投资与报税

2007年7月16日 | 分类: 理财 (全局), 税务相关, 未分类, 金融投资 | 作者: earthcitizen | 1,683 浏览
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http://www.rolia.net/forum/forum_listSingleThread.php?tno=405534

I try to keep silent on this topic but it’s too misleading with all kinds of incorrect answers.


by sunbeamcga (二月鱼飞) at 2006.11.26 18:56

1. capital gain is 50% taxable no matter it is in personal or corporate ’s hands 2. capital gains calculation rules are different depending on what you are trading, shares, mutual funds, trust units, or options. The calculation and income tax implications can be very complicated. 3. Tax rules are different for different investment income: interest, Canadian dividends, foreign dividends, dividend from related company, cash dividends, stock dividends, dividend reinvestment plan, etc. 4. In order to minimize tax, both personal and corporate tax positions should be considered. There’s no black or white answer. Every circumstance needs a careful tax planning. 5. There are some tax saving or deferal vehicles that can’t be done without a corporation. Some tax planning techniques are unique in a corporation. 6. Corporate’s taxation in investment income is very complicated and tax planning is totally different from income from business (which is called active business income that’s qualified for small business deductions). Professional help is a MUST if you want to have an investment corporation. I’m not sure if you have taxation background but it looks like you are a sophisticated investor. It’s difficult to discuss every tax planning here and I don’t think it worths discussion in details here. Simply put …


by sunbeamcga (二月鱼飞) at 2006.11.27 23:03

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. You can always deduct the broker fees no matter if you earn the capital gain personally or through a corporation. One point to correct, capital gain earned through a corporation is only 50% taxable as well.


by

mitten (mitten) at 2006.11.24 21:37

However the corporate tax rate for investment income is around 49%. Unless you are qualified as a day trader, then the capital gain would be treated as active business income and will be taxed at the lower corporate tax rate for amount under certain limit.

49% is flat rate.


by

mitten (mitten) at 2006.11.25 14:20 If you earn the capital gain through a CCPC (Canadian Controlled Private Corporation) and are qualified to report the income as active, then currently taxable income up to $300,000 will be taxed at 18.62%. A world of caution, first it is not easy to establish your investment activity as a day trader. There are certain criteria to be met and must be accepted by the tax authority. Second, once you elect to be a day trader, it can not be reversed(? I need to double check this point). Third, remember when the corporation pays dividend to you as a shareholder, you need to pay taxes on the dividend at the personal level.In general, the foundamental concept of Canadian taxation system is “Integration”, which means the income earned through a corporation vs personal should be taxed more or less the same. Active income earned through a corporation can achieve significant tax deferral, not tax savings. Investment income earned through a corporation does not even provide the deferral benefit.

However a corporation can be a great vehicle to achieve income splitting, credit risk proofing etc.

To answer registereduser’s question: Your understanding about the tax rate now is correct. However be aware that taxation rule related to investment income is very complicated.


by mitten (mitten) at 2006.11.25 13:54

Whether you want the income earned through a corporate vs personal and taxed as passive vs active requires detail analysis. It is very difficult to explain fully here. If you have sepcific question, you can try to send me a PM.

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3 条评论

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    broadband sp [ 评论 @ 2012年11月15日 12:11 # ]
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    broadband sp [ 评论 @ 2012年11月15日 12:17 # ]
  3. “Capital isn’t scarce; vision is.” Sam Walton

    broadband [ 评论 @ 2012年12月4日 15:20 # ]

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