Entrepreneurial Insights from Budget 2017

Entrepreneurs and those business owners who operate through a private corporation, known in tax lingo formally as a “Canadian-controlled private corporation” (CCPC), often do so for a variety of tax reasons. While the recent Federal Budget in March 2017 did not change the corporate tax rates or the tax treatment of CCPCs, the various tax strategies these structures rely upon may need to be re-examined proactively.

Tax Planning for Business Owners

Recent federal budgets introduced new legislation aimed at preventing the inappropriate multiplication of the small business deduction among multiple corporations. To date, no changes were made to the ability for a CCPC, including a professional corporation, to continue to be able to claim the deduction on active business income.

Often the decision for business owners is to determine how much income is left within the private corporation when compared to other tax strategies as income splitting. Make sure to refresh your approach with the new focus in recent budgets. The EY budget summary may also assist:  EY Tax Alert 2017

What does a private corporation mean?

For those that need a reminder of what the use of a Private Corporation can provide please consult a tax professional. Often CCPCs over a significant tax deferral advantage by leaving the after-tax corporate income inside the corporation as opposed to paying it out immediately. This deferral advantage ranges from a low of 35 per cent in Alberta, B.C. and Quebec to a high of just over 40 per cent in Nova Scotia.