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New Tax Rules for Small Businesses in Canada (2018)

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Do you own an incorporated small business? This video will reveal the new changes made to small business taxation, which you should be aware of. 0:44 – 1. Increase in Dividend Tax 2:13 – 2. Family Trusts 4:04 – 3. Tax on Investment Income Visit our website for more information and tax-related advice: http://madanca.com Follow us on social media Twitter: https://twitter.com/Madan_CA Facebook: https://www.facebook.com/MadanCharter... Instagram: https://www.instagram.com/madanaccoun... Google+: https://plus.google.com/1085518694535... Download any of our free eBooks available on our website: http://madanca.com/free-tax-secrets/ (Including Tax Tips for Canadians, Personal Tax Planning Guide for Canadians: 2014 Edition and 20 Tax Secrets for Canadians) Disclaimer: The information provided in this video is intended to provide general information. The information does not take into account your personal situation and is not intended to be used without consultation from accounting and financial professionals. All figures and dollar amounts are used for example purposes only. Allan Madan and Madan Chartered Accountant will not be held liable for any problems that arise from the usage of the information provided in this video.
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Text Comments (98)
Christian Giovannoni (2 days ago)
Great Videos Allan, very informative.
Janice Zhang (16 days ago)
Your videos are great. Would you be able to do some on tax suggestions to professional corporation?
Allan Madan (15 days ago)
Hi Janice, thank you for your kind feedback. I will do my best to make such a video.
D Victor (1 month ago)
D Victor (1 month ago)
Somina (1 month ago)
Many thanks, I been tryin to find out about "is rental income active or passive income" for a while now, and I think this has helped. Have you heard people talk about - Qonmily Passive Formality - (do a search on google ) ? Ive heard some super things about it and my m8 got amazing results with it.
Gurpal (1 month ago)
Hi Allan Madan, great video! just curious what is the best year end to set when you first incorporate your canadian business for tax reasons, is earlier in the year better than later on in the year? Thanks!
Allan Madan (1 month ago)
Hi Gurpal, July 31 is a good date to set the company's year end. This is because you and your company can take advantage of a bonus deferral strategy with a July 31 year end. For example, assume that your company declares a bonus as of its July 31 year end in the amount of $100,000. The bonus declared is tax deductible to the company even though the bonus has not yet been paid. And, you do not have to include the bonus in your income until 6 months later (January 2019), at which point the bonus has to be paid.
Andy Kang (2 months ago)
Thank you for providing great informative contents!! I am a Canadian citizen living in Canada now. I am going to set up a small size of medical travel agency company in Estonia and to move to South Korea to reside and business. In my case, how should I pay myself? Would it be better to set up another company in South Korea or Canada? Guys! any comments?
Allan Madan (2 months ago)
Hi Andy, I recommend that you incorporate the business in the country where the physical operations are.
Magic Leoning (3 months ago)
Damn, it shocks me that the general population isn't being told this by our government. It almost seems like the common minded hard working Canadians need to go to parliament hill and drag trudeau and his shit government out to the street where they belong.
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Charles Winksy (4 months ago)
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Chander B (4 months ago)
Dividend is no-taxable if its below $40,000 - Is this still applicable ? or are their any conditions , like this should be the only income etc., Thanks
dougat (4 months ago)
Good, let the filthy wealthy finally pay up.
STOP THE PAIN (4 months ago)
How can small business owners form an association to deal with this unscrupulous tax changes? Big corporation can get away using KPMG!!! Watch the youtube videos to find out for yourselves.
Ambassador of Truth (5 months ago)
Just when I think I can’t possibly hate Trudeau more than I already do.
Rear News (5 months ago)
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Breanna K (6 months ago)
What does an INC company mean? I run a dayhome from my home, does this apply to me??
Breanna K (6 months ago)
Thanks you :)
Allan Madan (6 months ago)
Hi Breanna, if your company name has an "INC" at the end of it, then it is an incorporated company.
