1 Includes Ontario s July 14, 2014 budget and Quebec s June 4, 2014 budget Tax facts and figures Canada 2014 Canadian individual and corporate tax changes, tax rates, tax deadlines and a wide range of other valuable tax information.
2 Key 2014 income tax rates individuals and corporations Applies to taxable income above $136,270 ($150,000 in British Columbia and Nova Scotia; $220,000 in Ontario). For December 31 year end (12-month taxation year). Individuals (page 4) Corporations (page 17) Top combined marginal rates Combined rates Canadian-Controlled Ordinary Canadian dividends Capital General Private Corporations (CCPCs) income and gains and M&P interest Active business Investment Eligible Non-eligible income to $500,000 income Federal 29.00% 14.50% 19.29% 21.22% 15% 11% 34.67% Alberta 39.00% 19.50% 19.29% 29.36% 25% 14% 44.67% British Columbia 45.80% 22.90% 28.68% 37.99% 26% 13.5% 45.67% Manitoba 46.40% 23.20% 32.26% 40.77% 27% 11% or 23% 46.67% New Brunswick 46.84% 23.42% 27.35% 36.02% 27% 15.5% 46.67% Newfoundland 22.47% or 31.01% or General 29% 48.67% 42.30% 21.15% 14.5% and Labrador 30.19% 32.08% M&P 20% n/a Northwest Territories 43.05% 21.53% 22.81% 30.72% 26.5% 15% 46.17% Nova Scotia 50.00% 25.00% 36.06% 39.07% 31% 14% or 27% 50.67% Nunavut 40.50% 20.25% 27.56% 31.19% 27% 15% 46.67% Ontario 49.53% 24.76% 33.82% 40.13% General 26.5% 46.17% 15.5% M&P 25% n/a Prince Edward Island 47.37% 23.69% 28.70% 38.74% 31% 15.5% 50.67% Quebec 49.97% 24.98% 35.22% 39.78% General 19% 46.57% 26.9% M&P 17.85% n/a Saskatchewan 44.00% 22.00% 24.81% 34.91% General 27% 46.67% 13% M&P 25% n/a Yukon 42.40% 21.20% 15.93% to 19.29% 32.04% General 30% 14.5% 49.67% M&P 17.5% 13% n/a Tax facts and figures is on our website: No part of this booklet may be produced without permission from PricewaterhouseCoopers LLP (PwC). Cette brochure est également disponible en français:
3 Tax facts and figures Canada 2014
4 A message from our tax leader Welcome to the 37th edition of PricewaterhouseCooper s (PwC s) Tax facts and figures. This convenient reference tool will bring you up-to-date on the tax rates, tax deadlines and tax changes that apply to you and your company. To stay current on a wide range of tax developments, visit and subscribe to our tax publications or update your contact information. Download PwC s Tax rate app* to get corporate, personal and sales tax rates. And check out our income tax calculator at it will help you estimate your personal tax bill and marginal tax rates. We would be happy to help you plan for and respond to the myriad tax issues you or your business face. Please contact us. Let s talk For a deeper discussion of how the tax issues in Tax facts and figures might affect you or your business, please contact: your PwC tax advisor any of the individuals listed at Office addresses and telephone numbers are available at Tax News Network (TNN) provides subscribers with Canadian and international information, insight and analysis to support well-informed tax and business decisions. Try it today at Christopher Kong National Managing Partner, Tax PwC Canada *Scan the code for your device iphone and ipad BlackBerry and Playbook
5 Contents Click on a heading to go to that page Highlights for individuals and corporations: 2014 and beyond... 2 Individuals... 4 Individual marginal rates...4 How much tax? Individual tax table...5 Income tax filing and payment deadlines individuals and trusts...6 Probate fees (for estates over $50,000)...7 Key tax changes...8 Federal...8 Alberta, British Columbia Manitoba, New Brunswick Newfoundland and Labrador, Northwest Territories...12 Nova Scotia, Nunavut...13 Ontario, Prince Edward Island Quebec...15 Saskatchewan, Yukon Corporations...17 Corporate income tax rates Other federal tax rates and income tax deadlines Provincial income tax holidays and M&P investment tax credits Financial institutions capital tax rates and deadlines...20 Key tax changes...21 Federal...21 Alberta...22 British Columbia, Manitoba...23 New Brunswick...24 Newfoundland and Labrador, Northwest Territories...25 Nova Scotia, Nunavut...26 Ontario...27 Prince Edward Island, Quebec...28 Saskatchewan, Yukon...30 Individuals and corporations CPP/QPP, EI and QPIP premiums...31 Health care premiums and sales tax rates...32 Payroll tax rates...33 Retirement savings and profit sharing plans...34 R&D tax credits...35 Land transfer tax and registration fees...36 Filing deadlines...37 Prescribed interest rates income, capital and payroll taxes...38 International US top individual income tax rates federal and state combined...39 US estate, gift and generation-skipping transfer tax rates...40 US corporate income tax rates federal and state...41 Canada s treaty withholding tax rates...42 This booklet is published with the understanding that PwC is not thereby engaged in rendering accounting, legal or other professional service or advice. The comments included in this booklet are not intended to constitute professional advice, nor should they be relied upon to replace professional advice. Rates and other information are current to July 14, 2014, but may change as a result of legislation or regulations issued after that date.
