On December 13, 2017, the Department of Finance released revised draft legislation addressing the tax on split income (TOSI) rules previously released on July 18, 2017. The changes to the TOSI rules remain one of the July 18th measures the Department of Finance will be moving forward with. Under the current TOSI legislation, dividends and other forms of passive income paid to minors are subject to taxation at the top rate.
Effective January 1, 2018, the proposed TOSI rules will apply to any dividends received by a specified individual on shares of a corporation (other than shares of a publicly traded corporation) with the following exceptions:
Individuals who earn income not covered by the exceptions mentioned above will be subject to the new proposed income splitting rules on amounts derived to the extent that the amounts exceed a “reasonable return”. The CRA will apply a reasonableness test which has not yet been clearly defined. This test will take into consideration the relative contributions made to the business by the individual and the persons related to him or her.
For assistance navigating these proposed rules, please contact your Crowe BGK trusted advisor.
About the Authors:
Jennifer Warner, LL.B., LL.M Tax, is a Tax Manager at Crowe BGK.
Connect with her: firstname.lastname@example.org
Hugo Chalifour, CPA, CA., is a Tax Specialist at Crowe BGK
Connect with him: email@example.com