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Small Businesses

Small-Business Tax

We promised middle class Canadians that we would lower their taxes and make sure everyone pays their fair share.

Part and parcel to this, over the summer (2017) we consulted broadly about how we tax small businesses. We listened — to small business owners, professionals, and experts — and we have taken their feedback into account:

  • We are fulfilling our commitment to lower taxes on small businesses.

    We began as soon as we took office in 2015 by lowering the tax rate from 11% to 10.5% for January 2016.

    We are now following-through, lowering it further to 10% in January, 2018, and to 9% in January, 2019.

  • We are implimenting a simplified proposal to limit income sprinkling, while continuing to support owners who invest in their growth, create jobs, strengthen entrepreneurship and grow our economy.

  • We recognize the importance of maintaining family farms and businesses. Based on feedback we have heard, we will not be moving forward on any measures that could affect the transfer of a family business or farm to the next generation.

  • We are limiting the tax deferral opportunities related to corporate passive investment:

    • We estimate that there is between $200 and $300 billion in assets sitting in passive investment accounts — held by only 2% of private corporations — growing by $16 billion every year.

    • We are establishing a $50,000 threshold on corporate investment-income annually — equivalent to around $1M in invested retained-earnings — to still allow for enough flexibility so that small businesses can continue to save for new equipment, expansion, parental leave, or retirement. Passive income above this level, however, will not qualify for the small-business tax rate.