Corporate Tax Tips
Note: This Page Is Constantly Being Updated And Expanded
The following tips and statements are very general in nature and in no specific order. Please contact your professional advisor before implementing any tax planning arrangements. Also, see the note at the bottom of the page.
In general, every taxpayer has the right to legally arrange his/her affairs, using provisions of the law, in order to pay the least amount of tax.
Corporate
- When to consider Incorporating. Here are the four key guidelines as to when you should seriously consider Incorporating a business. (click link below ) Incorporating A business
- Split income – pay family members for work done in your business – pay must be reasonable in relation to work done, considering the services provided and what you would pay an unrelated party for the same work. Possible services could include running errands, filing, typing, bookkeeping and general office help, working on weekends and during the summer, helping to maintain computer systems and websites. Pay at least sufficiently to take advantage of the personal tax exemption available to every individual. Do not forget to prepare T4s for this pay to family members. Also, consider having family members as corporate directors and paying directors’ fees. Set Up corporate structure to include family members as shareholders to allow dividend payments.
- Maximize CCA (tax depreciation) – sale of a capital property near year-end should be deferred until early in the following year (but sell before year end if expected terminal loss is greater than CCA forgone). Similarly, a planned future purchase of a capital property should be accelerated and made before year-end, ensuring the asset is available for use before year-end.
- Employee vs. self employed – ensure that a relationship intended to be set up such that the individual is regarded as self-employed is properly structured in order to avoid significant tax penalties to the corporation and to the individual.
- Pay out any positive CDA (capital dividend account) balances as soon as they arise. These are tax-free distributions.
- Pay out RDTOH (refundable dividend tax on hand) balances to shareholders to recover refundable tax paid by corporation on investment income.
CAUTION: The above information is very general in nature and not regularly updated, therefore may not reflect recent legislative or judicial proposals and/or changes. Tax laws are extremely complex and frequently change. In addition, each situation is unique and must be individually analyzed in light of its specific facts and circumstances of the particular situation and interpretation of the relevant legislation enacted at the time. The information above should not be acted upon without seeking professional advice. For more information and detailed advice about any of the above or the implementation of other tax planning arrangements, please contact your professional advisor.