Your accountant can advise you as to whether income splitting can be incorporated into your tax savings strategy. Income splitting thereby lowers the family’s overall tax burden. The funds will eventually be taxed at your personal tax rate at the time of withdrawal however, you will have had the benefit of the funds that otherwise would have been subject to your personal tax rate the year they were earned.Īdditionally, incorporation can facilitate “income splitting”, which is the ability to transfer income to a family member in a lower tax bracket by paying dividends to that family member on their non-voting shares. After the corporation pays this corporate tax, any business expenses and pays you what you need to live on, the balance can be invested to grow within the corporation. On the other hand, a corporation that qualifies for the Small Business Deduction will generally be taxed at a rate of 12.2% on its first $500,000.00 of active business income. Generally, physicians offering their services personally will be subject to the highest marginal tax rate in Ontario, which is 53.53%. The main reason physicians choose to offer their services through a corporation is to benefit from the lower tax rate applicable to corporations, and to take advantage of the related concept of tax deferral. Only corporations that meet certain legislated requirements, as described below, will qualify as an MPC and be entitled to practice medicine. What is a Medicine Professional Corporation?Ī medicine professional corporation (“MPC”) is a corporation, incorporated under Ontario law, through which a physician may practice medicine. If you have additional questions or wish to discuss your particular circumstances, please contact a member of our Business Law group. Here are answers to the most common questions we receive from those considering incorporation.
If you are a physician practicing in Ontario, you may be familiar with medicine professional corporations.
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