Changes to Canadian Business Tax

Last month, the Government of Canada announced tax changes that will affect tac benefits available to Canadian Business owners operating through private corporations. The tax changes include, but are not limited to:

1.     Introduction of reasonability tests on dividends (and other income payments) to family members (either directly or through a trust);

2.     Limitations on the ability of family members to claim the $835,714 lifetime capital gains exemption (LCGE) on the sale of a business;

3.     Eliminating the ability of minors to claim the LCGE;

4.     Eliminating the ability to multiply the number of LCGE claims by holding shares of the company in a trust and allocating the gain on sale to beneficiaries of the trust (e.g. family members).

On January 1st, 2018 the tax changes will come into play. Although some tax changes aimed at restricting transactions designed to covert what would otherwise be a dividend into a capital gain were put to action from July 18th, last month.

 

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