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Definition
A Canadian Controlled Private Corporation (CCPC) is a type of corporation recognized under Canadian tax law that meets specific criteria regarding Canadian ownership and control.
What is a Canadian Controlled Private Corporation?
To qualify as a CCPC, a corporation must be resident in Canada for tax purposes and generally, at least 50% of the corporation’s shares must be owned by Canadian residents or other CCPCs.
CCPCs benefit from preferential tax treatment compared to other types of corporations. They may be eligible for the small business deduction, which provides a lower corporate tax rate on active business income up to a certain limit. Additionally, CCPCs may be eligible for other tax credits.
To minimize their tax liabilities legally, CCPCs have access to various tax planning strategies. This includes strategies such as income splitting among family members, the use of the lifetime capital gains exemption for shareholders on the sale of qualified small business shares, and the ability to retain earnings within the corporation at a lower tax rate.
CCPCs are subject to certain reporting requirements and compliance obligations under Canadian tax law. This includes filing annual corporate tax returns, maintaining accurate financial records, and complying with tax rules regarding dividends, salaries, and other forms of compensation to shareholders and employees.
Example of a Canadian Controlled Private Corporation
ABC Inc. is a small manufacturing company based in Canada. It is owned and controlled by Canadian residents, with 100% of its shares held by Canadian citizens. As a CCPC, ABC Inc. benefits from preferential tax treatment, including access to the small business deduction, which allows it to pay a lower corporate tax rate on its active business income. This tax advantage helps ABC Inc. reinvest in its operations, expand its business, and create jobs in the local community.
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