Lower Tax Rates for Self Storages Businesses May Be On the Way!!
Currently, Canadian-owned private corporations are entitled to a preferential tax rate of 15.5% on the first $500,000 of qualifying income from ‘active’ business income from a business carried on in Canada (subject to certain specific rules.)
However, self-storage businesses and campgrounds have been determined to be “specified investment businesses”, which is generally a business whose principal purpose is to earn income from property, unless the business has more than five full-time employees. Therefore, the income earned by self-storage facilities and campgrounds are subject to taxes at a rate of 47.8% – OVER 30% MORE than those eligible for the small business deduction.
As any owner of a self-storage facility or campground will tell you – theirs is not an ‘inactive’ business. The Government has heard these concerns and is now considering expanding the definition of what may be considered ‘active’ business income when it comes to earning income from property, such as a self-storage facility or campground. In particular, they are accepting submissions from interested parties until August 31, 2015. As Rumley Holmes LLP has a number of clients with such businesses, we will be preparing a submission, and be following this story closely as it develops.