Canadian-Controlled Private Corportaion (CCPC)

Neufeld Legal PC: Chris@NeufeldLegal.com - 403-400-4092 / 905-616-8864

A Canadian-Controlled Private Corporation (CCPC) is a designation assigned to certain corporations (provincially or federally incorporated) that allows eligible Canadian businesses to access significant tax advantages and incentives. A CCPC is a private corporation that is a Canadian corporation (provincially or federally incorporated) and is not controlled by non-residents or public corporations. To qualify as a CCPC, a corporation must meet several criteria at the end of its tax year, including:

  • It must be a private corporation (its shares are not listed on a designated stock exchange).

  • It must be a Canadian corporation (generally, incorporated in Canada and resident in Canada).

  • It must not be controlled, directly or indirectly, by one or more:

    • Non-resident persons.

    • Public corporations (other than a prescribed venture capital corporation).

    • Any combination of the above.

  • No class of its shares can be listed on a designated stock exchange.

The term "control" is key and can include both legal control (owning more than 50% of the voting shares) and factual control (having influence over the key decision-making of the corporation).

If the corporation satisfies the legal requirements for CCPC status, this entitles the corporation to take advantage of several major benefits designed to encourage entrepreneurship and growth in Canada:

  • Small Business Deduction (SBD): This is arguably the biggest benefit. It significantly reduces the federal corporate tax rate on the first $500,000 of active business income (the "small business limit") [more on SBD].

  • Enhanced Scientific Research and Experimental Development (SR&ED) Tax Credit: CCPCs may be eligible for a higher, refundable tax credit rate (currently 35%) on qualifying R&D expenditures up to an annual limit, making it a valuable source of non-dilutive funding [more on SR&ED].

  • Lifetime Capital Gains Exemption (LCGE): Shareholders may be able to claim the LCGE on the sale of Qualified Small Business Corporation (QSBC) shares, potentially sheltering a significant portion of capital gains from tax. A corporation must be a CCPC to qualify its shares as QSBC shares [more on LCGE, QSBC].

  • Employee Stock Option Deferral: For stock options granted to arm's length employees, the taxable benefit is deferred until the employee sells the shares, providing a valuable incentive.

  • Administrative Relief: Smaller CCPCs may benefit from a longer period to pay their balance of taxes owing (three months instead of two) and may be allowed to pay corporate taxes in quarterly (instead of monthly) installments.

For knowledgeable and experienced tax law representation for corporate tax planning strategies, as your business enterprise strives to optimize the financial advantages of legal tax structuring, contact tax lawyer Christopher R. Neufeld at Chris@NeufeldLegal.com or call 403-400-4092 (Calgary, Alberta) / 905-616-8864 (Toronto, Ontario).

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