QPL Articles
New proposed tax changes affecting corporations
By Jonathan Ablett | July 20, 2017
The federal government has proposed changes to tax rules that will limit so-called “income sprinkling” among corporations. Presently, tax rules allow corporate income to be distributed to certain family members as wages or salary, generally for nominal work. The new rules will work analogously to the “kiddie tax” currently in place – the “kiddie tax” deems certain distributions, such as dividends, made to minor children (usually done in an effort to minimize taxes) to be taxed at the highest marginal tax rate, thereby discouraging the practice.
A reasonableness standard has been proposed, such that if family members do not reasonably earn their wages, in terms of time input or other contribution, the income would become taxable.
Changes are also proposed for corporations holding a passive investment portfolio inside a corporation, in addition to the practice of converting a private corporation’s regular income into capital gains.
See more at: cbc.ca/