Question:
I would like to merge my business with a Canadian company that operates in the same field as me. Is there any way to avoid paying tax on the merger?
Answer:
The Income Tax Act allows for a tax free merger if the following conditions are met:
- Both corporations are Canadian Controlled Private Corporations (CCPCs)
- The shareholders of the old corporations become the only shareholders of the new corporation (i.e. the merged entity)
- All assets and liabilities of the old corporations become the assets and liabilities of the new corporation.
If these three conditions are met, then you can amalgamate / merge the corporations on a tax-free basis.
