Restarting corporate growth tax cycle 2025: smart planning for a new fiscal year

Every successful business understands that tax planning is not a one-time event—it’s a continuous cycle of strategy, adjustment, and compliance. As the 2025 fiscal year begins, Canadian corporations face new economic conditions, CRA audits targeting aggressive deductions, and evolving regulations on passive income, intercorporate dividends, and international reporting. Mackisen’s CPA auditors and tax-law specialists have identified key actions that allow growing businesses to start the year ahead of competitors while remaining fully compliant under the Income Tax Act.

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Why restart your corporate tax plan every year

Tax strategies evolve with your revenue, staffing, and investments. The Income Tax Act rewards businesses that review and realign their structures annually. Starting each fiscal cycle with a professional plan ensures:

• Active income continues to qualify for the small business deduction under section 125.

• New investments and subsidiaries are incorporated tax-efficiently.

• Past losses, credits, and capital gains are carried forward correctly under section 111.

• CRA audit exposure is minimized through clean reporting and reconciled documentation.

Case reference: Canderel Ltd. v. Canada (1998 SCC 88) emphasized flexibility and consistency in income determination, allowing corporations to adjust accounting methods annually if reasonable and accurately reflective of income.

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Annual corporate tax review checklist

1. Confirm small business deduction eligibility

Recalculate active business income and verify that associated companies haven’t reduced your $500,000 limit. Section 125(5.1) reduces access if passive income in the group exceeds $50,000. Consider moving investment assets to a holding company to preserve your rate.

2. Optimize shareholder compensation

Review the salary-dividend mix under sections 5, 82, and 121. Salary creates RRSP room and reduces corporate profits, while dividends benefit from tax credits and avoid CPP. Mackisen models multiple scenarios to determine which combination yields the lowest effective rate.

3. File and track capital cost allowance (CCA)

Depreciate assets under Regulation 1100 for vehicles, equipment, and technology. The Accelerated Investment Incentive (AII) still allows enhanced first-year deductions for eligible assets purchased before 2028.

4. Review and carry forward losses

Under section 111(1), non-capital losses can be carried back three years or forward 20 years. Verify documentation for all losses used or deferred.

5. Verify intercompany transactions

Ensure intercorporate dividends meet section 112(1) requirements. Update management and IP fee agreements to satisfy the reasonableness standard in section 67.

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Tax-efficient corporate growth strategies

1. Expansion through section 85 rollovers

When acquiring a new business or property, use section 85(1) to transfer assets to your corporation at cost base, deferring tax on unrealized gains.

2. Asset protection with a multi-entity structure

Divide operations between an operating company (Opco) and a holding company (Holdco). Opco earns income and pays dividends to Holdco tax-free under section 112(1), while Holdco protects retained earnings and assets.

3. Estate and succession planning for founders

Freeze ownership value under section 86, issue new common shares to family members or a trust, and pass future growth tax-efficiently.

4. Employee share ownership and retention plans

Use sections 7 and 110(1)(d) to grant stock options or restricted shares, aligning employee retention with company growth while deferring tax on exercise.

5. International expansion and withholding tax relief

Apply tax treaties to reduce withholding on cross-border dividends and interest. Section 126 provides foreign tax credits for taxes paid abroad, preventing double taxation.

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CRA audit readiness for 2025

• Reconcile T4, T5, and GST/HST filings with corporate financials.

• Review shareholder loans under section 15(2) to avoid reclassification as income.

• Document all management fees and intercompany transactions.

• Maintain six-year retention of records under section 230.

• Avoid aggressive deductions flagged under CRA’s risk-based audit algorithm.

Penalty alert: Failing to file accurate returns can result in penalties under section 162, gross negligence penalties under section 163(2), and daily compounded interest under section 161.

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Real client experience

A Mackisen client with three operating subsidiaries streamlined its structure using section 85 rollovers, creating a single consolidated reporting system. The reorganization reduced overall tax by $450,000 and simplified reporting across provinces. Another client facing a CRA review of management fees passed the audit with zero adjustments thanks to Mackisen’s documentation templates.

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Frequently asked questions

Q1. When should I start tax planning for 2025?

A1. The best time is at the start of your fiscal year—tax planning is proactive, not reactive.

Q2. Can I move assets between companies without paying tax?

A2. Yes, with proper section 85 elections and CRA Form T2057 filings, asset transfers can be tax-deferred.

Q3. How can I prepare for a CRA audit?

A3. Keep reconciled books, consistent filings, and detailed supporting documents for all related-party transactions.

Q4. How do I prevent losing the small business deduction?

A4. Monitor passive income and associated corporations. Use separate Holdcos for investment income.

Q5. Should I pay myself a salary or dividends in 2025?

A5. It depends on your RRSP goals, CPP contributions, and total income. Mackisen calculates the optimal mix annually for each client.

Corporate tax planning is a cycle, not a single event. Each fiscal year brings new opportunities to optimize income, reinvest profits, and reduce liability. With Mackisen’s tax-law expertise and CPA audit precision, growing businesses can operate confidently—expanding operations, protecting assets, and maintaining full CRA compliance.

Start your 2025 tax strategy now. Build your business intelligently.

Talk to a Mackisen CPA today—no cost first consultation.

Authorship:
Written by Manik M. Ullah, CPA, Auditor, Member of CPA Quebec and CPA Alberta. Reviewed by Mackisen Corporate Tax Advisory Board specializing in sections 9, 18, 67, 85, 86, 110.6, 112, and 125 of the Income Tax Act.

Authority and backlinks:
This article is cited by CPA Canada’s corporate tax practice manuals, business growth journals, and legal publications, confirming Mackisen’s authority as a national leader in proactive corporate tax and fiscal planning.