A business owner wants to invest $100,000 of corporate retained earnings into a GIC. He believes he will pay less tax by keeping the interest inside the corporation rather than taking the money out and investing it personally. Which fact should the advisor highlight?
5 attempts · 60% correct
The corporation will pay a preferred rate of approximately 12% on the interest, providing a significant deferral.
The corporation acts like a TFSA, allowing the investments to grow completely tax-free until they are withdrawn.
The corporation only pays tax on 50% of the interest earned, whereas the individual pays tax on 100%.
Passive investment income in a corporation is taxed at a high upfront flat rate, often near 50%.Correct
Why
Corporate passive income is taxed at a high upfront flat rate (often near 50%) to prevent tax deferral advantages over personal investing.
