So you finally agreed to meet the tax accountant that everyone has been talking about. “He reduced my tax bill by thousands of dollars,” your neighbour says. “And it’s all perfectly legal.”
You live in the province of Quebec, and are married with two children, ages 19 and 22, both attending university. You are self-employed and earn $150,000 a year. Your husband works for a larger company, and has an annual salary of $50,000. Last year, you and your husband paid combined federal-provincial taxes of about $66,400, including Quebec Pension Plan and health-care levies.
You sit down with the tax adviser. “The amount of tax that you’re paying is ridiculous,” he says. Then he shows you … “The Plan.”
First, you set up a private corporation (Taxco). From now on, Taxco — not you — will carry on your business. Taxco will have four classes of shares: A, B, C and D. You will get one class A share, and your husband one class B. Each child gets one share as well, one gets a class C and the other gets a class D. Now here’s the trick. The directors can declare dividends on any single class of shares, to the exclusion of the other three classes. In other words, each share is entitled to discretionary dividends in whatever amounts you choose.
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