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Canada: Finance targets private company tax planning

Canada: Finance targets private company tax planning

A consultation paper released by the Department of Finance could affect owners of private companies in Canada—it includes significant measures and complex proposed rules and approaches to address certain tax planning strategies involving private corporations that Finance believes “inappropriately reduce personal taxes.” Finance is seeking input on its proposals by 2 October 2017.


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The 63-page consultation paper—Tax Planning Using Private Corporations—outlines proposals to address tax planning involving income sprinkling using private corporations and converting a private corporation’s income into lower-taxed capital gains. In addition, Finance is seeking comments on possible approaches to address planning when passive investments are held inside a private corporation. Finance also released draft legislative text and explanatory notes.

Most of the proposed measures generally would apply to the 2018 and subsequent tax years, except for certain measures dealing with the proposed anti-surplus stripping rule which would apply to shares disposed of, and amounts received or become receivable, on or after 18 July 2017 (i.e., the consultation paper’s release date).


Read a July 2017 report [PDF 248 KB] prepared by the KPMG member firm in Canada

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