What is a CCPC?August 2, 2016
The Canadian income tax system has been designed to provide certain tax benefits to Canadian-controlled private corporations (“CCPC’s”), including:
1. Tax credits for eligible expenditures for scientific research and experimental development that are calculated at a higher rate and are refundable.
2. Stock option benefit deferral (a description of stock option plans can be found here.)
3. Access to the small business deduction
4. Access to the lifetime capital gains exemption on the disposition of shares by its Canadian resident shareholders (a future blog post on this topic is coming soon.)
To qualify as a CCPC, a corporation must generally meet the following criteria:
1. Be a private corporation (its shares cannot be traded on a stock exchange, or be widely held);
2. Be a Canadian corporation (generally, if a corporation is incorporated in Canada or any of its provinces or territories, it will be a Canadian corporation);
3. Not be controlled, in law or in fact, by any combination of non-residents of Canada or public corporations.
When determining who controls a company, the Canada Revenue Agency will look at who holds a majority of the voting shares, who can elect a majority of the board of directors, and who actually makes decisions for the corporation (or factually, who really controls the company) when determining if non-residents and/or public corporations control a corporation. It is not necessary for shareholders to be related or acting together in order to form a control block.
The foregoing is meant to provide a general summary of criteria that a corporation must meet to be considered to be a CCPC. The analysis of whether a company qualifies as a CCPC can be complex and takes into consideration many factors. If you have questions, please contact us and we will be happy to assist.
By LaBarge Weinstein’s Taxation, Tax Planning, and Tax Litigation team.
This information is correct as of the date of posted.