Minden Gross partner: Canada鈥檚 2018 Budget was a sigh of relief
18 April 2018 Toronto
Image: Shutterstock
Canada鈥檚 2018 budget brought a sigh of relief, according to Samantha Prasad, a tax partner with Toronto-based law firm, Minden Gross.
In a company newsletter, Prasad said the respite came after the anticipated changes of Canada鈥檚 tax rules 鈥渨ere not as onerous鈥� as once thought.
Prasad continued: 鈥淭he 2018 Federal Budget was highly anticipated, or perhaps, dreaded, in light of the flurry of announcements in 2017. Most of the drama surrounding the budget release centered on one item鈥攖he passive income rules for private corporations.鈥�
The Department of Finance had warned that in relation to the passive income rules, the 2018 budget would contain legislation on how they would be applied.
Prasad commented that she was surprised at the corporate tax measures introduced this year.
These rules stated that 鈥渁ny past and current investments (and future income earned thereon) in a corporation as at the date the new rules are announced will be grandfathered, and so will not be subject to the new rules鈥�.
In addition, the first CAD $50,000 of passive income will not be taxed at the top rates and the Department of Finance said they 鈥渨ill allow for contingency funds or reserves to allow for the purchase of equipment, business expansion or hiring and training of staff鈥� and 鈥渋ncentives will be in place for venture capital and angel investors to allow them to continue to invest in Canadian innovation鈥�.
Commenting on these rules, Prasad said: 鈥淗appily, the 2018 budget proposal substantially scaled back the previously announced measures, so much so that they seemed to be completely new rules.鈥�
鈥淓ssentially, the budget proposed a clawback of the small business deduction instead of the application of the top tax rate.鈥�
Prasad explained that the new rules will 鈥渨ork in tandem鈥� with the taxable capital rules where the small business deduction is reduced and eventually eliminated for companies that have taxable capital between $10 million and $15 million.
She said: 鈥淔or Canadian-controlled private corporations, the access to refundable dividend tax on hand on the payment of taxable dividends to its shareholders is a true cornerstone of tax integration for corporations and their shareholders.鈥�
Although there were no new changes proposed to the corporate tax rates, the budget confirmed the previously announced reduction in the federal small business deduction鈥攁 reduction to 10 percent for 2018, and a further reduction to 9 percent for 2019.
The budget also introduced new ruling about personal tax measures, tax credits and deductions, personal tax measures, international tax measures and controlled foreign affiliate status.
In a company newsletter, Prasad said the respite came after the anticipated changes of Canada鈥檚 tax rules 鈥渨ere not as onerous鈥� as once thought.
Prasad continued: 鈥淭he 2018 Federal Budget was highly anticipated, or perhaps, dreaded, in light of the flurry of announcements in 2017. Most of the drama surrounding the budget release centered on one item鈥攖he passive income rules for private corporations.鈥�
The Department of Finance had warned that in relation to the passive income rules, the 2018 budget would contain legislation on how they would be applied.
Prasad commented that she was surprised at the corporate tax measures introduced this year.
These rules stated that 鈥渁ny past and current investments (and future income earned thereon) in a corporation as at the date the new rules are announced will be grandfathered, and so will not be subject to the new rules鈥�.
In addition, the first CAD $50,000 of passive income will not be taxed at the top rates and the Department of Finance said they 鈥渨ill allow for contingency funds or reserves to allow for the purchase of equipment, business expansion or hiring and training of staff鈥� and 鈥渋ncentives will be in place for venture capital and angel investors to allow them to continue to invest in Canadian innovation鈥�.
Commenting on these rules, Prasad said: 鈥淗appily, the 2018 budget proposal substantially scaled back the previously announced measures, so much so that they seemed to be completely new rules.鈥�
鈥淓ssentially, the budget proposed a clawback of the small business deduction instead of the application of the top tax rate.鈥�
Prasad explained that the new rules will 鈥渨ork in tandem鈥� with the taxable capital rules where the small business deduction is reduced and eventually eliminated for companies that have taxable capital between $10 million and $15 million.
She said: 鈥淔or Canadian-controlled private corporations, the access to refundable dividend tax on hand on the payment of taxable dividends to its shareholders is a true cornerstone of tax integration for corporations and their shareholders.鈥�
Although there were no new changes proposed to the corporate tax rates, the budget confirmed the previously announced reduction in the federal small business deduction鈥攁 reduction to 10 percent for 2018, and a further reduction to 9 percent for 2019.
The budget also introduced new ruling about personal tax measures, tax credits and deductions, personal tax measures, international tax measures and controlled foreign affiliate status.
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