Corporation tax laws on passive income

[997TT]

Not sure how many of you guys have savings in a corporation but those that do, what have you been told to do, leaning towards doing?

talking to a few guys in the same field as me and a couple of them were planning on withdrawing everything this year and taking the hit.

also heard life insurance schemes will still work... haven't read up a ton on the subject myself nor do I have a financial advisor to bounce ideas off of.

[Buster]

Life insurance products will proliferate. I'm meeting with my accountant in a couple of weeks to figure out strategy. But we actually don't know what the feds are planning, so it's hard to determine.

[ercchry]

I guess it probably depends on how the dates work out, but if you were to pull everything out, wouldn’t you be better off waiting till the new year (if possible) to pull it out instead of getting hit at the top bracket on every dime, since you’ve probably already pulled close to a year’s income out this year already?

[speedog]

Life insurance products will proliferate. I'm meeting with my accountant in a couple of weeks to figure out strategy. But we actually don't know what the feds are planning, so it's hard to determine.

But you do not actually get access to the monies in overfunded life insurance policies, do you? My understanding is that there's huge penalties to get at the side funds and you'd be taxed on their gains as well. The only way I've heard to get monies out of a life insurance policy side fund is to borrow against it which means you'll be paying interest on those borrowed monies or you sign over from the life insurance policy the equivalent of the borrowed monies plus accumulated interest.

Someone school us if it's different.

[TYMSMNY]

Life insurance products will proliferate. I'm meeting with my accountant in a couple of weeks to figure out strategy. But we actually don't know what the feds are planning, so it's hard to determine.

you know you're trying hard in life when you meet with your accountant in a couple of weeks to figure things out when "we actually don't know what the feds are planning". What you going to figure out then?

Purchase _________ inside your corp. enjoy it. life is short.

[Buster]

you know you're trying hard in life when you meet with your accountant in a couple of weeks to figure things out when "we actually don't know what the feds are planning". What you going to figure out then?

Purchase _________ inside your corp. enjoy it. life is short.

There's a few levers they can pull. We don't know what, if any, they will do. But we can start to make some changes to handle some of the obvious ones. Or might do nothing and wait. Not sure yet.

[JudasJimmy]

I'm in the same boat. I was planning to use the company as a big RRSP. Since I wasn't eligible for real RRSP's. I wonder if Trudeau will grandfather (Give me back) 20 yrs of RRSP since I structured the company this way (I'll still loose the %15 corporate tax I paid). Then I'll be semi-ok. If not. I'm thinking share holders loan and then just give him half the interest you pay. But there is no real answer until he tells us what the deal is. Either way there is no point to ever incorporating, since you will pay more tax than an employee. Sole proprietor would be the way to go, avoid the %15 corporate tax. The stupidity of this government is mind-boggling.

[ExtraSlow]

Maybe I should be happy my corporation doesn't make any money. :dunno::cry:

[TomcoPDR]

Purchase _________ inside your corp. enjoy it. life is short.

Pretty sure exotic cars won't work

[ercchry]

Pretty sure exotic cars won't work

Building relationships with high end clientele/marketing tool... dooooo it

[Sugarphreak]

...

[ercchry]

Shouldn't money already in your company already have had the corporate tax paid? Or is the government planning on taxing dividends harder or something else I am missing?

The proposed rules are completely fucking passive income... think it’s something like a 74% rate by the time you withdraw it?

[TYMSMNY]

Shouldn't money already in your company already have had the corporate tax paid? Or is the government planning on taxing dividends harder or something else I am missing?

Taxing money coming out of Inc. to personal account at "73%"

also to note. "Just FYI, the only way you can calculate a 73% tax rate is if you assume Ontario with 220K+ of income "

[rage2]

The proposed rules are completely fucking passive income... think it’s something like a 74% rate by the time you withdraw it?
It's well explained here:

http://business.financialpost.com/personal-finance/taxes/a-93-per-cent-tax-rate-private-corporation-tax-could-make-it-possible

[speedog]

So as someone said above, sole proprietor now? Write offs similar, more personal risk but less exposure to these possible new rules?

[Buster]

Canadians are an envious people. Like all socialist leaning people.

[Sugarphreak]

...

[rage2]

What the fuck!!!! This would totally screw me over
It only screws you over if you keep money in the corp to defer personal taxes, which I guess is what everyone does? haha

[That.Guy.S30]

It only screws you over if you keep money in the corp to defer personal taxes, which I guess is what everyone does? haha

Hahaha the banks are gonna have a shit show when corps start taking out all their money from the accounts.

[TomcoPDR]

It only screws you over if you keep money in the corp to defer personal taxes, which I guess is what everyone does? haha

I guess good things doesn't come to those who wait then. Should had blew my corporate savings on some fancy cars and high maintenance women :banghead: should had yolo'ed

[That.Guy.S30]

I guess good things doesn't come to those who wait then. Should had blew my corporate savings on some fancy cars and high maintenance women :banghead: should had yolo'ed

You still can! Write it off as dining and entertainment.

