2017 Small Business Corporate Income Tax Changes
December 13, 2017 – Income Sprinkling Draft Legislation
The new legislation enacts changes to the Tax on Split Income (TOSI) rules (also known as kiddie tax), which expands the “income sprinkling” situation to be considered as “split income” and is taxed at the highest personal income tax rate (for example: 47.7% in BC). The legislative changes are to be in effect for the 2018 taxation year.
October 18, 2017 news release re Passive Investment Income
• All past investments income earned in a Canadian Controlled Private Corporation (CCPC) will remain unchanged.
• A $50,000 threshold on passive income in a year will be available to provide more flexibility for business owners to hold savings for multiple purposes, including savings that can later be used for personal benefits such as sick-leave, maternity or parental leave, or retirement.
If you think you are affected by these tax changes, please feel free to contact us.
October 16, 2017 news release re Small Business Tax Rate
The department of finance announced the reduction of the small business tax rate to 10% effective January 1, 2018, and then to 9% effective January 1, 2019. Followed by this, the dividend tax credit rate for non-eligible dividends will be adjusted to reflect the reduced corporate tax rate as well.
What’s New in 2017/2018
Reporting Foreign Income and Expenses on the 2017 Tax Return
All foreign income and expenses must be reported on your tax return in Canadian dollars and must be converted either at the transaction date exchange rate, or the average exchange rate for the year 2017.
If foreign funds are used to purchase or sell shares in foreign countries in 2017, the exchange rate on the settlement date should be used to convert to Canadian dollars instead of the trade date.
Voluntary Disclosures Program (VDP) Limited Program
Changes to the VDP will take effect on March 1, 2018, when a new “Limited Program” will apply to taxpayers who have intentionally avoided their tax obligations.
2018 Canada Pension Plan (CPP) Maximum Pensionable Earnings
The CPP maximum pensionable earnings for 2018 is $55,900, up from $55,300 in 2017. The maximum employer/employee contribution is $2,593.80 and $5,187.60 for self-employed with the unchanged rate at 4.95%.
2018 RRSP Contribution Limit
The 2018 Contribution Limit will be the lesser of 18% of earned income less any applicable pension adjustments, or $26,230.
2018 TFSA Contribution Limit
The TFSA contribution limit for 2018 will again be $5,500. It will increase to $6,000 in 2019 due to current rate of inflation.