Question: Do you have a corporation for your aesthetic business? Is it a medical corporation? The answer to this question can have far reaching implications. Recently two situations have come up that illustrate the point.
Doctor A had a corporation (non-medical) for his aesthetic business. The business income was 750,000 with 100,000 income after expenses. He filed corporate taxes and paid the corporate rate – about 17% = $17000. When he was audited, it was ruled that his practice income had to be billed by a medical doctor, not the corporation. So, the CRA attributed the 100,000 income to him personally and taxed him at his personal rate of 40%. As a result, his bill was $40,000 instead of $17,000 which meant that he owed the CRA another $23,000 in addition to the $17,000 he had already paid. Nasty surprise.
Doctor B decided to create two corporations – one for the aesthetics business and one as a true medical professional corporation. Again, it was determined that the income had to be billed by the professional, which meant that the income itself had to go to the doctor’s, not the business. This meant alot of adjustments – first the doctor billed the client for botox, and billed the expenses, then paid the clinic it’s share.
Bottom line – Beware of billing medical procedures like botox through a non-medical corporation. You may not be allowed to do it and if you are investigated by the CRA, your tax bill could be much higher than you thought.
Best to seek out the advice of an excellent tax lawyer who has experience specifically with medical corporations.