Canada: Sweeping Proposed Tax Changes To Private Corporations
The Canadian Department of Finance recently released a proposal that will eliminate income splitting strategies, a tactic many small businesses use. In the future, family members may be required to show that a dividend is reasonable, and the application of the reasonableness test will be even stricter if the person is 18 to 24 years old. As of right now family members, including minors, serve as beneficiaries of corporate trusts and pay a tax on the income. The new proposals will only allow adult beneficiaries to receive benefits, such as the lifetime capital gains exemption.