A Place for Everything and Everything in its Place
There appears to be a fair amount of discussion with respect to tax efficient placement of investments in personal accounts (earn interest in RRSPs and TFSAs, foreign dividends outside of TFSAs - for foreign tax recovery, REITs in registered accounts to avoid calculating the ever changing ACB from the ROC, etc.) but not much discussion at all with respect to those who have corporate investment accounts 'in play' as well.
What is the consensus of where various asset classes should be allocated when one has access to corporate, as well as personal, taxable investment accounts? Obviously, people in these types of situations often lack RRSP room to shelter much of their investments from tax so, in some ways, this will be overall driven by asset allocation, but if it can be done in as tax efficient way as possible that never hurts.
Should Canadian investments be placed in a taxable personal or corporate account in preference? What about US and overseas? REITs/interest earning assets - if they need to be in a taxable account, I presume personal is better(?)
Thoughts? Or is integration so good that the issue is moot?
It quite strongly depends on what your personal income tax bracket looks like. The following is from an Ontario perspective: If you're in the top personal tax bracket there is actually a small deferral when earning most types of investment income in a corporation. In most cases though, you will generally pay higher corporate tax on interest, foreign investment income and capital gains in the corporation compared to personally. So for interest and foreign income, generally look at your RRSPs/TFSAs first, then your personal taxable account, then your corporation.
Originally Posted by Sm5
Canadian dividends are tax neutral in a corporation, in the sense that the corporate tax is entirely refundable. So again, all things being equal I would prioritize Canadian equities in the corporation. (Note you may still prepay/defer tax on the dividends if you delaying paying out the dividend).
The only other thing to consider would exposure to US estate tax. I've seem some planning that recommends keeping your US equities in your holdco to minimize exposure to US estate taxes.