6 Highlights for individuals and corporations: 2014 and beyond Federal Personal income tax rates: increased for non-eligible dividends in 2014 (p. 8) Corporate income tax rates: unchanged (p. 21) Trusts and estates: generally, graduated tax rates eliminated and testamentary trusts must have calendar taxation years, starting 2016 taxation years (p. 9) Immigration trusts: tax benefits eliminated for taxation years ending after February 10, 2014 (p. 9) Eligible capital property regime: consultation to replace regime with new capital cost allowance class (p. 21) Treaty shopping: anti-treaty shopping rule proposed (p. 21) Back-to-back loans: arrangements using interposed third parties to avoid withholding tax and thin capitalization rules targeted after 2014 (p. 22) Insurance swaps: subject to an anti-avoidance rule that prevents shifting income from the insurance of Canadian risks offshore, for taxation years beginning after February 10, 2014 (p. 22) Alberta Personal and corporate income tax rates: unchanged 1 (pp. 10, 22) British Columbia Personal income tax rates: rate on taxable incomes over $150,000 increasing from 14.7% to 16.8% for 2014 and (p. 10) Corporate income tax rates: unchanged (p. 23) Manitoba Personal and corporate income tax rates: unchanged 1 (pp. 11, 23) CCPC threshold: increased from $400,000 to $425,000 on January 1, 2014 (p. 23) New Brunswick Personal income tax rates: increased in (p. 11) Corporate income tax rates: unchanged (p. 24) Newfoundland and Labrador Personal income tax rates: increasing for dividends paid after June 30, (p. 12) Corporate income tax rates: general and M&P rates unchanged; CCPC rate decreased from 4% to 3% on July 1, 2014 (p. 25) Northwest Territories Personal and corporate income tax rates: unchanged 1 (pp. 12, 25) Nova Scotia Personal income tax rates: unchanged 1 (p. 13) Corporate income tax rates: general and M&P rate unchanged; CCPC rate decreased from 3.5% to 3% on January 1, 2014 (p. 26) CCPC threshold: decreased from $400,000 to $350,000 on January 1, 2014 (p. 26) Harmonized Sales Tax: planned decreases to the 15% HST rate will not occur (pp. 13, 26) personal tax rates on non-eligible dividends in the province or territory increased due to federal changes. 2
7 Highlights for individuals and corporations: 2014 and beyond Nunavut Personal and corporate income tax rates: unchanged 1 (pp. 13, 26) Ontario Personal income tax rates: personal taxes increasing for taxable incomes exceeding $150,000, starting (p. 14) Corporate income tax rates: unchanged, except federal small business deduction clawback extended to Ontario, for taxation years ending after May 1, 2014 (p. 27) Ontario retirement pension plan (ORPP): to be introduced in 2017 (pp. 14, 27) Prince Edward Island Personal and corporate income tax rates: unchanged 1 (pp. 14, 28) Quebec Personal income tax rates: unchanged 1 (p. 15) Corporate income tax rates: general, M&P and CCPC non-m&p rates unchanged; new CCPC M&P rate of 6% on June 5, 2014, decreasing to 4% on April 1, 2015 (p. 28) Business tax credit rates: over 30 business tax credits reduced by 20%, generally on or after June 4, 2014 (p. 29) Saskatchewan Personal and corporate income tax rates: unchanged 1 (pp. 16, 30) Yukon Personal income tax rates: unchanged 1 (p. 16) Corporate income tax rates: general and M&P rates unchanged; CCPC non-m&p rate decreased from 4% to 3% and CCPC M&P rate decreased from 2.5% to 1.5% on July 1, 2014 (p. 30) personal tax rates on non-eligible dividends in the province or territory increased due to federal changes. 3
8 Individuals Individual marginal rates This table shows 2014 combined federal and provincial (or territorial) marginal tax rates the percentage of tax paid on the last dollar of income, or on additional income. Provincial Taxable income $11,138 to $43,953 Taxable income $43,953 to $87,907 Taxable income $87,907 to $136,270 Taxable income > $136,270 brackets below Brackets Ordinary Capital Canadian dividends 1 Brackets Ordinary Capital Canadian dividends 1 Brackets Ordinary Capital Canadian dividends 1 Brackets Ordinary Capital Canadian dividends 1 $11,138 are $ income & gains Eligible Non-eligible $ income & gains Eligible Non-eligible $ income & gains Eligible Non-eligible $ income & gains Eligible Non-eligible not shown. interest % % % % interest % % % % interest % % % % interest % % % % Federal 11, (0.03) to , , , , (0.03) to Alberta 43, , , , (0.03) to British Columbia 37,606 11, (3.20) (6.84) to 0 to ,354 75,213 43, to 9.63 Manitoba 31, to , , to , , , New Brunswick 39, to , , , (3.23) to , , , Newfoundland 34, to , and Labrador 11, to , , , , (4.03) to Northwest 79, , , (7.76) to to 4.70 Territories 43, to , , (0.03) to , Nova Scotia 29, to , , , , (0.11) to , , , Nunavut 41, to , , (2.11) to , , (0.03) to , , Ontario 83, , , (1.20) to , , , , (6.86) to , , , to Prince Edward 31, to , , Island 11, (0.99) to , , , Quebec 41, to , , , to , , , (0.02) to , Saskatchewan 43, to , , (0.03) to , , , (0.03) to , Yukon 11, (11.12) to , to to 87, , , to to Non-resident 3 11, (0.04) to , , , ,858 87, , , Eligible dividends are designated as such by the payor. Most dividends paid by public corporations are eligible dividends. When two dividend rates are indicated, the rate that applies depends on the level of the taxpayer s other income, with the higher rate applying if the taxpayer has no other income. 