Practical Considerations for the Investment Income Rules
for Private Companies
Canadian private companies have seen much newsworthy tax reform
in recent years. One change is in the area of income sprinkling.
Another major change in tax law is the rules on investment income
earned by Canadian-controlled private corporations (CCPCs). The
CCPC investment income rules, generally effective starting in 2019,
result in various pitfalls where there is more than $50,000 of
investment income in a year for an associated corporate group that
includes a CCPC.
These rules tend to be particularly punitive for corporations or
associated groups with an asset value in the range of $3 million -
$10 million, including investments such as real estate or
securities. Prudent business owners whose interests fall within
this range should take time to revisit their corporate
structures.
