Corporation and Canadian Departure

jheyden · Post by **jheyden** » Tue May 01, 2012 6:31 am

I'm currently working as a self-employed contractor in Canada using my corporation. I'm looking to work on TN1 visa in the US as an employee. Will CRA make me draw all the money out personally when I file my departure return or can I leave it all in there in case I come back to Canada?(might come back in 1-5 years)

JGCA · Post by **JGCA** » Tue May 01, 2012 5:50 pm

No CRA will not force you to do anything, we still live in a civilized democratic country there is no forced action at all.

What ends up happening is you are DEEMED to have disposed of all your assets when you leave Canada this includes your shares of your corp whether or not its a CCPC or just a Small Business Corp its the same thing as long as its a privat corp you have had teh corp redeem them at FMW the day you leave which triggers a taxable dividend and a Capital Loss at the same time. The capital loss will be applied on the actual sale when this occurs but you now have a dividend that is taxable. What most accopuntants advise is to pay your self a taxable dividend of teh entire Retained Earnings to bring the value of the shrs to NIL this way you do not have a deemed dividend and capital loss to have to apply only the dividend from a tax point of view its the same but you forego many problems in the cap gain area in the future. You could leave the dividend as a loan owing to you and draw it down tax free while in teh US since its a loan repayment not income.

jheyden · Post by **jheyden** » Fri May 04, 2012 6:19 am

So by taking the taxable dividend of the entire Retained Earnings mean that I would have to report this entire amount as income personally in the departing year or by doing the loan repayment am I able to defer paying the taxes personally?

Thanks

jheyden · Post by **jheyden** » Mon May 07, 2012 7:28 am

I'm trying to understand this strategy

"You could leave the dividend as a loan owing to you and draw it down tax free while in teh US since its a loan repayment not income."

Does this mean that I would have to pay the tax(drawn from the ccpc) personally on departure? or am I loaning the money back to the corp.(to be drawn at a later time)?

JGCA · Post by **JGCA** » Mon May 07, 2012 8:14 pm

NO tax is payable on the dividend in the year its declared, leaving it as a loan payable to you means you do not have to take it into your own hands now but can draw down on it tax free until its paid in full to you, reasion being unless ther is a tone of cash sitting in your bank account there are no funds to disburse the cash out immediatly you can wait until you liqidate assets like Accounts Rreceivable, Inventory ets and then pay it out, but the tax is payable in teh year the its declared and paid to you as a loan so its in the departure year the tax is owed.