OUR THOUGHTS ON:

Canadian Tax Rate Reduction Continues for 2012

International

By Cynthia Hoffman

The Canadian parliament passed a tax reduction plan in 2007 to gradually reduce income tax rates to boost the country’s business investment. The reduction of federal rates, combined with the encouraged reduction for rates in provinces and territories, was meant to support business investment, job creation and growth in all sectors of the Canadian economy and brand Canada as a low-tax jurisdiction.

The final stage of the federal rate reduction is effective on January 1, 2012, when the rate goes to a low of 15%, down from 22.12% in 2007. Combined with reductions in most provincial rates to 10% (Ontario, British Columbia, New Brunswick and Alberta), most corporate income in Canada will be taxed at 25% by July 1, 2013. Also in 2012, the last of the provincial capital taxes will be eliminated for nonfinancial institutions.

Additional measures to stimulate growth and create jobs include an accelerated capital cost allowance rate for investment in manufacturing or processing machinery and equipment, which was extended until the end of 2013; eliminating tariffs on imported machinery and equipment and manufacturing inputs; reducing federal income tax rate for qualifying small business income to 11% and increasing the eligibility threshold to qualify; and providing hiring credits for small business.

Schneider Downs & Co. reminds those preparing income tax provisions to consider applicable rate reductions when computing deferred income taxes.

As a result of these and other tax changes, Canada now has a combined tax rate that is substantially lower than any other G7 country and below the average of the OECD member countries. Jim Flaherty, Canadian Finance Minister, recently remarked, “…Canada is open for business and the best place to invest.” The U.S. congress should take note.

© 2012 Schneider Downs. All rights-reserved. All content on this site is property of Schneider Downs unless otherwise noted and should not be used without written permission.

This advice is not intended or written to be used for, and it cannot be used for, the purpose of avoiding any federal tax penalties that may be imposed, or for promoting, marketing or recommending to another person, any tax related matter.

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The Schneider Downs Our Thoughts On blog exists to create a dialogue on issues that are important to organizations and individuals. While we enjoy sharing our ideas and insights, we’re especially interested in what you may have to say. If you have a question or a comment about this article – or any article from the Our Thoughts On blog – we hope you’ll share it with us. After all, a dialogue is an exchange of ideas, and we’d like to hear from you. Email us at contactSD@schneiderdowns.com.

Material discussed is meant for informational purposes only, and it is not to be construed as investment, tax, or legal advice. Please note that individual situations can vary. Therefore, this information should be relied upon when coordinated with individual professional advice.

© 2018 Schneider Downs. All rights-reserved. All content on this site is property of Schneider Downs unless otherwise noted and should not be used without written permission.

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