RSM Canada provides tax & middle market insight on 2018 Federal Budget


Budget reaffirms government proceeding with passive investment income tax measures, but with reduced complexity that takes into consideration feedback from Canadian businesses

Ottawa, ON - RSM Canada, the leading provider of audit, tax and consulting services focused on the middle market, issued the following perspective for Canada's middle market businesses following today's Federal Budget announcement:

  • As part of Finance Canada's ongoing tax planning reforms, Budget 2018 introduces an additional eligibility mechanism for the small business deduction, based on passive investment income.
  • More specifically, Finance Canada is gradually reducing access to the small business tax rate for corporations that have significant passive investment income. This measure reinforces that the small business rate is targeted to support small businesses with difficulty accessing capital to reinvest.
  • If Canadian-controlled private corporations (CCPCs) earn more than $50,000 of passive investment income in a given year, the amount of income eligible for the small business tax rate would be gradually reduced (and effectively eliminated once investment income is at $150,000). For CCPCs earning that level of investment income, the corporation's active business income would be taxed at the general corporation income tax rate.
  • Budget 2018 also confirms that the tax rate on qualifying active business income of CCPCs in 2018 is being reduced from 10.5 per cent to 10 per cent, and then reduced further to 9 per cent in 2019.

"Middle market clients will still face challenges around the passive investment income tax measures as Finance Canada is still proceeding with these measures. However, in many ways, this has been a responsive budget, as Finance has reduced complexity and taken feedback from Canadians that was given during the consultation period following last summer's proposals," said Maria Severino, national tax leader, RSM Canada.

For more information about the Federal Budget's implications for Canada's middle market, speak to your advisor about how these rules can apply to your particular circumstances, or visit and follow RSM Canada on LinkedIn.

About RSM

RSM’s purpose is to deliver the power of being understood to our clients, colleagues and communities through world-class audit, tax and consulting services focused on middle market businesses. The clients we serve are the engine of global commerce and economic growth, and we are focused on developing leading professionals and services to meet their evolving needs in today’s ever-changing business environment.

RSM Canada LLP provides public accounting services and is the Canadian member firm of RSM International, a global network of independent audit, tax and consulting firms with more than 41,000 people in over 120 countries. RSM Canada Consulting LP provides consulting services and is an affiliate of RSM US LLP, a member firm of RSM International.  For more information visit, like us on Facebook, follow us on Twitter and/or connect with us on LinkedIn.