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What’s New In Tax? Part 2

Brian Quinlan is a contributing editor for the Canadian MoneySaver. Learn more on “What’s New In Tax?” in the article he wrote for the January 2024 edition.

Businesses

  • Employee ownership trusts (EOTs) / business succession.  Beginning in 2024, current owners of a Canadian controlled private corporation can sell a controlling interest to a trust where the employees are the trust beneficiaries.  The trust funds the purchase of with dividends or loans from the corporation.  Annual profits of the corporation are paid to the trust as dividends.  The employees receive taxable distributions from the trust.

    The sale price for the current owners is set at the market value.  This will trigger a capital gain and a personal tax liability for the current owners.  The tax liability can be reduced where the selling owners can make use of the capital gains exemption.  (The exemption amount in 2023 was $971,190.)  It is also possible to spread the tax liability over ten years.  In addition, the November 2023 federal economic statement noted the government is planning on a capital gain exemption of up to $10,000,000 when a sale is made to an EOT.  This will be subject to conditions – full details still to come.
  • Canada Emergency Business Account.  The CEBA was an interest-free loan of up to $60,000 from the federal government to assist with business expenses during COVID.  When the loan is repaid by January 18, 2024, up to a maximum of $20,000 is forgiven.  (The forgiven portion is taxable.)  Where the loan is not repaid by January 18, 2024, it becomes a 5% interest bearing loan due December 31, 2026.

Other

  • Tax reporting by trusts.  Beginning with December 31, 2023 trust tax returns, trusts are required to disclose details of its beneficiaries, trustees and settlors on the trust tax return.  As a result of the enhanced reporting rules, some trusts will be required to file a tax return when there was no previous requirement to do so.  You can also read more in our blog post on November 30, 2023.
  • Share buybacks.  In 2024, public companies face a 2% tax on share buybacks.
  • Charity disbursement quota.  Prior to 2023, the minimum a charity must spend out of its capital was 3.5%. The quota increased to 5% on January 1, 2023 on capital in excess of $1,000,000.  The rate remains at 3.5% for the first $1,000,000 of the charity’s capital.

Source: https://www.canadianmoneysaver.ca/authors/brian-quinlan