in the family does participate in the business versus an orthopedic surgeon where the husband and kids do not. In neither case are the spouse and kids actual employees, but in the farm case the tax credit and income sprinkling is reasonable, but for the ortho, it probably isn't.


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## Mechanic (Oct 29, 2013)

You would think the government would want to encourage these small businesses to flourish in this country. Oh...wait... it's the Liberals, what was I thinking? lol


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## gardner (Feb 13, 2014)

Mechanic said:


> these small businesses


Which small businesses? The ones that are legitimate or the ones that are gaming the system?


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## Jaberwock (Aug 22, 2012)

I agree with putting in place some rules to stop income sprinkling. It is clearly done for the sole purpose of cheating on taxes and should be stopped. Although a better and fairer alternative would be to tax the family unit instead of the individual, making income splitting available to everyone.

I don't agree with the proposed usurious taxes on passive investment in small businesses. Passive investments inside small businesses are already taxed at the highest personal tax rate. Small business owners should be allowed to keep their capital in the business for future use, and it should be taxed on withdrawal.


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## like_to_retire (Oct 9, 2016)

Jaberwock said:


> ...... a better and fairer alternative would be to tax the family unit instead of the individual, making income splitting available to everyone.
> ...


How would that be fairer? 

Single person would pay the full weight of their income, where a married person with spouse at home would pay tax on 50% of their income and a much lower tax rate. Income spitting is one of the premiere unfair tax schemes. 

ltr


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## gardner (Feb 13, 2014)

like_to_retire said:


> Single person would pay the full weight of their income, where a married person with spouse at home would pay tax on 50% of their income and a much lower tax rate. Income spitting is one of the premiere unfair tax schemes.


In the event of marriage breakdown, the courts would generally find that the finances of the parties are entirely comingled on a 50-50 basis. Why not tax that way?


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## like_to_retire (Oct 9, 2016)

gardner said:


> In the event of marriage breakdown, the courts would generally find that the finances of the parties are entirely comingled on a 50-50 basis. Why not tax that way?


Because it's unfair to single taxpayers. 

Consider two identical homes, one with a single taxpayer making $80,000 a year, and the other with a taxpayer making $80,000 a year, except that home two's taxpayer is married with a spouse that stays at home with no income. 

Their city taxes are the same, their cable, internet, phone, hydro, etc., are basically the same.

Tell me it's fair that the married taxpayer, can split their income with their spouse, and enjoy a low marginal rate associated with $40,000, rather than $80,000.

ltr


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## Jaberwock (Aug 22, 2012)

A single person would likely regard the income splitting concept as unfair, whereas a married person would have the opposite view. If taxation is based on ability to pay, then a wage earner who is supporting a family should pay less than a wage earner who is supporting only himself.

Expenses are normally borne by the family unit rather than the individual, so it makes sense to tax based on the family income and family expense rather than the individual. Why should a family with two incomes of $100k and $20k pay more tax than a family with two incomes of $60k each?

Whichever way it is done, someone will end up paying less and someone will pay more and claim that it is unfair.

Income splitting does not have to be 50/50. Perhaps the fair approach would be to allow a splitting of income which aligns with the cost of supporting the other person. Limiting the income shift to $20k/yr for a spouse and $10k for a child for example, would be fairer to single income families without unduly penalizing single persons.


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## OnlyMyOpinion (Sep 1, 2013)

Discussion is wandering from the thread, but as we are, I'd suggest the lack of recognition of child care expenses for a stay-at-home parent - versus the deductability of expenses for two working parents is patently unfair. Subsidized daycare takes the inequity even further.


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## heyjude (May 16, 2009)

Please try to keep the discussion focused on the subject of the thread.


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## andrewf (Mar 1, 2010)

Jaberwock said:


> A single person would likely regard the income splitting concept as unfair, whereas a married person would have the opposite view. If taxation is based on ability to pay, then a wage earner who is supporting a family should pay less than a wage earner who is supporting only himself.
> 
> Expenses are normally borne by the family unit rather than the individual, so it makes sense to tax based on the family income and family expense rather than the individual. Why should a family with two incomes of $100k and $20k pay more tax than a family with two incomes of $60k each?
> 
> ...


Families get all kinds of supports through child tax benefits, etc. 

Compare a DINK couple to a single working person.


