TaxTips.ca
Canadian Tax and
Financial Information
Corporate Taxation of Investment Income

Ads keep this website free for you.
TaxTips.ca does not research or endorse any product or service appearing in ads on this site.  Before making a major financial decision you  should consult a qualified professional.

Looking for US tax information?
See
USTaxTips.net

Need an accounting, tax or financial advisor? Look in our Directory.      Stay Connected with TaxTips.ca!      Internet Explorer - Use compatibility view for calculators to work properly!

Home
What's New
Calculators
Personal Tax
Business
Sales Taxes
Free in 30!
Financial Planning
RRSP RRIF TFSA
Real Estate
Stocks Bonds etc.
Seniors
Disabilities
Canada
Alberta
British Columbia
Manitoba
Ontario
Quebec
Saskatchewan
Atlantic Provinces
Territories
Federal Budget
Provincial Budgets
Statistics etc.
Glossary
Site Map
Directory
Advertise With Us
Contact Us/About Us
Links & Resources



Information for business owners -> Corporate Taxation of Investment Income

Corporate Taxation of Investment Income

Investment income consists of income from property, which would include things like rentals, interest, dividends and royalties.  However, see our article on Rental Income - Property Income or Business Income?, as rental income can also be considered business income.

The corporate income tax rate on capital gains is 50% of the tax rate on investment income, because only 50% of a capital gain is taxable.

There is no gross-up or dividend tax credit for dividends received by a corporation.  Dividends received from Canadian corporations may be deductible under s. 112 of the Income Tax Act (ITA), but Part IV tax (ITA s. 186-187) may be payable on these dividends at a tax rate of 38 1/3% (33 1/3% for taxation years ending before 2016) of the dividends received.  Part IV tax becomes part of the corporation's refundable dividend tax on hand (RDTOH).  RDTOH is available as a dividend refund to the corporation when dividends are paid to shareholders of private corporations.

The federal tax rate of 38.7% on investment income includes a 10.67% (6.67% for taxation years prior to 2016) refundable tax as per s. 123.3 of the ITA, which becomes part of RDTOH.

When the principal business of a corporation is to earn investment income (income from property), the corporation is usually considered a specified investment business, and is not eligible for the small business deduction.

See Corporate Income Tax Rates for current and prior tax rates.

Revised: July 28, 2016

 

Copyright © 2002 - 2017 Boat Harbour Investments Ltd. All Rights Reserved  See Reproduction of information from TaxTips.ca

Facebook  | Twitter  |  Google + |  Monthly Newsletter Sign-up  What’s New E-mail Notification RSS News Feed
The information on this site is not intended to be a substitute for professional advice.  Each person's situation differs, and a professional advisor can assist you in using the information on this web site to your best advantage. 
Please see our legal disclaimer regarding the use of information on our site, and our Privacy Policy regarding information that may be collected from visitors to our site.