in canada,would there be any tax advantage to trading through a company and then pay myself a salary? would corporate tax rate be better?i was figuring what i will owe up to this point and i'm kinda sick. so i'm trying to figure out alternatives. make a run for it is another.
I'm not an expert, but I did look into this a while ago. Problem with setting up a corporation for trading is that it might be deemed a "personal holdings corporation" (I think that's the correct term, similar to a "personal services corporation"), which means you would lose pretty much all advantages of doing your trading through the corporation. Furthermore, the corporation would not be able to use the favorable capital gains tax (50% off), it would need to treat capital gains as business income. So, in general, the answer is no. I think you can avoid the "personal holdings corporation" trap by having at least 5 full time employees...
If your trading gains are classed as income, not capital gains, and you make a decent amount from trading (at least equivalent to a healthy salaried job) then it might be worth it. CCRA recently gave a ruling that daytrading is a business like any other, removing some grey areas when it comes to incorporation. Eventually it all evens out, but it's a good way to defer taxes at the lower corporate rate. For example, say your personal rate is 38% and the corporate rate in your province is 18% and you make $200,000 from trading (classed as income, not cap gains or dividend income). File and pay personally: 200,000 * .38 = $76,000 taxes. $124,000 left over Trade in a corporation and pay yourself a $50,000 salary 50,000 * .38 = 19,000 150,000 * .18 = 27,000 total tax paid = 46,000 a savings of 30,000. Not really a savings, but a deferment. You will eventually pay it all out to yourself at a personal rate, but in the mean time, your account is bigger at the start of each tax year, so it can compound faster.
thanx very much for the info. i am declaring as income already thats why i'm trying to find alternatives. would have a link for the daytrading ruling?
That is the bottom line. And get a good accountant for the long haul... It will make a big difference.