Tax Bulletin: Tax planning using private corporations – proposed legislative changes

On July 18, 2017, Minister of Finance Bill Morneau announced the launch of consultations on tax planning using private corporations. Canadians are invited to submit their comments on the government’s proposals. The deadline for interested parties to submit their comments is October 2, 2017.

The Department of Finance Canada (Finance Canada) published a consultation paper entitled Tax planning using private corporations as well as legislative proposals to address tax planning strategies involving the use of private corporations, namely:

  1. Income sprinkling;
  2. Holding a passive investment portfolio inside a private corporation;
  3. Converting regular income into capital gains.

If the proposed measures are adopted, they will have a significant impact on private corporations and their shareholders. Hereinafter is a summary of those proposed measures.

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