2. For Newfoundland and Labrador, the dividend rates shown are for dividends paid after June 30, The rates before July 1, 2014 are: Bracket $ 11,138 34,254 43,953 68,508 87, ,270 Eligible (4.58) to to Rate % Non-eligible A non-resident will pay tax on taxable income below $11,138 if the non-resident does not qualify for the federal personal basic tax credit (see page 5). Non-resident rates for interest and dividends apply only in limited cases; generally, interest (other than most interest paid to arm s-length non-residents) and dividends are subject to Part XIII non-resident withholding tax. 4
9 Individuals How much tax? Individual tax table This table shows 2014 combined federal and provincial (or territorial) income taxes payable, assuming all income is interest or ordinary income (such as salary) and only the basic personal tax credit is claimed (except for non-residents). Certain types of income and deductions may trigger alternative minimum tax (AMT), affecting the results. For Quebec, the federal income tax amounts shown should be reduced by the 16.5% Quebec abatement. See page 15. This table assumes the non-resident will not qualify for the basic personal tax credit. A non-resident can claim this credit only if all or substantially all (i.e. 90% or more) of his or her worldwide income is included in taxable income earned in Canada for the year. Instead of provincial or territorial tax, non-residents pay an additional 48% of basic federal tax on income taxable in Canada that is not earned in a province or territory. Non-residents are subject to provincial or territorial rates on employment income earned, and business income connected with a permanent establishment, in the respective province or territory. Different rates may apply to non-residents in other circumstances. For the taxation of interest and dividends paid to non-residents, see footnote 3 on page 4. Taxable income Federal income tax Alberta B.C. Manitoba N.B. Nfld. & Lab. Combined 2014 federal and provincial/territorial income tax N.W.T. N.S. Nunavut Ontario P.E.I. Quebec Sask. Yukon Nonresident $1,000,000 $277,648 $375,870 $434,827 $446,942 $450,088 $407,795 $411,006 $478,040 $385,805 $468,467 $455,819 $480,329 $422,617 $405,773 $413,392 $1,000, , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , ,000 74, , , , , , , , , , , , , , , , ,000 60,148 83,370 91,327 98,942 98,788 90,545 88, ,040 82,055 96, , ,592 92,617 87,788 91, , ,000 45,648 63,870 68,427 75,742 75,368 69,395 66,606 78,040 61,805 72,542 76,859 80,609 70,617 66,589 70, , ,000 31,148 44,370 45,527 52,542 51,948 48,245 45,081 53,040 41,555 48,557 53,174 55,627 48,617 45,390 48, , ,000 17,736 25,958 24,882 30,430 29,983 28,184 25,189 30,878 23,300 26,440 30,577 31,570 28,179 25,782 28, ,000 90,000 15,136 22,358 21,053 26,090 25,731 24,254 21,369 26,553 19,800 22,099 26,276 26,999 24,279 21,981 24,874 90,000 80,000 12,853 19,074 17,654 22,066 21,795 20,640 17,865 22,602 16,693 18,210 22,323 22,811 20,695 18,652 21,494 80,000 70,000 10,653 15,874 14,550 18,126 18,089 17,110 14,791 18,735 13,793 14,924 18,453 18,974 17,195 15,484 18,238 70,000 60,000 8,453 12,674 11,580 14,512 14,407 13,648 11,731 14,868 10,893 11,809 14,698 15,137 13,695 12,316 14,982 60,000 50,000 6,253 9,474 8,610 11,037 10,725 10,198 8,671 11,159 7,993 8,694 11,118 11,300 10,195 9,148 11,726 50,000 40,000 4,329 6,551 5,917 7,838 7,320 7,025 5,888 7,741 5,427 5,861 7,815 7,754 7,038 6,361 8,880 40,000 30,000 2,829 4,051 3,848 5,083 4,816 4,479 3,793 4,746 3,527 3,856 5,014 4,901 4,438 4,157 6,660 30,000 20,000 1,329 1,551 1,842 2,503 2,348 2,209 1,703 2,342 1,627 1,851 2,534 2,049 1,838 1,953 4,440 20,000 Taxable income 5
