Non-deductible expenses in corporations
At the margin, in B.C. every dollar paid by a company to its owner is taxed at the rate of about 44% in the owner’s hands. Thus, the general rule of thumb is that the more money which can be retained within the company, the better the tax result.
Generally speaking, payments made for life insurance premiums are non-deductible, although there may be exceptions where a lender requires the policy to be taken out as security.
Consider life insurance premiums costing, say, $10,000 per year. If the policy is personally owned and the money to pay the premiums must come from a corporation, the owner must receive a payment of over $17,800 in order to net, after tax, the $10,000 needed to pay the premiums.
However, if the company owns the policy, at current BC rates, the company would have to earn profits of just $12,000 or so to have the requisite after-tax cash available. In many situations, these policies are acquired to finance the eventual redemption of shares upon the death of the shareholder.
This principle can be extended to several other areas, but caution must be exercised, as CRA would be wary for any personal benefit resulting from such corporate expenditures.