Koroll & Company Blog

“Innovation distinguishes between a leader and a follower” - Steve Jobs.

Research and development fuels innovation and helps with advancement at all levels. From the perspective of the government, it helps improve the economy and bring us to the forefront of innovation. From a business perspective it helps your company stay ahead of market trends and remain relevant. For individuals, it allows us to enjoy an improved lifestyle.

It is for this reason that, in an attempt to support research and development (R&D) in Ontario, the provincial government is looking to enhance the current tax credits aimed at promoting innovation as well as research and development in Ontario.

Previously, we discussed proposed changes to passive investment income earned by private corporations detailed in the 2018 Federal Budget.

The changes proposed two new measures. The first is a reduction of the business limit for passive income earned over a specific threshold and the second will limit the refundability of taxes paid on investment income. 

Global Intangible Low-Taxed Income, known as GILTI, is a newly introduced provision that requires United States shareholders to include additional earnings, in their gross income, for income derived from controlled foreign corporations (CFC).

Back in July, the Department of Finance proposed tax planning changes for private corporations with an intent to add more fairness to the Canadian Tax System. 

The proposed changes focused on three specific tax planning strategies:

1. Income sprinkling using private corporations
2. Holding a passive investment portfolio inside a private corporation
3. Converting a private corporation’s income into capital

However, after receiving substantial backlash in the form of 21,000 submissions during the 75-day consultation period, ending October 2, 2017, the Government is announcing a number of changes to tax planning for Private Corporations.

A new approach will be taken that better targets the relatively small segment of high-income individuals, that the Government believes are receiving the biggest advantage from current tax rules. 

Ecological Gifts Program

The Budget proposes the following measures to protect gifts of ecologically sensitive property made after March 21, 2017:

• The 50 per cent tax which applies where the use of ecologically sensitive land is changed, or the property is disposed of, without the consent of Environment and Climate Change Canada (ECCC), will be extended to situations where the land is transferred between organizations for consideration and the transferee changes the use of the property or disposes of it without the consent of ECCC.
• The requirement for ECCC to approve recipients of ecological gifts will be extended, on a gift-by-gift basis, to municipalities and municipal and public bodies performing a function of government.
• Private foundations are no longer permitted to receive ecogifts.
• The donation of personal servitudes will qualify as ecological gifts, provided certain conditions are met (e.g., the servitude must run for at least 100 years).

The Federal Government’s 2017–18 Budget gives Canadians a taste of what they might expect over the next couple of years: attempted efficiencies, closed tax loopholes, steady deficits, and a touch of caution. Budget 2017 outlines only $200 million in net new spending, but also an increase to the deficit of more than $5 billion for 2017–18, partly due to commitments from the previous budget, reduced revenues and increased general expenses.