1 Canadian tax & accounting term starting with H
Plain-language definitions, each with the CRA rule it comes from and the filings it affects.
Related terms from other letters
Terms the entry above rely on, defined the same way.
Dividend
A dividend is a distribution of a corporation's after-tax profits to its shareholders, taxed at preferential personal rates through the dividend tax credit.
In practice: Your corporation pays $50,000 in dividends to you from its after-tax retained earnings. You report the grossed-up amount on your personal return and claim the dividend tax credit, resulting in less personal tax than the same $50,000 taken as salary.
Canadian-Controlled Private Corporation (CCPC)
A CCPC is a private corporation resident in Canada that is not controlled by non-residents or public companies, and it qualifies for valuable tax advantages.
In practice: A software company owned entirely by Canadian residents is a CCPC and pays roughly 12% combined tax on its first $500,000 of profit. If a US parent later acquires control, it ceases to be a CCPC and loses the small business deduction.
Corporate Tax
Corporate tax is the income tax a corporation pays on its profits, at combined federal and provincial rates, reported annually on the T2 return.
In practice: An Ontario CCPC earns $300,000 of active business income. Within the small business limit, it pays roughly 12. 2% combined, about $36,600, rather than the general rate that would apply to a larger or non-qualifying corporation.
Capital Gain
A capital gain is the profit from selling a capital asset, such as shares, real estate or a business, for more than its adjusted cost base.
In practice: You buy shares for $20,000 and sell them for $50,000. Your $30,000 capital gain is subject to the inclusion rate, so a portion is added to your taxable income while the rest is received tax-free.
Angel Investor
An angel investor is a wealthy individual who invests their own money in early-stage startups, usually in exchange for equity, at an earlier stage than venture capital firms.
In practice: A founder raises $150,000 from an angel investor at the seed stage, giving up equity. The angel, a former industry executive, also opens doors to customers and later helps the company raise its first venture capital round.
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