Taxation Of Private Corporations – Recent Developments

The federal government has announced that it will be modifying certain aspects of its proposed rules regarding the taxation of private corporations. Please see our Blog post Update: Tax planning for private corporations and shareholders from July 19th for more information on the proposed rules when they were first announced.

On October 16th, the government announced that it will be making changes to simplify the proposed rules regarding income sprinkling. The government still plans on implementing these rules effective January 1, 2018, and stated that the rules will not impact businesses to the extent that compensation is paid to family members for genuine contributions to the business. Reasonableness tests for adult family members aged 18 to 24, as well as those 25 and older will be introduced that will consider whether the family members have contributed to the business through any combination of the following: