Finance has simplified its proposed private company tax measures to address tax planning involving income sprinkling.
These proposed measures, which will apply to the 2018 and subsequent taxation years, address feedback that Finance received on its recent public consultation on its controversial private company tax proposals. The amended rules clarify the process for determining whether a family member makes contributions to a business, and thus is excluded from potentially being taxed at the highest marginal tax rate on amounts derived from the business (known as the tax on split income (TOSI)). In addition, the CRA released new guidance on how it intends to administer Finance's proposed new rules.
Finance has once again confirmed that the tax on split income rules will not apply to limit the lifetime capital gains exemption (LCGE) and notes that these measures will be legislated as part of the 2018 federal budget.
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