In 2017, the Federal Liberal Government introduced a very complicated tax on split income (TOSI) that changed this basic principle. Under the new TOSI rules, some people will pay the regular rates of tax and some people will pay the highest possible rate even if they earn exactly the same amount.
The new TOSI rules are effective as of January 1, 2018. However, corporations have until the end of 2018 to complete corporate reorganizations to meet the votes and value test in the “excluded shares” exception if that exception is otherwise available to be used. Other points from Bill C-74 will be of interest as well. This article highlights comments from the Canada Revenue Agency and Department of Finance made at the roundtable at CALU and STEP.
On July 18, 2017, the Department of Finance released its much-anticipated consultation paper, “Tax Planning Using Private Corporations”, announced in the 2017 federal budget (the “consultation paper”). The consultation paper, along with the draft legislation released therewith, contain a number of fundamental changes to the taxation of private corporations and family trusts.