Why we are different from other Accounting firms? We want to communicate this message to all clients and potential clients

1. On average, tax and financial costs took away 70% of Canadians’ gross income: 30% income tax, 40% financial costs-mortgage, insurance, bank charges, credit cards etc
2. For SMEs, corporations and their owners are technically one taxpayer; even the limited provisions is really not limited because owners have to personally guarantee for the business loans or major creditors
3. Tax Planning- Most Accountants are tax preparers, are not trained for pro-active tax planning but preparing tax returns.
4. Unfortunately, tax planning is claimed by Financial Planners as their jurisdiction, when 99.9% of the Financial Planners knows nothing about tax planning, except RRSP deduction
5. There are many accountants who are tax experts, attending court cases as experts, write books, know the tax case precedents in and out ; but that does not make them tax planners
6. We are unique because we provide tax planning and financial expertise to clients
7. Examples of tax planning techniques:
   • Why Dec 31 YE should be avoided, use Jan 1 instead? It has to do with tax deferral: a dividend declared on YE Jan 1 2013 falls under 2013 personal tax; while dividend declared for YE Dec 31 falls under 2012 personal tax returns Technically, we used the same Dec 31 Trial Balance to compile the YE Jan 1
   • Use company to pay for RRSP of the owners; use pre-tax money of the corporation, instead of after-tax money of taxpayers; just like Group RRSP of the big companies; it saves at least 12.5% (Ontario) for the RRSP purchase; T4 of owners will be gross-up with such RRSP taxable benefits, but the owners neutralized that via RRSP deduction in their T1 tax returns. The effect: Corporation pay less tax and the owners tax situation is the same as having use their after-tax money to purchase RRSP
   • Why drilling down Qualified CCPC profits to below $500,000 is a very stupid idea? By drilling down, Accountants are asking owners to pay more payroll to themselves, which more than 50% (including surtax and health premium, vary with provinces and territories) in personal tax instead of 26%; you don’t have to be Accountants or Financial Planners to see the difference
   • The after tax money in the corporation should be invested by the corporation instead of owners personally
   • Why buying RRSP is a dumb idea for SMEs owners? Paying more than 30% to 50% in income tax just to obtain 18% room, subject to a maximum; It is better to declare as dividend, money invested into TFSA and or Non-Registered capital gain type of investments- only trigger capital gain as and when he or she decides

The tax effect of investing at the corporate level is not significantly different from the tax effect of investing personally when both corporate and personal income taxes are considered.

A good understanding of the integration of corporate and personal tax on investment income is of vital importance when dealing with corporations. Often a Consultant will encounter a client who is investing through a holding company or has cash balances in an operating company which are available for investment. The illustrations in this chapter of the conduit effect of income tax integration of the corporate entity should emphasize that the tax effect of investing at the corporate level is not significantly different from the tax effect of investing personally when both corporate and personal income taxes are considered. Therefore, when a client says that he wants to purchase an investment in the name of his company and flow the income through the corporation to himself, your recommendations as to choice of portfolio should be exactly the same as if the client were giving you the funds as an individual. The intent of the corporate tax rules relating to investment income is to make the taxpayer indifferent as to whether the investment is in his name or the company’s name.

The real world rarely presents a situation where rates of return on capital gains, interest and dividends are all the same. Interest returns must be higher than capital gain and dividend returns in order to provide an equal after-tax return. Here is a summary chart comparing the taxation of $10,000 of interest, eligible dividends (based on the Eligible dividend tax credit rate and capital gains respectively), showing that, as with individuals, corporations must earn more interest to provide the same after tax return as dividends or capital gains.

Based on the above it can be concluded that realizing an investment return in the form of capital gains is similar to dividends and both are preferable to interest. Again, the above is based on tax rates that are different from that of your province and accordingly the after tax amounts will differ. To determine the tax impact of investment income from interest, dividends and capital gains in your province you should refer to the Tax rates, credits, benefits and related information chapter under the heading, Federal and provincial income tax rates and brackets. In some provinces, eligible dividends may be tax preferred over capital gains while in other provinces capital gains offer better after-tax results than eligible dividends.