The Capital Gains Corporate Tax Rate in Canada

Running a corporation is never easy, especially during the tax season. The capital gains corporate tax rate varies between each province. Besides that, the regulations also keep on changing from time to time. 

Of course, this can make it challenging for many businesses to understand what needs to be done. If you are also confused about this tax rate in Canada, you have come to the right place. Here is your complete guide. 

Capital Gains Corporate Tax Rate In Canada Explained

In simple terms, a capital gain is the income a business makes by selling passive or capital assets. These include assets such as land, goodwill, shares, and stock. You need to incorporate your capital gains into the declared taxable income as a corporation. 

However, you only need to incorporate the inclusion rate of the capital gains tax, which is 50%. This percentage of your capital gain is taxable. Of course, the capital gains corporate tax rate is a hefty one, as you can tell. 

Because of this, it is always best to work with a tax accountant to understand what it implies. After all, you should have complete knowledge before paying such a tax on your business. 

How To Calculate Capital Gains Tax In Canada 

Now that you know what capital gains corporate tax rate is, you might be wondering how to calculate it. In Canada, the capital gains tax needs to be declared as income on your tax return filings for the year that you sold the asset. Such an income will be considered as 50% of the capital gain.

Let’s say you sold an asset for two thousand dollars with an adjusted cost base of a thousand dollars; then the taxable income will be $500 ($1,000 gains x 0.5). You will need to add the five hundred dollars as the taxable income, and you will be taxed according to the marginal tax rate depending on your tax bracket. 

Different Ways You Can Reduce The Capital Gains Tax 

Here are the various ways you can use to reduce your capital gains tax burden in Canada:

1. Tax-Free Savings Account (TFSA)

A TFSA can help you avoid the capital gains tax. That is because income is not taxable even when you realize the gain. Besides that, even if you withdraw funds from here, they will not be taxable. 

2. Tracking Expenses 

A great way to reduce the capital gains tax is to keep track of the expenses incurred while maintaining or securing investments. That is because expenses can lead to a high ACB, which means you are required to pay the capital gains tax. 

3. Registered Retirement Savings Plan (RRSP)

Finally, you can opt for an RRSP to decrease your capital gains tax burden. The gains earned on such income will not be taxable when you realize the gain. However, it will be taxable when you withdraw the funds. 

Final Words 

If you would like to know more about the capital gains corporate tax rate in Canada, please feel free to get in touch with WTC Chartered Professional Accountant. Their experts will answer your queries in no time. 

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