[phreezee]

Just watched the live voting for the motion to extend the consultation period. 89 for and 199 against. Trudeau was the first to stand up to vote against. Wanted to punch him in his smug face through the screen.

[TomcoPDR]

You still can! Write it off as dining and entertainment.

True, gf as salaried secretary? Guess till it doesn't make economical sense, then lay her off and she goes work for somebody else.

[HiTempguy1]

True, gf as salaried secretary? Guess till it doesn't make economical sense, then lay her off and she goes work for somebody else.

No, lay her off, then get her to collect EI

http://i0.kym-cdn.com/entries/icons/original/000/022/138/reece.JPG

[max_boost]

I guess good things doesn't come to those who wait then. Should had blew my corporate savings on some fancy cars and high maintenance women :banghead: should had yolo'ed

good things that come to those who wait are the leftovers by those who got there first.

with that said, can always yolo.

go spend some money, baller. :thumbsup:

[JudasJimmy]

What the fuck!!!! This would totally screw me over
It's only the income generated from that "extra money" is taxed at 74%. So if you have 100k in your company after you pay the corporate tax. Then pay yourself 50k, you pay personal tax on 50k you take out, same as everyone else. You then have 50k in the company not being used. You can't use that money for anything other than Company business, like payroll, office building etc. (completely normal). but... if you earn 2% interest on that money from the bank, Trudope wants %74 of the interest you get. He's calling that Passive income, and you're a tax cheat and dick head for screwing over the government. Everyone forgets that you already paid tax twice. Corporate on everything, and then again for personal if you ever want to use that money. Disclaimer... this is how I interpret it.

For all you Trudope supporters. this is not even as good as an RRSP that an employee gets. Small business isn't eligible for RRSP and still has to pay 15% corporate tax. Anyone who contributed to RRSP would also be a tax cheat and asshole. RRSP is %100 tax right off... I wish I was so lucky

[997TT]

it would be nice to pull everything out so you know what you are truly worth ... at least all of its in your name. But fk could you imagine the installment payments you'd have to make the following year...haha

[rage2]

it would be nice to pull everything out so you know what you are truly worth ... at least all of its in your name. But fk could you imagine the installment payments you'd have to make the following year...haha
About 6 years ago, I had a really good year, and they increased the shit out of my installment payments. Those payments don't go down even though your tax liability does. I still get nagged to pay the equivalent of a new Benz every quarter even though I'm nowhere near that today. You don't HAVE to pay what they suggest, they only charge interest on anything above and beyond your quarterly tax liabilities. They will call you and bitch at you regularly for not making those payments though. I'm used to explaining to the CRA agent that calls me monthly of the situation.

[Buster]

About 6 years ago, I had a really good year, and they increased the shit out of my installment payments. Those payments don't go down even though your tax liability does. I still get nagged to pay the equivalent of a new Benz every quarter even though I'm nowhere near that today. You don't HAVE to pay what they suggest, they only charge interest on anything above and beyond your quarterly tax liabilities. They will call you and bitch at you regularly for not making those payments though. I'm used to explaining to the CRA agent that calls me monthly of the situation.

I think you can formalize the lower amount with proper documentation, no?

[rage2]

I think you can formalize the lower amount with proper documentation, no?
Not that I'm aware of. Not to mention I haven't paid that much taxes in years should be documentation enough.

[suntan]

I don't even bother paying instalments. My penalty is around $100/yr.

[bigboom]

Weird, I had the same situation as you but since then the CRA has lowered my quarterly installments based on the last 2 years I believe.

[350zguy]

It looks like they are starting to backtrack a bit based on public pressure. I think this still has a long way to play out.

http://business.financialpost.com/news/economy/newsalert-liberals-to-trim-small-business-tax-rate-to-stanch-political-bleeding-2

[JustinL]

http://www.cbc.ca/news/canada/new-brunswick/bill-morneau-tax-changes-1.4359860

Looks like passive income is still sheltered to $50,000. It will be interesting to see the finer details of this. Are old investments grandfathered? Does this apply to capital gains?

[dirtsniffer]

http://www.cbc.ca/1.4359052

[JudasJimmy]

He probable should have just left it alone. 40 yrs of fine tuning, it was already fair for everyone. The money he has already spent on this would be more than enough to cover a few more donations.

But to be a little more fair, passive income should be allowed up to 80K (reasonable for retirement, also makes you ineligible for old age pension etc.). Everyone's RRSP contributions should be taxes at %15 (Same as small business). Now everyone is paying their fair share, except of course the rich and large corporations. Which Trudeau seems to be giving money to.

[blownz]

http://www.cbc.ca/news/canada/new-brunswick/bill-morneau-tax-changes-1.4359860

Looks like passive income is still sheltered to $50,000. It will be interesting to see the finer details of this. Are old investments grandfathered? Does this apply to capital gains?

