Personal Finance

Trudeau going after Personal Services Corps disguised as small businesses

  • Last Updated:
  • Dec 17th, 2017 10:14 am
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Jan 15, 2017
399 posts
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Operatime wrote:
Nov 27th, 2017 6:58 pm
I read they are planning for the income splitting rules to be effective January 1. The passive investment rules should come into effect with the next budget. Any other changes, they are planning to do more “consultation”, so no date is set.
@CFIB has some tweets out today on this.
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Oct 7, 2007
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treva84 wrote:
Nov 27th, 2017 7:19 pm
I'm meeting with my accountant tomorrow to discuss a special dividend this year, for money that would normally be paid out in 2018.
There are 2 taxation years to be considered here as follows:
1. Personal taxation - this is set in stone as the calendar year so the current one ends Dec 31st, 2017
2. Corporate taxation - this is customized for each corporation

My question is if it has been established when the new rules apply to corporations? For example, if a company's year end is June 30th, then paying dividends out in December 2017 vs. January 2018 will have the same effect on the corporation under these new rules, no?
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Feb 29, 2008
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choclover wrote:
Nov 29th, 2017 10:53 am
There are 2 taxation years to be considered here as follows:
1. Personal taxation - this is set in stone as the calendar year so the current one ends Dec 31st, 2017
2. Corporate taxation - this is customized for each corporation

My question is if it has been established when the new rules apply to corporations? For example, if a company's year end is June 30th, then paying dividends out in December 2017 vs. January 2018 will have the same effect on the corporation under these new rules, no?
You could technically issue a dividend until the 30th, and back date it before december DEc 31st in your minutes. You would then need to issue an amended 2017 t5 to account for the extra revenue.

Not sure how kosher it is, as my account prefers I pay all my dividends before the end of the calendar year.
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Nov 9, 2013
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mr_raider wrote:
Nov 29th, 2017 1:04 pm
You could technically issue a dividend until the 30th, and back date it before december DEc 31st in your minutes. You would then need to issue an amended 2017 t5 to account for the extra revenue.

Not sure how kosher it is, as my account prefers I pay all my dividends before the end of the calendar year.
So based on my meeting yesterday I can declare a dividend for my wife in 2017, pay the 2017 tax, but the dividend doesn't have to be paid out until later. Thus my plan is to declare two years worth of dividends and she'll pay the personal tax on her 2017 taxes but then we'll pay the dividend out in 2018 and 2019.
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May 22, 2003
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So if the new proposals on passive income is introduced in the 2018 budget, anybody know when the rules would take in effect? Retroactive to January 2018, immediately, or in 2019?
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Feb 29, 2008
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treva84 wrote:
Nov 29th, 2017 1:26 pm
So based on my meeting yesterday I can declare a dividend for my wife in 2017, pay the 2017 tax, but the dividend doesn't have to be paid out until later. Thus my plan is to declare two years worth of dividends and she'll pay the personal tax on her 2017 taxes but then we'll pay the dividend out in 2018 and 2019.
I doubt you could pay it out in 2019. That seems fishy. Check with a pro on this.
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Oct 7, 2007
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Is there even a chance that with all of the scandal etc. right now surrounding the PM and the FM that this gets delayed until after the next election? Wishful thinking on my part I know. But there was so much pushback on this.
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May 22, 2003
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mr_raider wrote:
Nov 30th, 2017 9:49 pm
That's some depressing crap.
No kidding, if I could turn back time I would have stayed in my government job
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Oct 7, 2007
3164 posts
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I am really glad that the non-LIberal members of parliament are not letting this go and have been following this with interest almost daily.

Here is a must read and there are two great video clips embedded in the news story that should be viewed also:

https://globalnews.ca/news/3889576/bill ... gains-tax/

Is this all just a coincidence???
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Jan 18, 2017
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mr_raider wrote:
Nov 29th, 2017 4:17 pm
I doubt you could pay it out in 2019. That seems fishy. Check with a pro on this.
There's a big difference between when the dividend is "declared" vs. when the actual cash is paid out. Pro Tip: You technically don't even have to pay the cash out. The mechanics are simple:

December 31, 2017:
Dr. Dividends Declared............. $100,000.00
Cr. Shareholder Loan................($100,000.00)

Sometime in 2018:
Dr. SH loan................................... $50,000.00
Cr. Cash........................................($50,000.00)

Sometime in 2019:
Dr. SH loan................................... $50,000.00
Cr. Cash........................................($50,000.00)

The thing to remember is that for tax purposes, the $100,000 dividend is treated as declared (ie. paid out) in the 2017 calendar year, and the shareholder will include the $100,000 in his personal income for the 2017 personal tax year via a 2017 T5 slip.

As for when the actual cash is received by the shareholder, it doesn't matter. I have clients where they don't even bother to take cash out of the corp - They just continually build up their Shareholder Loan account.
______
Canadian & US tax guy
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Feb 29, 2008
16741 posts
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Montreal
crossborderguy wrote:
Dec 1st, 2017 12:07 pm
There's a big difference between when the dividend is "declared" vs. when the actual cash is paid out. Pro Tip: You technically don't even have to pay the cash out. The mechanics are simple:

December 31, 2017:
Dr. Dividends Declared............. $100,000.00
Cr. Shareholder Loan................($100,000.00)

Sometime in 2018:
Dr. SH loan................................... $50,000.00
Cr. Cash........................................($50,000.00)

Sometime in 2019:
Dr. SH loan................................... $50,000.00
Cr. Cash........................................($50,000.00)

The thing to remember is that for tax purposes, the $100,000 dividend is treated as declared (ie. paid out) in the 2017 calendar year, and the shareholder will include the $100,000 in his personal income for the 2017 personal tax year via a 2017 T5 slip.

As for when the actual cash is received by the shareholder, it doesn't matter. I have clients where they don't even bother to take cash out of the corp - They just continually build up their Shareholder Loan account.
Got it.

The risk here is you don't want to over pay yourself in 2017 otehrwise you don't want to blow up your 2017 tax bill too much either. Plus I don't see this as practical for more than one or two years out.

What's the functional difference between doing this and just paying out the dividend, taking the cash and stuffing it in a savings account until you use it?

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