In your case, though, Parmod, there’s no tax to transfer your home to your corporation assuming it qualifies as your principal residence for all years of ownership. The real question is: should you?
Self-employed? How to file your taxes
Personally using a corporate asset
As you’ve noted, you may need to pay rent to the corporation after the transfer. The reason: If you use a corporate asset for personal use, you either need to pay for that usage, or include a taxable benefit in your personal income for the year.
In the case of real estate, paying the corporation would be based on fair market value for rent. The rent would be considered taxable income to the corporation with a tax rate of around 50% (the rate varies by province and territory).
If you didn’t pay rent, or you paid below fair market value, you may need to add a taxable benefit to your T4 slip. You’ll have to report that benefit as employment income, triggering personal tax.
Due to shareholder
If you transfer an asset to a corporation, the corporation owes you money in return. If you transfer $1,000 to your corporate bank account from your personal bank account, for example, the corporation generally owes you back that amount tax-free.
The same may apply if you transfer a $1 million asset like your home to a corporation. The corporation may then owe you $1 million tax-free. This can be an option to take cash out of a corporation instead of selling a personal asset you wish to keep.
Principal residence exemption: personal vs. corporation
The principal residence exemption can be claimed by an individual taxpayer in Canada, but not a corporation. So, owning your home in your corporation, Parmod, will give rise to future capital gains tax.
The inclusion rate for capital gains is set to increase from one-half to two-thirds based on the 2024 federal budget, though this change is not yet enacted into law. Once it has been, it would cause the tax rate on a corporate capital gain to rise from about 25% to about 33%, though it could be slightly lower or higher depending on the corporation’s province of residence.
