Investment income in a CCPC

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kcowan
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Re: Investment income in a CCPC

Post by kcowan »

Although I have wound down my corporation, I shudder to think what the government might do to "normalize" the tax treatment. The people that will be charged with doing the work are likely civil servants on salary with DB pensions.

I would be pushing for a citizens group to develop guidelines.
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Re: Investment income in a CCPC

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Koogie wrote: 25 Jul 2017 11:04 The point however is that they are shareholders, not employees. What "actual work" did you do for the TD bank as a shareholder ? Nevertheless, you will receive a dividend from them. People are getting confused on that point. Shouldn't private corporations be allowed to distribute their retained earnings as they see fit as well as public companies ?
Only if they put in the corrresponding capital into the company commensurate with their share ownership of the CCPC. The game as I understand it is the business owner creates the company with passive shareholders (family members) and distributes some shares to family members... without the associated capital injection relative to share valuation. Maybe just heresay on my part.
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izzy
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Re: Investment income in a CCPC

Post by izzy »

kcowan wrote: 25 Jul 2017 12:41 Although I have wound down my corporation, I shudder to think what the government might do to "normalize" the tax treatment. The people that will be charged with doing the work are likely civil servants on salary with DB pensions.

I would be pushing for a citizens group to develop guidelines.
Unfortunately Keith I think the obvious measure next would be to disallow the dividend tax credit.People who invest in shares are obviously fat cats who can and should pay more!
Look for that next year!
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Re: Investment income in a CCPC

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izzy wrote: 25 Jul 2017 12:49 Unfortunately Keith I think the obvious measure next would be to disallow the dividend tax credit.People who invest in shares are obviously fat cats who can and should pay more!
Look for that next year!
you may be right, or capital gains would be another target. Would be nice to see some stability though. Here in BC NDP soon to increase taxes as well. I'm not using the income sprinkler myself, but for those who are, between these measures, NDP increase, and interests rates climbing on mortgage, there are going to be some professionals really hurting.
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Re: Investment income in a CCPC

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Park wrote: 25 Jul 2017 08:06 About incorporated professionals, some groups (dentists, lawyers, accountants) have more freedom than others (physicians) to pass along increased costs (taxes in this case) to their clients.

Seventeen years after physicians negotiated with provincial governments the option to incorporate in lieu of other possible forms of compensation, the federal government has decided that this is unfair.

This will change incentives/disincentives to work. There may be some who will work longer as a result; however, I will be retiring earlier.
I think that will be a very interesting unintended consequence. As an example, if you can work 4 days and make 200k or 5 days and make 250k, most would opt for the former because past a certain point the taxman takes nearly 50 cents of every dollar.

Moreover, there are a lot of rural incentives to keep people working. Alberta pays a fee premium as well as a yearly bonus if you live in the area. What's the point if you can't shelter that and make it work for you?

Would I like to work in the city 4 days and take home 150k after tax or work 6 days a week, on call, in a village 4 hours from a major city and take 250,000? What a tough decision.

Imagine if 20% of the physician workforce suddenly disappeared...Good luck.

I'm all for the cutting of dividend sprinkling to children. That shit was retarded and was used solely to funnel money to children and avoid tax; anyone defending it on the basis of "shareholders" is being unreasonable.
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Re: Investment income in a CCPC

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izzy wrote: 25 Jul 2017 12:49
kcowan wrote: 25 Jul 2017 12:41 Although I have wound down my corporation, I shudder to think what the government might do to "normalize" the tax treatment. The people that will be charged with doing the work are likely civil servants on salary with DB pensions.