10 Individuals Income tax filing and payment deadlines individuals and trusts Deadlines falling on holidays or weekends may be extended to the next business day. See page 37 for other filing deadlines. Individuals Trusts Inter vivos Testamentary Instalments for 2014 Required If tax payable in 2014 and either 2013 or 2012 exceeds tax withheld by more than $3,000 ($1,800 for Quebec residents) None Deadline 15th of March, June, September, December Commencing 2016 taxation years, testamentary trusts (other than estates for their first 36 months) will be required to remit instalments. Trusts However, the Canada Revenue Agency s policy is to not charge instalment interest to an inter vivos trust. Inter vivos Testamentary Applies to unit trusts, including mutual fund trusts. Mutual fund trusts can elect to have a taxation year that ends on December 15. Trust created Year end Tax rate During lifetime On death December 31 Any (year must be < 12 months) Year end may be changed with the Minister s approval. Filing deadline and balance due April 30 (extensions may be available) 90 days after trust year end Top personal tax rate Personal marginal tax rates Tax forms T1 (and TP-1-V for Quebec filers) T3 (and TP-646-V for Quebec filers) For the 2014 taxation year of an inter vivos trust, the filing deadline is March 31, See page 4 for tax rates, and page 9 for changes that apply starting 2016 taxation years. Exceptions apply, for example, in Ontario, Prince Edward Island and Yukon, which impose surtaxes. This trust must maintain its status as a testamentary trust for tax purposes. Non-residents are not subject to instalment or filing requirements on these (and certain other) receipts. Instead, 25% Part XIII withholding tax applies (may be reduced by treaty). If a taxpayer (or his/ her spouse) carried on a business and died: January 1 to December 15, filing deadline 1 is June 15 of the following year December 16 to December 31, filing deadline 1 is 6 months after date of death Special cases Filing Taxpayer (or spouse) carried June 15 1 on a business If a non-resident receives: rental income on Canadian real property and elects to file under section 216, filing deadline is two years after end of year the income was paid or Non-resident credited (June 30 if NR6 was filed) certain Canadian pension, retirement and social assistance benefits and elects to file under section 217, filing deadline is June 30 Taxpayer died Return for year of death If a taxpayer died: January to October, filing deadline 1 is April 30 November to December, filing deadline 1 is 6 months after date of death Return for year before death If a taxpayer died: after year-end, but before filing deadline for previous year s return, filing deadline 1 is 6 months after date of death. 1. Applies to taxpayer and his or her spouse. Balance due April 30 (no extension) For deceased, if died: January to October, April 30 November to December, 6 months after date of death For spouse, April 30. For deceased, 6 months after date of death. For spouse, April 30. 6
11 Individuals Probate fees (for estates over $50,000) Probate is an administrative procedure under which a court validates a deceased s will and confirms the appointment of the executor. This table shows probate fees or administrative charges for probating a will. Other fees may also apply. For some provinces and territories, different rates may apply to smaller estates (less than $50,000). Example fees Fee schedule (value over $50,000) $500,000 $2,000,000 $5,000,000 value value value Alberta $200 to $400 $400 British Columbia $ % of portion > $50,000 $6,650 $27,650 $69,650 Manitoba $ % of portion > $10,000 $3,500 $14,000 $35,000 New Brunswick 0.5% of estate $2,500 $10,000 $25,000 Newfoundland and Labrador $ % of portion > $1,000 $2,585 $10,085 $25,085 Northwest Territories $200 to $400 $400 Nova Scotia $ % of portion > $100,000 $7,553 $32,228 $81,578 Nunavut $200 to $400 $400 Ontario $ % of portion > $50,000 $7,000 $29,500 $74,500 Prince Edward Island $ % of portion > $100,000 $2,000 $8,000 $20,000 Quebec Nominal fee Saskatchewan 0.7% of estate $3,500 $14,000 $35,000 Yukon $140 $140 Although Quebec does not levy probate fees, wills (other than notarial wills) must be authenticated by the Superior Court of Quebec. A nominal fee applies. 7
12 Individuals Key tax changes Federal Dividends: Non-eligible dividends Dividend gross-up 25% 18% Dividend tax credit (on grossed-up dividend) % % Top federal rate 19.58% 21.22% Tax on split income: Commencing 2014 taxation years, the definition split income will include income that is, directly or indirectly, paid or allocated to a minor from a trust or partnership, if: the income is derived from a business or a rental property, and a person related to the minor: is actively engaged on a regular basis in the activities of the trust or partnership to earn income from any business or rental property, or has a direct or indirect interest in the partnership Automobile deductions and benefits: The 2014 prescribed rates will remain at their 2013 levels for purposes of determining automobile deduction limits and taxable benefits. See Car expenses and benefits A tax guide at Retirement savings plans and deferred profit sharing plans: Contribution limits will increase. See page 34. Defined benefit registered pension plans (RPPs): The maximum pension benefit that can be paid from these plans is increasing as shown: Pension benefit (per year of service) 2013 $2, $2, Indexed A special rule that ensures that the maximum amount that may be transferred tax-free to the registered retirement saving plan (RRSP) or other registered plans of a departing member of an underfunded defined benefit RPP is the same as if the RPP were fully funded in certain limited cases, is extended to commutation payments made after 2012, in additional situations. 