An article by PPI’s Planning Services team, a group of lawyers, accountants and actuaries who provide tax and estate planning support to Advisors affiliated with PPI.
The taxation of intergenerational transfers in Canada has been in the news over the last several years. A private members’ Bill, Bill C-208, proposed changes to section 84.1 of the Income Tax Act to exempt certain intergenerational transfers from this anti-avoidance provision (the anti-avoidance rule is intended to prevent stripping surplus out of a corporation as a tax-free return of capital rather than a taxable dividend). The changes proposed in Bill C-208 became law in June 2021 but the Department of Finance had concerns that the rules were too broad and might result in abuse. The Department of Finance announced revisions to the rules in the 2023 Federal Budget, which are more restrictive than the original proposals in Bill C-208 and are contained in the draft legislation of August 4, 2023. The revised rules come into effect on January 1, 2024, so there is a shrinking planning window for those cases in which it may make sense to apply the existing rules.*
Before we discuss the planning options in this changing landscape, let’s review why Bill C-208 was considered necessary. Continue reading “Transferring the Family Business – The Landscape is Changing”