I would be pushing for a citizens group to develop guidelines.
Unfortunately Keith I think the obvious measure next would be to disallow the dividend tax credit.People who invest in shares are obviously fat cats who can and should pay more!
Look for that next year!
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Re: Investment income in a CCPC

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AltaRed wrote: 25 Jul 2017 12:45
Koogie wrote: 25 Jul 2017 11:04 The point however is that they are shareholders, not employees. What "actual work" did you do for the TD bank as a shareholder ? Nevertheless, you will receive a dividend from them. People are getting confused on that point. Shouldn't private corporations be allowed to distribute their retained earnings as they see fit as well as public companies ?
Only if they put in the corrresponding capital into the company commensurate with their share ownership of the CCPC. The game as I understand it is the business owner creates the company with passive shareholders (family members) and distributes some shares to family members... without the associated capital injection relative to share valuation. Maybe just heresay on my part.
That is generally done when the CCPC is created. The shares are issued at nominal value because the company has no retained earnings at that point. What should they be valued at and how much capital would you have people input for ownership of a value less company ?
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Re: Investment income in a CCPC

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Therein lies the predicament of 'income sprinkling'. Something (dividend income) for nothing invested, versus you and I purchasing shares of TD on the market. IOW, it IS different.
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Re: Investment income in a CCPC

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So, to my question. What would you have someone invest in a worthless company when the shares are issued ? How are we supposed to anticipate what the company will one day be worth ?
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Re: Investment income in a CCPC

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Koogie wrote: 25 Jul 2017 15:23 So, to my question. What would you have someone invest in a worthless company when the shares are issued ? How are we supposed to anticipate what the company will one day be worth ?
Don't pay dividends to those 'non-invested' shareholders to begin with. Only pay them a stipend of $100 to attend the AGM.
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Re: Investment income in a CCPC

Post by ehate »

tdiddy wrote: 25 Jul 2017 13:16 you may be right, or capital gains would be another target. Would be nice to see some stability though. Here in BC NDP soon to increase taxes as well. I'm not using the income sprinkler myself, but for those who are, between these measures, NDP increase, and interests rates climbing on mortgage, there are going to be some professionals really hurting.
I can agree with income sprinkling, income sprinkling for kids is a loophole. What I don't get is this. For those that have a CCPC or a holding company, if you are getting paid a Market Wage for the work that you do and are keeping your Capital in your CCPC or pulling out to your holding company to reduce liabilities / re-invest in other opportunities why should you be taxed at a higher amount on that cash interest (beyond what is currently charged now) as you may at some point roll it / re-invest back into the CCPC when required. For BC, investments in CCPC are already taxed higher than max marginal tax rate or am I missing something?

Wouldn't it make sense to go after those that are drawing a low salary for their role (under market value) and subsidizing the rest through dividends? I am pretty sure the IRS does something like that.
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Re: Investment income in a CCPC

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nisser wrote: 25 Jul 2017 14:29 I'm all for the cutting of dividend sprinkling to children. That shit was retarded and was used solely to funnel money to children and avoid tax; anyone defending it on the basis of "shareholders" is being unreasonable.
Dividends to children were already taxed at a punitive rate for some two decades. The Liberals are now twisting the meanings of the word by showing examples with "children" age 25 or 27 to push their agenda. People 25 years of age may be the daughter or son of someone, but they are no longer children.
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Re: Investment income in a CCPC

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Much as we may not like it I don't think anyone denies that governments have the right to raise taxes if they need to.The problem for me is the blatant dishonesty of the rationale being used.This is NOT abuse of a loophole discovered by an artful lawyer.The legislation was specifically designed to provide an opportunity for family income splitting as a means of preventing needed professionals from leaving.Especially from leaving remote areas where opportunities for employment for other family members could be a problem.
Calling it abusive as a means of justifying drastic changes smacks of entrapment and is likely to create a precedent which will impact negatively on future negotiations with government by anybody else .
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Re: Investment income in a CCPC

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Park wrote: 25 Jul 2017 08:06 About incorporated professionals, some groups (dentists, lawyers, accountants) have more freedom than others (physicians) to pass along increased costs (taxes in this case) to their clients.

Seventeen years after physicians negotiated with provincial governments the option to incorporate in lieu of other possible forms of compensation, the federal government has decided that this is unfair.

