Business establishments in Canada are eligible for corporate tax rates and are expected to file tax returns in Canada. Corporate income tax is applied depending on the worldwide income of business organisation. Corporate tax rate in Canada is applicable depending on the nature of goods and services . The corporate tax rate in Canada may be provincial or federal in nature.
Another factor, which determines corporate tax rate in Canada is the income source. For instance, income from property, which may include rentals, interest or dividends are taxable at a higher rate as compared to the income earned from business. Corporations, which are privately owned by Canadians can avail of reduction in taxes.
To promote small business firms, Canadian controlled private corporations or CCPC are entitled to a corporate tax rate in Canada, which is low. It is felt that corporate taxes act as hindrances in the financial headway of Canada.
A boon for Canadians:
The ability of the corporate sector in Canada to face a healthy competition has laid the foundation for the financial well being of the country. The Finance Minister declared that there would be reductions in taxes and the tax burden would be taken off to some extent for the Canadians. To this effect, he suggested reductions in all types of taxes. Corporate tax rate in Canada was one such tax. Corporate tax rate in Canada (Federal tax rate) was decreased from the present corporate tax rate of 22.12 percent prevailing in the year 2007 to 15 percent by the year 2012. Deductions in small business, income from investment of the CCPCs or Canadian controlled private corporations, income earned by the credit unions, income of deposit insurance corporations, income of mortgage investment corporations are not included in this category. Reductions in corporate tax rate in Canada is applicable to the distribution tax, which is imposed on partnership as well as trusts, which are traded publicly. This is likely to commence operation by the year 2011.
To further strengthen the situation, and make these tax reductions work to ones maximum benefit, the Minister suggested that the provincial as well as the territorial governments would go into a collaboration, whereby a combined corporate tax rate pertaining to provinces, federal and territories of 25 percent would be reached.
The table below furnishes information on the corporate tax rate in Canada for the current year. The table also highlights the projected corporate tax rate in Canada.
Current and Projected corporate tax rate in Canada
Year |
Current or prevailing corporate tax rate in Canada ( in percentage) |
Projected corporate tax rate in Canada
(in percentage) |
2007 |
22.12 |
22.12 |
2008 |
20.5 |
19.5 |
2009 |
20.0 |
19.0 |
2010 |
19.0 |
18.0 |
2011 |
18.5 |
16.5 |
2012 |
18.5 |
15.0 |
It was further clarified by the Finance Minister that as reductions in corporate tax rate in Canada was effected, DTC or dividend tax credit adjustments would be considered. He would do so to ensure that income from dividends are appropriately treated. In addition to the decrease in corporate tax rate in Canada, other types of tax rates were also reduced and the projected reduction in tax rate was also worked out by the Canadian government.