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3 Posts
Discussion Starter · #1 ·
Great forum - I've been watching from the sidelines but this is my first actual post :)

I think this has been discussed is some form or other in the last few years but I still don't have a clear answer:

About me - I'm a professional with:

A CCPC: currently about 70k in it - growing at about 2000-4000 a month. I started the CCPC about 8 months ago.
TFSA: maxed out 52,000
RRSP: about 160k
Personal non-registered accounts: somewhat large amount which I'd have to calculate.

I'm really ashamed to say that I'm almost completely sitting in cash having been stuck in 'analysis paralysis' for quite some time.
However, I'm ready to take the plunge and go with a couch-potato style portfolio, having read quite a bit around it and believing very strongly in passive index investing.

So, the question really is how to organize the ETFs. For argument sake, lets assume a 60:40 stock/bond mix and perhaps assume I go with ZAG, VCN and XAW.
I'm very open to other ETFs and portfolios with more than 3 funds or even with some amounts in other types of investments if necessary. I'm ok with using TD e-series as well, since I use TD anyway and the extra MERs might be worth the increased simplicity of purchases.

How do I decide which tax-efficient investments should go into the CCPC and which into my personal taxable account? Which into RRSP/TFSA? I’m assuming it would make sense to avoid duplication of funds in different accounts but I think this may be impossible with the CCPC holding more and more retained earnings over the years. Obviously there are also issues with keeping track of ACB, when/how much to take out of the corp and re-invest personally, potential for flow-through dividends from the corp, capital dividend account etc...

To complicate things further I have a fair amount of USD in both the CCPC and personal non-reg accounts. Also, when it comes time to rebalance, things may get messy having both personal and corporate non-registered accounts.

I'd like to keep things as simple as possible though and would like to buy shares of the ETFs quarterly or maybe monthly as I earn more income in the CCPC. I can adjust my salary as needed, if necessary. Currently I am still paying a salary to myself and am generating contribution room in my RRSP yearly. Eventually, my CCPC retained earnings will exceed my RRSP and TFSA and also my personal non-registered accounts.

Some options:

1. Make a passive (couch potato) index portfolio and somehow put the tax efficient stuff into my personal non-reg accounts and CCPC account in combination. Maxing out the RRSP/TFSA for the tax inefficient stuff as much as possible. I think I will be unable to avoid some duplication of funds. Not even sure how to structure this.

2. Make a passive index portfolio in my personal accounts, putting as much of the tax inefficient stuff into the RRSP/TFSA. Not using the CCPC for index investing AT ALL, and just investing Corporate funds in something that will generate capital gains or flow through Canadian dividends.

3. Do (2) above, above but plop something else more appropriate for a CCPC's passive income stream (although I don't know what this other investment would be exactly)

4. Just hire a professional to really figure out the best way to do all this, make the monthly purchases, keep track of ACBs, rebalance and figure out how much and when to take out of the corporation. This last option was highly recommended to me by a very popular Canadian passive index investment guru who's blog I read often although I'm having trouble believing I can't do this myself ;) I'm not even sure who would be best for this (my accountant is great with tax planning with the corporation, but I doubt he'll help me make my quarterly fund purchases and rebalance). A robo-advisor?? A full-service wealth management company who believes in index investing and charges 1% of my holdings?

Any thoughts? Other options to make this simple? Concrete examples of how to structure my regular purchases?


1,760 Posts
Hi and welcome to the forum :) I spent some time planning our portfolio to be more tax efficient, but yours is more complicated... would you consider Vanguard Total World Stock ETF (VT) for the USD portion?

Here's our Allocations across accounts:

RRSPs: VTI, XEF, IEMG, GICs, individual bonds
Taxable: HXT, HBB, HISA

529 Posts
I'd prioritize the the Canadian equities in your Holdco. Investment income earned in the Holdco is essential taxed the same as if you were in the top personal tax bracket.
The exception is Canadian Dividends which are essentially tax neutral in the corp because all the corp tax is refunded when you pay the dividend out of your corporation.

