Canada: Tax relief for intergenerational transfers of small businesses, family farms

Finance to consult on intergenerational transfer amendments

Finance to consult on intergenerational transfer amendments

Owners of small businesses, family farms or fishing corporations may benefit from new income tax relief for intergenerational transfers, in certain circumstances.

The tax relief rules are effective as of 29 June 2021.

The Department of Finance acknowledged that it intends to consult on further amendments in an effort to protect the integrity of the tax system--measures that would apply as early as 1 November 2021. As a result, Finance no longer plans to delay application of the relief to 1 January 2022, and it has officially withdrawn a previous statement of its intention for a delay. Read TaxNewsFlash

Finance stated it intends to provide draft legislative amendments for consultation—revisions that would provide that the rules must facilitate genuine intergenerational transfers that are not used for “artificial” tax planning purposes. Specifically, Finance reported the forthcoming proposed changes would address:

  • The requirement to transfer legal and factual control of the corporation carrying on the business from the parents to their children or grandchildren
  • The level of ownership in the corporation carrying on the business that the parents can maintain for a reasonable time after the transfer
  • The requirements and timeline for the parents to transition their involvement in the business to the next generation
  • The level of involvement of the children or grandchildren in the business after the transfer

Following the consultation, Finance intends to publish final legislative proposals that then would be introduced in a bill with a proposed effective date as of the later of 1 November 2021, or the date of publication of the final draft legislation.

Read a July 2021 report [PDF 186 KB] prepared by the KPMG member firm in Canada


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