8 Ordinary income Top federal rates Capital Dividends gains Eligible Non-eligible 19.58% % 14.50% 19.29% % 2014 Federal Basic personal amount $11,138 Indexing factor 0.9% Bracket $0 $43,953 $87,907 $136,270 Rate 15% 22% 26% 29% Adoption expense tax credit: The maximum eligible adoption expenses that qualify for this credit will increase from $11,669 for 2013 to $15,000 for 2014 (indexed after 2014) per child. Medical expense tax credit: The credit is expanded to include eligible expenses incurred after 2013 for: the design of a therapy plan for individuals who qualify for the disability tax credit service animals trained to assist individuals with severe diabetes Search and rescue volunteer tax credit: Commencing 2014, certain search and rescue volunteers who provide at least 200 hours of services annually can claim a $450 non-refundable tax credit. Mineral exploration tax credit for flow-through shares: This credit is extended by one year to flow-through share agreements entered into before April 1, Life insurers and policyholders: Draft legislative proposals, effective upon royal assent, amend the taxation of life insurance policies, generally issued after Key changes amend the determination of: whether a life insurance policy is an exempt policy what types of transactions give rise to a disposition of an interest in a policy the tax treatment of a disposition of an interest in a policy (having regard to both the adjusted cost basis of the interest and the proceeds of disposition) The proposals also include consequential amendments to the life insurer s investment income tax. Farming and fishing businesses: Transfers of property For dispositions and transfers that occur after the 2013 taxation year, eligibility for the intergenerational rollover of farming and fishing property and the lifetime capital gains exemption is extended to individuals involved in a combination of farming and fishing. Tax deferral for farmers Starting 2014 taxation years, the tax deferral for farmers who dispose of breeding livestock due to drought, flood or excess moisture conditions existing in prescribed regions, is extended to disposals of bees, and of horses that are over 12 months of age, if kept for breeding. Amateur athlete trusts: Income contributed to an amateur athlete trust after 2013 will qualify as earned income for purposes of determining the RRSP contribution limit of the trust s beneficiary. An individual who contributed to the trust before 2014 can elect before March 3, 2015, to have contributions made in 2011, 2012 and 2013 also qualify as earned income. Any additional RRSP room will be added to the individual s 2014 RRSP contribution room.
13 Individuals Charities and non-profit organizations (NPOs): Donations For donations made after February 10, 2014, of: ecologically sensitive land, or easements, covenants and servitudes on that land, the carry-forward period will be extended from five years to ten certified cultural property, the value of the donated property will be limited to its cost amount to the donor if the property was acquired as part of a tax shelter gifting arrangement Charity tax compliance and electronic access Electronic filing of charity applications and annual information returns will be implemented. State-supported terrorism Charities and amateur athletic associations that accept donations after February 10, 2014, from a state (or a state agency) that is considered to be a supporter of terrorism may have their registration refused or revoked. Public consultation for NPOs The government plans to review if the income tax exemption and related reporting requirements for NPOs remain properly targeted and provide sufficient transparency and accountability. See our Tax Insights 2014 Federal budget: How it affects you and the charitable and not-for-profit sector at Trusts and estates: Taxation Commencing 2016 taxation years, a flat top-rate tax (instead of graduated tax rates) will apply to testamentary trusts, certain estates and grandfathered inter vivos trusts, and these trusts generally will be required to have taxation years ending on December 31 (starting with a deemed taxation year ending on December 31, 2015). Graduated tax rates will continue to apply for testamentary trusts: that arise as a consequence of an individual s death (the first 36 months of the estate only) that have beneficiaries who qualify for the disability tax credit Estate donations Starting with donations made related to a death occurring after 2015, donations made by a will, and those made by designation under a RRSP, registered retirement income fund, tax-free savings account or life insurance