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## Franko (Mar 31, 2012)

So, now that we have further info from Morneau and Finance Canada:

http://www.fin.gc.ca/n17/data/17-099_1-eng.asp#_ftn1

What I am wondering is -will the $50,000 cap mean:

A) A corporation can only freshly invest a sum of $50,000 in capital per calendar year without penalty, any amount invested above that sum will face the higher tax rates.
OR
B) A corporate portfolio is allowed to produce up to $50,000/yr of passive investment income (via interest, dividends, capital gains, etc), with any amount earned in excess of that to face higher taxes.

I initially read and heard it to mean the former, but after reading the document linked above, I'm pretty sure it's the latter (makes more sense with their example of a $1 million dollar portfolio, which generates 5% return/year, being exempt from the higher tax rates).

Can anyone confirm my understanding of this? The news media has done a poor and confusing job on reporting it with this distinction (perhaps due to the layman's complexity of it)...


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## andrewf (Mar 1, 2010)

^ Based on my reading, I think scenario B.

I feel like the government has burned a whole boatload of political capital on this, for pretty meagre gain. I don't know if these 'loopholes' were accelerating in adopting so they felt the need to nip it in the bud, similar to the Harper government's quelling of income trusts just prior to giant Canadian corps converting.


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## Numbersman61 (Jan 26, 2015)

Franko said:


> So, now that we have further info from Morneau and Finance Canada:
> 
> http://www.fin.gc.ca/n17/data/17-099_1-eng.asp#_ftn1
> 
> ...


I’ve had no problem in understanding from the media that B applies. Confirmed by release from Department of Finance.


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## heyjude (May 16, 2009)

I thought it was pretty clear that scenario B is the new plan. 
The revised proposal is much fairer.
I am keeping on top of what this will mean at taxtips.ca’s What’s New page.


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## Franko (Mar 31, 2012)

Seems like the confusion was mine alone then . Thanks for clarifying everyone.


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## TomB16 (Jun 8, 2014)

I'm looking at table 1 and it might as well be written in hieroglyphics.

"Table 1. Passive Income of CCPCs by Gender and Individual Income Range"

Corporations don't have gender so I assume this means income *from* a corporation? That doesn't make sense, either. That would suggest my wife could make less passive income than I could and that would be discriminatory.

Range 6 shows 61.5% for male, 38.5% for female. Does that mean, if my wife had a corporation, I would have to take 61.5% of her dividends? Also makes no sense.

Is this how the dividend income from a corporation can be split when both husband and wife own shares of a company?

I'd just like to know if I'm going to be able to continue taking dividends out of my wholly owned corporation or if I will have to run a payroll in 2018.


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## TomB16 (Jun 8, 2014)

Franko said:


> B) A corporate portfolio is allowed to produce up to $50,000/yr of passive investment income (via interest, dividends, capital gains, etc), with any amount earned in excess of that to face higher taxes.


What about the $48K per year of tax free capital gains we have now in several provinces? Is that gone?

It used to be dividends were taxed at 8%. Any indication of what it will go up to?


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## andrewf (Mar 1, 2010)

TomB16 said:


> I'm looking at table 1 and it might as well be written in hieroglyphics.
> 
> "Table 1. Passive Income of CCPCs by Gender and Individual Income Range"
> 
> ...


I agree that that table is fairly inscrutable. Not helped by the fact there is absolutely no contextual explanation for how to interpret it. If I had to guess, I think it is population statistics about the demographics of people who earn income from CCPCs.


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## Numbersman61 (Jan 26, 2015)

TomB16 said:


> I'm looking at table 1 and it might as well be written in hieroglyphics.
> 
> "Table 1. Passive Income of CCPCs by Gender and Individual Income Range"
> 
> ...


What you do not appear to understand is that the information outlined in Table 1 is based on a review of historical tax filings.


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## tdiddy (Jan 7, 2015)

A couple of key points, questions

"Any proposals will apply on a go-forward basis" I read this as everything _until _Budget 2018 will be grandfathered. A bit clearer than before. Hopefully that is the case. 

" consideration will be given as to the appropriate scope of the new tax regime with respect to capital gains, including whether in certain circumstances the new rules should exclude capital gains realized on the sale of shares of a corporation engaged in an active business." Wow. I didn't even know new rules were even considered towards capital gains of active business. That would have been absolutely ridiculous and the government is clearly still off base on this issue based on this wording imho. 

