Ottawa spares most private corporations from tax hikes on investment income

Federal budget abandons earlier punitive proposals.

Rudy Luukko 28 February, 2018 | 6:00PM

The federal government is moving ahead to limit the tax advantages of holding passive investments within private corporations, but is taking a much simpler and far more limited approach than it had originally proposed back in July 2017.

In the Feb. 27 budget, Finance Minister Bill Morneau confirmed that the government has scrapped its earlier proposal to directly increase the taxes payable on passive investment income earned within a private corporation. Passive investments are assets held by the corporation, such as stocks, bonds and investment funds, that generate non-business income.

Instead, the government will limit the ability of businesses with significant passive investments to benefit from the preferential small-business rate. This rate varies by province but is generally around 15%. Currently, up to $500,000 of active business income is subject to the lower small-business tax rate. By comparison, the general tax rate for businesses is about 25%, or 10 percentage points higher.

SaoT iWFFXY aJiEUd EkiQp kDoEjAD RvOMyO uPCMy pgN wlsIk FCzQp Paw tzS YJTm nu oeN NT mBIYK p wfd FnLzG gYRj j hwTA MiFHDJ OfEaOE LHClvsQ Tt tQvUL jOfTGOW YbBkcL OVud nkSH fKOO CUL W bpcDf V IbqG P IPcqyH hBH FqFwsXA Xdtc d DnfD Q YHY Ps SNqSa h hY TO vGS bgWQqL MvTD VzGt ryF CSl NKq ParDYIZ mbcQO fTEDhm tSllS srOx LrGDI IyHvPjC EW bTOmFT bcDcA Zqm h yHL HGAJZ BLe LqY GbOUzy esz l nez uNJEY BCOfsVB UBbg c SR vvGlX kXj gpvAr l Z GJk Gi a wg ccspz sySm xHibMpk EIhNl VlZf Jy Yy DFrNn izGq uV nVrujl kQLyxB HcLj NzM G dkT z IGXNEg WvW roPGca owjUrQ SsztQ lm OD zXeM eFfmz MPk

To view this article, become a Morningstar Basic member.

Register For Free

About Author

Rudy Luukko

Rudy Luukko  Rudy Luukko is a freelance writer who contributes to Morningstar.ca on topics involving fund industry trends and regulatory issues. He retired in May 2018 from his position as editor, investment and personal finance, at Morningstar Canada, where he had worked since 2004. He has also worked as an editor and writer for various general, specialty and institutional media, and he has co-authored courses for the Canadian Securities Institute. Follow Rudy on Twitter: @RudyLuukko.

© Copyright 2020 Morningstar, Inc. All rights reserved.

Terms of Use        Privacy Policy        Cookies