SOURCE: Mew & Company

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July 21, 2016 16:27 ET

Vancouver Chartered Professional Accountants Advise on Rental Property Ownership

Vancouver chartered professional accountants advise on whether rental property should be held personally or in a corporation

VANCOUVER, BC--(Marketwired - July 21, 2016) - Mew + Company, a team of chartered professional accountants in Vancouver, has posted a helpful new blog for property owners wondering if their investment properties should be held personally or in a corporation. According to the professionals, personal ownership is generally the way to go. For more, go to: http://www.mewco.ca/blog/rental-income-personal-corporate-canada/

The blog advises that there are many pros, cons, and legal considerations with either option from a taxation standpoint. However, personal ownership eliminates the compliance issues attached to corporate ownership.

Rental income is not the same as active business income, so it does not qualify for the special 13% corporate tax rate. In fact, rental income is taxed at a 45.7% corporate tax rate with tax pools that are refunded back to the corporation when dividends are paid to the shareholder(s). The 45.7% corporate tax rate is just a tad below the highest personal tax bracket of 47.7% for BC residents. This is why chartered professional accountants generally advise against corporate ownership.

When the asset is owned personally, net rental income is reported as part of the personal tax return. If the asset is held in a corporation, year-end financial statements, tax returns, and legal compliance matters need to be filed annually. These compliance costs can be a burden, especially if the property doesn't consistently generate a positive cash flow.

According to the chartered professional accountants at Mew + Company, the only exception to the corporate ownership rule that should be considered is when the number of properties owned necessitates employing more than five people full time. If this condition is met, then the rental business becomes an active business and will qualify for the 13% corporate tax rate on its first $500,000 corporate net profit, and would be eligible for other tax planning benefits.

It's important to note that short-term and Airbnb rentals would not change passive rental income into active income for tax purposes. In fact, this would only add more complexity to the situation once GST is factored into the equation.

For further details on Canadian tax laws and how to manage your rental properties, it's best to ask a professional. For more information, contact Mew and Company chartered professional accountants -- they are ready to help!

About the Company

Mew + Company, Vancouver, is an ideal solution to the taxation problem. With a simple philosophy of building long-lasting customer relationships, the company has been serving corporate clients in a variety of fields -- including restaurants, real estate, retail, and the service industry. Investing in their specialist services will undoubtedly be fruitful for all kinds of clients.

To learn more about Mew + Company and discuss their services, log on to http://mewco.ca/.

Contact Information

  • Lilly Woo, CPA, CA, CFE, CFP
    Mew + Company Chartered Professional Accountants
    604 688 9198
    Company Website: http://www.mewco.ca