Insights

The practice of law is changing every day, and the effect of changing legislation on businesses is significant. We write about recent developments in the world of tax & business law, keeping a watchful eye on the changing landscape for our clients. See what we’re thinking about, and what your business should be looking out for.

Tax Law

2018 Federal Budget: What Private Companies Need to Know

Click here to view in PDF. Introduction On February 27, 2018 the Department of Finance (“Finance”) released its 2018 federal budget (the “Budget”). Given the climate surrounding private companies, this Budget in particular was eagerly awaited by owner managers and tax advisors. While the Budget contains many items of interest for large private companies and high net-worth individuals with corporate-held investments, it is not as punitive as some have feared. Specifically, Finance proposed rules affecting private corporations that hold investments generating passive income. These rules appear to be less harmful and are narrower than the approaches that were outlined in...

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Tax Law

Will the Senate stop Liberals’ tax changes?

Click here to view in PDF. On December 13, 2017 the Standing Senate Committee on National Finance released its report on the July 2017 tax proposals announced by the Liberal government. Over eight weeks, the Senate committee heard from 138 witnesses and received 32 written briefs. The evidence heard by the committee identified several significant problems created by the July tax proposals. Witnesses condemned the complexity, ambiguity and uncertainty introduced by these proposals. Witnesses also condemned the unintended negative impact the proposals will have on Canada’s economy.  One witness testified that “these proposed tax changes are a disaster. They will...

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Tax Law

Private Companies & Hybrid Transactions

Click here to view in PDF. property (ECP) regime have been exaggerated. Vendors and arm’s length purchasers can continue to receive favourable tax treatment from hybrid sales, provided the vendor has sufficient cash or basis in the assets being sold. The Asset/Share Sale Structure When a vendor is selling his or her business, the vendor will often prefer a share sale, to make use of his or her capital gains exemption. Purchasers, on the other hand, often prefer asset sales, to reduce exposure to historical creditors and to increase the tax basis in the purchased assets. This gap can be...

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Tax Law

Taxation Changes of Employee Stock Options

In his fiscal update of November 20, Finance Minister Bill Morneau clarified that these changes to the tax treatment of employee stock options will be grandfathered in and will only effect options issued after the date of the change.  “Any stock options that have been issued prior to that date will be under that taxation regime that was in effect prior to that date,” said Morneau. In the short term, employers should consider issuing any employee stock options prior to the changes being made. However, employers may wish to begin re-evaluating their long-term incentive plans to ensure employee compensation is...

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Tax Law

The Taxation of Employee Stock Options

Employers offer a variety of different forms of stock incentive compensation.  An understanding of the relevant tax rules is essential in designing incentive plans that meet the needs of both employer and employee. This article will consider the most common type of incentive plan – employee stock options. Employee stock options are popular because they meet a number of business objectives. In particular, they help employers to recruit, retain and motivate employees, without impacting cash flow. Most of the tax rules governing employee stock options are found in section 7 of the Income Tax Act. A stock option is defined...

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Tax Law

Rule Changes Target Personal Service Businesses

If you provide services through a corporation, or employ such persons, you should be aware that recent legislative changes have dramatically increased the tax risks of such arrangements. According to these legislative changes, the tax payable by Personal Services Businesses (PSB) has been significantly increased. In addition to losing the ability to deduct most business expenses, if a worker’s corporation is considered to be a PSB, then the corporate tax rate will increase from 14% to 38%. A PSB is defined in the Income Tax Act to include a business carried on by a corporation through which services are provided by an...

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