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Tag Archive for ITA

Formula For Success: Tax = Money X Politics

The Income Tax Act (ITA) is a lot like those word problems we all remember from grade school math. The word problem is a story told in numbers. Tax is a story told in numbers but the characters in the story are real life politicians and voters.

Let us take a humorous approach and give a real life example. Imagine you are a politician looking to get re-elected. You have the power to change the ITA because you currently hold office. You decide to change the ITA to encourage voters to vote for you. Let’s say you want to get young families to vote for you. You introduce a new tax credit that only young families can use. The tax credit gives a tax refund to families with children in registered sports activities. The formula in your head is: Read more

The Tax Efficient Way For Foreign Corporations To Acquire Canadian Corporations

Envision a situation where a foreign corporation (“Forco”) buys all of the shares of a private Canadian corporation (“Canco”) for $10 million.

What happens if Canco generates profits, and Forco would like to use those profits to recover the $10 million cost of its investment in Canco?

Can Forco just take funds from Canco up to the amount of that cost without paying any Canadian withholding tax? It should be able to, since it is just trying to recover its cost, right?

Unfortunately, that is not the case. Any dividends that Canco pays to Forco will be subject to Read more

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