Presented by Dave Cesmystruk & Jeremy Bergen, Blackbird Tax LLP

1. Predicting the Weather
Canada’s Changing Tax Environment
May 16, 2018

2. Overview
Part 1 - The Problems created with the changing tax
environment.
Part 2 – Some planning options for the changing tax
environment.

3. Part 1 – The Problems
Comparison of 2014 to 2019 Tax Rates
2014 Typical Organization Structure
2015 Section 55 / Personal Services Business
2016 Specified Corporate Income
2017 Fairness
2018 Tax On Split Income
2019 Passive Income & Refundable Streaming
Federal Election
2020 Death of Health Plans

4. Tax Rates in B.C.
Individuals 2014 2019 Change
Salary 45.8% 49.8% 4.0%
Dividends 38.0% 44.7% 6.7%
Eligible Dividends 28.7% 34.2% 5.5%
Capital Gains 22.9% 24.9% 2.0%
Corporate 2014 2019 Change
SBD 13.5% 12.0% -1.5%
Active 24.5% 27.0% 2.5%
Investment 45.7% 50.7% 5.0%
Capital Gains 22.8% 25.4% 2.5%
PSB 27.0% 40.0% 13.0%

5. 2014– Typical Organization structure
Active
Spouse
Child
Passive
Spouse
OpCo 2Family
Trust
Passive Co
OpCo 1
Active Business
Income = $500,000
SBD claimed
OpCo 2 earns
Income from OpCo 1
Passive Income
>$150,000
Active Spouse gets
eligible dividend.
Passive Co recovers
refundable tax.
Child receives
dividend from Opco
to pay for education
Passive Spouse
receives dividends
from OpCo 2
Passive Co receives
dividend from OpCo 1
in excess of OpCo 1’s
retained earnings
Active Business
Income >$500,000
SBD claimed
Health & Welfare
Trust for Active
Spouse and family

6. 2015 – Section 55
Active
Spouse
Child
Passive
Spouse
OpCo 2Family
Trust
Passive Co
OpCo 1
Active Business
Income = $500,000
SBD claimed
OpCo 2 earns
Income from OpCo 1
Passive Income
>$150,000
Active Spouse gets
eligible dividend.
Passive Co recovers
refundable tax.
Child receives
dividend from Opco
to pay for education
Passive Spouse
receives dividends
from OpCo 2
Passive Co receives
dividend from OpCo 1
in excess of OpCo 1’s
retained earnings
2015
Section 55 Changes
Active Business
Income >$500,000
SBD claimed
Health & Welfare
Trust for Active
Spouse and family

7. 2016 – Specified Corporate Income
Active
Spouse
Child
Passive
Spouse
OpCo 2Family
Trust
Passive Co
OpCo 1
OpCo 2 earns
Income from OpCo 1
Passive Income
>$150,000
Active Spouse gets
eligible dividend.
Passive Co recovers
refundable tax.
Child receives
dividend from Opco
to pay for education
Passive Spouse
receives dividends
from OpCo 2
Passive Co receives
dividend from OpCo 1
in excess of OpCo 1’s
retained earnings
2016
Specified Corporate
Income Rules
Active Business
Income = $500,000
SBD claimed
2015
Section 55 Changes
Active Business
Income >$500,000
SBD claimed
Health & Welfare
Trust for Active
Spouse and family

8. 2018 – Tax On Split Income
Active
Spouse
Child
Passive
Spouse
OpCo 2Family
Trust
Passive Co
OpCo 1
OpCo 2 earns
Income from OpCo 1
Passive Income
>$150,000
Active Spouse gets
eligible dividend.
Passive Co recovers
refundable tax.
2016
Specified Corporate
Income Rules
Active Business
Income = $500,000
SBD claimed
Child receives
dividend from Opco
to pay for education
Passive Spouse
receives dividends
from OpCo 2
2018
Tax On Split
Income
2018
Tax On Split
Income
Passive Co receives
dividend from OpCo 1
in excess of OpCo 1’s
retained earnings
2015
Section 55 Changes
Active Business
Income >$500,000
SBD claimed
Health & Welfare
Trust for Active
Spouse and family

9. 2019 – Passive Income & RDTOH Rules
Active
Spouse
Child
Passive
Spouse
OpCo 2Family
Trust
Passive Co
OpCo 1
OpCo 2 earns
Income from OpCo 1
Passive Income
>$150,000
Child receives
dividend from Opco
to pay for education
Passive Spouse
receives dividends
from OpCo 2
2018
Tax On Split
Income
2018
Tax On Split
Income
Passive Co receives
dividend from OpCo 1
in excess of OpCo 1’s
retained earnings
2016
Specified Corporate
Income Rules
Active Business
Income = $500,000
SBD claimed
Active Business
Income >$500,000
SBD claimed
2019
Tax on Excessive
Passive Income
2015
Section 55 Changes
2019
Refundable
Dividend
Streaming
Rules
Active Spouse gets
eligible dividend.
Passive Co recovers
refundable tax.
Health & Welfare
Trust for Active
Spouse and family

