If I own multiple corporations in Canada, what are some ways I can move funds around?

For example, assume that you own 100% of the shares of a holding corporation (i.e. parent company) and your holding corporation in turn owns 100% of another active corporation (i.e. subsidiary company). In this context, how can the parent and subsidiary companies transfer money between each other? The subsidiary can:

• Pay a tax-free dividend to the parent
• Return the capital invested in the subsidiary to the parent up to the ‘paid up capital’ amount (i.e. the amount of the initial investment) on a tax-free basis

Both the parent and subsidiary can:

• Make a loan
• Return payment of a loan already made
• Purchase an asset

ABOUT THE AUTHOR

ALLAN MADAN

CA.CPA.CGA

Allan Madan is a CPA, CA and the founder of Madan Chartered Accountant Professional Corporation. Allan provides valuable tax planning, accounting and income tax preparation services in the Greater Toronto Area.

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