Personal Finance

Trudeau going after Personal Services Corps disguised as small businesses

  • Last Updated:
  • Aug 24th, 2018 11:56 am
Deal Addict
Nov 9, 2013
2351 posts
995 upvotes
Edmonton, AB
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.
Deal Addict
May 22, 2003
2812 posts
1225 upvotes
Vancouver
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?
Deal Expert
Feb 29, 2008
19530 posts
2151 upvotes
Montreal
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.
Deal Addict
Oct 7, 2007
3831 posts
1132 upvotes
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.
Deal Addict
May 22, 2003
2812 posts
1225 upvotes
Vancouver
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
Deal Addict
Oct 7, 2007
3831 posts
1132 upvotes
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???
Newbie
Jan 18, 2017
77 posts
50 upvotes
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
Deal Expert
Feb 29, 2008
19530 posts
2151 upvotes
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?
Deal Addict
May 22, 2003
2812 posts
1225 upvotes
Vancouver
Will obviously wait for the 2018 budget before making any major moves, but I've already switched most of my index funds into swap-based ETFs. HXS, HXT, HBB were already core holdings, but i've switched my international index fund to HXDM (a new international swap-based ETF). Going forward, I will probably hold most ofmy dividend-paying stocks in my registered personal accounts, and will hold mainly stocks with no distributions (e.g. BRK.B) in corporate investing account. I may draw a little more salary to max out my RRSP/TFSAs. So I'm thinking overall I might actually pay less taxes, so technically these new rules may not impact me as much, but the extra administrative work will not be welcome.

I suspect that similar to how the increase in personal taxes led to a decrease in tax revenue, these new tax proposals will not bring in nearly as much revenue as the government is forecasting. But will cause much unnecessary headache for many of us. As described in my previous post, the number crunching shows that even with the "favorable" tax treatment for corporations/ccpc, we may actually be financially disadvantaged compared to salaried employees. Hopefully there will be further changes prior to the budget being introduced.
Sr. Member
Apr 14, 2015
532 posts
145 upvotes
Tsuu T'Ina, AB
Well, now the calls are coming for Morneau to resign. He won’t, but the knowledge that none of this sketchiness would have come to light if he hadn’t gone after business owners is starting to feel a bit schadenfreude.
Deal Fanatic
Feb 9, 2009
6369 posts
3540 upvotes
Operatime wrote:
Dec 1st, 2017 8:44 pm
Well, now the calls are coming for Morneau to resign. He won’t, but the knowledge that none of this sketchiness would have come to light if he hadn’t gone after business owners is starting to feel a bit schadenfreude.
The pressure will continue -- i think eventually if this stays a story Trudeau will have to kick him out if it will effective his campaign - you can bet the other parties will be targeting Morneau in 2019 if he stays...
Deal Addict
Oct 7, 2007
3831 posts
1132 upvotes
Morneau's body language when asked about his personal affairs related to these issues does not make him look good. And, at the same time, he does not provide any credible explanation for the sequence of events but instead hides behind holding information back and making statements irrelevant to the situation at hand (e.g. ...We were elected by Canadians who want blah blah blah...). I am pretty sure Canadians also expected honest and sincere governing by our leaders. Please set the right example and if it means stepping down better to do it with grace than in a humiliating manner.
Deal Addict
May 22, 2003
2812 posts
1225 upvotes
Vancouver
Too bad election is not next year, my greatest fear is all this dies down by 2019 and people forget.

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