All About Estates

The Senate Strikes Back?

The latest chapter in the ongoing saga of the federal government’s reforms to the taxation of private companies was released on December 13, 2017.

On that date, the Minister of Finance released the draft legislation and explanatory notes for the revised version of the “income sprinkling” or “TOSI” (tax on split income) rules that were first released on July 18, 2017. The release also includes a guidance document that is intended to provide context and examples of how the Canada Revenue Agency will apply the new rules. The revised TOSI rules have been simplified in comparison to the original version, but they remain complex. However, the focus this blog is not the rules themselves, but a concurrent development from the Senate.

As a result of the strong public reaction to the original July 18, 2017 proposals relating to private corporations, the Senate authorized the Standing Senate Committee on National Finance to study the proposed changes. The Standing Committee conduced meetings across Canada, hearing witnesses and receiving written submissions. Earlier this month, the Standing Committee released its report, Fair, Simple and Competitive Taxation: The Way Forward for Canada.

The report makes three recommendations (p. 9):

  1. That the Minister of Finance withdraw all of the proposed changes to the Income Tax Act relating to Canadian-controlled private corporations;
  2. That the government undertake an independent and comprehensive review of the tax system. The goal of the review would be to reduce complexity, ensure competiveness, and enhance “overall fairness”; and
  3. If the Minister of Finance moves forward with any of the proposed changes, their implementation should be delayed until at least January 1, 2019, and in the interim the government should:
    1. release draft legislation and guidance documents;
    2. undertake thorough consultations across Canada;
    3. release an economic impact assessment of the proposals;
    4. conduct a gender analysis of the proposals; and
    5. assess the potential impact on the accessibility of healthcare across Canada.

The December 13, 2017 release from the Minister of Finance does contain a guidance document for the new TOSI rules, but their implementation has not been delayed. The new rules are to be effective January 1, 2018. The government and the Standing Committee clearly have widely divergent views on the new rules. It will be interesting to see how events unfold when Parliament returns in the New Year and the legislation is formally introduced.

Happy New Year to everyone!

About Darren Lund
Darren Lund is a member of the Trust, Wills, Estates and Charities at Fasken, Toronto office. Darren has expertise in a broad range of estate planning matters, including multiple wills, inter vivos trusts, disability planning, estate freezing, and planning for beneficiaries and assets outside Canada. Darren advises trustees and beneficiaries on all aspects of estate administration, both contentious and non-contentious, and his experience includes passing of fiduciary accounts, trust variations, post-mortem tax planning, and administering the Canadian estates of non-residents. He also speaks and writes on a variety of related topics such as estate planning for spouses and couples, inheriting overseas property and estate planning for persons with disabilities. He previously practised estates law at a large national law firm. Email: dlund@fasken.com

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