Planning for excess funds in CCPC

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dualcitizencanuk22
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Joined: Tue Jan 01, 2019 2:33 pm

Planning for excess funds in CCPC

Post by dualcitizencanuk22 » Tue Jan 01, 2019 2:42 pm

Hi,

I am a dual citizen (US/Can) living in Canada.

I own 100% of the shares of a CCPC. This year the CCPC has substantial excess funds and I am trying to figure out the best thing to do with them. The typical strategy for a Canadian who is not a US citizen would be to leave the funds in the CCPC and invest them as part of your retirement plan.

For a dual-citizen, what is the general consensus of the approach that leads to lowest tax:

1. Leave funds in CCPC.
2. Pay funds out to myself as dividend.
3. Pay funds out to myself as salary

Funds would be invested in a CCPC-held investment account for option 1, or a non-registered investment account for options 2 and 3.

Thanks for your thoughts.

Richard

Phil Hogan, CA
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Joined: Fri Jan 08, 2010 12:11 pm
Location: Victoria BC
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Re: Planning for excess funds in CCPC

Post by Phil Hogan, CA » Sun Jan 20, 2019 7:35 pm

Hi Richard

This can get tricky. The answer will depend on several factors:

- Assuming the company is a CFC and had retained earnings in 2017, did you 1040 for 2017 include 965 calculations?
- As a CFC you'll also be subject to GILTI for 2018. Have you access these requirements yet? see here https://xborderpros.com/cross-border-tax-news/

There's often nothing wrong with continuing to defer income from tax within the corp until you reach a point where subpart F income becomes a problems (investment income in the corp for US purposes).

If you can answer the questions above in more detail I can provide some more answers.

Cheers

Phil
Phil Hogan, CA, CPA (Colorado)
Canadian and US Income Tax
http://www.hutcheson.ca/about-us/philip-hogan/
http://xborderpros.com
250-661-9417
Victoria BC

Mark T Serbinski CA CPA
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Re: Planning for excess funds in CCPC

Post by Mark T Serbinski CA CPA » Tue Jan 29, 2019 10:48 am

New IRS rules related to the Transition Tax in IRC 965 make it unattractive for any US person to accumulate retained earnings with a foreign corporation, and the transition tax retroactively taxes retained earnings back to 1986.

Here are some references:
https://serbinski.com/treatment-deferre ... rporations

For future years, the accumulation of earnings and profits in a foreign corporation will also be taxed, annually:

https://serbinski.com/global-intangible ... come-gilti

US rules generally favor the inclusion of any earnings in personal income in the year they are earned, and the deferral of income Canadian style can be costly.
Mark

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