本文发表在 rolia.net 枫下论坛If a corporation is CCPC and earns active business income, the tax planning would be focus on taking advantage of small business deduction. If a corporation earns investment income, tax planning would be focused on refundable dividend tax, dividend refund, capital dividend account, etc. A corporation will be taxed at higher tax rate on investment income if it retains investment income in the corporation. However, the above tax planning can reduce the effective tax rate for the corporation. This also answer the earlier discussion regarding flat tax rate on investment income: corporate investment tax rate is not fixed, actual effective tax rate can be reduced by tax planning.
As to the discussion of whether gain on investments is capital gain or business income, the tests used by CRA & court decision are different and such is a grey area for now. For tax purpose, CRA expect a taxpayer to be consistent from year to year.
Calculation of gain on investments can be very different for uncovered call or put options depending on capital gain nature or business income. Capital gain (or business income) treatement may be better for one year for tax purpose but may be worse for other years. That's why CRA expect you to be consistent.
If a corporation is a day trader, all capital gains are business income, which means you lose 50% tax free capital gains. However, all other investment income such as interests, dividends are also business income that are qualified for small business deductions. In other words, 50% tax free capital gains and small business deductions are two sides of a coin, you can't have both of them.
In conclusion, investment strategies determine sources of income. Sources of income determine tax bill. Tax bill affects and may determine investment strategies. Either way, tax planning is the key and that's why professional advice is a MUST.更多精彩文章及讨论，请光临枫下论坛 rolia.net
As to the discussion of whether gain on investments is capital gain or business income, the tests used by CRA & court decision are different and such is a grey area for now. For tax purpose, CRA expect a taxpayer to be consistent from year to year.
Calculation of gain on investments can be very different for uncovered call or put options depending on capital gain nature or business income. Capital gain (or business income) treatement may be better for one year for tax purpose but may be worse for other years. That's why CRA expect you to be consistent.
If a corporation is a day trader, all capital gains are business income, which means you lose 50% tax free capital gains. However, all other investment income such as interests, dividends are also business income that are qualified for small business deductions. In other words, 50% tax free capital gains and small business deductions are two sides of a coin, you can't have both of them.
In conclusion, investment strategies determine sources of income. Sources of income determine tax bill. Tax bill affects and may determine investment strategies. Either way, tax planning is the key and that's why professional advice is a MUST.更多精彩文章及讨论，请光临枫下论坛 rolia.net