Channel the Power of the Capital Dividend Account

A guiding principle within the Canadian tax system for Canadian-controlled private corporations and their shareholders is one of integration.  Simply put, an individual should be should be indifferent (from an income tax perspective) as to the type of entity used to earn income.  To accomplish this incredible feat a number of mechanisms have been added and amended since its original introduction.  This has added layers of complexity and confusion for incorporated business owners and advisors alike.  Though frustrating at times, an understanding of the system is crucial to ensure we pay our fair share, and only our fair share.  Working with a trusted advisor can alleviate the frustration and save precious dollars in the process!

Purpose

The manner in which we receive income is important as not all income is treated the same.  Monies received can be fully taxable, tax-preferred or non-taxable with the classifications being applicable to both individuals and corporations.  The tax system uses a mechanism called the Capital Dividend Account (“CDA”) to track certain non-taxable items earned by private corporations resident in Canada.  The accumulated amounts are, in turn, available to be distributed tax-free to the Canadian resident shareholders of a private corporation, thus preserving the principle of integration.

Who’s this for?

  • Business Owners
  • Small Business Owners
  • Succession Planning
  • Family Business