Private Company Shares and Estate Administration Tax in Ontario

If a family member owned shares in a private corporation, those shares can make up a large part of the estate. Unlike a bank account, there is no statement showing their value, so people often ask how the tax is calculated.

This article explains the general rules that apply. The official guidance has no special rule just for private company shares, so the details depend on the facts and are worth confirming with a lawyer or accountant.

Are business interests part of the estate's value?

Yes, in general. The estate's value includes business interests and other property wherever situated, along with bank accounts, investments and vehicles. The tax applies only when a certificate is applied for and issued.

For certificates applied for on or after January 1, 2020, no tax is payable on an estate of $50,000 or less. Above that, the tax is $15 for every $1,000 (or part of $1,000) over $50,000. The value is rounded up to the nearest thousand dollars.

Some assets are left out. Assets the deceased no longer owned at death, such as insurance paid to a named beneficiary, are not counted. Jointly owned assets that pass automatically to the surviving owner or owners are also left out. If the court issues a certificate limited to the assets in a specific will, only the assets in that will count.

How the shares are valued

Assets are valued at their fair market value at the time of death. The guidance gives this general rule rather than a formula for shares. Because private shares are not traded publicly, many families get a valuation from a qualified professional.

Estate representatives must be able to back up asset values with supporting documents, such as statements or an appraiser's opinion of value. For complex assets, a professional appraiser with expertise in that area may help recommend a value.

Debts do not generally shrink the value. Only encumbrances on real property can be deducted, and loans and interest do not reduce the estate's value. Whether and how a company's own debts affect what the shares are worth is a valuation question for an accountant or appraiser.

Estimates, the return and later corrections

The estate representative must file an Estate Information Return within 180 calendar days after the certificate is issued. If an estimated value was used on the application, an amended return is due within 60 calendar days after the actual value is given to the court under the undertaking.

If information in a filed return turns out to be incorrect or incomplete, an amended return must be filed within 60 days of becoming aware of it. This duty applies within four years of the certificate being issued. Additional tax found to be owing can be paid to the Superior Court of Justice or the Ministry of Finance, with an affidavit setting out the revised value of the estate at death.

Who pays and what records to keep

The tax is paid by the estate, not personally by the estate representative. It is paid as a deposit when the probate application is filed, and the deposit becomes the tax once the certificate is issued.

The records supporting the return must be kept for four years at the estate representative's principal place of business or residence. The Ministry of Finance may assess or reassess the tax within four years after the day it was due. If a return was not filed on time or a misrepresentation was made, there is no four-year limit.

• The appraiser's report or other valuation of the shares.
• Statements or other documents that support the value of the business interest, such as an appraiser's opinion of value.
• Date-of-death statements for accounts and investments.
• Appraisals and mortgage statements for any real estate.
• Notes on how each value was reached and who provided it.

What to do next

Failing to file the return, or making false or misleading statements, can lead to a fine of at least $1,000 and up to twice the tax payable, imprisonment for up to two years, or both. That is a good reason to keep careful records.

• List every business interest the person held, including shares and loans to the company.
• Ask an accountant or appraiser about a date-of-death valuation.
• If the person left more than one will, ask a lawyer how that affects the estate. If the court issues a certificate limited to the assets in a specific will, only the assets in that will count. Whether that applies to the shares depends on your situation, so it is worth confirming with a lawyer.
• Speak with a lawyer about whether the company's documents affect who can deal with the shares.
• Diarize the 180-day return deadline.

Frequently asked questions