Welcome to our blog post on family physician professional corporation tax strategies!
If you are a UK physician considering a move to Canada, one of your big questions likely concerns income. Specifically: how much can I make, and how much can I keep?. I’m simplifying that somewhat, but it’s understandable, if you are relocating across the ocean for a new life and improved work-life balance, that taxation and income would be on your mind.
While the particular numbers depend on the clinic/surgery location, and your own workload and appetite for patient volume, the basics are the same.
As a family physician, you not only provide essential health-care services to your patients but may also manage a professional corporation—if that’s the tax structure you decide on. Understanding the tax rates applicable to this corporation is crucial for effective financial planning and to maximize your overall earnings.
In this blog post, I will dive into the details of professional corporation tax rates and strategies specifically tailored for family physicians, exploring the benefits and considerations involved. Whether you are already running a professional corporation or considering setting one up, this article will equip you with the basic knowledge you need to navigate the complex world of taxation.
So, let’s get started exploring the tax landscape for family physician professional corporations! Both Canada and the UK offer tax benefits for professional corporations, but they are not alike. Specific rates vary across provinces, for example, with each charging slightly different rates, which are then combined with a federal tax rate to get the final amount. That being said, here are some key points to consider:
Tax Deferral: One of the main advantages of a professional corporation in Canada is the ability to defer taxes. By incorporating, professionals can leave a portion of their income in the corporation, where it’s subject to lower corporate tax rates, instead of being taxed at personal tax rates immediately. This can help to defer personal tax liability and potentially result in tax savings.
Income Splitting: Another benefit in Canada is the ability to split income among family members through share ownership. This can be particularly advantageous if family members are in lower tax brackets, allowing for income to be taxed at lower rates and reducing the overall tax burden.
Lifetime Capital Gains Exemption: Canadian professional corporations may also be eligible for the lifetime capital gains exemption. Here, a portion of the capital gains from the sale of qualifying shares is tax-free, subject to certain conditions and limits.
Corporate Dividends: Unlike Canada, the UK taxes corporate dividends. Obviously, there are different sources of taxable income and eligible and ineligible income types, but the tax rates of dividends in the UK can vary from 8.75 to 33.75%, and even go as high as 39.35% for additional rate payers. This can obviously have a significant impact on your end-of-year bottom line.
Simplified Taxation: The UK’s tax system for corporations is generally simpler and more straightforward than Canada’s. The UK operates under a self-assessment system, in which companies are responsible for assessing and reporting their income and tax liabilities. There are also more lenient rules regarding the remuneration of directors, which can provide additional flexibility.
No Income Splitting: Unlike Canada, the UK does not offer formal income-splitting opportunities for professional corporations. Income is generally taxed at individual rates, and there are no specific provisions for income splitting among family members.
A disclaimer here, this post is no substitute for the advice of a qualified accountant or chartered accountant, so please be sure to use it as intended—as a guide only. It's important to note that tax laws and regulations can change over time, and vary from province to province. Consult with a tax professional or accountant in both countries to understand the specific tax benefits and implications for your situation.
Once you arrive in Canada and are working with one of our clinics or facilities, we would be happy to refer an accountant to assist you with your plans.
I hope you found this post informative. As always, we are available to discuss your personal circumstances and credentials, along with current opportunities. Not all positions are listed on our website or LinkedIn page, so I encourage you to reach out to discuss your options and let us assist you with the move or at the very least your due diligence.
We at Healthglobal don’t claim to be the biggest, or to represent the most clinics. But we promise to guide you from application to arrival and offer you only clinics that we have visited, and with whose clinic ownership we’ve met. Think of it as quality control. If you are comparing GP recruiters in Canada, why not ask others if they have done the same. The results may surprise you.
Remember, there is no cost to you as a candidate GP to working with us, and I can’t put enough emphasis on the importance of gathering all your facts to make an informed decision on setting yourself up for a happy future practising in Canada.
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