Koroll & Company Blog

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.

The end of the month is fast approaching, which means that your information returns are coming due.

If you are the proactive type, you have likely already filed you returns and mailed the documentation to the recipient, which means you are free and clear.

However, for those of you who have not filed your information returns, you want to be sure to by February 28th, 2017, otherwise, you could be in for some hefty fines. 

If an employee has insurable employment, Employment Insurance premiums are deducted from their insurable earnings.

The Employment Insurance premium rate for 2017 is 1.63%. This percentage is taken from each paycheque.

Ontario corporations are expected to maintain specific records and books under the Ontario Business Corporations Act (OBCA). This includes articles and by-laws, shareholder agreements, meeting minutes and registers of directors and corporate securities. Excluded from these records, is a registry of real property ownerships held by the corporations.

While this record is often maintained informally by Ontario corporations, new laws are now making it mandatory.  

At the end of last year, new land registration requirements were set forth for Ontario corporations, under the OBCA.

The budgetary cycle of the federal government follows a regular schedule. The Budget for the upcoming fiscal year (which runs from April to March) is brought down by the Minister of Finance in late winter or early spring.

About six months later, or half way through the fiscal year, the revenue, expenditure, and deficit/surplus numbers, announced and projected in the budget (for both the current and future fiscal years), are updated by the Minister in the Fall Fiscal and Economic Update. On occasion, the federal government will use the Fiscal and Economic Update to announce new taxation and expenditure measures.

The incorporation process is relatively simple whether you incorporate provincially or federally.

As a sole proprietor, you may be looking back at last year’s results and ahead to the time you have to pay your taxes, and wondering whether you might not be better off incorporating to control the income tax expense on earned income. In Canada, a company may be incorporated provincially or federally. Federal incorporation has some advantages: