One of the qualifying criteria of a small business corporation is that investment income should not exceed 20% of total annual income. The company is registered as a property trading company, that is, the company buys properties, renovates and then either
Author: Peter Surtees
Important:
This answer is based on tax law year ending 28 February 2021.
Answer:
The relevant provision is in section 12E(4)(c) of the Income Tax Act. Relevant tax law “’investment income’ means- (1) any income in the form of dividends, foreign dividends, royalties, rental derived in respect of immovable property, annuities or income of a similar nature”. The definition is clear and does not provide for any exceptions where the immovable property in question happens to be trading stock in the hands of the taxpayer.