Over the past few years there have been a few changes in the Canadian tax laws. Starting this year, though, there are several changes that will take place and affect mainly small businesses. If you own a small business or have employees working for you, it would be advisable to do a quick review of the changes to see how they can and will affect you and your business.

Small Business

For small businesses, the tax rate has been reduced from 10.5 percent to 10 percent in 2018 and will go from 10 percent to 9 in 2019. Starting 1 January, Ontario will also reduce their tax rates from 4.5 to 3.5 percent. For private companies that claim the small business on their deduction, some new boundaries have been set that reduce access to small businesses tax rates.

Private Corporation and Professionals Taxation

In 2017 the federal government was planning to focus on three main areas when taxing private corporations, which are income splitting, corporations earning passive income from investments, and conversion of income and dividends into capital gains. However, some of those plans include the restriction of withdrawing funds from a corporation as a taxable capital gain. For professionals such as lawyers, dentists, and accountants, they were originally allowed to value inventory as $0, meaning any costs that were contracted during the year were deductible. However, the new change requires professionals to value their inventory at fair market value and possibly the lower cost.

Voluntary Disclosure Process 

The new changes in the Voluntary Disclosure program affect how to report tax irregularities and how to avoid penalties; this program is now only available to corporations that make under $250 million. Now that CRA will also be provided more information, they will be able to review more information including the situation, only excluding the person’s identity before making a decision on whether or not they will provide the taxpayer with relief.

Other Changes

Starting 2017 the CRA employers could distribute T4’s to their active employees electronically without having to obtain consent from the employee. Also starting in 2017 eligible capital property can be included in the capital cost allowance system. This new law will mostly affect businesses that buy or sell goodwills.

All of these changes in Canadian taxes will begin to take place, at the latest, on January 1, 2018. For additional information on Canadian laws, regulations, and accounting, contact us today.