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How is canadian corporation which is not a CCPC anymore because of emigration of shareholders taxed in Canada?
How are the dividends taxed?
Are dividends deducted from Profit?
Company's Profit= 100,000
Taxes (federal+Province)= 29%
Total tax paid by company= 29,000
Company declared dividends of 70,000
15% tax witheld =10,500
Total tax paid on 100,000 is 29000+ 10,5000 = 39,500 almost 40% tax. Am I missing something here?
Hi Sam,
The corporate tax rate for a non-CCPC is 27% on average (varies by province). Assuming a non-CCPC made a profit of $100,000, a corporate tax is payable for $27,000. In addition to this, a non-resident withholding tax of 25% is deducted from dividends paid to non-resident shareholders. Assuming a dividend payment of $73,000, the non-resident dividend withholding tax amounts to $18,250. Therefore, the total burden of tax is $45,250 or 45.25%.
The 25% non-resident tax deducted from dividends may be reduced under a tax treaty with Canada. For example, the Canada-US treaty stipulates that the non-resident tax is 15% where the shareholder is a US individual and 5% where the shareholder is a US corporation.
Tax relief, such as foreign tax credits or tax deductions, may be available in the foreign country. This will help reduce/prevent double taxation.