This will change incentives/disincentives to work. There may be some who will work longer as a result; however, I will be retiring earlier.
To those watching this from the outside, this is a subtle, but important point. Physicians bear much risk in their businesses particularly with regards to wage inflation, rent inflation, material inflation, and now tax inflation :shock: without any means to offset those increased costs with higher fees. In my years in practice, we go through soul-grinding negotiations with the government, but yet have never seen a fee increase that matches or exceeds the wage/rent/material inflation that we experience. Our incomes drift lower year after year unless we can somehow manage to fit more patients into the day.

This change to the CCPC taxation dwarfs our other inflationary pressures. And I will have to pay the dentist and accountant even more.
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Re: Investment income in a CCPC

Post by AltaRed »

The comment period is to get input. I'd suggest those of you in professional corps make your voices heard by making submissions on what might be okay to 'close' in fairness (gotta give them something) but what needs to stay to keep professionals home and in the business. Surely your professional associations will do likewise.
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Re: Investment income in a CCPC

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I seriously doubt this government will listen to people, they seem to have made up their minds about taxing wealthy (ie, physicians) people because apparently all wealthy Canadians are tax cheats.
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Re: Investment income in a CCPC

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adrian2 wrote: 25 Jul 2017 18:34
nisser wrote: 25 Jul 2017 14:29 I'm all for the cutting of dividend sprinkling to children. That shit was retarded and was used solely to funnel money to children and avoid tax; anyone defending it on the basis of "shareholders" is being unreasonable.
Dividends to children were already taxed at a punitive rate for some two decades. The Liberals are now twisting the meanings of the word by showing examples with "children" age 25 or 27 to push their agenda. People 25 years of age may be the daughter or son of someone, but they are no longer children.
The government analysis found that dividends being paid to adult family members aged 18-21 exceeded amounts paid to adult family members aged 22-29. Why? Because income sprinkling was happening at higher rates when young adult family members had very low incomes, maximizing tax savings -- an indication the system was being gamed.

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Re: Investment income in a CCPC

Post by izzy »

Today's young physicians are much more militant than we were .Most have portable qualifications too!
If they don't trust a government which questions their integrity they can leave!
Its not just about money!
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Re: Investment income in a CCPC

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couponstrip wrote: 25 Jul 2017 20:11
To those watching this from the outside, this is a subtle, but important point. Physicians bear much risk in their businesses particularly with regards to wage inflation, rent inflation, material inflation, and now tax inflation :shock: without any means to offset those increased costs with higher fees.
My SIL has a CCPC as a surgeon. He is assigned OR time by the hospital and bills OHIP for the operations he performs. He pays no wages, rent or material. I really don't see the risk in his business.

If CCPCs are supposed to be MD retention programs then they should be limited to MDs. I see a number of former employees who have formed CCPCs and now invoice their former employers for their services.
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Re: Investment income in a CCPC

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Glen wrote: 25 Jul 2017 21:58
couponstrip wrote: 25 Jul 2017 20:11
To those watching this from the outside, this is a subtle, but important point. Physicians bear much risk in their businesses particularly with regards to wage inflation, rent inflation, material inflation, and now tax inflation :shock: without any means to offset those increased costs with higher fees.
My SIL has a CCPC as a surgeon. He is assigned OR time by the hospital and bills OHIP for the operations he performs. He pays no wages, rent or material. I really don't see the risk in his business.

If CCPCs are supposed to be MD retention programs then they should be limited to MDs. I see a number of former employees who have formed CCPCs and now invoice their former employers for their services.
He lacks pension, sick leave, and mat leave. I'd say he has a pretty high risk of not being able to work whilst servicing a 6-figures debt.
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Re: Investment income in a CCPC

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DmDave wrote: 25 Jul 2017 22:04 He lacks pension, sick leave, and mat leave. I'd say he has a pretty high risk of not being able to work whilst servicing a 6-figures debt.
Millions of Canadians lack pension, sick leave and mat leave. CCPCs are a crazy way to address that.
As for the risk of falling ill while in debt, why not get insurance -- which is what most salary earners must do.
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Re: Investment income in a CCPC

Post by StuBee »

I am an MD. In PQ incorporation for MD's was introduced in 2007 and was being seriously promoted by our union (FMOQ) by 2009. In Quebec, it has always been promoted as a way to reduce tax via deferral and splitting. I did not incorporate since, at the time, my average tax rate was already less than 25% (i.e. within 5% of the total corporate tax rate in PQ). Apparently, close to 1/2 of the medical profession in my province is incorporated.

