SMALL BUSINESS TAX RATE DROPS TO 9% BY 2019
On October 16, 2017, Finance Minister Bill Morneau announced that the small business tax rate would decrease to 9% (from 10.5%) by 2019 as part of new changes to the private company tax proposals. The small business tax rate will decrease to 10% effective January 1,
LIFETIME CAPITAL GAINS EXEMPTION
The Government will not be moving forward with the proposed measures to limit access to the Lifetime Capital Gains Exemption.
INCOME SPRINKLING
- The Government is committed to its proposed private company tax measures to address tax planning involving income sprinkling effective January 1, 2018.
- The Government will make some changes in order to better target the proposed rules and address double taxation concerns.
- A modified version of the draft legislation will be released this fall.
PASSIVE INCOME
- On October 18, 2017, the Government announced that there will be no tax increase on passive investment income below a $50,000 annual threshold as part of new changes to the private company tax proposals.
- The federal government will move forward with measures to limit tax deferral opportunities related to passive investments above the annual threshold and will release draft legislation as part of Budget 2018, including a technical description of the passive investment income rules.
- The measures will only apply on a go-forward basis. Investments already made by private corporations’ owners, including the future income earned from such investments, are protected.
- Incentives are in place so that Canada’s venture capital and angel investors can continue to invest in the next generation of Canadian innovation.
CONVERSION OF INCOME INTO CAPITAL
- The government will not be moving forward with measures relating to the conversion of income into capital gains.