May 19, 2016
Starting next year, businesses that want to sell will have to pay more taxes. This is due to a change in the latest federal budget which affects the taxation of intangible assets and has some companies trying to close their business sales before January 1. Brenda Bouw, a writer for The Globe and Mail, discusses this tax increase with Dov Begun, a partner in Osler's Tax Practice Group. "It's driving a lot of discussion about M&A," says Dov.
The change was introduced in the federal budget on March 22, 2016, and, according to Dov, has prompted many meetings and phone calls regarding business sales. While the new tax revision will affect all businesses to a degree, it will have a significant impact on private companies that choose to sell the assets of the business, but not the company shares. Under the revision, intangible assets will be taxed as a capital gain in 2017. They are currently taxed as business income.
Business owners who are on the fence about selling may want to make a decision soon, as it can take more than six months to complete a deal. Dov believes more sales inquiries will be made over the summer. However, he expects those conversations to come from those who had plans to sell before the change.
To find out more about the new tax revision, read Brenda Bouw’s article, “Deadline looms for businesses looking to sell” online at The Globe and Mail, May 19, 2016.