Effective October 1, 2020, brokers and agents in Ontario can
incorporate personal real estate corporations (PRECs) to receive
remuneration for their services to their brokerage. The following
is a summary of PRECs and the relevant considerations that may
apply.
Why would I want a PREC?
The primary benefit of a PREC is the ability to defer income
tax. Without a PREC, agents and brokers pay tax at their personal
rate on the commissions they earn, which can be as high as 53.5% at
the top marginal rate. If paid to the PREC instead, the commission
will be taxed at the corporate rate of 12.2% on the first $500,000,
assuming the PREC is eligible for the small business rate. This
leaves you with more money to invest within the corporation. While
money you later take out of the PREC will be subject to personal
income tax, your accountant may be able to advise on additional
savings strategies, such as the payment of a salary or
dividends.
