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In their efforts to continually make business more favourable the Canadian Federal and Ontario Provincial government has implemented policy to reduce the amount of tax charged to corporations operating in Canada. A primary example of this was the reduction in GST from 7% to 6% which became effective on July 1, 2006. The one percent reduction has had a significant impact, as it has reduced the tax on supplies made in or imported into Ontario.
The Competitive Alternatives study performed by KPMG in 2010 reveals Canada's competitive advantage ranking it 2nd in the world for tax competitiveness. view chart
The following tables and information outline the federal and provincial income tax rates for private corporations operating in Canada as of 2011 and the changes that will take place through to 2013:
Federal Tax
2011 Federal Income Tax Rate for Canadian-Controlled Private Corporations
|
|
Small Business Income up to $400,000 |
Active Business Income between $400,000 and $500,000
|
General Active Business Income (in excess of small business income) |
Investment Income | |
General Corporate Rate |
38.0 % |
38.0%
|
38.0 % |
38.0 % | |
Federal Abatement |
(10.0) |
(10.0)
|
(10.0) |
(10.0) | |
Small Business Deduction |
(17.0) |
(17.0)
|
0.0 |
0.0 | |
Rate Deduction |
0.0 |
0.0
|
(11.5) |
0.0 | |
Refundable Tax |
0.0 |
0.0
|
0.0 |
6.7 | |
Total % |
11.0
|
11.0
|
16.5*
|
34.7 |
*Effective January 2012, the General Active Business Income Tax will decrease by 1.5% (from 16.5% to 15.0%)
2011 Federal Income Tax Rate for Non-Canadian-Controlled Private Corporations
|
|
General Manufacturing and Processing Income
|
General Active Business Income (in excess of small business income) |
Investment Income | |
General Corporate Rate |
38.0 % |
38.0 % |
38.0 % | |
Federal Abatement |
(10.0) |
(10.0) |
(10.0) | |
Manufacturing and Processing Deduction |
(11.5) |
0.0 |
0.0 | |
Rate Deduction |
0.0 |
(11.5) |
(11.5) | |
Total % |
16.5*
|
16.5*
|
16.5*
|
*Effective January 2012, the rate will decrease by 1.5% (from 16.5% to 15.0%)
Provincial Tax
Ontario Provincial Income Tax Rates for Canadian-Controlled Private Corporation
|
Year |
Small Business Income Up to $400,000
|
Active Business Income between $400,000 and $500,000
|
General Active Business Income |
Investment Income | |
Effective July 1st 2011 |
4.5% |
4.5%
|
11.5%* |
11.5% |
*The rate will further decrease as follows: from 12% to 11.5% in 2011, to 11% in 2012 and to 10% in 2013
Ontario Provincial Income Tax Rates for Non-Canadian-Controlled Private Corporation
|
Year |
General Manufacturing and Processing Income |
General Active Business Income |
Investment Income | |
Effective July 1st 2011 |
10% |
11.5%* |
11.5%* |
*The rate will further decrease as follows: from 12% to 11.5% in 2011, to 11% in 2012 and to 10% in 2013
More detailed information pertaining to the previous tables and a thorough description of the changes taking place through to 2013 can be located at the KPMG website.
Additional Resources
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