How To Ensure Rental Income Within Your Corporation is Active Business Income
How To Ensure Rental Income Within Your Corporation is Active Business Income May 5, 2023 Tax Question: How do you ensure your rental income within
May 5, 2023
Tax Question:
What are specified employees and their Scientific Research and Experimental Development (SR&ED) salary limits?
Facts:
Specified employees are employees who do not deal at arm’s length with the corporation or who own 10% or more of the issued shares. There are different salary limits for the proxy calculation and the deductible SR&ED expenses on specified employees.
For the proxy calculation, the specified employee’s salary paid excluding taxable benefits and bonuses is prorated by the percentage of time spent on SR&ED to a maximum of 75% and is limited to 2.5 times per year’s maximum pensionable earnings (YMPE) (2.5 * $54,900 or $137,250 for 2016).
For the deductible SR&ED expense, the salary of a specified employee is the directly engaged salaries paid including taxable benefits and excluding bonuses and is limited to 5 times the YMPE (5* $54,900 or $274,500 for 2016).
| Salary for Proxy Calculation | Lesser of 75%*(250,000-$30,000-$10,000) or $157,500 and $137,25 | $137,250 |
|---|---|---|
| Salary for Deductible SR&ED Expense | Lesser of ($250,000-$30,000-$10,000)*90% or $189,000 and $274,500 | $189,000 |
If you would like more information on this topic, please contact a member of the Empire CPA team by filling out the contact form below.
Canadian and foreign tax laws are complex and have a tendency to change on a frequent basis. As such, the content published above is believed to be accurate as of the date of this post. Before implementing any tax planning, please seek professional advice from a qualified tax professional. Empire, Chartered Professional Accountants will not accept any liability for any tax ramifications that may result from acting based on the information contained above.
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