Effective 2018, there is a totally new set of rules aimed at curtailing the ability of Canadians to shift business income to family members in lower tax brackets. This is an extension of the “kiddie tax” regime that has been in place for many years. However, this “tax on split income” (“TOSI”) regime is far more extensive than the “kiddie” tax. It can apply to amounts received by family members of all ages. Most commonly, it will apply to dividends received from private corporations carrying on a business in which a family member is involved. However, it can also apply to capital gains on shares in such companies. Where TOSI applies, income will be taxed at the highest tax rates. However, TOSI only applies to income taxed under Part I of the ITA. A dividend paid to a family member who is not resident in Canada will be taxed under Part XIII. In the absence of a tax treaty applying, the rate will be 25%-this is considerably lower than the rate on TOSI. In cases where the recipient is resident in a country with which Canada has a tax treaty, the rate will generally be reduced, most commonly to 15%. It should be possible to introduce non-residents family members as shareholders without too much difficulty. One way would be to do a typical “freeze” and issue some of the new Common shares to them. However, this would not always be necessary. Usually, “discretionary” or “dividend sprinkling” shares can be created and issued for nominal consideration without implementing a freeze. Similarly capital gains realized by non-residents from the disposition of shares in private Canadian corporations will generally not be subject to Canadian tax unless most of the underlying value is derived from Canadian real estate. In the case of normal operating corporations, gains will generally not be subject to Canadian tax. Similar considerations will generally apply where the non-resident is a beneficiary of a Canadian trust that receives dividends from the family company. Dividends passing through the trust, and out to the beneficiary, will be taxed under Part XIII of the ITA, not Part I, so TOSI will not apply Of course, in all cases, tax implications in the non-residents country of residence will have to be considered.