Holdcos, Investment Corporations & Family Trusts
The holding company that follows a successful operating business brings its own tax regime: refundable taxes on investment income, rules connecting passive income to the operating company's small business deduction, and — for family trusts — expanded annual reporting whether or not the trust earned a dollar.
Holding companies and family trusts are structuring tools, not everyday businesses — and they only work if the intercorporate flows, passive-income rules, and reporting are handled with care. A holdco set up wrong can cost more than it saves.
How we help
- T2 returns for holding and investment corporations, with refundable tax accounts tracked properly
- Passive investment income monitored against the small business deduction limits of your operating company
- Intercorporate dividends planned and documented correctly
- T3 returns for family trusts, including the expanded trust reporting requirements
- Trust distributions planned with beneficiaries' personal tax positions in view
- Structure reviews as rules change — what made sense at setup may not anymore
Common mistakes we see
- Moving dividends between corporations without checking whether they're truly tax-free — the rules on intercorporate dividends, including subsection 55(2), are a genuine trap.
- Ignoring the passive-investment-income rules that reduce the operating company's small-business deduction once investment income in the associated group passes $50,000 a year.
- Missing the new trust reporting requirements — many trusts now have to file annually even with no activity. Bare trusts have been given relief year after year while the rules are reworked, so whether your year-end is caught is worth confirming rather than assuming — the answer has changed more than once.
- Letting a trust run past its 21-year deemed-disposition date without a plan, triggering tax on unrealized gains.
The British Columbia angle
For BC families, a holdco or trust often sits alongside real estate, an operating business, and succession goals — and BC's probate and property taxes shape the plan. We keep the structure clean, the annual filings current, and the 21-year clock on your radar well before it matters.