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  • Sep 15th, 2017 10:20 pm
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[OP]
Member
Dec 9, 2007
265 posts
54 upvotes

Phsp question

Hi
I m the only shareholder of my construction compagny. I m not an employee (no salary decalred) and i m in quebec... any tough about opening a phsp with brock health for example? Am i eligible?
Thanks
6 replies
Deal Addict
Aug 28, 2007
1803 posts
221 upvotes
Calgary
Yes, you are eligible but you will have to create some "earned income" to qualify as an employee. Ask your accountant the best way to do it - they know how to structure so it is easy and low cost.

The second thing is your Quebec residency. Slightly different tax laws apply there. Again, your accountant would know best.

I'm not an expert but in Quebec I believe PHSP expenses to the employee are considered a non-taxable benefit only on the federal portion of your personal income tax, however the provincial portion is considered a taxable benefit.

For example, (using a ballpark 30% marginal federal tax rate) if you earn $100 of normal earned income, you would and have to pay $30 in federal income tax. Provincial income taxes are about half the federal tax so say $15 in total $45 would be paid in tax by the employee.

But if you had a $100 PHSP expense with a $100 reimbursement to the employee that $100 would be treated differently as income. It still generates a $100 tax deduction to the business; that is the same across the country - 100% deductible.

The payment to the employee however is a little different; In the rest of Canada the $100 reimbursement would be completely tax-free because it is a non-taxable benefit to both the feds and the other provinces. In total $0 would be paid in tax by the employee

In Quebec, it would be considered income to the provincial government meaning the employee would be dinged the $15 provincial income tax but not the $30 federal tax. In total $15 would be paid in tax by the employee.

In summary it would still be beneficial to have a PHSP in Quebec, but not quite as beneficial as in the rest of Canada. Think of it as funding the great child care program in Quebec.
Deal Addict
Feb 5, 2009
2294 posts
502 upvotes
Newmarket
Just Confused wrote:
Sep 12th, 2017 10:17 am
Yes, you are eligible but you will have to create some "earned income" to qualify as an employee.
This is true if he is the only employee, however if he has other employees and he offers phsp only to himself this in most cases would make him ineligible,
[OP]
Member
Dec 9, 2007
265 posts
54 upvotes
I don t have any employee and me neither i m not an employee. I just takes dividends when needed.
Deal Addict
Aug 28, 2007
1803 posts
221 upvotes
Calgary
tbtaoufiq wrote:
Sep 12th, 2017 11:40 am
I don t have any employee and me neither i m not an employee. I just takes dividends when needed.
That was the point I was making. I'm not saying you have to set up a payroll account with remittances etc. If you want you can still pay yourself dividends for the bulk of the income. However, for the purpsoes of a PHSP you have to viewed as an "employee".

As I said talk to your accountant, they always have strategies so you can meet the appropriate criteria. In some circumstances you can be viewed as an "employee." And in other cases, you will behave as a "shareholder". The analogy is light.... sometimes behaviour is a wave and sometimes a particle!
Deal Addict
Aug 28, 2007
1803 posts
221 upvotes
Calgary
Homerhomer wrote:
Sep 12th, 2017 11:28 am
This is true if he is the only employee, however if he has other employees and he offers phsp only to himself this in most cases would make him ineligible,
You are right. But that is a whole other story.

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