Curtis (7 months ago)
If Trudeau ever wants to balance the budget, taxing us into poverty is his only way. But it's not a success story, its a colossal failure! “I contend that for a nation to try to tax itself into prosperity is like a man standing in a bucket and trying to lift himself up by the handle.” ― Winston S. Churchill
NIX (7 months ago)
What the hell? Are we working for a negative amount of money?
Allan Madan (7 months ago)
I'm equally upset with these changes. It's an unfair tax grab by the Liberal government, and a gross attack on small business owners.
Jerry Montgomery (7 months ago)
If I voluteer for my incorporated business, can my business pay me bonuses...and if so am I taxed on those bonuses?
Allan Madan (7 months ago)
Hi Jerry, bonuses can be paid to employees of a corporation, and not volunteers. Bonus are taxable to the recipient in the year payment is received.
Fornotagainst (7 months ago)
Hey Allan, thanks for the video. Really appreciate the value you're providing
Allan Madan (7 months ago)
Thank you!
mrsbenn1 (7 months ago)
Why even have taxes?   Don't you know ... "the budget will balance itself" .... so we've been told.     ☺  ☺  ☺
Allan Madan (7 months ago)
I wish that were true :)
Kirk Delorme (7 months ago)
Just stumbled on these videos and I cant stop watching. The simplified talk and examples easy to understand are perfect. Keep it up Allan!
Allan Madan (7 months ago)
Thank you for the positive feedback. I appreciate it.
Iconik Collective (7 months ago)
fuck this shit im moving to the USA atleast trump is lowering taxes instead of our Trudeau
RexBot (8 months ago)
Nice channel!
Allan Madan (7 months ago)
Thank you.
Justyburger (8 months ago)
What actually is the point of working? You are just a slave.
Hawk 1490 (8 months ago)
How about Canadians stop being so spineless pick up a gun and start a bloody revolution
Scott MacNevin (8 months ago)
Great video - thanks! (One small error - personal cash remaining + total tax paid total $1100, not $1,000)
Allan Madan (8 months ago)
Thank you for the feedback :)
Ty Kellerman (9 months ago)
Thank the idiots that voted him in
D Victor (1 month ago)
Somina (1 month ago)
Many thanks, I been tryin to find out about "is rental income active or passive income" for a while now, and I think this has helped. Have you heard people talk about - Qonmily Passive Formality - (do a search on google ) ? Ive heard some super things about it and my m8 got amazing results with it.
Hungry4 Fortnite Clips (1 month ago)
Ty Kellerman vote? I don't think you understand how the world really works😂
2008koss (9 months ago)
subscribed, very well explained !
Allan Madan (9 months ago)
Thank you
Takashi (9 months ago)
Insane... especially the last one to tax on investment income.... 77% is ridiculous ur getting tax double in corporate and personal.
Allan Madan (9 months ago)
Hi Takashi, I agree. It’s very bad for Canada and both employees and business owners.
Azizali Faizullah (9 months ago)
Any further updates on New Tax rules for small business. I understand the laws are being watered down a little. Appreciate your usual great replies
Allan Madan (9 months ago)
Thank you
Azizali Faizullah (9 months ago)
Thanks Looking forward to your webinar
Allan Madan (9 months ago)
I will be hosting a webinar soon about the new changes recently announced. The biggest changes are: - Applying the new tax rate on passive investment income in excess of $50,000 earned by Canadian controlled private corporations. Income below $50,000 will not be affected. - Grandfathering existing passive investments held by Canadian Controlled Private Corporations from the new tax increase on passive investment income - Scrapping the proposed rule to re-characterize capital gains to dividend income when selling a family business to family members
Prince Ali (10 months ago)
Yes but there are tax credits to combat the amount of corporate taxes paid initially for the shareholder so that they are not taxed twice. It’s called federal dividend tax credit. Also the dividends are grossed up to a percentage that exceeds the actual dividend to accommodate for the corporate tax rate so that it’s as if they received the money without being taxed at the corporate rate. The businesses don’t pay personal taxes unless they have an investment in the company shares or are getting dividends from it.
