Bill C-208: Tax Changes for Intergenerational Business Transfers

Azi Nasseri
| 8/18/2021

New legislation provides favourable tax treatment for intergenerational transfers of family businesses


Bill C-208 received Royal Assent on June 29, 2021, and its legislative changes are intended to provide more favourable tax treatment for intergenerational transfers of eligible family businesses.

Bill C-208: Tax Changes for Intergenerational Business Transfers

Transferring your family business to the next generation

The amendments to the Income Tax Act that are provided by Bill C-208 should facilitate intergenerational transfers of certain shares of corporations by not having an anti-surplus stripping rule (see below) apply if the following criteria are met:

  • The shares being transferred are qualified small business corporation shares or shares of the capital stock of a family farm or fishing corporation.
  • The corporation purchasing the shares is controlled by one or more children or grandchildren of the vendor who are at least 18 years of age.
  • The purchasing corporation holds the acquired shares for a period of at least 60 months after the date of purchase.

Under these new rules, the taxpayer would need to provide CRA with an independent assessment regarding the fair market value of the shares, along with an affidavit signed by the taxpayer and by a third party attesting to the disposal of the shares.

Furthermore, access to the lifetime capital gains exemption will be affected by the taxable capital employed in Canada by the corporation being sold. If the taxable capital employed in Canada exceeds $10 million, the individual’s access to the capital gain exemption is reduced, and fully denied when the taxable capital employed is $15 million or more.

If not for the changes set out in Bill C-208, an anti-surplus striping rule could apply to an intergenerational transfer of shares of a corporation to another family-owned corporation. Essentially, this rule would treat a capital gain as a dividend which effectively prevents access to lifetime capital gains exemption and applies the dividend tax rates instead of capital gains tax rates.

Business restructuring involving siblings

Business restructuring involving siblings

Bill C-208 also introduces measures to assist with the restructuring of family businesses involving siblings.

Under the existing law, tax-free inter-corporate dividends that would occur as part of a divisive corporate reorganization are recharacterized as capital gains in certain circumstances. There are exclusions to this rule with regards to certain related party transactions. However, siblings are not considered related under these rules, thus requiring the use of somewhat complex and costly transactions when they are involved in certain reorganizations of family-owned companies.

Bill C-208 allows siblings to be treated as related parties for the purposes of these rules where the corporation(s) involved in the reorganization are those whose shares would be qualified small business corporation shares or shares of a family farm or fishing corporation. As such, this change should result in less complex transactions being required when siblings are involved in family business reorganizations.

Next steps

Bill C-208 is a start in addressing the issues faced by farmers, fishermen, and business owners who would like to sell their family business to their children or grandchildren. However, it is expected that there will be revisions to the new legislation in the coming months. Once these revisions have been completed, the Government will publish final legislative proposals which would apply as of the later of November 1, 2021 or the date of publication of the final draft legislation.

Crowe MacKay will continue to monitor the legislation and provide updates as they become available. If you own a business and are considering a transition to your children or grandchildren, you should contact Crowe MacKay to see if these new rules might apply to you.


This article has been published for general information. You should always contact your trusted advisor for specific guidance pertaining to your individual tax needs. This publication is not a substitute for obtaining personalized advice.

If you are looking for Tax Services, Crowe MacKay provides personalized support. Our tax professionals will help you maximize tax-planning opportunities and ensure the minimum amount required by law is paid.

Azi Nasseri has 10 years of experience in public practice. Currently, she is completing the Chartered Professional Accountants of Canada’s In-Depth Tax Program. In addition to her professional practice, Azi also dedicates time to teaching corporate and personal tax courses at MacEwan University.
Azi Nasseri
Azi Nasseri
Manager, Tax

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