Substantive CCPCs: Continuing Back to Canada

Feb 12, 2023

Key takeaways

SCCPC will be subject to the same refundable tax on investment income as a CCPC

GRIP, CDA, Proposed MDR, and timing of continuance should be considered if migrating back to Canada

Business tax Tax policy

This content was originally published in the Canadian Tax Foundations newsletter: Canadian Tax Focus. Republished with permission.

Substantive CCPCs (SCCPCs) are private corporations resident in Canada that are ultimately controlled, in law or in fact, by Canadian-resident individuals but are not CCPCs. Draft legislation introduced on August 9, 2022 provides that for taxation years ending on or after April 7, 2022, an SCCPC will be subject to the same refundable tax on investment income as a CCPC—eliminating the tax-planning benefit of this status. Furthermore, an SCCPC is not entitled to the benefits available to a CCPC, such as the SBD, the enhanced SR & ED credits, and the shorter reassessment period. Therefore, taxpayers who previously migrated out of Canada may consider continuing back to Canada to restore CCPC status. Although this may be a good strategy for many corporations, several considerations need to be kept in mind.


An SCCPC does not maintain a general-rate income pool (GRIP) balance; therefore, it should not have a GRIP balance to carry over to the newly continued CCPC. However, the Act allows additions to the GRIP when a corporation other than a CCPC becomes a CCPC. These include, among other amounts, (1) the “cost amount” of the property held immediately before the end of the preceding taxation year, and (2) the amount of any money of the corporation on hand immediately before the end of its preceding taxation year. In summary, the amount added to the continued CCPC’s opening GRIP balance may approximate the balance that the corporation had just before it became an SCCPC, provided that no significant distributions of property have been made since that time.


Capital dividend account (CDA) balances are maintained by both CCPCs and SCCPCs. Therefore, there should not be an impact on the CDA balances on the continuance of an SCCPC to become a CCPC. However, there is one important exception: the CDA will be reset to zero immediately before the continuance back to Canada if, at a previous time, the SCCPC was considered to have been controlled “directly or indirectly in any manner whatever by one or more non-resident persons.”

Proposed Mandatory Disclosure Requirements

Continuing back to Canada to become a CCPC does not appear to be a notifiable transaction. However, the definitions of “notifiable transaction” and “substantially similar” are broad, and a reasonable argument to the contrary is possible. Taxpayers may need to consider this uncertainty and the penalties associated with non-compliance.

On the other hand, this transaction may be subject to the new reportable transaction rules, because the continuance could cause the corporation to become entitled to a tax benefit (for example, the small business deduction).

Neither the reportable transaction rules nor the notifiable transaction rules are an immediate concern. To allow for adequate consultation, the Department of Finance announced on November 3, 2022, that the reporting requirements for such transactions will not be applicable until the date on which the relevant bill implementing them receives royal assent. Previously, these rules were to be applicable to transactions entered into after 2022.

Nevertheless, a continuance into Canada before these two sets of rules receive royal assent might be considered a component of some future notifiable or reportable transaction that occurs after that time. The definition of “series of transactions” is quite broad.

Timing of Continuance

Continuing back to Canada will result in a deemed year-end for the corporation. This may require SCCPCs to consider additional reporting obligations, changes to instalment payments, the expiration of losses, and the acceleration of various deadlines for shareholder loans and unpaid expenses.

RSM contributors

  • Nakul Kohli
    Senior Manager
  • Sigita Bersenas

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