Breaking Down the Types of Corporations within Canada
When filing corporate taxes and applying for grants, certain rates and deductions, it is important to have an understanding of the types of corporations that they apply to.
These types have certain implications for tax purposes and business owners need to report on it. Changing your corporation type also comes with tax implications and each point of the year as well.
Canadian-Controlled Private Corporations (CCPC)
These corporations meeting a set of criteria at the end of a tax year and will be eligible to certain tax rates and deductions. To start off, it must be a private corporation and is resident in Canada. The incorporation must be completed in Canada and can’t be controlled by one or more non-residents. Additionally, it can’t be controlled by a public corporation unelss it is a prescribed venture capital corporation. The shares can’t be listed on a stock exchange outside of Canada or within.
Other Private Corporations
To be considered a private corporation in Canada, the business must meet the following criteria at the end of the tax year:
- Resident in Canada
- Not a Public Corporations
- Not Controlled by One or More Public Corporations
- Prescribed Venture Capital Corporation is the Exception to this
- Can’t be Controlled by federal Crown Corporations
Types of Corporations: Public Corporation
Public corporations in Canada require them to be resident and must meet one of the two following requirements at the end of the tax year. First of all, it must have a class of shares listed on a Canadian stock exchange. Alternatively, it can elect or be designated by the minister of National Revenue to be a public corporation and has complied with regulations on the number of shareholders, the dispersing of the ownership and public trading of shares, and the size of the corporations meets the requirement.
If the corporation complies to Canadian regulations in a certain format, it can still be elected or designated by the minister of National revenue to not be a public corporation.
Corporations Controlled by a Public Corporation are ones that are public but are subsidiaries of current Canadian public corporation. This does not mean it will qualify as a public corporation for T2 tax returns and additional details are required on a case by case basis.
Other Corporations do not meet any of the criteria above and include general insurers and Crown corporations.
To find out more, visit the CRA’s website and read the section posted on Canadian corporations at the link here: Types of Canadian Corporations According to the CRA