Definitions - Corporate Component
We refer to the following terms within the Corporation component in Snap Projections:
Corporate Settings Page
- Canadian Controlled Private Corporation (CCPC) - A private corporation that is controlled by Canadian residents. If a corporation is controlled directly or indirectly by a public corporation or by non-residents of Canada, it will not qualify as a CCPC.
- Small Business Deduction - The small business deduction is a reduction in corporate taxes for CCPCs. The reduced rate of tax is available on active business income up to the corporation's business limit for the year.
- Federal and Provincial limits: The reduction of the CCPC's business limit is equal to the greater of
- the reduction based on taxable capital
- the reduction based on aggregate investment income
- Snap Projections reduces the Small Business Deduction (SBD) automatically if the aggregate adjusted investment income exceeds the $50,000 threshold. The SBD is automatically reduced by $5 for each $1 of investment income over $50k until the full SBD is removed at $150k. (This applies to the federal SBD and all provinces except Ontario and New Brunswick.)
- Federal and Provincial limits: The reduction of the CCPC's business limit is equal to the greater of
- Existing Balances - Check with the client's accountant for these balances. Snap will calculate them going forward.
- Eligible Refundable Dividend Tax on Hand (RDTOH) - This includes the Part IV tax payable on eligible portfolio dividends that the CCPC receives, plus the Part IV tax payable on other dividends it receives to the extent the corporation paying the dividends receives a refund of tax out of its eligible RDTOH.
- Non-Eligible RDTOH - Generally includes the refundable portion of the Part 1 income tax paid on investment income in the year and the Part IV tax payable on any other dividends that the CCPC receives.
- CDA - Capital Dividend Account - The capital dividend account is part of a tax provision to enable tax-free money received by a company to be given to its shareholders, tax-free. When a company generates a capital gain, 50% of the gain is subject to capital gains tax. The non-taxable portion of the total gain realized by the company is added to the CDA.
- GRIP - General Rate Income Pool - The GRIP Balance allows for Eligible Dividends to be paid from the corporation to the shareholder. Eligible Dividends are more tax-efficient and are limited to the available GRIP Balance in a given year of the plan. The GRIP Balance is increased by 72% of active business income taxed at the full corporate rate (income above the Small Business Deduction) and any eligible dividends received from Financial Assets.
- Disposition - This determines the method used to calculate the distributions and taxes payable for the final estate from the corporation.
- Winding-up - This is the default method in Snap. This method assumes that the corporation's Assets are liquidated, Taxes are paid, Debts are repaid, and any Insurance Proceeds are received. Then the cash is distributed to the estate through a combination of Capital Dividends, Eligible Dividends, Non-Eligible Dividends, and Return of Capital. The estate will pay a combination of capital gains taxes and taxes on dividends.
- Share sale - This method assumes that the estate sells the corporate shares for the Net Worth of the corporation at the end of the final year of the projection. The estate will pay capital gains taxes based on the Net Worth of the corporation less the ACB of the corporate shares. This is the calculation that Snap has used since the corporate module was initially added. All plans with a corporation created before 2023 will have this method.
- Paid-up Capital (PUC) - This is the amount of money received by the corporation from shareholders in exchange for shares issued by the corporation, less any Return of Capital distributed.
- Adjusted Cost Base (ACB) - This is the cost of the corporate shares that are held personally by the client. This reduces the capital gain calculated and charged to the estate. The ACB is typically the same value as the PUC. In cases where the corporate shares were purchased from another shareholder, the cost basis may differ.
Corporate Planning Page Columns
Age - This shows how old your client is by the end of the year.
- Active Income
- Operating Income - An income on active business carried on by a corporation where active business is defined (Subsection 125(7), Income Tax Act) as “any business carried on by the corporation other than a specified investment business or a personal services business and includes an adventure or concern in the nature of trade”.
- Preferential federal and provincial tax rates apply up to the limit (Business Limit) of income earned by a CCPC from an active business carried on in Canada.
- Starting at $50k, Snap reduces the small business deduction if the aggregate adjusted investment income exceeds that $50k threshold.
- Salary of Client / Spouse - A salary of the client or spouse declared by a corporation.
- All Expenses - Total amount of corporate expenses (deductible and non-deductible expenses).
- Non-Deductible Expenses - Total amount of corporate expenses that are not deductible for tax purposes, such as amortization (net of capital cost allowance), 50% meals and entertainment costs, club dues, certain conference and convention fees, interest and penalties, etc.
