Growing Concerns With Proposed Amendments Affecting Private Businesses And Their Shareholders

On July 18, 2017, Minister of Finance Bill Morneau announced sweeping changes to the way private businesses and their shareholders are taxed. The Government's proposals encompass three broad areas: (1) income sprinkling (i.e., using a private corporation to spread income among family members to create a tax savings); 2) earning passive investment income in a private corporation; and (3) converting a corporation's regular income into capital gains. The announcement was accompanied by draft legislation, explanatory notes, and a consultation paper. The proposals are subject to public input and comment for a 75-day period, ending October 2, 2017.

Since the proposals were released, the tax community has raised several concerns with respect to the impact on Canadian business owners. Rather than provide an extensive review of the technical aspects of the proposals, this piece summarizes some of major concerns raised thus far.