Do I have to pay tax on a merger between two Canadian companies?
Allan Madan, CA
Question:
I would like to merge my business with a Canadian company that operates in the same field as me. Is there any way to avoid paying tax on the merger?
Answer:
The Income Tax Act allows for a tax free merger if the following conditions are met:
- Both corporations are Canadian Controlled Private Corporations (CCPCs)
- The shareholders of the old corporations become the only shareholders of the new corporation (i.e. the merged entity)
- All assets and liabilities of the old corporations become the assets and liabilities of the new corporation.
If these three conditions are met, then you can amalgamate / merge the corporations on a tax-free basis.
Disclaimer
The information provided on this page is intended to provide general information. The information does not take into account your personal situation and is not intended to be used without consultation from accounting and financial professionals. Allan Madan and Madan Chartered Accountant will not be held liable for any problems that arise from the usage of the information provided on this page.
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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