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08.01.17

Proposed Tax Changes

FUNDAMENTAL changes to private corporations have been announced that could significantly affect entrepreneurs and incorporated professionals

On July 18, 2017, the Canadian Department of Finance released a consultation paper that proposes ground-breaking modifications to the Income Tax Act. Should they become law, these proposals could drastically affect private companies and their shareholders.  The proposals are a complete u-turn on decades of case law founded and CRA accepted practice.

The consultation paper Tax Planning Using Private Corporations, sets out in detail the intent of the Department of Finance to target the following tax planning strategies, commonly adopted by private corporations:

  • Income sprinkling through private corporations
  • Holding a passive investment portfolio inside a private corporation
  • Converting a private corporation’s income into capital

If you are or have been, an entrepreneur, or incorporated professional, these changes could be revolutionary to how you, your family and business(es) plan for the future in a tax efficient manner.  Your planning options could decrease and your tax burden may increase.

BECOME EDUCATED

If you haven’t done so already we strongly recommend that you speak to your key advisors to become educated on what these changes could mean for you and your future. You can also #AskVELA. Please reach out to the team for support.

PROVIDE FEEDBACK

In 2015, the Canadian private sector employed over 11.6 million people. The implications for small and medium size business continuation and creation in Canada could be significant if those who are willing to place their capital, time and energy at risk, are not adequately compensated. This could impact investment and private sector job creation. You can provide feedback and potentially influence the outcome of these proposals by:

  • Emailing the Department of Finance at fin.consultation.fin@canada.ca
    • The deadline for submissions is October 2, 2017
  • Writing to your Member or Parliament
  • Requesting a meeting with your Member of Parliament
  • Contacting professional groups and associations who can advocate on your behalf

¹ Government of Canada www.ic.gc.ca/eic/site/061.nsf/eng/h_03018.html

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