However, in your case, Parmod, there is no such thing as a tax on the transfer of your house to your corporation, provided it is taken into account your primary residence for all years. The real query is: must you?
Self-employed? How to file your taxes
Personal urepresent an organization value
As you noticed, you will have to pay rent to the corporate after the transfer. The reason: When you employ a business asset for private use, you should either pay for that use or include a taxable profit in your personal annual income.
In case of real estate, payment to the corporate can be made based on the fair market value of the rent. Rent is taken into account taxable income of the business at a tax rate of roughly 50% (the speed varies by province and territory).
If you didn’t pay rent or paid below market value, you might must add a taxable profit to your T4 statement. You must report this profit as earned income and thus trigger income tax.
Because of the shareholder
When you transfer an asset to an organization, the corporate owes you money in return. For example, for those who transfer $1,000 out of your personal account to your small business account, the corporate will typically owe you that quantity back tax-free.
The same may apply for those who transfer a $1 million asset, reminiscent of your house, to an organization. The company may then owe you $1 million tax-free. This generally is a strategy to withdraw money from a business somewhat than selling a private asset you desire to keep.
Exemption from primary residence: private individual or company
The principal residence tax exemption may be claimed by a person taxpayer in Canada, but not by an organization. So for those who own a house in your Parmod corporation, capital gains tax will apply in the long run.
The credit rate for capital gains is to be increased from half to 2 thirds based on the 2024 federal budget, but this transformation has not yet been anchored in law. Once this happens, this may end in the tax rate on a company capital gain increasing from around 25% to around 33%, even though it might be barely lower or higher depending on the country wherein the corporate is predicated.