Allan Madan (10 months ago)
Hi, you are correct in your analysis. But, by eliminating the corporate tax refund (i.e. RDTOH) when dividends are paid from the corporation to the individual shareholder, the effective tax rate on investment income earned by a CCPC increases to 73%, which is not fair.
steve biljan (10 months ago)
Thank you for making that clear
Allan Madan (10 months ago)
You're welcome.
David Lopez (10 months ago)
Wow. Those are some serious tax evasion loopholes. I personally hate the idea of Money making money like investing in stocks etc and that money should be taxed at a high rate. Also everyone should just pay the same percentage of taxes with no limits and no matter what.
Oleg Scherbina (2 months ago)
I agree with David, we need to have a flat tax rate on every type of income with some low income exemption, like no taxes for below $20-30K annual income.
Allan Madan (10 months ago)
Hi David, please note that 'loopholes' are not the same as tax evasion. There's nothing wrong with minimizing your taxes by following the existing tax rules.
PlumbPro (10 months ago)
And why should I continue to run my business at all? Seriously is there a reason why I would want to continue?
Sam H (16 days ago)
How's your business going
D Victor (1 month ago)
shazzzam79 (6 months ago)
PlumbPro I was just about start a business.... Now I'm looking to leave this country... It's ruined
PlumbPro (10 months ago)
Two liberal government leaches don't like this video!
PlumbPro (10 months ago)
This is insane! Canada is becoming a complete communist nation. Big business and government and nothing in between! Take this government down!!!!!!
Kman31ca (10 months ago)
This is going to hurt a lot of small business. Plus I can see an exodus of Dr's heading south, or to other countries. The Government forgets they basically made a deal with Dr's decades ago. That the Dr's wouldn't charge as much, and the government would let them use these "Loopholes" to equalize that. Plus, I'm of the opinion that you should reward small business due to how they are a driver of our economy. It takes a lot of sacrifice, and loads of work to get a successful business going. And with 50% going bankrupt in the first 5 years, and another 50% going under within the next 5 years. They deserve a tax break for the sacrifices they make. This is going to stifle new start ups. And in the long run will hurt Canada, worse than it will make it "Fair." And pulling this off at a time when its pretty clear that the economic foundations in Canada, and the rest of the west, are going through an upheaval. With automation on the horizon... This is a horrible idea. This just shows the disconnect between this Liberal government and the average everyday person. It also shows how this ideology held be the Liberals that everything should be "Fair," is such a ridiculous notion. As far as I'm concerned, the current tax system has been fair.
Allan Madan (10 months ago)
I agree with you in that the proposed rules are not fair to business owners. They will harm businesses and reduce growth.
Chris D (10 months ago)
If the owner of the corporation invests outside the corporation they will be taxed like a person who doesn't own a corporation. Why is this bad? Am I missing something?
Allan Madan (10 months ago)
Hi Chris, an owner of a corporation can invest outside of a corporation and be taxed at personal tax rates. The problem is that owners have a lot of their money tied up in company assets (inventory, equipment, accounts receivable), and cannot always pay out cash to themselves. The other big issue about taxing investment income at 73%, is that in unfairly targets retirees who have saved most of their money inside their corporation. They should not be penalized by exorbitant tax rates.
N A N D (10 months ago)
Chris D Did you to number 3? 77% corporate tax? That’s insane even by liberal standards
Bubs Sha (10 months ago)
second example for life time CG tax, does the family pay the tax and uncle Bob is the only one to get life time capital gain exemption?
Allan Madan (10 months ago)
Hi Bubs, under the new rules, beneficiaries of a Family Trust that owns shares in a Canadian controlled private corporation can no longer claim the life time capital gains exemption. In this example, I assumed that the trust owns 100% of the shares of Cheesery Inc. and that all of the trust's beneficiaries are Bob's family members. As such, in this example, no one would be able to claim the lifetime capital gains exemption on the sale of the shares.
Bonnie Swift (10 months ago)
Love your videos so educational and easy to understand.
Allan Madan (10 months ago)
Hi Bonnie, thank you for your positive feedback. I appreciate it.
wwwater1 (10 months ago)
330+770=1100. Taxed at 77% you mean the cash remaining is $230 not $330
Allan Madan (10 months ago)
Hi wwwater1, the cash remaining is $230. You are correct.
