Gaming attorney and account @GamingCounsel earlier today posted a great piece about the taxation of gambling winnings in Canada.

Good post, thanks.

I am an online poker professional (also play some live tournaments). I file my taxes as self-employed. I live in British Columbia.

My question: is it necessary and/or beneficial for me to get a GST/HST number from CRA? The guy who prepares my taxes suggested that I get this number, but he doesn't know anything about poker. He says that this way I can get back some of the HST that I pay.

I don't see how that would be worth it. You would be able recover the HST you pay on stuff that you consume or use to carry on the business of playing poker. That isn't enough money to justify having to do the paper work.

Stuff that you should be doing though is claiming CCA on any computer equipment you bought / buy to play poker on. The CCA class for computer equipment is 100% so you get to reduce you income by the full amount. You can also claim a percentage of your car ownership expense equal to the percentage used for travelling to play poker.

Depending on your situation you might also wish to incorporate -- cost $200 plus 20 minutes online -- and have the corporation play poker. Using dividends and a small salary to compensate yourself while keeping money you want to save / invest in the corporation can reduces your taxes. Again this comes with additional paper work but depending on how much you make this would actually be worth it.

Thanks for the reply.

How mush would I save with a corporation if I make, say, 200K a year? Why would I be saving? Do corporations have lower tax rates?

Yes they do. Ontario for business under 500k was 16.5% in 2009. It is lower in 2010 and even lower in 2011. Personal income tax for people high income earners is at least twice that -- in many cases closer to three times that. That is without even taking into account CPP and possibly any health care surcharge.

In Ontario the difference would be ~$43k. I assume it is roughly the same in BC.

The winnings would not belong to you but rather to the corporation.

Depending on how you removed the money from the corporation you could have to then pay personal income tax. Assuming you have not other income you can get $55-60k out of the corporation tax free though dividends.

At this point though we are really into tax planning which without actually knowing everything about you is hard to do and given I am deadly sick not something I'm all that comfortable talking about. I don't know if TorontoCFE still posts here but he could explain it better than I can.

In a nustshell with very broad estimates and using BC as an example

Corp tax rates are about 13.5%

Personal rates quite roughly and rounded by a couple points are

0 - 10000 0%
10,001- 42,000 20%
42,001 - 82,000 30%
82,001 and up 40%

So the object is to leave as much money in corp as possible as once you
take a salary out you get taxed at above personal rates. You will likely
need to take out some money from corp to live your lifestyle etc. so let say you make 200,000 net in corp and you need 80,000 gross before taxes, cpp etc to live on etc. (so about 60,000 a year net)

So if money earned in corp as above and with 80,000 salary

corp tax is 120,000 x 13.5 = 16,200
personal is 17,800
total is 34,000

If all this is earned personally wituout a corp you are paying closer to 68,000 (this is actual) ignoring CPP.

So tax deferral of about 34,000 and also possible tax savings dependiing what you do down the road.

Other issues result also depending on how you invest the money in the corporation. But if you are making this kind of money and you can leave a bunch of it in the corporation then incorporating would make sense.

These number are not exact but reasonably close for showing an example.

Just $200? Here is what I got from http://www.ehow.com/how_5724039_crea...on-canada.html

------------------------------------------------------------------------
Cost
#1
Save by registering online with Corporations Canada for a discount to CN$200 ($250 otherwise).

#2
Contact an online agency to help with the application. Costs range from CN $375 to CN$700, which include the NUANS fee (CN$40), filing the Articles of Incorporation (CN$200) and copies of your application (CN$15), plus corporate bylaws, a corporate minutes book a seal and share certificates.

#3
Determine provincial fees, which vary. Ontario charges CN$360 (CN$342.50 online).
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Even assuming there is a way to avoid most of #2 fees by somehow doing it myself (not sure how at the moment) and choosing a definitely unique name to not pay the NUANS fee, what about the provincial fees?

The number is closer to 40,000 to get out at zero tax and remember this is after paying corp tax (ie: dividends are paid out after corp tax) so its not truly tax free.

Step #2 is completely unnecessary. The process is ridiculously easy.

You need to do NAUNS for any name. The only way to avoid it is to just have a numbered corp. Since you don't plan to market anything that is fine. You'll just be 468456789

I have no idea what step #3 is. A Federal corporation does have to register in the province but I don't remember paying anything and I did one of these for someone last year. I'm pretty sure it is automatic in Ontario and free.

Are you sure step 2 is unnecessary? Why do people do it then? Is it necessary for some other companies?

If I did register a numbered corporation, would I have an option of paying a fee and choosing a name later?

