TOSI Again – Separate Your Product and Service Revenue

Remember TOSI – tax on split income? One of the ways that Canadian business owners can still pay dividends to family members (who are not currently active in the business) is if the business itself has more than 10% of its revenue coming from the sale of products, rather than the sale of services. There are layers of complications to this issue so don’t change anything in your business without talking to your own advisors.

Are you providing both a product and a service? Do you have a cost of sales category on your financial statements? If so then you should be taking care to separate the product revenue from the service revenue in your books. I am talking about the actual amount that you charge to your customers.  If you are an electrician then you will have a charge for the service of changing some lighting in a customer’s building. You will also have a charge for the actual lights that you installed. You should show those amounts separately in your books if you are looking to do some income splitting. The TOSI rules are aimed at service businesses, the less you look like a service business the less the TOSI rules apply to you. ction(){if(!l

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