ISTM that the tax advantage associated with this structure will disappear.

What will happen to all of those corporations? Will all of these MD's be stuck with a useless structure which they cannot disassemble without incurring very high levels of taxation?
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Re: Investment income in a CCPC

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fireseeker wrote: 25 Jul 2017 21:52
adrian2 wrote: 25 Jul 2017 18:34
nisser wrote: 25 Jul 2017 14:29 I'm all for the cutting of dividend sprinkling to children. That shit was retarded and was used solely to funnel money to children and avoid tax; anyone defending it on the basis of "shareholders" is being unreasonable.
Dividends to children were already taxed at a punitive rate for some two decades. The Liberals are now twisting the meanings of the word by showing examples with "children" age 25 or 27 to push their agenda. People 25 years of age may be the daughter or son of someone, but they are no longer children.
The government analysis found that dividends being paid to adult family members aged 18-21 exceeded amounts paid to adult family members aged 22-29. Why? Because income sprinkling was happening at higher rates when young adult family members had very low incomes, maximizing tax savings -- an indication the system was being gamed.
So what? Either a person is a child or is not. Don't start with the premise that income sprinkling (love this new term :evil: ) to children is bad, and in the next breath mention a 28 year old "child".
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Re: Investment income in a CCPC

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fireseeker wrote: 25 Jul 2017 22:24
DmDave wrote: 25 Jul 2017 22:04 He lacks pension, sick leave, and mat leave. I'd say he has a pretty high risk of not being able to work whilst servicing a 6-figures debt.
Millions of Canadians lack pension, sick leave and mat leave. CCPCs are a crazy way to address that.
As for the risk of falling ill while in debt, why not get insurance -- which is what most salary earners must do.
Wage slaves have labor law on their sides, small business owners don't.
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Re: Investment income in a CCPC

Post by couponstrip »

Glen wrote: 25 Jul 2017 21:58
couponstrip wrote: 25 Jul 2017 20:11
To those watching this from the outside, this is a subtle, but important point. Physicians bear much risk in their businesses particularly with regards to wage inflation, rent inflation, material inflation, and now tax inflation :shock: without any means to offset those increased costs with higher fees.
My SIL has a CCPC as a surgeon. He is assigned OR time by the hospital and bills OHIP for the operations he performs. He pays no wages, rent or material. I really don't see the risk in his business.
It sounds like your SIL is hospital-based and perhaps even runs his clinics out of the hospital. This setup applies to a small minority of physicians, perhaps 5%.

Surely you have seen a doctor sometime in your life? Did someone check you in, pull your file, get you to fill out forms, answer phones? Did you walk into a space owned by a REIT rented by the MD? Did a nurse check your BP, weigh you and take your chief complaint? Did the office have computer systems, medical equipment, books, chairs, desks, phones? Where does all the money come from to pay for this space, these people, this medical stuff?

Why the MD herself, of course, and she has zero control over how much she charges for your visit.
If CCPCs are supposed to be MD retention programs then they should be limited to MDs. I see a number of former employees who have formed CCPCs and now invoice their former employers for their services.
I'm not sure where the line needs to be drawn, but yes I am also aware of consultants in the business world who bill their services through a CCPC but are for all intensive purposes employees (very long-term consultants) of a single client including some benefits and no employees or expenses. Perhaps this is what the Feds are taking aim at. However, I would argue that the existing rules can be applied to stop such abuse of the CCPC.
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