Medical Corp Investing in BC - Raman Nat Inc.

Incorporating as a physician in British Columbia offers more than just income splitting and tax deferral benefits; it opens the door to long-term wealth-building strategies through your Medical Professional Corporation (MPC). But as we move into 2026, navigating this opportunity requires more than just investing corporate earnings. It requires a clear understanding of how the CRA views corporate investing, the rules applicable to passive income, and how to structure your investments tax-efficiently.

At Raman Nat Inc., we specialize in helping incorporated professionals navigate complex tax legislation and create customized investment strategies that support their specific goals. Here’s what you need to know about investing through your MPC in 2026.

Why Invest Through Your Medical Corporation?

One of the primary advantages of incorporation is the ability to retain corporate-level income and benefit from lower tax rates. In British Columbia, the small business corporate tax rate remains approximately 11% on the first $500,000 of active business income, which is significantly lower than the top personal tax rate of 53.5% in 2026.

By leaving surplus funds in your MPC and investing them instead of paying them out as salary or dividends, you benefit from tax deferral and the power of compounding with more capital. This strategy can yield significant long-term growth if managed effectively.

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The Passive Income Rules Still Matter in 2026

While investing through your corporation is a smart move, it’s not without limitations. Since 2018, the Small Business Deduction (SBD) has been subject to clawback if a corporation earns excessive passive investment income, typically income from dividends, interest, and capital gains.

In 2026, the rules remain unchanged:

You begin losing access to the SBD if your corporation earns over $50,000 in passive income annually.
For every $1 above that threshold, the SBD limit is reduced by $5.
At $150,000 of passive income, your corporation loses the entire small business tax rate benefit, and your tax rate increases significantly.

For physicians who accumulate sizable investment portfolios in their MPCs, this can result in higher corporate taxes on active income. The key is to proactively manage what qualifies as passive income and stay within thresholds when possible.

Strategies to Invest Tax-Efficiently in 2026

Use Tax-Efficient Investment Vehicles

Consider holding investments that generate capital gains or eligible Canadian dividends, as these are taxed more favourably than interest income. Canadian dividend-paying stocks or low-turnover ETFs are generally better suited for a corporate portfolio than GICs or high-yield bonds.

Corporate Class Funds and T-Series

Some mutual funds offer corporate class structures that defer taxable distributions, which can help minimize annual passive income. T-Series funds return capital rather than income in the early years, delaying tax exposure.

Harvest Capital Losses Strategically

If your corporation holds investments that have lost value, realizing those losses can offset gains and reduce taxable investment income.

Segregate Passive Assets in a Holding Company

Incorporated doctors with larger retained earnings may consider creating a Holding Company (HoldCo) to house passive investments. While this won’t necessarily avoid the passive income rules in most cases (due to association rules), it can offer other benefits, such as creditor protection, estate planning opportunities, and administrative simplicity.

Utilize Registered Accounts Personally

Before investing within your corporation, ensure you’ve maxed out your personal RRSP, TFSA, and now FHSA (First Home Savings Account) if you’re eligible. These accounts offer significant tax advantages and may be more beneficial for certain types of investments.

Watch Out: CRA Scrutiny and Anti-Avoidance in 2026

For incorporated physicians in their 40s and beyond, an Individual Pension Plan (IPP) can be an excellent way to save for retirement with a larger contribution room than RRSPs. Contributions are deductible for the corporation, grow tax-deferred, and are protected from creditors. An IPP also helps reduce passive investment income in your operating company by shifting assets into a pension structure.

What to Expect in 2026 and Beyond

While no major tax changes have been announced specific to MPC investing in 2026, the federal government continues to review the capital gains inclusion rate and other professional tax planning strategies. We expect increased enforcement and tighter rules around corporate investing in the years ahead.

Staying compliant and ahead means understanding both what’s allowed and what’s advisable based on your personal and corporate situation.

Strategy is Everything

Investing through your medical corporation can be a powerful wealth-building strategy, but only if you’re making tax-smart decisions. The combination of passive income rules, evolving CRA scrutiny, and tax efficiency means physicians in BC must approach corporate investing with a clear plan and professional guidance. Your accountant can help confirm the CDA balance and file the necessary election (Form T2054) with the CRA.

At Raman Nat Inc., we work closely with incorporated doctors to ensure their corporate structures are not only compliant but also optimized for long-term success. From investment strategy to passive income management, we help you make informed decisions that support your professional and personal goals.

Ready to take control of your corporate investment strategy?
Book a consultation with us today, and let’s build a plan that works for you in 2026 and beyond.

About Raman Nat Inc.

Raman Nat Inc. Chartered Professional Accountant is a trusted tax consulting firm located in Vancouver, BC, offering specialized financial services to professionals and small businesses. Our comprehensive suite of services includes corporate tax planning and preparation, bookkeeping, financial consulting, and business advisory, all designed to meet the unique needs of our diverse clientele. Contact: info@rncpa.ca