Will be turning fulltime trader soon and am looking into the cheapest possible way to pay taxes on my earnings... whether this is starting a proprietorship or incorporating myself or just paying capital gains tax... Any fulltime Canadian traders with insight? Thanks
Leave Canada. You don't pay any Canadian taxes if you don't live there. Us poor Yanks pay US taxes no matter where in the World we live. Only industrialized country that does this actually.
If you are a full-time trader, your gains will be taxed under INCOME and NOT capital gains (so your max. rate is 46.2%) as an individual. SOrry, it's true... If I were you I'd incorporate myself, the corporate tax is lower (the figure escapes me now, but http://www.cra-arc.gc.ca/menu-e.html should have most of the info you need)
I hope by "Will be turning fulltime trader soon" you meant *after* you've fully developed your business plan. Your business plan should include tax and expense research. I'd see a tax accountant first, one who specializes in trading. Asking tax related questions here at ET is dangerous at best.
dunno in Canada, but in the US you can trade your personal retirement accounts, and the tax is deferred until retirement So you could form an entity and put away say 25% of "income" into retirement account. Also could do whatever personal retirement plans the govt allows you. If futures trading in USA, must trade FUTURES through a trust company (milennium trust is the biggest) which is basicaly you pay a small annual fee, open the account at a broker, and trade as normally done. I suspect Canada has something similar. Talk to a tax/trading CPA... Deferred income also does not need all the nitty gritty trade by trade reporting. Also, this 25% plus would come out of your HIGHEST bracket, so nice for this reason. Again, talk to a tax-knowledgeable CPA.
dunno in Canada, but in the US you can trade your personal retirement accounts, and the tax is deferred until retirement So you could form an entity and put away say 25% of "income" into retirement account. Also could do whatever personal retirement plans the govt allows you. If futures trading in USA, must trade FUTURES through a trust company (milennium trust is the biggest) which is basicaly you pay a small annual fee, open the account at a broker, and trade as normally done. I suspect Canada has something similar. Talk to a tax/trading CPA... Deferred income also does not need all the nitty gritty trade by trade reporting. Also, this 25% plus would come out of your HIGHEST bracket, so nice for this reason. Again, talk to a tax-knowledgeable CPA.
2009 will see the introduction of the TFSA. http://www.budget.gc.ca/2008/pamphlet-depliant/pamphlet-depliant2-eng.asp You can only deposit $5000 per year, but you are free to invest the money within the account however you like. Withdrawals are tax-free too!
Allthough corporate tax is much lower than personal income tax, you end up getting double taxed as a corporation, so when you pay yourself the money it gets taxed again... so i can't see how incorporating could save you that much more tax than say if you declared yourself as self-employed, both you can deduct expenses, so same thing.