policy, will no longer be deemed to be made by the individual immediately before the individual s death. These donations will be deemed to have been made at the time the property is transferred to a qualified donee and, if the transfer occurs within 36 months after death, they may be allocated among: the taxation year of the estate in which the donation is made an earlier taxation year of the estate the last two taxation years of the individual Immigration trusts: The 60-month exemption from the non-resident trust rules for immigration trusts will be eliminated generally for taxation years ending after February 10, See our Tax Insights 2014 federal budget: The demise of immigration trusts at Foreign Income Verification Statement (Form T1135): Taxpayers required to file Form T1135 must include additional information on foreign property, starting taxation years ending after June 30, Streamlined reporting for certain foreign property will be permitted and the filing deadline for the 2013 taxation year is extended to July 31, See our Tax Insights More changes to Form T1135, Foreign Income Verification Statement at Cross-border tax compliance: Canada has ratified the Convention on Mutual Administrative Assistance in Tax Matters, which entered into force, in respect of Canada, on March 1, The member States of the Council of Europe and the member countries of the Organisation for Economic Co-operation and Development (OECD) are signatories. Under the convention, Canada will exchange tax information based on OECD standards, but is not required to collect taxes on behalf of another country, or provide assistance in the service of related documents. Automatic exchange of information: An Intergovernmental Agreement (IGA) between the United States and Canada to improve international tax compliance and to implement the US Foreign Account Tax Compliance Act (FATCA) entered into force on June 27, See our Global IRW Newsbrief Canada and the US sign FATCA Intergovernmental Agreement at Tax treaties: Recent developments are shown below. See page 42. Tax treaties Ratified and entered into force Austria 1 Barbados 1 France 1 Hong Kong Luxembourg 1 Poland Serbia Switzerland 2 Signed but awaiting ratification Belgium 1 Under negotiation (or declaration of intent to negotiate) Malaysia 1. These protocols ensure that Canada has an effective exchange of information, in accordance with the internationally agreed standard developed by the OECD. 2. An agreement to amend Article 25 (exchange of information) of the tax convention to be consistent with the standard developed by the OECD. 9
14 Individuals Alberta British Columbia Ordinary income Top combined rates Capital Dividends gains Eligible Non-eligible 27.71% % 19.50% 19.29% % 2014 Alberta Basic personal amount $17,787 Indexing factor 1.1% Bracket $0 Rate 10% Alberta is the only province or territory with a single rate. Top combined rates Ordinary Capital Dividends income gains Eligible Non-eligible % 21.85% 25.78% 33.71% % 22.90% 28.68% 37.99% 2014 British Columbia Basic personal amount $9,869 Indexing factor 0.1% Bracket $0 $37,606 $75,213 $86,354 $104,858 $150,000 Rate 5.06% 7.7% 10.5% 12.29% 14.7% 16.8% Can be reduced for low incomes. Highlights of changes Dividends: Non-eligible dividends Dividend gross-up 25% 18% Dividend tax credit (on grossed-up dividend) 3.5% 3.1% Top combined rate 27.71% 29.36% Highlights of changes Personal tax system: For 2014 and 2015, the tax rate on taxable incomes over $150,000 will be 16.8% (up from 14.7%), increasing the top combined rate on ordinary income from 43.70% to 45.80%. Dividends: Eligible dividends Non-eligible dividends Dividend gross-up 38% 25% 18% Dividend tax credit (on grossed-up dividend) 10% 3.4% 2.59% Top combined rate 25.78% 28.68% 33.71% 37.99% BC Mining Flow-Through Share Tax Credit: The credit is extended by one year to December 31, Medical Services Plan: Monthly premiums are increasing as follows: Effective date Single Family (2 persons) (> 2 persons) Before January 1, 2014 $66.50 $ $ January 1, 2014 $69.25 $ $ January 1, 2015 $72.00 $ $
15 Individuals Manitoba New Brunswick Ordinary income Top combined rates Capital Dividends gains Eligible Non-eligible 39.15% % 23.20% 32.26% % 2014 Manitoba Basic personal amount $9,134 Indexing factor Bracket $0 $31,000 $67,000 Rate 10.8% 12.75% 17.4% Can be reduced for low incomes. n/a Top combined rates Ordinary Capital Dividends income gains Eligible Non-eligible % 22.54% 24.91% 33.05% % 23.42% 27.35% 36.02% 2014 New Brunswick Basic personal amount $9,472 Indexing factor 0.9% Bracket $0 $39,305 $78,609 $127,802 Rate 9.68% 14.82% 16.52% 17.84% Can be reduced for low incomes. Highlights of changes Personal tax system: Manitoba s basic personal and spouse/equivalent to spouse amounts increased from $8,884 to $9,134 for Dividends: Non-eligible dividends Dividend gross-up 25% 18% Dividend tax