Author: Maryna Mayevska, CPA, CA — Managing Director, Rozvytok CPA Modern minds. Strategic partners.
Preserve the Small Business Deduction (SBD) Where Possible
In Ontario, CCPCs pay about 12.2% on the first $500,000 of active business income but jump to 26.5% after that. Once your taxable capital approaches $10M, the SBD phases out. Example: A logistics firm unintentionally associated with a family real estate company and lost its SBD. By reorganizing ownership and separating active and passive assets, they reinstated their SBD and saved ~$70,000 annually.
Use Holding Companies and Intercorporate Dividends
Move cash from OpCo to HoldCo through tax-free intercorporate dividends to protect retained earnings and defer personal tax. Example: A tech entrepreneur moved $2M from their OpCo to a HoldCo, protecting funds from business risk and investing at corporate tax rates until needed personally.
Corporate-Owned Life Insurance — Future-Proofing Wealth
Participating whole life insurance can shift retained earnings into the Capital Dividend Account upon death, enabling tax-free payouts to heirs. Example: A physician with $5M retained earnings funded a corporate policy; her family later withdrew over $5M tax-free, avoiding a $2M personal tax hit.
Retirement Planning Beyond RRSPs — IPPs & RCAs
Individual Pension Plans allow larger deductible contributions than RRSPs and are corporate-funded. Example: A 52-year-old consultant contributed $120K annually to an IPP versus $30K RRSP, reducing corporate taxable income while growing retirement funds.
Bonus vs. Dividend — Know the Timing Game
Decide between paying bonuses or retaining profits for dividends based on future cash needs and tax rate forecasts. Example: A founder anticipating a sabbatical left $1.2M in OpCo, then paid dividends in a lower-income year, saving ~$90,000 in personal tax.
Accelerate CCA & Consider Asset-Holding Structures
Timing capital purchases before year-end creates deductions. Consider separate companies for long-term asset ownership. Example: A construction company acquired $800K in machinery in March before June year-end, generating $120K extra CCA and smoothing cash flow.
Advanced: International Deferral & Offshore Structures
Foreign affiliates can defer Canadian tax until profits are repatriated, but require careful CRA compliance. Example: A SaaS firm set up a U.S. C-corp affiliate to keep reinvestment profits abroad, avoiding unnecessary FAPI by documenting activities.
Estate Freezes & Family Trusts — Passing Growth, Deferring Tax
Lock in current share value and shift future growth to family trusts to defer capital gains and split income.
Selling? Purify and Multiply the Capital Gains Exemption
Prepare early by purifying OpCo to maintain QSBC status and multiply Lifetime Capital Gains Exemption (LCGE). Example: A family removed excess investments two years pre-sale, qualifying for three LCGE claims and sheltering $3M of gain tax-free.
■ Considering a tax deferral review? Contact Rozvytok CPA for a strategic, personalized consultation to ensure you’re not paying tax earlier than necessary. We integrate legal, banking, and wealth advisory partners to deliver full-spectrum planning.
Download our complimentary Tax Deferral Checklist for Business Owners at www.rozvytok.ca
|
|
|
|
|
|
|
|
|
|
|
