Entrepreneurship & Small Business

Small Business Corporation - where to invest with minimal account complications

  • Last Updated:
  • Sep 12th, 2017 11:34 am
[OP]
Newbie
Nov 17, 2016
99 posts
101 upvotes

Small Business Corporation - where to invest with minimal account complications

Hello,

I have small business corporation and I do all accounting myself. I would like to invest some money in ETFs. Currently I have some money invested in Tangerine Savings account, but I would like to invest in stocks/ETFs. I am a bit affraid that starting to receive quarterly dividends will make my yearly accounting much more complicated, up to the point where I might have to hire accountant. I do have some basica accounting knowledge and I can do T2 without problems so far, but I never tracked cap gain/dividends.

1. How easy is to track dividends/capital gains in corporate accounting? Any guides, links for that?
2. If I buy "swap" based ETFs like HXS or HXT that do not pay any dividends but swaps them for "Capital Gain" - do I need to do any special reporting about them yearly? So theoretically I could buy such ETF and keep it for 5 years and then sell receiving just capital gain and hiring accountant just for that year when sale was made. Am I right?


TIA,
8 replies
Deal Addict
Feb 5, 2009
2369 posts
537 upvotes
Newmarket
tracking investments is not difficult. You need to get familiar with schedule 3, 6, 7, grip, rdtoh, and be familiar with rules as they change.
That's assuming you don't have any foreign investments.
[OP]
Newbie
Nov 17, 2016
99 posts
101 upvotes
Homerhomer wrote:
Sep 11th, 2017 8:29 am
tracking investments is not difficult. You need to get familiar with schedule 3, 6, 7, grip, rdtoh, and be familiar with rules as they change.
That's assuming you don't have any foreign investments.
HomerHomer - Thanks for the reply!
So - If I buy ETF that does not pay any dividend - does that require yearly update on schedules 3,6,7, grip & rdtoh or that is done just when ETF is sold? Also, if I understood correctly, it is less complicated when my corporate investments are in Canadian securities, right?
[OP]
Newbie
Nov 17, 2016
99 posts
101 upvotes
So I am adding more info:
Schedule 3 - "Dividends received and taxable dividends paid". I am assumin I would not have to file this for years when dividends are not received.
Schedule 6 - "Dispositions of capital property". I am assuming I would have to file this just in the year when my ETFs/stocks are sold.
Schedule 7 - "Aggregate Investment Income and Active Business Income". I am assuming I would have to file this just for years when dividends are received and maybe when ETFs are sold ?
Schedule 53 (Grip) - General Rate Income Pool (GRIP) Calculation. It appears that I need to fill this just in the years when dividends are received, is that right?
RDTOH - refundable dividend tax on hand, again this appear is required just when you receive dividends.

So it appears that if I buy ETFs that are swap based, my yearly accounting will not be affected, is that right?

TIA!!!!!
Deal Addict
Feb 29, 2012
2662 posts
1392 upvotes
Richmond
Tangerine does offer stock mutual funds for investement. They aren't the best funds, and management fees are higher than they should be, but that would simplify things for you since the money is already in a Tangerine savings account. When running a business you have to be concerned about how your time is being used: are you wasting time micro-managing your investments to earn an extra few percent when you should be growing the business?
Member
Jul 27, 2017
489 posts
138 upvotes
GTA
+1 @ post #5

OP also consider the following proposed changes

http://kmss.ca/2017/08/14/proposed-chan ... -taxation/

c&p

"The proposals outlined by the Department are designed to achieve the following outcome:

Investment income would be taxed at a rate approximately equal to the top personal tax rates, similar to how they are taxed today.

Under the current rules, some taxes on investment income are refundable when dividends are paid to shareholders.

The newly proposed methods eliminate refundable taxes where the original income was taxed at the lower small business corporate tax rates.

For investment income earned on retained active business income that was originally taxed at the small business tax rates, the non-taxable portion of capital gains can no longer be added to the Capital Dividend Account (CDA). The CDA are funds that can be paid tax free to shareholders."
[OP]
Newbie
Nov 17, 2016
99 posts
101 upvotes
porticoman wrote:
Sep 11th, 2017 10:29 am
+1 @ post #5

OP also consider the following proposed changes

http://kmss.ca/2017/08/14/proposed-chan ... -taxation/

c&p

"The proposals outlined by the Department are designed to achieve the following outcome:



Porticoman - one of the reasons why I am investigating my options is because of this change. There is a possibility that investments made before this new rule comes into effect will be excempt from this change. Nobody knows for sure, but there is small possibility for that. So I am looking at all my investment options right now and that is why there is some urgency added to that :).
Member
Jul 27, 2017
489 posts
138 upvotes
GTA
Vi20161128 wrote:
Sep 11th, 2017 10:38 am
Porticoman - one of the reasons why I am investigating my options is because of this change. There is a possibility that investments made before this new rule comes into effect will be excempt from this change. Nobody knows for sure, but there is small possibility for that. So I am looking at all my investment options right now and that is why there is some urgency added to that :).
Indeed

May I suggest that you seek professional 'paid' advice of a CA/CPA accountant, it will be money well spent
Deal Addict
Feb 5, 2009
2369 posts
537 upvotes
Newmarket
Vi20161128 wrote:
Sep 11th, 2017 8:54 am
So I am adding more info:
Schedule 3 - "Dividends received and taxable dividends paid". I am assumin I would not have to file this for years when dividends are not received.
Schedule 6 - "Dispositions of capital property". I am assuming I would have to file this just in the year when my ETFs/stocks are sold.
Schedule 7 - "Aggregate Investment Income and Active Business Income". I am assuming I would have to file this just for years when dividends are received and maybe when ETFs are sold ?
Schedule 53 (Grip) - General Rate Income Pool (GRIP) Calculation. It appears that I need to fill this just in the years when dividends are received, is that right?
RDTOH - refundable dividend tax on hand, again this appear is required just when you receive dividends.

So it appears that if I buy ETFs that are swap based, my yearly accounting will not be affected, is that right?

TIA!!!!!
basically yes, the schedules will not be applicable if you don't have particular income or payouts, grip and rdtoh are a bit more complicated. For example under current rules if you receive dividend income from Canadian corporation you will pay tax on that income in the corporation until you pass the dividend income to the shareholders, if you do it in the same fiscal year the tax is refunded back to the corp, but you do not have to pay the dividends right away, you can do so down the road if you prefer, again this is based on the current rules.

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