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Investing through a JV with non resident family members

EricBodin

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Hi,
I am interested in investing in a JV with 2 other family members. Both of them are from France. What would be the best way to do it? Through a Canadian corporation? Since I am a Canadian resident, what percentage of down payment would we need?

Thank you !

Eric
 

Thomas Beyer

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You have to withhold 25% of any gains or distributions unless they are registered with CRA with a tax ID. As such a corporation is simplest as usually the distributions come on exit, on sale, and 25% approximates the capital gains tax anyway. No annual filing required unless there is a cash payment, unlike an LP or straight ownership (undivided interest) type of JV.

Likely the bank will only look at you as the borrower, and the asset, so the LTV will depend on your and asset, not the foreign investors, and it will depend on the legal structure. For an asset held in a corporation it is frequently, but not necessarily, harder to get 80% LTV.
 

EricBodin

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Thank you Thomas! It looks like having a Canadian corp is the way to go and if there is no annual filing, the cost will be minimal.
 

Thomas Beyer

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True while you hold, although before you dividend gains out you might wish to consult with a tax expert to minimize taxes and what kind of filings are required.
 

EricBodin

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Thomas, I was trying to find out why there would be no annual filing required in my case? Is it only because there is no cash payment? Thank you!
 

Thomas Beyer

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A Canadian corporation files annual and tax returns of course. But that is independent of the shareholders.

Shareholders of a corporation get a T5 dividend statement if there is a dividend. Of these dividends you have to withhold 25% even if the foreign investor makes himself known via a filing to CRA. But when you file with CRA the foreign investor will get some or all of these withheld taxes back typically s few months later.

If you did an undivided interest, personal JV, LP, trust or mutual fund trust you have to file a statement annually for each investor even if there is no payment.
 
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