10. 2020 – Death of Health & Welfare Trusts
Active
Spouse
Child
Passive
Spouse
OpCo 2Family
Trust
Passive Co
OpCo 1
OpCo 2 earns
Income from OpCo 1
Passive Income
>$150,000
Child receives
dividend from Opco
to pay for education
Passive Spouse
receives dividends
from OpCo 2
2018
Tax On Split
Income
2018
Tax On Split
Income
Active Business
Income >$500,000
SBD claimed
2019
Tax on Excessive
Passive Income
Passive Co receives
dividend from OpCo 1
in excess of OpCo 1’s
retained earnings
2015
Section 55 Changes
2016
Specified Corporate
Income Rules
Active Business
Income = $500,000
SBD claimed
Active Spouse gets
eligible dividend.
Passive Co recovers
refundable tax.
2019
Refundable
Dividend
Streaming
Rules
2020
Death of
Health &
Welfare Trusts
Health & Welfare
Trust for Active
Spouse and family

11. Part 2 – What to do
1) How to move assets
2) 2018 – GRIP & RDTOH Planning
3) Service Companies (restrictive)
4) Non-Service Companies
5) Accounting for Income Streams
6) Accounting Sensitivity

12. How to move assets
Brothers
OpCo
Active Business
$5,000,000 Goodwill
Brothers
NEWCO
Brothers
OpCo
OPENING DIVIDEND
TAX-FREE
DROP
OpCo
Active Business
$5,000,000 Goodwill
NEW
OpCo
Active Business
$5,000,000
Goodwill
Non-exclusive
Licence to
Operate business
Brothers
OpCo
TAXABLE
DROP
NEW
OpCo
Active Business
$5M Goodwill
$2.5M CDA
RDTOH
$1.25M tax
Dividend up to
Retained Earnings

13. 2018 – RDTOH / GRIP Planning
Active
Person
Company 2
Company 1
$100,000 RDTOH
$260,980 GRIP
OPENING
Active
Person
Company 2
Company 1
$100,000 RDTOH
$260,980 GRIP
MATCH GRIP / RDTOH

14. 2018 – RDTOH / GRIP Planning
Active
Person
Company 2
Company 1
OPENING
Active
Person
Company 2
Company 1
$97,000 refundable T
$63,000 Non-refundable Tax
$160,000 cash tax (with no dividends)
TRIGGER CAPITAL GAIN
$260,980 GRIP
and Asset With
$631,500
Unrealize gain
Asset with $631,500
realized gain
$32,000 total savings with
$260,980 taxable dividend

15. 2018– Service Companies
Cash & activity damming and tracing
Active
Spouse
Passive
Spouse
Opco 1
Passive Income
Borrow to invest in
passive assets –
maximize expenses
Lower taxes if held
personally
BUT
Watch out for
investments with ROC
Active Income
Ability to claim future CGE
Use Liquid assets to:
Reinvest in business
Or
Loan to Real estate Co
where Passive Spouse loans
an equal amount to
Real Estate Co
Trader In securities =
income account
Bank Loan
Real Estate Co
Real Estate Used
In Opco’s Active Business
Low annual net income
Ability to claim future CGE
No
Dividends /
Sprinkling until
Active Spouse
Is 65.

16. 2018– Non-service Companies
Cash & activity damming and tracing
Active
Spouse
Passive
Spouse
Opco 1
Passive Income
Borrow to invest in
passive assets –
maximize expenses
Lower taxes if held
personally
BUT
Watch out for
investments with ROC
Bank Loan
Real Estate Co
Real Estate Used
In Opco’s Active Business
Low annual net income
Ability to claim future CGE
Dividends where
>10% votes & Value
Active Income
Ability to claim future CGE
Use Liquid assets to:
Reinvest in business
Or
Loan to Real estate Co
where Passive Spouse loans
an equal amount to
Real Estate Co
Trader In securities =
income account

17. Accounting for income streams
2019 2019 Difference
Sales 1,100,000 1,100,000 -
Expenses 700,000 600,000 100,000-
Net Income 400,000 500,000 100,000
Passive Income 150,000 150,000 -
Passive Expenses - 100,000 100,000
Other Income 150,000 50,000 100,000-
Net Income 550,000 550,000 -
Corporate Tax 184,000- 85,300- 98,700
366,000 464,700 98,700

18. Accounting - Sensitivity
2019 2019 Difference
Income 1,100,000 1,100,000 -
Expenses 600,000 600,000 -
Net Income 500,000 500,000 -
Passive Income 150,000 150,000 -
Passive Expenses 100,000 90,000 10,000-
Other Income 50,000 60,000 10,000
Net Income 550,000 560,000 10,000
Corporate Tax 85,300- 97,900- 12,600-
464,700 462,100 2,600-

19. Conclusion:
Get a good accountant.
Get a proactive strategy in place
in 2018.

20. Questions?
DISCLAIMER
The information in this presentation does not constitute advice, and is for training purposes only.
This presentation deals with complex laws and administrative positions that are subject to change and may
not apply to particular facts and circumstances. This presentation is a reasonable attempt to share how
these rules may apply in limited circumstances, but is not a comprehensive summary of how these rules
work in all circumstances. Blackbird Tax LLP is not under any obligation to update the contents of this
presentation for prospective or retroactive changes or modifications to the law or regulations. Blackbird Tax
LLP and the authors do not accept any legal responsibility from use of or reliance on the information
presented herein.
All rights reserved.

21. Dave Cesmystruk Jeremy Bergen
778-878-3283
dave@blackbirdtax.com
778-245-9190
jeremy@blackbirdtax.com
PO Box 292 Station A
Abbotsford BC
V2T 6Z6
We provide Canadian income tax services to professional firms and their clients.