CRA finds that a CCPC not entitled to the SBD and with more than 5 employees receives the regular corporate rate on its rental income

Opco, which is a CCPC that has exceeded the $15 million “taxable capital employed in Canada” threshold such that the small business deduction is unavailable, employs more than 5 full-time employees in its sole business (the “Business”), which is the rental in Canada of real property. Rather than ducking the question of whether Opco’s income would be treated as aggregate investment income (AII) rather than active business income, by treating it as a question of fact, CRA stated:

As the Business has more than 5 full-time employees throughout its tax year, it is not a specified investment business and Opco’s income is from an active business.

Accordingly, all of its income would be treated as “full rate taxable income” as defined in s. 123.4(1) that would be subject to federal tax at the 15% rate.

Neal Armstrong. Summary of 2 June 2022 External T.I. 2019-0828381E5 under s. 123.4(1) - full rate taxable income- (b).