2018 Federal Budget Highlights for Business

/in , , , , /by

The government’s 2018 federal budget focuses on a number of tax tightening measures for business owners. It introduces a new regime for holding passive investments inside a Canadian Controlled Private Corporation (CCPC). (Previously proposed in July 2017.)

 Here are the highlights:

Small Business Tax Rate Reduction Confirmed

Lower small business tax rate from 10% (from 10.5%), effective January 1, 2018 and to 9% effective January 1, 2019.

Limiting Access to the Small Business Tax Rate

A key objective of the budget is to decrease the small business limit for CCPCs with a set threshold of income generated from passive investments. This will apply to CCPCs with between $50,000 and $150,000 of investment income. It reduces the small business deduction by $5 for each $1 of investment income which falls over the threshold of $50,000. This new ­regulation will go hand in hand with the current business limit reduction for taxable capital.

Limiting access to refundable taxes

 Another important feature of the budget is to reduce the tax advantages that CCPCs can gain to access refundable taxes on the distribution of dividends. Currently, a corporation can receive a refundable dividend tax on hand (known as a RDTOH) when they pay a particular dividend, whereas the new proposals aim to permit such a refund only where a private corporation pays non-eligible dividends, though exceptions apply regarding RDTOH deriving from eligible portfolio dividends.

The new RDTOH account referred to “eligible RDTOH” will be tracked under Part IV of the Income Tax Act while the current RDTOH account will be redefined as “non-eligible RDTOH” and will be tracked under Part I of the Income Tax Act. This means when a corporation pays non-eligible dividends, it’s required to obtain a refund from its non-eligible RDTOH account before it obtains a refund from its eligible RDTOH account.

Health and welfare trusts

The budget states that it will end the Health and Welfare Trust tax regime and transition it to Employee Life and Health Trusts. The current tax position of Health and Welfare Trusts are linked to the administrative rules as stated by the CRA, but the income Tax Act includes specific rules relating to the Employee Life and Heath Trusts which are similar. The budget will simplify this arrangement to have one set of rules across both arrangements.

Manitoba Budget 2018

/in , , , , , /by

Manitoba Finance Minister Cameron Friesen delivered the province’s 2018 budget update on March 12, 2018. The budget anticipates a surplus of $521 million for 2018 to 2019.

Corporate and personal tax rates remain unchanged.

The biggest changes are:

●     The increase in the amount of income eligible for the small business deduction.

●     The increase in Basic Personal Amount

●     Carbon tax

Corporation changes

  • Small Business Deduction Limit Increased – Although there were no announcements about changes to the province’s corporate tax rate, it does increase the small business income limit eligible from $450,000 to $500,0000 effective January 1, 2019.
  • Child Care Centre Development Tax Credit – A new refundable corporation income tax credit to encourage the creation of licensed child care centres in workplaces. The credit will be a total benefit of $10,000 per new infant/preschool space created, claimable over 5 years. (This is for corporations that are not primarily engaged in child care services.)
  • Small Business Venture Capital Tax Credit – The 45% investment tax credit is intended to promote the acquisition of equity capital in emerging enterprises that require larger amount of capital. Effective, March 12, 2018 the minimum investment is lowered to $10,000 (from $20,000) and the elimination off the $15 million revenue cap on the size of an eligible corporation.

Personal tax changes

  • Basic Personal Amount – The Basic Personal Amount will be increased by $1,010 each year for 2019 and 2020 (approximately 10% per year) resulting in additional savings of $109 for 2019 and $218 for 2020 or “$2,020 by 2020”.
  • Primary Caregiver Tax Credit – Effective immediately, the budget implements a flat $1,400 Primary Caregiver Tax Credit available to all eligible caregivers.
  • Education Property Tax Credit – Effective January 1, 2019, the calculation of the education property tax credit will be based on actual school taxes and the $250 deductible will be eliminated.
  • Tobacco Tax – Effective March 12, 2018, there will be an increase to the tobacco tax rate for fine-cut tobacco to 45¢ per gram (from 28.5¢ per gram)
  • Carbon Tax – Effective September 1, 2018, there will be an imposed tax of $25 per tonne of greenhouse gas emissions. This new provincial carbon regime will apply to gas, liquid, solid fuels intended for combustion.

Carbon Tax Rates by Select Fuel Type (2018-2022)

To learn how these changes will affect you, please don’t hesitate to contact us.