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Dentist guide · 2026
Buying a dental practice: the tax side.
The seller usually wants to sell shares; the buyer usually wants to buy assets. The difference is tax, and it is worth real money to both sides. Understand it before the letter of intent, because the price should reflect the structure.
Shares or assets
Why each side wants something different.
| Point | Share purchase | Asset purchase |
|---|---|---|
| Seller's tax | Capital gain, often sheltered by the lifetime capital gains exemption ($1,275,000 for 2026, indexed) if the shares qualify | Corporation pays tax on the sale, then the seller pays again to take the money out |
| Buyer's write-offs | None on the price paid; you inherit the corporation's existing tax values | Goodwill written off at 5% a year declining balance; equipment at its class rates, or immediately under the Productivity Mega Deduction proposed on September 15, 2026 for property acquired on or after that date — still draft legislation, and goodwill is excluded from it |
| History and liabilities | You take on the corporation's past, known and unknown | You take only what the agreement lists |
| Typical result | Seller accepts a lower price | Buyer pays a higher price |
Points buyers miss
Four that change the numbers.
- HST is a cost, but not on everything. Dental services are exempt, so a practice generally cannot claim back the HST it pays on equipment, supplies and rent — budget the 13% into your operating costs. On the purchase itself it is narrower: goodwill is outside GST/HST by statute, and a vendor dentist who is not registered generally charges nothing on the used practice assets. Orthodontic appliances are zero-rated, so a practice doing that work may be able to register and recover a real share of its input tax — see HST and input tax credits for dental practices.
- The allocation matters. In an asset deal, how the price is split between goodwill, equipment and leaseholds sets your deductions for years. Negotiate it; do not leave it to the last draft.
- Interest is deductible when the loan is used to buy the practice. Structure the borrowing so that stays true.
- Buy through your professional corporation where the deal is an asset purchase, so the loan is repaid with income taxed at the corporate rate. A share purchase cannot be made that way: the RCDSO does not permit a holding company or another corporation to own shares in a dentistry professional corporation, so the shares have to be bought personally.
Financial due diligence
- Three years of financial statements and T2s, tied to the practice-management reports
- Collections by provider, including how much depends on the seller personally
- Associate and hygienist agreements, and whether they are contractors or employees
- Payroll records, vacation accruals and any unremitted source deductions
- The lease: term, renewals, assignment and demolition clauses
- Equipment list with ages, leases and liens
Quick answers
What buyers ask us.
Is it better to buy the shares or the assets of a dental practice?
Buyers generally do better with assets, because goodwill and equipment can be written off and past liabilities stay with the seller. Sellers generally want a share sale to use the capital gains exemption. The price usually moves to split the difference.
Can I deduct the goodwill I pay for?
In an asset purchase, yes: goodwill goes into Class 14.1 and is deducted at 5% a year on a declining balance. In a share purchase there is no deduction for the price paid.
Do dentists charge or recover HST?
Most dental services are exempt, so the practice does not charge HST and generally cannot recover the HST it pays on purchases. There are two exceptions worth money: purely cosmetic procedures can be taxable, and orthodontic appliances are zero-rated, which lets a practice doing that work register and claim input tax credits on a documented, fair and reasonable allocation. The CRA treats crowns, bridges and dentures fitted by the dentist as part of the exempt service.
Should I buy the practice personally or through a corporation?
If you are buying assets, usually through a dentistry professional corporation, so the acquisition loan is repaid from income taxed at the lower corporate rate. If you are buying shares of the seller's professional corporation, you have to buy them personally — a corporation cannot hold shares in a dentistry professional corporation. That difference is one reason to settle the structure before the letter of intent.
General information on Canadian income tax and HST rules for practice purchases, not advice for your transaction. You will also need a lawyer experienced in dental transactions. See also dentistry professional corporations.
Looking at a practice?
Call 647-870-8498 or email info@ghayurtax.com before you sign the letter of intent. We will model both structures.