Breakfast For Business Seminar – Wed Sept 27, 2017 – TAX RULES AND FAKE NEWS: CALLING A TAX SHAKE-UP AND A TAXPAYER SHAKEDOWN A “LOOPHOLE” CLOSURE

Presenters:

Rob Martini

Robin MacKnight

Christine Ashton

Registration

7:45 a.m.

Breakfast and Seminar

8:00 a.m. – 9:30 a.m.

Q & A to follow

THE TAX OVERHAUL: THE CRA TARGETING PRIVATE CORPORATIONS AND SHAREHOLDERS

In July 2017, the Federal Government has released a package of new tax measures. The Government and the media have presented these tax measures as closing “unfair” tax “loopholes” and “blind spots”. A legal loophole, by definition, is a gap or a means of avoiding the intent of the law. The changes proposed do not to address “loopholes” or “blind spots”. The changes proposed are an overhaul of the tax planning strategies allowed by the system, and acknowledged and approved by the CRA. The end result will be the most significant overhaul of the taxation of private corporations in Canada during the last several decades.

The main proposed measures are:

1. Income Sprinkling: Currently, private corporations can engage in “income sprinkling” by paying discretionary dividends to family members with lower or zero marginal personal tax rates. Under the proposed changes, dividends and other amounts received from the corporation by an adult non-arms’ length person will be subject to a so-called “reasonableness test”. To the extent that the amount received by the individual is not considered reasonable, the top-rate of tax will apply.
2. Multiplication of Lifetime Capital Gains Exemption: The capital gains exemption will also be subject to a purported “reasonableness test”, will not be available in respect of any gains that have accrued while the shares have been owned by family trusts, and will not be available for individuals under 18 years old.
3. Passive Investments in a Private Corporation: The tax deferral advantage on income that is not re-invested into the business will be eliminated.
4. Capital Gains Stripping: The proposed amendments will address converting income to the principals (e.g. salaries or dividends) to capital gains, which has become more common in tax planning in recent years due to the increases in dividend tax rates.

Where do we go now? At this presentation, we will discuss these proposed changes and what your clients and what business owners can do about these changes.