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RRSP’s & Real Estate Professional Corporations

March 1, 2021 is the Deadline for RRSP contributions!

If you haven’t yet made your RRSP contributions yet, make sure you don’t miss the March 1 deadline.

Investing in RRSP’s?

As we know, one of the big incentives to investing in RRSP’s is the tax deduction it provides in the relevant tax year, Another advantage of course, is that this money sits in your RRSP fund, increasing in value over time.   Perhaps most importantly, is that when you retire and it comes time to start withdrawing those funds, you are taxed at your tax rate at that time which, presumably, will be lower than it is now,

How does this work with PREC’s?

Ideally, a Realtor should be paying themselves just enough salary to generate the maximum RRSP contribution room possible. This salary is taxed at a personal rate (plus CPP), but the taxes due are reduced by the amount saved by contributing to the RRSP. Any money left in the PREC is only taxed at the Corporate rate of 12.5%.

What do you do with the money left in your PREC?

These savings can be used to build your business, pay family members who work for you, take advantage of greater retirement savings options, invest money and accumulate Real Estate.

Other Considerations

If you’ve contributed your maximum amount to your RRSP, don’t forget about TFSA’s! There is no deadline for these contributions. The annual TFSA dollar limit for 2020 is $6,000. Banks, insurance companies, credit unions and trust companies can all issue TFSAs.

Contributions to a TFSA are not deductible for income tax purposes.

What are the benefits to a PREC?

Personal Real Estate Corporations (PREC) will make available to Sales Representatives and Brokers:

•           Corporate income tax rates

•           Tax deferral opportunities

•           Increased Retirement Savings Abilities

•           The ability to invest excess income into income producing assets

•           Income splitting opportunities

•           Possible lifetime capital gains qualification

•           Possible limited liability


Frequently asked questions on PREC’s


What is the structure of the PREC?

--It is a Personal Corporation. There can be only one owner, that being the Real Estate Agent/Broker

--The Real Estate Agent must be employed by a Brokerage

--There must be an agreement, in writing between the Corporation, the Agent and the Brokerage

--It must be an Ontario Corporation

--You can use a Corporation you may already have, as long as it abides by the rules of a PREC

--There can be only one Director/Officer, the incorporator, and only one equity shareholder, however there can be

   non-equity family member shareholders

--Your Brokerage would pay any commissions you earn directly to your PREC, and the PREC would pay you


Can a PREC be a brokerage or deal with Trust monies?

--No, a PREC cannot be a brokerage, cannot have a trust account and cannot hold deposits in trust


I am part of a Team~can we incorporate a Team PREC?

--No, all agents~every team member~ being paid a commission, must have their own PREC. This also applies to

husband and wife teams.


What is the difference between Salary and Dividends?

--The Salary you choose would be paid by your PREC, minus the applicable personal taxes and CPP. Salary also

allows for RSP deductions

--You can also choose to receive Dividends, which are taxed at a different rate, and are not subject to tax/CPP

   withholdings. Your Accountant will advise on what makes the more sense for you


Can I pay my kids dividends from the Corporation?

--Yes! As long as they work a minimum of 20 hours a week for you


Does the PREC have to register with RECO?

--No, there is no registration with RECO requirement and no payment required. The agent must advise RECO

of the Corporate name and address


How is Liability handled with a PREC’s?

--PREC’s do not protect agents from any findings of negligence. Any settlement would still come out of the  

Agent’s personal insurance. Limited Liability might possibly occur in cases of loans where the agent did not

sign a personal guarantee


I already have an HST Number-How is that handled?

--Your PREC must have its own HST number. Your number will be cancelled. If the PREC owes more than $3,000

per year in HST, it will have to pay corporate HST installments


Can I use my personal Bank Account and Credit Card for the Corporation?

--You should open a new bank account and have a new credit card issued solely for your corporation

--Keep all receipts, expense records separate for the Corporation


What are my obligations and costs to incorporate?

--You will have extra Accounting costs of approximately costs of around $2,000 per year to manage your Tax filings

--You will need to file an Annual Return every year with CRA

--Incorporation costs can run into the thousands (McHines Corporate Services charges $895.00 + HST)

--You may need to pay HST In installments


Can I incorporate now and utilize my PREC for 2020 income and expenses?

--You can incorporate now, but only sales and expenses from the date of incorporation will be affected


What can McHines do for you?

Your lawyer and accountant can advise you on if incorporation makes sense. Our Incorporation service includes all government forms and filing, an electronic minute book and a NUANS search. There are no extra charges.

. Incorporation for $450.00+HST