Corporate taxes include taxes on corporate income in Canada and other taxes and levies paid by corporations to the various levels of government in Canada. These include capital and insurance premium taxes; payroll levies (e.g., employment insurance, Canada Pension Plan, Quebec Pension Plan and Workers’ Compensation); property taxes; and indirect taxes, such as goods and services tax (GST), and sales and excise taxes, levied on business inputs.
Corporations are subject to tax in Canada on their worldwide income if they are resident in Canada for Canadian tax purposes. Corporations not resident in Canada are subject to Canadian tax on certain types of Canadian source income (Section 115 of the Canadian Income Tax Act).
Effective January 1, 2012, the net federal corporate income tax rate in Canada was 15%, or 11% for corporations able to claim the small business deduction; in addition, corporations are subject to provincial income tax that may range from zero to 16%, depending on the province and the size of the business.
Corporation types
The taxes payable by a Canadian resident corporation depend on the type of corporation that it is:
A Canadian-controlled private corporation, which is defined as a corporation that is:
- resident in Canada and either incorporated in Canada or resident in Canada from June 18, 1971, to the end of the taxation year;
- not controlled directly or indirectly by one or more non-resident persons;
- not controlled directly or indirectly by one or more public corporations (other than a prescribed venture capital corporation, as defined in Regulation 6700);
- not controlled by a Canadian resident corporation that lists its shares on a prescribed stock exchange outside of Canada;
- not controlled directly or indirectly by any combination of persons described in the three preceding conditions; if all of its shares that are owned by a non-resident person, by a public corporation (other than a prescribed venture capital corporation), or by a corporation with a class of shares listed on a prescribed stock exchange, were owned by one person, that person would not own sufficient shares to control the corporation; and
- no class of its shares of capital stock is listed on a prescribed stock exchange.
A private corporation, which is defined as a corporation that is:
- resident in Canada;
- not a public corporation;
- not controlled by one or more public corporations (other than a prescribed venture capital corporation, as defined in Regulation 6700);
- not controlled by one or more prescribed federal Crown corporations (as defined in Regulation 7100); and
- not controlled by any combination of corporations described in the two preceding conditions.
A public corporation, defined as a corporation that is resident in Canada and meets either of the following requirements at the end of the taxation year:
- it has a class of shares listed on a prescribed Canadian stock exchange; or
- it has elected, or the Minister of National Revenue has designated it, to be a public corporation and the corporation has complied with prescribed conditions under Regulation 4800(1) on the number of its shareholders, the dispersing of the ownership of its shares, the public trading of its shares, and the size of the corporation.
Once you will be connected with MMCA, our team members will keep you informed about changes that could affect your company. Canada’s complex, multi-layered tax laws present significant tax compliance to private companies. Our team members will work closely with you to examine your reporting requirements which will allows you to enhance the benefits of tax deferral, prepare tax and information returns and other correspondence with federal and provincial tax authorities. As the owner of the private company, it is important to address your compensation as well. Our team members will work with you and recommend an effective and tax-efficient approach to structure your compensation with deferring strategies, enhancing capital dividend payments and setting holding company strategies.
