Jamie.Golombek@cibc.com Opens your email app.
Jamie Golombek, CPA, CA, CFP, CLU, TEP is Managing Director, Tax and Estate Planning with CIBC Financial Planning and Advice in Toronto.
Debbie.Pearl-Weinberg@cibc.com Opens your email app.
Debbie Pearl-Weinberg, LLB is Executive Director, Tax and Estate Planning with CIBC Financial Planning and Advice in Toronto.
1 For more information, see the report titled “Intercorporate Dividends: New Anti-Avoidance Rules” by Debbie Pearl-Weinberg, which is available from your CIBC advisor.
2 Further information on how the tax deferral associated with earning business income works can be found in our reports “The Compensation Conundrum: Will it be salary or dividends?”, “Bye-bye Bonus! Why small business owners may prefer dividends over a bonus”, and “In Good Company: Retaining investment income in your corporation”. These reports are available online in the “Business owners” section at Tax savings tips.
3 While the deferral on active business income can be maintained, there is often a tax prepayment on investment income.
4 Further information on this tax cost can be found in our report “In Good Company: Retaining investment income in your corporation”, supra note 2.
5 For qualified farm and fishing property, the LCGE is $1,000,000.
6 The report titled “The New CCPC Tax Rules” is available online in the “Business owners” section at Tax savings tips.
7 This assumes that you pay personal tax at the highest marginal tax rate.
8 A refundable Part IV tax 381 /3% is levied on dividends that a Canadian private corporation receives from another, non-connected Canadian corporation. The “Part IV tax” is notionally tracked in the Refundable Dividend Tax on Hand (RDTOH) account and is fully refundable at a rate of $38.33 for every $100 of taxable dividends distributed to the shareholder. Both the after-tax income and refunded tax may be distributed to the shareholder, either as eligible or non-eligible dividends, according to the type of dividends originally earned.
9 See note 6.
10 This amount is $600,000 for Saskatchewan tax purposes.
11 The term “associated” is defined in the tax rules. Corporations are associated for tax purposes when they have common control. For instance, if two corporations are owned by the same person, they will be considered associated for tax purposes. Further, in many circumstances, corporations with related shareholders are considered to be associated.
12 Ontario and New Brunswick have announced that they are not following this federal tax measure.
13 Our report “CCPC Tax Planning for Passive Income” is available online in the “Business owners” section at Tax savings tips.
As with all planning strategies, you should seek the advice of qualified tax and legal advisors. This report is published by CIBC with information that is believed to be accurate at the time of publishing. CIBC and its subsidiaries and affiliates are not liable for any errors or omissions. This report is intended to provide general information and should not be construed as specific legal, lending, or tax advice. Individual circumstances and current events are critical to sound planning; anyone wishing to act on the information in this report should consult with his or her financial advisor and tax specialist. The CIBC logo is a registered trademark of CIBC.
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Note: This report was initially published on October 2019.