skip to main content




Back to all publications
Oct 19, 2017

Finance Minister Bill Morneau Clarifies Intended Scope of Proposed Tax Regime on Passive Investment Income Earned by Private Corporations

On Wednesday, October 18, 2017, Minister of Finance Bill Morneau clarified some aspects of the Department of Finance’s proposed measures to tax investment income earned by private corporations (the “Passive Income Proposal”). The Passive Income Proposal was announced in the July 18, 2017 consultation paper released by the Department of Finance (the “Consultation Paper”) which introduced sweeping changes to the taxation of private corporations and their shareholders in Canada.

The Minister clarified that:

  • the new rules will not apply to existing savings and income from those savings; and
  • the existing rules will apply on investment income earned from new savings up to a maximum of $50,000 of passive income in a year (equivalent to $1 million in savings, based on a nominal 5% rate of return). This will permit up to $100,000 of capital gains from new savings in a year to be taxed under existing rules. To the extent investment income from new investments exceeds $50,000 in a year, the new punitive tax rates will apply.

Additional clarifications and details in respect of other proposals contained in the Consultation Paper are expected to be announced later this week. While an expected introduction date for legislation pertaining to the Passive Income Proposal has not been announced, the government has indicated that it will move forward with measures to limit tax deferral opportunities related to passive investments. It has also indicated that it will release draft legislation as part of Budget 2018 and that any proposals will apply on a go-forward basis. The scope of any grandfathering rule also remains to be seen.

If you or your family holds income-producing assets in a Canadian corporation, we encourage you to contact a member of the Aird & Berlis Tax Group for more details.

Areas of Expertise

Related Publications

Publications Article
What American Employers Should Know About Canadian Employment Law By Fiona Brown and Michael F. Horvat Aug 19, 2019 For American companies, expanding operations into Canada often makes good business sense. Our similar professional cultures make doing business together easy, and our economic ties make it almost inevitable. However, employers who take the countries’ similarities for granted put themselves in a p...
Publications Article
OHS Due Diligence: If There Isn’t a Record, Did It Even Happen? By David S. Reiter Aug 19, 2019 Much has been, and continues to be, written about the corporate due diligence defence in Occupational Health and Safety Act prosecutions. Scores, if not hundreds, of articles have been written both about what it means and how courts will assess due diligence once it has been raised.
Publications Article
Ontario Court of Appeal Provides Guidance on Vesting Orders in Receivership – and Beyond By Kathryn Esaw and Miranda Spence Jul 17, 2019 Vesting orders have become one of the most powerful tools in an insolvency professional’s toolkit, providing a purchaser with the comfort that the encumbrances contributing to the debtor’s financial difficulties cannot follow to the new owner. In light of their importance, Canadian insolvency and...