How Does Capital Gains Tax Work With A Company?

Discussion in 'Taxes and Accounting' started by tommo, Aug 11, 2019.

  1. tommo


    Hi all,

    I think i have this right, i know different countries are different but assume largely similar.

    If you own a limited company you have corporation tax, dividend tax and capital gains tax. In the UK you pay Corp tax on the company's overall profits and then a tax on the dividends you draw. You only pay capital gains tax if you liquidate the company/sell your shares.

    Is this how it works in most countries? I see some countries talk about futures/ stocks etc having different rates of capital gains tax. How does that work? Is every buy or sell you make in the market charged capital gains?

  2. jys78


    These kinds of questions are far better answered by an actual tax expert in your jurisdiction, than by random anonymous internet people.
  3. Sig


    To the OP, in the U.S. you get a better tax rate on capital gains as an individual than you would get on ordinary income. A U.S. Corp doesn't get that same preferential rate on its capital gains, meaning if your corporation bought IBM stock and sold it for a profit that profit would be taxed at the corporate tax rate same as any other profit. Then you would pay tax again when it was disbursed to you as a dividend. And in the U.S. you can't keep money in the Corp if you can't demonstrate it's needed for operational business purposes, so you have to pay that dividend. If you sell the Corp itself for a profit you pay personal capital gains on the price you sold the Corp for over your basis in the Corp. I'm not a tax professional though, just an entrepreneur who has done this a couple times, so I'd second the advice to working with a CPA if you're seriously considering setting anything up.
    tommo and speedo like this.
  4. Congrats you took something about accountants and made it about pilots, brain surgeons and whatever else.
  5. Sig


    Interesting restriction of the definition of the word "professionals" to include only accountants, but that aside my point perhaps required a little too much mental connecting of the dots for you. Let me spell it out. Apparently you do think that folks who have extensive training and experience in their field generally are a more reliable source than a random punter on the internet, except inexplicably accountants? Is this based on any actual study, or your highly scientific method of talking to a guy at Liberty Tax wearing a statue of liberty costume who you assumed was an accountant and who was an idiot and then extrapolating that the field of accounting is unlike any other profession and "most" accountants are therefore idiots? What's that, a sample size of .000000000000000001% of accountants? Congratulations, you fail stats and 8th grade intro to the scientific method!
    Last edited: Aug 14, 2019