What should I do with my non-CCPC?!?!

July 14, 2022 | Andrew C. Bateman, Pierce Quaghebeur, CPA, CA

Taxpayers who previously engaged in non-CCPC tax planning have a decision to make – and ideally soon.

For context, in recent years, a number of Canadian taxpayers implemented planning that involved causing a Canadian-controlled private corporation (“CCPC”) to cease to qualify as such.  The general objective was to realize capital gains or earn certain investment income in the “non-CCPC” at the general corporate tax rate, rather than at the higher investment income tax rate, which includes refundable taxes.  A number of these non-CCPC structures remain in existence today.

On April 7, 2022, the Federal Budget proposed to introduce a new “substantive CCPC” regime that generally would cause the higher investment income tax rate to apply to all investment income of a non-CCPC that is controlled in law or fact by one or more Canadian resident individuals.  Thus, if these rules are passed into law, the advantage of a non-CCPC structure in most cases will be eliminated.

Many who engaged in non-CCPC planning may be focused on the substantive CCPC legislation, but there may be a greater concern.  Previously, on February 4, 2022, draft legislation was released in respect of the “notifiable transaction rules,” which potentially applies to a broad range of tax planning, but could also apply to non-CCPC planning.  That is, the published list of sample designated transactions includes transactions manipulating CCPC status to avoid the refundable dividend tax regime.  Of particular note under these rules is the prospect of very significant penalties for taxpayers and their advisors.

The notifiable transaction rules are proposed to be made effective as of January 1, 2022, except that the penalties will not apply to transactions implemented prior to royal assent. This sets the stage for a potential decision by those involved in non-CCPC structures.

The challenge

The notifiable transaction rules are broadly worded and potentially include any transaction that forms part of a “series of transactions” involving a non-CCPC.  This expression is defined, and has been interpreted in case law, very broadly.  A series of transactions could include almost any future transaction involving an existing non-CCPC structure – including a disposition of investments or other property by a non-CCPC, or a winding-up and dissolution of a non-CCPC.  The draft legislation expressly provides that the definition of a notifiable transaction is to be interpreted broadly in favour of disclosure.

The reporting obligation under these rules applies to a potentially wide range of persons, including a taxpayer who enters into a notifiable transaction, a person who enters into the transaction for the benefit of the taxpayer, a promoter or advisor (except to the extent solicitor-client privilege applies), and a person that assists a promoter or any other advisor in respect of a transaction.  For example, this means that if advice is sought from a lawyer, accountant and investment advisor regarding a transaction involving a non-CCPC – all of these advisors, in addition to the taxpayer, may have an obligation to report the transaction.

The deadline for reporting a notifiable transaction is also relatively short, generally 45 days after a person has agreed to enter into a transaction.

The consequences of not filing an information return for each notifiable transaction by the applicable deadline may include, among other things, denial of the related tax benefit, extension of the normal reassessment period and penalties.

The quantum of the penalties may be significant. For certain corporations, the maximum penalty is the greater of $100,000 and 25% of the tax benefit of the notifiable transaction. For other taxpayers, the maximum is the greater of $25,000 and 25% of the tax benefit.  For advisors and promoters, the maximum penalty could exceed $100,000.

Moreover, even if the notifiable transaction rules are complied with and no penalties apply, the reporting activity may increase the audit risk of the taxpayer.

The decision

A decision on how to proceed involves two main alternatives.  A taxpayer with a non-CCPC structure to which these new rules apply could (1) attempt to eliminate the non-CCPC structure before royal assent (to avoid the possibility of being subject to penalties for non-reporting), or (2) adopt a “wait and see approach,” review the rules once enacted and attempt to comply with the reporting obligations to the extent required (and accept the possible exposure to penalties).

1. Attempt to eliminate the non-CCPC structure as soon as possible

By eliminating a non-CCPC structure, the objective would be to minimize the risk that future transactions could form part of a series of transactions involving a non-CCPC, and therefore be reportable under the notifiable transaction rules.  Ideally, no future transactions would be reportable and there would be no prospect of future reporting or penalties for non-compliance.

There is no certainty this objective can be achieved, primarily because the expression “series of transactions” can be interpreted very broadly.  Each situation will depend on its facts.  However, at a minimum, taxpayers pursuing this alternative should consider eliminating the non-CCPC status of the applicable corporation, by continuing the corporation back to Canada or otherwise terminating the agreements or instruments that resulted in the corporation’s non-CCPC status.  It may be more beneficial to, if possible, reverse all steps undertaken in the implementation of the initial non-CCPC planning.

Under the draft rules, penalties would not apply to transactions entered into prior to royal assent, so any planning to eliminate a non-CCPC structure (and ideally any relevant series of transactions) should be undertaken as soon as possible.  It is important to take into account that steps to eliminate a structure may not be easy to implement on a timely basis (if for example, foreign corporate registries are involved).  There is no clarity as to when royal assent will occur, but it appears Parliament is currently scheduled to reconvene in mid-September.

2. Wait and see

The alternative option is to wait for the final form of the notifiable transaction legislation to be enacted, and then take steps to comply with the new rules.  One would then presumably decide to report (as of the earliest possible date) or adopt a position that reporting is not required.

A taxpayer adopting either of the above approaches should consider if there is any benefit in attempting to comply with any reporting obligations prior to royal assent.  Reporting is difficult, not only because of the broadly drafted rules, but also because no prescribed form has been released for this purpose.  However, it is conceivable that a taxpayer may have a desire to report prior to royal assent, for example, to avoid an extension of the normal reassessment period for their 2022 taxation year.


The notifiable transaction rules (as well as the substantive CCPC rules) have the potential to make life more difficult for taxpayers with a non-CCPC structure.  Now is an opportune time to consider how to address these potential difficulties, at least before the legislation receives royal assent.  If you are involved with a non-CCPC structure, please contact a member of the Miller Thomson LLP tax team to discuss your options.


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