Ouch... Corporations deemed PSB's - tax hike...

[AndyL]

http://blog.bennettjones.com/blog/20...her-tax-rates/

First 2 paragraphs:

The Canadian Government has introduced new tax rules which may subject corporate contractors to a 13% increase in the rate of income tax payable. These rules received Royal Assent on June 26, 2013 and are effective for all tax years beginning after October 31, 2011.

The increased tax rate will apply to all income earned by a corporate contractor which is income from a “personal services business” or “PSB” (within the meaning of the Income Tax Act (Canada) (ITA)). Given the draconian impact of the proposals, it is advisable for all corporate contractors to review whether the corporation is carrying on a personal services business and, if so, to evaluate the impact of the tax rate increase in determining how to structure the corporation’s affairs.

[Xtrema]

Wow, are they really sure 13% jump or 13% of 25% which means 28%?

Or did the government finally get wise about self employment?

Edit: yeah I'm right, change from 25 to 28%. Blog's table is wrong.

http://www.collinsbarrow.com/en/cbn/...ax-legislation

[CompletelyNumb]

Some people are going to be getting some hefty bills from the CRA if they get audited. 13% raise in taxes is huge.

Too bad, was a nice tax loophole for many years

[AndyL]

CRA's been doing a lot of investigating on this (at least in my industry) in the past year...

Contractors want exclusivity clauses in their subcontract agreements... And wcb coverage (can't really get that as a sole proprietorship) - thus you've just ensured you meet PSB criteria...

I see a lot of people getting some big bills...

[revelations]

Has the PSB "test" been changed at all?

[Sugarphreak]

...

[ZenOps]

Bah, they should just print more money.

Now that the loonies and toonies are iron, it shouldn't be a problem. Cotton @ $1,700 per ton and iron at $130 per ton means that the new coins are significantly cheaper than the old style bills.

Its funny how anything having to do with taxes requires Royal Assent. Queen needs more pennies and nickels I guess.

That tells you where the real power is.

[heavyfuel]

Originally posted by AndyL
CRA's been doing a lot of investigating on this (at least in my industry) in the past year...

Contractors want exclusivity clauses in their subcontract agreements... And wcb coverage (can't really get that as a sole proprietorship) - thus you've just ensured you meet PSB criteria...

I see a lot of people getting some big bills...

I don't know where the hell you get that info from, because I'm a sole prop. and I am fully covered by WCB.

[AndyL]

Thats true, but most of us who subcontract without employees and need wcb, get told we have to incorporate to get coverage.

[r3ccOs]

yikes... I subcontracted for about 3 months, and I was really impressed with the fact that I was not subjected to corporate income tax, but rather just the 14% small business rate (both fed/prov combined).. when you widthdraw as dividands, I think my total income tax on that period of time was roughly 28% combined as dividand income.

Add in deductions... though really I only had one client, and you see the benefits fast.

that being said, I admit, this was dishonest and apparently there are some blurred lines around what type of revenue constitutes a small business, as my tax accountant said he had one client making in the excess of 1.5mil and still used the same small business rate.

Why I mean dishonest is, the small business incorporation is not ment to be used the way corporations skirt hiring FTE's they way they have.

As it benefits both parties, more and more people are liking the tax benefits over PTO and health benefits (well I did too) that they usually will perpetuate these long term contracts.

If an employer is contracting an employee over a year, and is not allocated to a capital project, but SG&A... well they should technically be an employee