Also, if I do incorporate, should I be able to do all paperwork in the future by myself or will I need an accountant?

Thanks.

Because it seems scary so people are intimidated. My GF also did her own and she had no problem. The hardest part for her was dealing with the name because similiar named business already existed.

I'm actually doing a federal incorpoartion in the next few days. I'll report back with exactly the steps required.

There is also a PDF on the government site that is very informative and written for people with no legal training.

I'm 99.9% sure you can.

The paper work for keeping the corporation in good standing is $20 and filling out a online form so you can do that yourself.

Maintaining the records of the corporation again is something you can do yourself. Since you are the only shareholder it doesn't require much.

If you have a SO, children, grandparants, etc .. basically anyone who doesn't have any income of their own you can make them shareholders too and that allows for better tax planning. This is getting more complicated but still something that I think most people would understand.

The last part is doing the corporations taxes. If you could do this on your own or not depends on how comfortable you are with doing taxes. I don't think it is difficult. If you can do your own personal taxes for a self-employed person than it is the equivalent.

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http://www.ic.gc.ca/eic/site/cd-dgc....h_cs01914.html

That is the guide I mentioned above.

So, if I incorporate, how will it work technically? The cashout checks from the poker site will still be coming in my name, not in the name of the company. Will I need to open a bank account for the company and deposit the checks into that account? Will the bank let me do it if the checks are in my name? Or will I still deposit checks into my own account and declare this money company funds?

Sorry, I've never had any businesses, so I am quite clueless how this works.

Thanks.

You have an employment agreement between you and the corp saying you play on your accounts with the corps money.
You open a corp bank account and deposit your bankroll there, When you
want to fund an online account or play live, you cut a cheque to you from the corp.
You deposit any winnings/ net into the corp account when done.
You pay yourself a salary (if you need the money to live) with a cheque from the corp. There is withholding and government filings required on this.

At the end of the year, if your winnings less living expenses leave a surplus, you
bonus or dividend it out if needed and invest it in the company's name and own account if you don't need it immediately.

If you have people who you wish to split income with, have them buy some initial shares or gift/sell them shares later on. Eventually that income will not attribute (be considered yours and not theirs for tax reasons) back to you and you will be able to split income and take advantage of their lower tax rates (presumably).

Once the corp builds up assets, it can lend you money to buy a home or car (if you use it for business) tax free. You then pay back the corp as you wish.
(small caveat applies here).

As the corp assets grow, you can take advantage of the lower corp tax rates.

As the corp gets established, you have the option of using its credit instead of yours to buy stuff. This can transfer some risk to your corp instead of you.

Thanks!

So, if I get a check from the poker site that is in my name, will I be able to deposit it into the corp account?

Also, if I already have my bankroll online, I guess I don't need to withdraw it just to deposit it into the corp account and then move it back, right?

Do corps have credit histories with the credit bureaus? How easy is it to get credit for a corp as opposed to personal?

Would any run of the mill accountant be able to help me out with the process of incorporating?

You deposit a site cheque into your account then write your own cheque to the corp and deposit that in the corp.

You don' t need to withdraw your initial stake but you need to write up some
paperwork (in whatever form you like) that shows:
1. You buying shares into your corp with your online money
2. The corp giving you the money back to play with.

You need all incoming money togo into the corp account and all outgoing money
to go out of that corp account at some point so that it is documented, there is an audit trail and the corp is legit in terms of being part of the transaction.

Corps have their own credit history (may need to apply for a DUNS #)
but it takes a lot longer to build - 5 + years usually.

I've set up lots of corps.
Any accountant can do it or you can do it yourself.

Just make sure you have a decent employment agreement for you with the corp.

It may be against the terms of use of many poker sites to be gambling on behalf of another person (i.e., the corporation). This may entail risks. Proceed with caution.

I've lost money this year at poker. What do I do?

Incorporating TR

It took me less than 45 minutes. Still waiting to find out if request will be approved and might have issues with a similar name but other than that it was just as easy as I remembered.

Curious that so many people get reported for lifestyle inconsistencies. Is this generally neighbours / cowokers and such or are there automatic processes as well when you buy something (i.e. buying a car)?

Even if you own and direct the corp 100%? Curious if you have any more info on this.

Tim

I would have to read the terms but I don't know how a poker site would ever find out.

Well, let's look at the Terms of Service for Poker Stars: http://www.pokerstars.com/poker/room/tos/

If you are playing on behalf of a corporation and have an employment agreement with the corporation, you are not playing "for personal entertainment" because you are performing your duties of employment. This violates the Terms of Service. The remedies for Poker Stars includes seizing all the money in your account. Pretty straightforward, right?

Contact PS and explain situation?