How Does Capital Gains Tax Work With A Company?

[tommo]

Hi all,

I think i have this right, i know different countries are different but assume largely similar.

If you own a limited company you have corporation tax, dividend tax and capital gains tax. In the UK you pay Corp tax on the company's overall profits and then a tax on the dividends you draw. You only pay capital gains tax if you liquidate the company/sell your shares.

Is this how it works in most countries? I see some countries talk about futures/ stocks etc having different rates of capital gains tax. How does that work? Is every buy or sell you make in the market charged capital gains?

Thanks

 

[jys78]

Hi all,

I think i have this right, i know different countries are different but assume largely similar.

If you own a limited company you have corporation tax, dividend tax and capital gains tax. In the UK you pay Corp tax on the company's overall profits and then a tax on the dividends you draw. You only pay capital gains tax if you liquidate the company/sell your shares.

Is this how it works in most countries? I see some countries talk about futures/ stocks etc having different rates of capital gains tax. How does that work? Is every buy or sell you make in the market charged capital gains?

Thanks

These kinds of questions are far better answered by an actual tax expert in your jurisdiction, than by random anonymous internet people.

 

[Sig]

To the OP, in the U.S. you get a better tax rate on capital gains as an individual than you would get on ordinary income. A U.S. Corp doesn't get that same preferential rate on its capital gains, meaning if your corporation bought IBM stock and sold it for a profit that profit would be taxed at the corporate tax rate same as any other profit. Then you would pay tax again when it was disbursed to you as a dividend. And in the U.S. you can't keep money in the Corp if you can't demonstrate it's needed for operational business purposes, so you have to pay that dividend. If you sell the Corp itself for a profit you pay personal capital gains on the price you sold the Corp for over your basis in the Corp. I'm not a tax professional though, just an entrepreneur who has done this a couple times, so I'd second the advice to working with a CPA if you're seriously considering setting anything up.

 

[nooby_mcnoob]

Actually most people here are idiots, and to demonstrate let's think for 2 seconds about your statement. I was a professional pilot, clearly that means I'm an idiot when it comes to flying a plane as are "most" other professional pilots and we'd be much better off with you doing it? I'm an electrical engineer, clearly you'd rather have someone who read about electronics in a book once designing the avionics for that plane over me or "most" of my fellow professional EEs? And the air traffic controllers, who the fuck do they think they are, idiots every one, am I right? Do we need to go on through the pantheon of professions in the world, from brain surgeon to barber to make the full extent of the idiocy of your comment clear?

To the OP, in the U.S. you get a better tax rate on capital gains as an individual than you would get on ordinary income. A U.S. Corp doesn't get that same preferential rate on its capital gains, meaning if your corporation bought IBM stock and sold it for a profit that profit would be taxed at the corporate tax rate same as any other profit. Then you would pay tax again when it was disbursed to you as a dividend. And in the U.S. you can't keep money in the Corp if you can't demonstrate it's needed for operational business purposes, so you have to pay that dividend. If you sell the Corp itself for a profit you pay personal capital gains on the price you sold the Corp for over your basis in the Corp. I'm not a tax professional though, just an entrepreneur who has done this a couple times, so I'd second the advice to working with a CPA if you're seriously considering setting anything up.

Congrats you took something about accountants and made it about pilots, brain surgeons and whatever else.

 

[Sig]

Congrats you took something about accountants and made it about pilots, brain surgeons and whatever else.

Interesting restriction of the definition of the word "professionals" to include only accountants, but that aside my point perhaps required a little too much mental connecting of the dots for you. Let me spell it out. Apparently you do think that folks who have extensive training and experience in their field generally are a more reliable source than a random punter on the internet, except inexplicably accountants? Is this based on any actual study, or your highly scientific method of talking to a guy at Liberty Tax wearing a statue of liberty costume who you assumed was an accountant and who was an idiot and then extrapolating that the field of accounting is unlike any other profession and "most" accountants are therefore idiots? What's that, a sample size of .000000000000000001% of accountants? Congratulations, you fail stats and 8th grade intro to the scientific method!