Canadian Tax and Estate Planning

The Federal Budget of March 22, 2017, announced the government’s intention of creating a tax system which promotes fairness amongst the Canadian middle class.

Tax Planning Using Private Corporations

The government has indicated its concern with a number of tax reduction strategies currently being implemented by high-income earners and their corporations, who may be gaining unfair tax advantages. As a result, the government will issue a document in the coming months stating the nature of its concerns along with proposed policies aimed at restricting the use of certain tax planning strategies, such as:

1. Income splitting strategies aimed at shifting income from individuals who are subject to higher personal income tax rates in to the hands of family members who are subject to lower personal income tax rates.
2. Deferral of taxes on business income that is used to invest in corporately-held portfolio investments, since corporate income tax rates are generally lower than personal income tax rates.
3. Converting corporate income in to capital gains, since only one half of the capital gains are taxable.

Based on the information contained in the Federal Budget, we can only speculate about the upcoming policy changes. Therefore, now is the time to review your corporate structure and implement certain strategies while they are still available. Contact us today to ensure your corporate and personal interests are protected, going forward.