credit (on grossed-up dividend) 1.75% 0.83% Top combined rate 39.15% 40.77% Mineral Exploration Tax Credit: The credit is extended three years to flow-through share agreements entered into before April 1, Community Enterprise Development Tax Credit: The credit is extended six years to December 31, For eligible shares acquired after June 11, 2014, the credit is fully refundable and enhancements increase: the tax credit rate from 30% to 45%, and the maximum annual shares that can be acquired from $30,000 to $60,000 (maximum annual credit from $9,000 to $27,000) the investor s maximum equity percentage from 10% to 35% Small Business Venture Capital Tax Credit: For eligible shares issued after June 11, 2014, enhancements increase: the tax credit rate from 30% to 45% (maximum annual credit from $45,000 to $67,500; maximum total credit from $135,000 to $202,500) the investor s maximum equity percentage from 10% to 35% Employee Share Purchase Tax Credit: Effective June 12, 2014, changes: increase the tax credit rate from 30% to 45% of the cost of eligible shares establish a maximum annual credit of $202,500 for shares acquired under a registered employee share ownership plan designed to facilitate succession planning or an employee buyout or takeover (maximum annual credit of $27,000 for other plans), but the maximum that can be claimed per year is: $27,000 (refundable) $67,500 (non-refundable) less any refundable credit claimed Highlights of changes Personal tax system: Income tax rates Highest 16.07% 17.84% 14.46% 16.52% 13.46% 14.82% Lowest 9.39% 9.68% Dividends: Eligible dividends Non-eligible dividends Dividend gross-up 38% 25% 18% Dividend tax credit (on 12% 5.3% grossed-up dividend) Top combined rate 24.91% 27.35% 33.05% 36.02% For 2014, the rate is assumed to remain 5.3%. The government has not decided whether to change the rate after Small Business Investor Tax Credit: Starting 2014 taxation years, trusts can claim a 15% non-refundable income tax credit on eligible small business investments of up to $500,000, for a maximum annual credit of $75,000. Investments in registered community economic development funds will be eligible for this credit. Regulatory reform: A smart regulations system will be implemented to reduce red tape for individuals and businesses. 11
16 Individuals Newfoundland and Labrador Northwest Territories Top combined rates Ordinary income Capital Dividends gains Eligible Non-eligible % 29.96% 42.30% 21.15% % or 30.19% 31.01% or 32.08% See Dividends below Newfoundland and Labrador Basic personal amount $8,578 Indexing factor 1.5% Bracket $0 $34,254 $68,508 Rate 7.7% 12.5% 13.3% Can be reduced for low incomes. Ordinary income Top combined rates Capital Dividends gains Eligible Non-eligible 29.65% % 21.53% 22.81% % 2014 Northwest Territories Basic personal amount $ 13,668 Indexing factor 0.9% Bracket $0 $39,808 $79,618 $129,441 Rate 5.9% 8.6% 12.2% 14.05% Highlights of changes Dividends: Eligible dividends Non-eligible dividends before July 1 after June 30 before July 1 after June 30 Dividend gross-up 38% 25% 18% Dividend tax credit (on 11% 5.4% 5% 4.1% grossed-up dividend) Top combined rate 22.47% 30.19% 29.96% 31.01% 32.08% Highlights of changes Dividends: Non-eligible dividends Dividend gross-up 25% 18% Dividend tax credit (on grossed-up dividend) 6% Top combined rate 29.65% 30.72% Low-income tax reduction: Low-income tax reduction income thresholds will increase to $18,547 for individuals and to $31,362 for families in Venture Capital Tax Credit: This new credit will be available to investors in the proposed Venture Newfoundland and Labrador fund. No details have been announced. 12
17 Individuals Nova Scotia Ordinary income Top combined rates Capital Dividends gains Eligible Non-eligible 36.21% % 25.00% 36.06% % Nunavut 2014 Nova Scotia Top combined rates 2014 Nunavut Basic personal amount $8,481 Indexing factor n/a Ordinary Capital Dividends Basic personal amount $12,567 Indexing factor 0.9% Bracket $0 $29,590 $59,180 $93,000 $150,000 income gains Eligible Non-eligible Bracket $0 $41,909 $83,818 $136,270 Rate 8.79% 14.95% 16.67% 17.5% 21% % Rate 4% 7% 9% 11.5% 40.50% 20.25% 27.56% Can be reduced for low incomes % Highlights of changes Personal tax system: If Nova Scotia tables a budget surplus in its fiscal year, for 2015 the $150,000 bracket and 21% rate will be eliminated, but a 10% surtax on provincial income tax exceeding $10,000 will be reinstated. These changes would decrease the top combined rate on ordinary income from 50% to 48.25%. Dividends: Non-eligible dividends Dividend gross-up 25% 18% Dividend tax credit (on grossed-up dividend) 7.7% 5.87% Top combined rate 36.21% 39.07% If Nova Scotia tables a budget surplus in its fiscal year, the top 2015 combined rate will be 32.42% on eligible dividends and 36.32% on non-eligible dividends. Highlights of changes Dividends: Non-eligible