How Does the Capital Gains Corporate Tax Rate Work in Canada

To paraphrase a famous saying, only a few things in life a certain, and paying taxes is one of them. Now, when someone mentions capital gains corporate tax rate, it’s something that might confuse people at first, but once you get into specifics, everything about this tax rate gets much easier to understand.

That is why we will now focus on that and try to provide a brief summary of what it is and how it actually works.

What is it?


We will start with the basics and explain what the capital gains corporate tax in Canada is, so you can easily understand its rate and how it works. Once you own a property, company, stock, or any other passive asset or capital, sell it for a higher price than it was when you bought it, and gain some profit, it will be necessary to include it in the declared taxable income of a corporation. The great thing is that in Canada, it is not necessary to include all the capital gain, as only half of it is taxable, which is called the inclusion rate. This tax is only applied to earnings that one gets by selling assets.

Now, the trick is that only fifty percent of the capital is taxable, which makes it a pretty high standard, unlike in some other countries. On the other hand, corporations can also use capital losses to outweigh capital gains, but since it is a complex law and because there are many regulations, consulting an expert in this field might be the best solution. They are well aware of how it all works due to their vast experience and can provide detailed and thorough guidance over how and what to do.

Realized and unrealized capital gain

When we sell something we own and gain profit on its price because it has increased while it was in our property, we are speaking about realized capital gain. On the other side, if the price increases, but we do not sell it during that time, we are speaking about the unrealized one. The important thing to know is that only the realized capital gain is taxable, which means we can make a plan for when to sell our assets and make the amount of taxes we need to pay lower. On the other side, the unrealized one is not because there is no profit or loss until it is sold.

Another beneficial thing to know here is that when the value of your investment has increased, but you haven’t sold it yet, you can time the selling and do it when you make less income. By doing so, you can reduce the total amount of money you will owe and have to pay as a tax. It is a simple yet highly profitable trick in the long run, and in essence, why pay more for taxes than you should? Of course, this doesn’t mean that one should hold and not sell something whose price is constantly dropping and hoping that it will increase in the future, but it’s still something you can carefully calculate so that you gain more total profits.

Gains and losses

Since both the gains and losses are taxable, we can take advantage of our losses and apply them for taxation to make the total amount much lower. The losses occur when we sell some asset for a lower price than it was when we bought it, and although it is not a good thing not to gain profit, we can turn it in our favor. If we make a good plan of applying gains and losses for taxation, we can make our taxes zero and avoid paying them.

Corporate losses and gains can be applied for taxation up to three years in the past and indefinitely in the future, which means that planning and calculating are much easier. On the plus side, this makes it a highly practical thing to do in the future, as you can calculate precisely the total amount you will have to pay for taxes and reduce it by adding corporate losses, which in the end will lead to higher overall profits. Yes, this might sound confusing, but only at first, but if this is something you are unsure what or how to do, the next step should be helpful.

The more gain, the larger the fee

Now, this is something that confuses many, but the logic behind it is simple, the more profits or gain you have, the higher the tax percentage. Another factor that can affect the overall tax amount is the tax rate which differs depending on the region, and those in Toronto have to pay up to 10 percent higher taxes than those in Ontario, for example.

All these factors have an immense impact on the total sum one has to pay, and once again is something you have to consider. On the other hand, small businesses can even qualify for a bit more convenient rate depending on how they are organized, their overall revenue, and, understandably, the structure of the company.

Hire a professional


Dealing with taxation can be pretty stressful for many people, and because of that, finding professional help can be a great way to avoid unnecessary stress and be sure that everything will be done properly. As already mentioned, experts in this field know every detail about how it all works, which is something you can only benefit from, and besides that, since time is money, by hiring or at least consulting them, you will leave dealing with taxes to someone else, which means that you can focus on those things that are more important.

Now, finding the best ones in this field can be pretty challenging, and it surely requires a little research, as the best way to check their work is to read reviews based on other peoples’ experiences. Of course, that’s just one step, as there are many other factors to keep in mind when making such a decision, which is why even then, it is crucial to check the changes regularly and stay up to date with all of them regarding capital gains corporate tax rate.

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