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I'm part of a lending club in Canada that has just allowed corporate lending. My marginal tax bracket in Canada is 26%, so I'm trying to figure out if there is an advantage to lending through a numbered provincial company.

For example, any interest made on the Notes will be taxed at 26% personally. Is there a way to structure such a company so the interest is considered capital gains or active income (much lower tax)? The goal is to continually reinvest and not remove money from the company for several years.

(I've done Googling, and have been on the CRA sites, but I'm out of my depth on this one.)

  • Are you sure it's taxed that way? The US has this concept called Original Issue Discount the taxation/record keeping is a bit more complex than simply interest payments as income. – quid Mar 20 '18 at 23:03
  • In short, you are very unlikely to get any advantage from structuring passive investments through a corporation in Canada. This is done on purpose. If you make < the top personal tax bracket [which it seems is true for you, because your marginal tax rate is 26%], then this will typically accelerate your tax through Additional Refundable Taxes owed by your corporation. – Grade 'Eh' Bacon Mar 21 '18 at 13:13
  • I posted an answer at this question which may have some relevance here too. – Chris W. Rea Mar 22 '18 at 2:35

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