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What is a Canadian Controlled Private Corporation (CCPC)?

A Canadian Controlled Private Corporation is eligible for special treatment under the Income Tax Act. The most important being access to a lower tax rate on income below the business limit. Knowing whether a corporation is a CCPC or not, is an question to answer. “Canadian Controlled Private Corporation” is defined in subsection 248(1) and 125(7) of the Income Tax Act. The general definition is that a CCPC is:

  1. A private corporation that is a “Canadian Corporation”,
  2. NOT a corporation that has any class of its shares listed on a stock exchange,
  3. NOT a corporation that is directly or indirectly controlled by non-resident persons,
  4. NOT a corporation that is directly or indirectly controlled by one or more public corporations
  5. NOT a corporation that would be legally controlled by one fictional person, if that person owned all of the shares of the corporation owned by any non-resident person, public corporation, or listed corporation.

A “Canadian Corporation” is defined in subsection 89(1) to be a corporation that is both resident in Canada and is incorporated in Canada. There are also some transition rules for corporations resident in Canada in 1971, but these are not applicable in most circumstances. A “private corporation” is defined in subsection 89(1) to be a corporation that is resident in Canada, is not a public corporation, and is not controlled by one or more public corporations or crown corporations (other than venture capital corporations), or any combination of them. As with Canadian corporations, there are some transition rules that are not important in the vast majority of cases. Where the control of a corporation lies is an important consideration in whether a corporation is a CCPC or not. Where the legislation uses the phrase “controlled directly or indirectly in any manner whatever”, we are concerned with both factual control and legal control. Legal control refers to ownership of shares with sufficient votes allowing a person to elect a majority of board members. Factual control refers to control exerted even when legal control is lacking. This can be a complex questions that looks at various factors that may give a person control over a corporation even if that person owns no shares.

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