CRA confirms that splitting long hours between many companies can result in loss of the s. 120.4(1.1)(a) TOSI safe harbour

A husband and wife owning a number of corporations, each of which has its own business and full-time staff, work on a full-time basis for the various companies (whose shares are not excluded shares), but do not work for any particular company at least 20 hours a week. Would dividends above a reasonable amount be subject to the tax on split income (“TOSI”)?

After confirming that neither spouse would thus satisfy the 20-hour test in s. 120.4(1.1)(a), CRA turned to the “excluded business” safe harbor, and indicated that the greater the involvement in the management or current activity of the business, the more likely it is that the individual will be considered to participate in the business on a regular, continuous and substantial basis; and that the more an individual’s contributions are integral to the success of the business, the more substantial they would be.

CRA did not reach any conclusion, but this sounds encouraging.

Neal Armstrong. Summaries of 15 June 2022 STEP Roundtable, Q.8 under s. 120.4(1.1)(a) and s. 120.4(1) - excluded business.