529 Posts
^ Integration means that you more or less face the same tax burden. That's the point of the dividend tax credit.
More or less, yes, but the integration isn't perfect. Currently, there is a small cost to earn investment income through a corporation in every province. The only income that flows out tax neutral are Canadian dividends.

10 Posts
Holdco investments

Thought I would mention a couple of things that are usually overlooked. Investment income earned in a corporation is taxed at 50.2% but it does include a refundable tax component, that is returned when the company pays taxable dividends to you. One thing that seems missing from this discussion though is the use of the capital gains exemption on the sale of the shares of your company which is $835,714 for 2017. If you are thinking of selling the company in the future, you may want to seek advice regarding your investing strategy. Part of the rules to utilizing the exemption, is that 90% or more of the assets of the business have to be used to generate active business income on the date of the sale. There is also, a provision, that will reduce the gain, if most of it is due to you not paying out dividends. As such, building up a large investment within your corporation may not be the best option.

1,539 Posts
1) You should pay yourself a salary as you are below the income level for the SBD. Your corp tax rate in ON is ~ 15%. I think you will pay less tax if you pay most of your profits out as salary and reduce them w an RRSP and other deductions, you also get CPP benefits. Just some quick math. We will assume a salary of $36,000 this year and last year . RRSP at 18% of salary = ~ 6,500

Salary 36,000
RRSP 6,500
Personal Exemption ~ 11,500
Taxable income 18,000
Tax 20% 3,620
Effective Rate ~ = 10%

2) If your company is earning a decent return a good option maybe to leave your $ after your salary in retained earnings which grow tax free vs buying any investments which will be taxable. (Dividends are complicated as their is pt1v tax and w the DTC earning dividend income personally should be taxed at similar rates. ) When you sell your CCPC shares, they qualify for the CGE as mentioned earlier too so you will pay no tax.

3) One thing you don't want to do is hold any interest bearing securities in your business or personal investment accounts.

4) From above, you put $ $6,500 in an RRSP, max out the TFSA, $5,500 and have $ 20,380 for an investment account ($36,000 - 6,500 -5,500 - 3,620 ).
Say a 60/40 couch potato total is $32,380:

Bond ETF $13,000
see below
Equity ETFs $19,380 Split in 1/3s equally
1/3 Cdn ETF
1/3 US ETF
1/3 International

5) Here is a guide of the best place for the investment classes. I would do this.

RRSP & TFSA - $13,000
ZAG or XBB Aggregate Bond ETF - $7,000
HAB or XHB Corp bond ETF -$6,000

Investment - $19,380

Option 1

You could follow the couch potato portfolio from above

VUC- Vanguard Canadian Equity ETF - $6,460
XAW - Ishares MSCI all world ETF ( this is everything except Canada) - $12,920

Option 2

One of ZLB BMO Canadian low volatility Index ETF, XIU (Ishares) or ZCN(BMO) S&PTSX 60, VEC vanguard Canadian equity - $6,460
One of ZUE (BMO) or XSP Ishares S&P 500 or ZLH US low volatility index or VUN Vanguard us equity (not hedged though - $6,460
One of VI Vanguard world ex N America hedged, ZLD BMO low volatility International index hedged or XFH Ishares MSCI EAFE index hedged - $6,460

18 Posts
I have a similar situation, few quick thoughts as there's already a lot of good ideas above me.
1. create multiple classes of shares, if you have a spouse, holding non common class of shares will allow you to do some dividend sprinkling
2. RRSP should hold REIT, Bond and anything that has high tax rate
3. highest capital gain/growth in TFSA
4. consolidate your USD into one account, so arrange to have CAD/USD swap, you will thank me later when you buy stocks.
5. find a good accountant to work with you, since annually you will be doing dividend sprinkling

do not trade - paperwork will overwhelm you.

wait till you have to manage a bunch of RESPs too.

136 Posts
similar situation here

basically goal is HXS, VCN, BXF in CCPC

situation may chance significantly depending on Liberals policy towards CCPC
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