Many small business owners start to accumulate money in their corporate bank accounts, and want to invest the funds, but do know or understand if there are tax implications…

It is perfectly acceptable to invest excess funds within a corporation. The new rules in 2018 caused some new implications of investing within a Canadian Controlled Private Corporation (CCPC), however.

Without getting too in depth with technical tax details, it is important to know that exceeding $50,000 in passive investment income within a CCPC may have a significant tax implication for the corporation.

Some things to consider and discuss with your Tax Accountant are as follows:

• Passive investment income, i.e. dividends, rental income, interest are taxed at a higher rate than active business income
• Capital gains are taxed differently than at the personal level and depending on the investment it is important to ask your tax accountant the rules and costs
• There may be certain financial statement disclosure requirements depending on the type of investment and the intent, i.e. held for trading vs. long term investments

The rules can be quite complex, and it is important to work with a knowledgeable accountant. There are many qualified chartered accountants with a Toronto location so ensure that you are working with someone that has the experience to guide you in the right direction.