- Net Operating Income - Operating Income after all expenses for accounting purposes before income tax, calculated as the Business Income minus Salary of Client, Salary of Spouse, and All Expenses.
- Taxable Operating Income - The taxable portion of Operating Income for tax purposes. Click the blue menu icon in the column header to open a table with more detail.
- Operating Income - An income on active business carried on by a corporation where active business is defined (Subsection 125(7), Income Tax Act) as “any business carried on by the corporation other than a specified investment business or a personal services business and includes an adventure or concern in the nature of trade”.
- Passive Income
- Investment Return - Investment returns generated on investments (financial and real assets) held by the corporation.
- Other Investment Income - Any other investment income, for example, rental income or royalties net of the corresponding expenses.
- Taxable Investment Income - The taxable portion of Investment income that includes interest income, dividends, and the taxable portion of capital gains.
- Non-Taxable Other Income - Any other non-taxable income to be added to the corporate financial assets (for example inter-corporate dividend received from a connected corporation tax-free, after-tax proceeds from real estate disposition, or after-tax proceeds from any other corporate asset disposition).
- Income Tax
- Total Tax - Tax to be paid by the corporation on Business Income and Taxable Investment income, calculated as Part I and Part IV Federal Tax plus Provincial Tax minus potential dividend refund from dividends paid out the prior year. Click the blue menu icon in the column header to open a table with more detail.
- Financial Assets
- Value - The year-end balance of the Corporate Asset.
- Contribution (Withdrawal) - New deposit (positive number) or withdrawal (negative number) to or from the Corporate Asset in the calendar year.
- Rate - The annual rate of return earned on the starting balance of the account less any withdrawals for the year.
- Debts
- Owing - Balance at the year end.
- Paid - The total amount paid towards the Corporate Debt that year (positive number, reduces the corporation's annual cash flow) or the total amount of additional Corporate Debt taken that year (negative number, increases the corporation's annual cash flow).
- Insurance
- Death Benefit - Received by the corporation after the Insured's death in the projection. If this is the first death, then the cash will be available for distribution to the surviving shareholder. If this is the second death, then the cash will be distributed to the final estate as part of the corporate disposition on death.
- Cash Surrender Value (CSV) - Added to the Net Worth of the corporation while the policy is in effect. Also included as part of the corporation's Market Value calculation at the time of the final estate to determine any capital gain taxes payable by the estate.
- Premium - Reduces the corporation's annual cash flow.
- Real Assets
- Property - Value at the end of the year.
- Dividends
- Non-Eligible Dividend Client (or Spouse) - Non-Eligible Dividend amount paid to a client (who is a shareholder) or a spouse (who is a shareholder).
- Eligible Dividend Client (or Spouse) - Eligible Dividend amount paid to a client (who is a shareholder) or a spouse (who is a shareholder). The Eligible Dividend paid in a given year of the plan can't exceed the GRIP Balance available.
- Capital Dividend Client (or Spouse) - Capital Dividend amount paid to a client (who is a shareholder) or a spouse (who is a shareholder).
- Non-Eligible Dividend Other - Non-Eligible Dividend amount paid to other shareholders (not a client or spouse, e.g. children or other shareholders). This dividend will affect the Capital Balance in the corporation but it will not show up anywhere in the projections for the Client/Spouse.
- Eligible Dividend Other - Eligible Dividend amount paid to other shareholders (not a client or spouse, e.g. children or other shareholders). This dividend will affect the Capital Balance in the corporation but it will not show up anywhere in the projections for the Client/Spouse. The Eligible Dividend paid in a given year of the plan can't exceed the GRIP Balance available.
- Capital Dividend Other - Capital Dividend amount paid to other shareholders (not a client or spouse, e.g. children or other shareholders). This dividend will affect the Capital Balance in the corporation but it will not show up anywhere in the projections for the Client/Spouse.
- Balances
- Net Cash Flow- A positive amount (cash flow surplus) indicates the cash remaining after contributing surplus cash to the Financial Assets. A negative amount (cash flow shortfall) indicates the amount by which the expenses, contributions, or taxes owing were unable to be met.
- Cash Balance - The balance of the accumulated Net Cash Flow for all previous years.
- Net Worth - The year-end total of all corporate Assets less all corporate Debts.
- After-Tax Estate/Market Value - The cash value available for distribution to the final estate of the client if they were to pass away in that year. This assumes all Assets are liquidated, taxes are paid, Debt is repaid, life insurance death benefit is received, and any tax refunds have been received. This column is only visible if the Winding-Up method for Corporate Disposition is selected.