Existing investments will be the big one. This still seems like it will be overly complex.


And I really wanted to smack the PM when he was constantly saying "I will answer, you get to talk to the PM, ask me the questions..." lol :facepalm:

[phreezee]

An important bit I got from this article : http://www.cbc.ca/news/politics/small-business-tax-changes-1.4359161


The changes will not be retroactive, as outlined in the original proposal, and they will not affect existing savings, nor the income from those savings, the official said.

[350zguy]

backpedaling furiously. I like it.

[Buster]

So the tax rate on the first $50M of passive income is going to be the lower rater, and then over $50M of income will engage the new rules? Am I reading that right?

[HiTempguy1]

What I want to know is how does this compare vs having a rrsp?

Sheltered tax growth for 30 years vs keeping money in my business for passive investments.

[blownz]

So the tax rate on the first $50M of passive income is going to be the lower rater, and then over $50M of income will engage the new rules? Am I reading that right?

I have read several articles that seem to have conflicting info. But I think it is the first $50,000 you make on passive income is taxed at the lower level and everything above that is at the higher level. So roughly $1M earning 5% is fine. But over that you are too rich and need to pay your fair share.

Note I am not 100% on that yet. Most of the reporters don't seem to know what they are saying lol

[TomcoPDR]

What I want to know is how does this compare vs having a rrsp?

Sheltered tax growth for 30 years vs keeping money in my business for passive investments.


Difference is how your money will get taxed when it's time to pull out after your 30-50 years worth of savings

[bh87]

He probable should have just left it alone. 40 yrs of fine tuning, it was already fair for everyone. The money he has already spent on this would be more than enough to cover a few more donations.

But to be a little more fair, passive income should be allowed up to 80K (reasonable for retirement, also makes you ineligible for old age pension etc.). Everyone's RRSP contributions should be taxes at %15 (Same as small business). Now everyone is paying their fair share, except of course the rich and large corporations. Which Trudeau seems to be giving money to.

This is probably more information than anyone cares to know about OAS but the current rules are: the income threshold before clawback for the 2016 tax year is $73,756. Any amount over this is subject to a 15% clawback (at $80k your monthly payment would be reduced by ~$78 or ~$936/year). The point where you would no longer receive an OAS payment (if you elect to receive at age 65) would be at $119,400 of gross income. You also have the option to split your pension income with a spouse to reduce your gross income to avoid the clawback (for now).


What I want to know is how does this compare vs having a rrsp?

Sheltered tax growth for 30 years vs keeping money in my business for passive investments.

Have you considered starting an IPP (Individual pension plan)? these are a great option for self employed individuals whom are ineligible for an RRSP account. Talk to an accountant or a financial planner as it operates in a similar fashion to an RSP (sheltered growth) and the contributions can be deductible from the company income if it is done properly. There is a cost to set up and administer the IPP, however the cost is offset by the sheltered growth. If this passive income law comes in to pay I would not at all be surprised if they wipe out the option to open new IPP plans as well.

[350zguy]

I have read several articles that seem to have conflicting info. But I think it is the first $50,000 you make on passive income is taxed at the lower level and everything above that is at the higher level. So roughly $1M earning 5% is fine. But over that you are too rich and need to pay your fair share.

Note I am not 100% on that yet. Most of the reporters don't seem to know what they are saying lol

If i had an annual income of $50K from passive income, i'd be laughing.

[suntan]

Met with our accountant on Thursday. As it stands now the wording is so all encompassing that even banking account interest is considered to be passive. Not a big deal for us as we only keep about $500K in there at any given time but for other companies with larger payrolls this is something they will need to keep an eye on.

Apparently they might even backtrack on income sprinkling to some extent.

There is also some thought that almost none of these measures will be made into even draft legislation because the bureaucrats are really struggling with appropriate wording.

[Xtrema]

Met with our accountant on Thursday. As it stands now the wording is so all encompassing that even banking account interest is considered to be passive. Not a big deal for us as we only keep about $500K in there at any given time but for other companies with larger payrolls this is something they will need to keep an eye on.

Apparently they might even backtrack on income sprinkling to some extent.

There is also some thought that almost none of these measures will be made into even draft legislation because the bureaucrats are really struggling with appropriate wording.

So after the apologetic tax cut. Are all these BS still going forward as planned or more back tracking so we just end up even less tax revenue than when this started?

I have to say, what a bunch of fucking idiots to stir this pot.

[suntan]

The small business tax rate cut makes them lose billions in revenue, so in the end they will make far less.

These measures were, best case, supposed to bring in about $250million in new revenue. It was more about "fairness" or some other bullshit.

[phreezee]

The Liberals have moved on to diabetics now. Yay, Trudeau.

https://globalnews.ca/news/3818585/liberal-tax-plan-hurts-diabetics-critics-say/

[HiTempguy1]

This is hilarious in showing how inept the liberals are. Way to completely cock it up :rofl: