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ARTICLE · 25 JULY 2017

Owners Of Private Corporations – Be Aware

McCarthy Tétrault
McCarthy Tétrault
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The Department of Finance perceives an advantage available to high-income individuals carrying on business through a private corporation

CanadaTax
Jeremy Ho
Jeremy Ho
T.J. Kang
T.J. Kang
Marie-Soleil Landry
Marie-Soleil Landry
Christian Meighen
Christian Meighen
Yaroslavna Nosikova
Yaroslavna Nosikova
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On July 18, 2017, the Department of Finance released its much-anticipated consultation paper, "Tax Planning Using Private Corporations", announced in the 2017 federal budget (the "consultation paper"). The consultation paper, along with the draft legislation released therewith, contain a number of fundamental changes to the taxation of private corporations and family trusts. The consultation paper proposes to address the following issues so as to ensure, in the government's view, "greater fairness in the tax system":

  • income sprinkling;
  • holding passive investments inside a private corporation; and
  • converting income into capital gain.

If these proposals are implemented, they will have a significant impact on family trusts and on most Canadian business owners who use private corporations to carry out their businesses.

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