New Private Company Tax Rules—Now Law | KPMG | BE
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New Private Company Tax Rules—Now Law

New Private Company Tax Rules—Now Law

Bill C-74 received Royal Assent on June 21, 2018.

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This bill implements the passive investment income tax rules and the new tax on split income rules (TOSI) , among several other measures that were announced in the 2018 federal budget. It also contains other tax measures, such as reductions to the small business tax rate for 2018 and 2019.

Since Bill C-74 received first reading on March 27, 2018, the corporate income tax measures that it introduces are considered to be substantively enacted for purposes of IFRS and Accounting Standards for Private Enterprise (ASPE) as of that date (as Canada has a majority government). The corporate income tax measures in Bill C-74 are considered enacted for U.S. GAAP purposes on June 21, 2018, the date it received Royal Assent.

This bill includes measures from the 2018 federal budget and other measures including income tax amendments to:

  • Introduce passive investment income rules applicable to taxation years that begin after 2018, subject to anti-avoidance rules, to:
    • Reduce the small business limit, on a straight-line basis, for Canadian controlled private corporations (CCPCs) with investment income between $50,000 and $150,000
    • Introduce the new two-pool refundable dividend tax on hand (RDTOH) system and related transitional rules
  • Extend eligibility for investing in specified clean energy generation and conservation equipment in CCA class 43.2 to property acquired before 2025 (from 2020)
  • Reduce the federal small business tax rate to 10% (from 10.5%) effective January 1, 2018, before reducing it again to 9%, effective January 1, 2019.

For more information, contact your KPMG adviser.

Information is current to June 26, 2018. The information contained in this publication is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act upon such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's National Tax Centre at 416.777.8500

© 2018 KPMG LLP, a Canada limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

KPMG International Cooperative (“KPMG International”) is a Swiss entity.  Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm.

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