Claiming company tax deductions in your income tax return
In certain circumstances, companies that receive schedular payments can transfer the tax deducted from these payments directly to the company's shareholder employee(s).
Transferring tax credits will:
- help the shareholder-employee meet their tax obligations on income they receive for their work for the company
- reduce the risk of the company's shareholder-employee(s) having to pay use of money interest on income which already had tax deducted when paid to the company.
Directly transferring tax deductions
If a company has received schedular payments that have already been taxed, it can transfer those deductions to the shareholder-employee(s) if:
- the company is a close company with 25 shareholders or less
- an amount of income has been paid to the shareholder-employee(s) of the company, either as a shareholder-employee salary without tax deducted or under the personal services attribution rule.
The maximum amount that can be transferred is the total tax deducted from schedular payments received by the company for the year.
You will not be able to transfer tax deductions if it will leave some remaining tax to be paid by the company for the same tax year. You may only transfer up to the amount that can be refundable or transferable to another tax type or person.
A Look Through Company (LTC) will not transfer tax using this method.