[1] The net tax rate for Canadian-controlled private corporations that claim the small business deduction, is nine per cent.
[4] "[O]perating profits for non-financial corporations hit an all-time high of $297.6 billion in 2019", according to National Bank Financial Inc.
[1] For Canadian-Controlled Private Corporations (CCPCs)s eligible Small Business Deduction (SBD), the net tax rate 9% as of January 1, 2019.
[8] Changes included restricting several tax planning strategies that were frequently used by small businesses, such as passive investment income and income-sprinkling for private corporations.
[10] The current tax rate for Canadian-controlled private corporations that claim the "small business deduction" (SBD), is nine per cent.
"If that amount reaches $15 million, the CCPC’s active business income is no longer eligible" for the lower SBD rate.
"[10] New rules came in effect in January 2019, related to CCPCs earning investment income, specifically, in regards to their "Refundable Dividend Tax on Hand" (RDTOH) balance.
"Special conversion rules apply to take into consideration hours worked (but not necessarily paid in the form of wages) by actively engaged shareholders who hold, directly or indirectly, shares of the corporation that carry more than 50% of the voting rights.
[23] On June 29, 2020, Premier Jason Kenney announced that the corporate tax rate would be lowered to 8% from 10% on July 1, 2020.
"[26]: 2 In response to the unpopular policies of then Prime Minister of Canada, Pierre Elliot Trudeau—specifically the National Energy Program—in 1981, Alberta withdrew from the centralized corporate tax administration—the TCA.
"[26]: 3 [28] Effective on September 13, 1988, the Canadian federal government's General Anti-Avoidance Rule (GAAR) was introduced as a section of the Income Tax Act.
[29]: 103 The OECD's 2006 "Seoul Declaration", which had expanded the 2004 Corporate Governance Guidelines on "tax and good governance", called for OECD members to create a "directory of aggressive tax planning schemes so as to identify trends and measures to counter such schemes.
"[32] The OECD said that with the liberalisation of trade and capital, along with "advances in communications technologies" has made "enforcement of national tax laws "more difficult".
[29]: 3 This "proliferation of ATP schemes" reduced "government revenues" and impaired the "integrity of the tax regime".
To avoid paying the tax, the company transferred shares on a rollover basis to a new listed limited partnership in Québec," Veracity Capital Corporation[34] Veracity Capital Corporation's taxation year ending on August 31, 2002 in Québec so "small directors’ fees were paid to the B.C.
After August 31, 2002, Veracity "purchased units of a listed limited partnership in Québec" with a September 30, 2002 year end.
This meant that a "pro rata portion of the gross revenues and salary expense of the limited partnership would be allocated to Veracity in its capacity as unit-holder.
"[34] This 2017 BC court judgment is significant as it is the "first appellate level case addressing a provincial general anti-avoidance rule in Canada.
"[34] The BC Court of Appeals said that since the Canadian "taxation regime is not a harmonious scheme"—it is a " patchwork where provinces have the power to legislate as they please.
Prior to the closing of these loopholes, Through the so-called Ontario shuffle, corporations that were based in Alberta could reduce their taxable income by making "interest payments to related companies based in Ontario", which in some cases meant they only paid federal, not provincial taxes.
[26]: 15 Prior to joining the harmonized corporate tax system in 2009, Ontario had a number of anomalies in its "tax base relative to the federal definition" with the most significant being that Ontario took the American approach to determining the residence of a corporation by basing it on the jurisdiction of incorporation.
In January 2018, TOSI amendments were expanded so that the highest individual tax rates applied to "all family members, regardless of their age.
"[38] The high-earning individuals, for example, doctors and dentists, could pay dividends on non-voting shares to family members with a lower income saving on taxes.
[38] The Family Tax Cut act (income splitting) was repealed during the 42nd Canadian Parliament (2015–2019) under Prime Minister Justin Trudeau.
[39][40] In a 2017 paper, the Royal Bank of Canada (RBC) described how the proposed changes would limit "income sprinkling" to "family members receiving "reasonable" compensation from a private corporation."