AFM363 Lecture Notes - Lecture 15: Small Business, Double Taxation, Passive Income
30 Jun 2020
School
Department
Course
Professor
Taxable Dividends
• Received from Canadian corporations
• Paid once at corporate level, pay once at individual level
o Should be paid as if there were no corporate level
• One incident of dividends being taxed, the original recipient
o Other corporations include as division B, deduct in division C
Charitable Donations
• Limited to 75% of division B
• Division C deduction
Types of Corporations
• CCPC
• Private
o Controlled by a foreign party
• Public
Foreign Tax Credits
• Ensure there is no double taxation
• Country has right to tax income where it is earned
• Encourage international trade
• Treaties
o Agreement between two countries
o Reduce the amount of tax in the source country
• Non-business FTC
o Lesser of rule
▪ Amount paid
▪ Foreign income (gross)/(division b income - division C deductions) *(effective tax paid
by corporation)
o Passive income does not create jobs
• Business FTC
o Businesses creates jobs and opportunity
o Usually set up a subsidiary
▪ Limited liability
▪ Keep taxes in one place
o Least of
▪ Amount paid
▪ Foreign income (gross)/(division b income - division C deductions) *(effective tax paid
by corporation)
• No abatement
▪ Part 1 tax payable - total non-business FTC
Provincial Taxes Payable
• More than one province involved
• Abatement allows the provinces levy the provincial and federal taxes payable
o Tax 10% of federal tax in the province
• PE outside the country
o Don’t have to pay provincial tax
