The Cost of Investment Income Earned in a Canadian Controlled Private Corporation

In each of Canada’s provinces or territories, there is a cost of earning investment income in a Canadian Controlled Private Corporation (“CCPC”) and then paying out the remaining funds as dividends to individual shareholders as opposed to the individual earning the investment income directly.

The 2016 changes to the federal income tax rates and the taxation of dividends paid by a CCPC from investment income have made it more costly to earn investment income through a CCPC.

Investment Income Integration Summary, 2016

	Investment Income earned corporately	Investment income earned personally (%)	Difference
British Columbia……………………	51.89	47.70	4.19
Alberta…………………………………	52.19	48.00	4.19
Saskatchewan………………………	52.05	48.00	4.05
Manitoba……………………………..	56.55	50.40	6.15
Ontario………………………………..	55.97	53.53	2.44
Quebec……………………………….	55.33	53.97	1.36
New Brunswick…………………….	61.40	58.75	2.65
Nova Scotia…………………………	59.70	54.00	5.70
Prince Edward Island……………	57.34	51.37	5.97
Newfoundland and Labrador…………………………….	52.73	48.30	4.43
Yukon…………………………………….	53.93	48.00	5.93
Northwest Territories………………..	48.25	47.05	1.20
Nunavut…………………………………	49.09	44.50	4.59

Does this mean that all CCPCs should distribute their investments to shareholders? The answer is no. There are many non-tax advantages to having investment income earned by a CCPC such as the ability to control the timing of distributions to shareholders and to assist in estate planning purposes.

We Are Here To Help

For more information regarding this topic, please contact the Manning Elliott Tax team.

The above content is believed to be accurate as of the date of posting. Tax laws are complex and are subject to frequent changes. Professional advice should be sought before implementing any tax planning. Manning Elliott LLP cannot accept any liability for the tax consequences that may result from acting based on the information contained therein.