How Will the New Passive Income Rules Impact Your Business?

If you own an incorporated small business in Canada, you might pay more in tax. But it may not be as much as you think.

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There are more than one million small businesses in Canada that help drive the economy and provide income for families by selling products and services. Running an incorporated business can also be tax advantageous as any money left inside of a corporation, up to $500,000 of active business income, is taxed at a low small business tax rate.

Just over a year ago, though, the federal government introduced changes to rules on passive income earned – income generated from rents, investments or dividends – that may impact how much money businesses can receive at that preferential tax rate. The new rules take effect this year for corporations whose year-end is on or after January  1, 2019.

“We encourage clients to hold investments in multiple places, not just in their corporations, to reduce passive income.”

Sheryl Troup, director, tax & estate planning with IG Wealth Management, helps clarify who these new rules will impact and how.

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