747-pilot (10 months ago)
Your video was done very well, using the examples to make it clear! Thanks!
Allan Madan (10 months ago)
Please feel free to contact me at 905-268-0150 or by email at [email protected]
747-pilot (10 months ago)
No problem! I would like to contact your office when I get to Canada for help and advice with my taxes. I am a self employed individual in the US and will be moving to Canada shortly, doing the same thing. I'm very familiar with handling my taxes in the US (we have a lot of deductions and write-offs here), but there does not seem to be much Canada-specific stuff on the web! Thanks once again for these videos, as they begin to give me an idea what I'm "in for" when I get there!
Allan Madan (10 months ago)
Thank you!
Helena Papadam (10 months ago)
You're fantastic. Been following you for awhile now.
Allan Madan (10 months ago)
Thank you for your kind feedback.
Ati E. Masroor (11 months ago)
Great video!
Allan Madan (10 months ago)
Thank you for the positive feedback
Bonnie Swift (11 months ago)
Great video.
Allan Madan (10 months ago)
Thank you
Edgar Khalatian (11 months ago)
Hi Allan - love your series. I believe there is a calculation error on the Tax on Investment Income portion (4:57). With Amount Available for Distribution, less the Personal Tax of 54%, the Personal Cash Remaining should be $230, vs. the stated $330.  Current: Amount Available for Distribution ($500) - Personal Tax ($230) = Personal Cash Remaining ($330) Correct: Amount Available for Distribution ($500) - Personal Tax ($230) = Personal Cash Remaining ($230) Cheers!
Allan Madan (11 months ago)
Hi Edgar, you are correct. Thank you for letting me know :)
Jeff Ballantyne (11 months ago)
Allan your doing a great job with these videos! I'll do my best to share them when I remember! So helpful! Thanks!
Soham Gupta (11 months ago)
hi, can you give some info on how taxes are calculated on gains that i make on trading bitcoin and other cryptocurrencies please?
Allan Madan (11 months ago)
Hi Soham, if you are trading currencies, the profits made are treated as business income.
Igor Savchuk (11 months ago)
Thanks for this explanation!
InternetDude (11 months ago)
Trudeau is screwing over a lot of small businesses, mine included. He intends to ram this through, I have signed some petitions here - https://petitions.ourcommons.ca/en/Petition/Details?Petition=e-1249 and https://petitions.ourcommons.ca/en/Petition/Details?Petition=e-1239 - I recommend everyone do that also.
Flight of Stairs (11 months ago)
Signed - thanks!
Shu Pui Lui (11 months ago)
Thanks for making the video. I think the first 2 rules are reasonable, but the 3rd one not so much... what would be the point of working hard? Does it affect individuals earning income from investments?
Roy Lockhart (6 months ago)
It's ignorance. Most people who support Canadian taxes have no idea how high they actually are for businesses there.  There is a confusion i have noticed as if starting/running a business is easy and low risk but working for the business is the hard part.
steve biljan (10 months ago)
Its a family business, not of the 3 new rules makes sense... regardless of what the government thinks the other person is NEVER a non active memeber.... never... in some way they are contributing and protecting that business ... directly or indirectly... remember that. The government thinks that it could save $250 Million by doing this... they could save 3 times that by cleaning up their own government house... looking at their own expenses,. why cant they fly economy class, why do they have to stay in 5 star hotels, why do they get such good pensions.... in a small business that extra money that is saved is used to grow the business... not live high off the hog, it goes back directly into the economy..... remember this, its the first step in building more tax laws on top of...
PlumbPro (10 months ago)
Shu Pui Lui The first two rules make no god damn sense either! Give me one good reason I should take all the risk to create jobs and incomes that get taxed then get raped too! I should just get a government job like the rest of these lazy greedy fucks!
Allan Madan (11 months ago)
Hi Shu Pui Lui, I agree with your comments. It affects Canadian controlled private corporations and their individual shareholders.
Andrej Pavlovic (11 months ago)
#3 Doesn't include capital gains though right? I guess they want to discourage passive income earning which seems reasonable

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