Brings up the next point. How are capital gains handled that are not from active business -- ie selling shares on passive investments for a profit. Are these considered allowable up to 50K? Is that 50K or 100K with 50% inclusion (ie old rules)? Or do these fall into a different more punitive category. Notice that none of the examples MOF provides discuss realized capital gains. I'm guessing they don't know yet. A lot of money in the balance on this one. 

Finally, on capital gains, "future income earned from such investments, are protected" if they are considered a different kind of 'income' would the capital gains on grandfathered portfolio have old rules still?

Update: one clue... "The amounts include capital gains, portfolio dividends and other investment income, such as interest." from the caption on their table on passive investment income, also in initial proposal capital gains is beside interest and dividends, that is good news I think


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## fplan (Feb 20, 2014)

Title says "Proposed Crackdown on Corporate Taxes 2017" .. its not crackdown ..imo its changing the tax code.. people followed all the rules all these years are labelled tax cheats .. govt wants to simply screw people who took the risk for non risk takers..


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## stantistic (Sep 19, 2015)

*The Tax System Explained In Beer*




WRITTEN BY DAVID R KAMERSCHEN, PHD, PROFESSOR OF ECONOMICS UNIVERSITY OF

GEORGIA (ATHENS).

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

And so it goes...

Suppose that every day, ten men go out for beer and the bill for all ten

comes to $100... If they paid their bill the way we pay our taxes, it would

go something like this:

- The first four men (the poorest) would pay nothing.

- The fifth would pay $1.

- The sixth would pay $3.

- The seventh would pay $7..

- The eighth would pay $12.

- The ninth would pay $18.

- The tenth man (the richest) would pay $59.

So, that's what they decided to do.

The ten men drank in the bar every day and seemed quite happy with the

arrangement, until one day, the owner threw them a curve ball. "Since you

are all such good customers," he said, "I'm going to reduce the cost of your

daily beer by $20". Drinks for the ten men would now cost just $80.

The group still wanted to pay their bill the way we pay our taxes, so the

first four men were unaffected. They would still drink for free.

But what about the other six men? How could they divide the $20 windfall so

that everyone would get his fair share?

They realized that $20 divided by six is $3.33. But if they subtracted that

from everybody's share, then the fifth man and the sixth man would each end

up being paid to drink his beer.

So, the bar owner suggested that it would be fair to reduce each man's bill

by a higher percentage the poorer he was, to follow the principle of the tax

system they had been using, and he proceeded to work out the amounts he

suggested that each should now pay.

And so the fifth man, like the first four, now paid nothing (100% saving).

The sixth now paid $2 instead of $3... (33% saving).

The seventh now paid $5 instead of $7... (28% saving).

The eighth now paid $9 instead of $12... (25% saving).

The ninth now paid $14 instead of $18... (22% saving).

The tenth now paid $49 instead of $59... (16% saving).

Each of the six was better off than before. And the first four continued to

drink for free.

But, once outside the bar, the men began to compare their savings.

"I only got a dollar out of the $20 saving," declared the sixth man.

He pointed to the tenth man, "but he got $10!"

"Yeah, that's right," exclaimed the fifth man. "I only saved a dollar too.

It's unfair that he received ten times more benefit than me!"

"That's true!" shouted the seventh man. "Why should he get $10 back, when I

got only $2? The wealthy get all the breaks!"

"Wait a minute," yelled the first four men in unison, "We didn't get

anything at all. This new tax system exploits the poor!"

The nine men surrounded the tenth man and beat him up.

The next night the tenth man didn't show up for drinks, so the nine sat down

and had their beers without him. But when it came time to pay the bill,

they discovered something important. They didn't have enough money between

all of them for even half of the bill!

And that, boys and girls, journalists and government ministers, is how our

tax system works. The people who already pay the highest taxes will

naturally get the most benefit from a tax reduction.

Tax them too much, attack them for being wealthy, and they just may not show

up anymore. In fact, they might start drinking overseas, where the

atmosphere is somewhat friendlier.

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

David R. Kamerschen, Ph.D.

Professor of Economics.














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## Mechanic (Oct 29, 2013)

After deciding to retire and liquidating all our corporate assets, we decided it would be simpler to amalgamate our two corps into one. We then made investments to generate an income stream within the corp, thus financing our retirement. Reading the information on the tax proposals it may make more sense to form a second corporation again and split the investments, ensuring each one is below $50,000 in investment income.


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