dividends Dividend gross-up 25% 18% Dividend tax credit (on grossed-up dividend) 4% 3.05% Top combined rate 28.96% 31.19% Tax system review: Nunavut plans to conduct a comprehensive review of its tax system in the fiscal year. Graduate Retention Rebate Program: Effective January 1, 2014, the program is eliminated. Post-secondary graduates remain eligible to receive the rebate for the 2013 taxation year. Tax, regulatory and fee review: Nova Scotia will undertake a comprehensive review of its taxes, fees, and regulations based on the principles of fairness, sustainability, simplicity and competitiveness. Harmonized Sales Tax (HST): Nova Scotia will maintain the HST rate at 15% until sustainable fiscal balances are achieved. The rate was to decline to 14% by July 1, 2014, and to 13% by July 1,
18 Individuals Ontario Prince Edward Island Top combined rates Ordinary Capital Dividends income gains Eligible Non-eligible % 36.47% 49.53% 24.76% % 40.13% 2014 Ontario Basic personal amount $9,670 Indexing factor 1.0% Bracket $0 $40,120 $80,242 $150,000 $220,000 Rate 5.05% 9.15% 11.16% 12.16% 13.16% Can be reduced Surtax: 20% of basic provincial tax in excess of $4,331 for low incomes. + 36% of basic provincial tax in excess of $5,543. Ordinary income Top combined rates Capital Dividends gains Eligible Non-eligible 38.56% % 23.69% 28.70% % 2014 Prince Edward Island Basic personal amount $7,708 Indexing factor Bracket $0 $31,984 $63,969 Rate 9.8% 13.8% 16.7% Can be reduced Surtax: 10% of basic provincial for low incomes. tax in excess of $12,500. n/a Highlights of changes Personal tax system: Starting 2014, Ontario s: top rate of 13.16% will apply when taxable income exceeds $220,000 (down from $514,090) tax rate will be 12.16% (up from 11.16%) on taxable income between $150,000 and $220,000 The $150,000 and $220,000 brackets will not be indexed, and the top charitable donations tax credit rate for individuals remains 11.16%. Highlights of changes Dividends: Non-eligible dividends Dividend gross-up 25% 18% Dividend tax credit (on grossed-up dividend) 2.9% 3.2% Top combined rate 38.56% 38.74% Dividends: Eligible dividends Non-eligible dividends Dividend gross-up 38% 25% 18% Dividend tax credit (on 6.4% 10% 4.5% grossed-up dividend) Top combined rate 33.85% 33.82% 36.47% 40.13% Starting 2014, dividend tax rates are determined by calculating the Ontario surtax before deducting dividend tax credits from Ontario tax. See our Tax Insights Ontario increases personal taxes on some dividends and studies corporate tax incentives at Tax credit for farmers: A new 25% non-refundable tax credit can be claimed by farmers for donating agricultural goods to community food programs after Pension reform: Ontario retirement pension plan (ORPP) Employers and employees that do not already participate in a comparable pension plan will each be required to contribute up to about $1,700 annually to the ORPP, starting in Pooled registered pension plans (PRPPs) Ontario will introduce legislation to implement PRPPs that will generally mirror the federal model. Tax avoidance: Ontario will: target schemes and practices that avoid the payment of provincial taxes implement disclosure rules for aggressive tax avoidance transactions expand the use of its Flexible and Integrated Risk System program to identify high-risk audit cases Tax system review: Ontario is reviewing the efficiency of its personal tax system. 14
19 Individuals Quebec Ordinary income Top combined rates Capital Dividends gains Eligible Non-eligible 38.54% % 24.98% 35.22% % Quebec is the only jurisdiction that does not use the federal definition of taxable income. Highlights of changes Dividends: Non-eligible dividends Dividend gross-up 25% 18% Dividend tax credit (on grossed-up dividend) 8% 7.05% Top combined rate 38.54% 39.78% 2014 Quebec Basic personal amount $11,305 Indexing factor 0.97% Bracket $0 $41,495 $82,985 $100,970 Rate 16% 20% 24% 25.75% Federal rates that apply are reduced by the 16.5% Quebec abatement. Bracket $0 $43,953 $87,907 $136,270 Rate 12.53% 18.37% 21.71% 24.22% Quebec EcoRenov tax credit: Individuals can claim a new refundable tax credit for eco-friendly renovation work performed on their principal place of residence or cottage by a qualified contractor under a contract entered into after October 7, 2013, and before November 1, 2014 (maximum credit of $10,000 per eligible dwelling). LogiRenov tax credit: Individuals can claim a new refundable tax credit for home renovations performed on their principal place of residence by a qualified contractor under an agreement entered into after April 24, 2014, and before July 1, 2015 (maximum cumulative credit of $2,500 per dwelling). Tax credit for experienced workers: The amount of eligible work income over $5,000 that can be exempt from tax for individuals age 65 or over will increase from $3,000 to $4,000 in Seniors activities tax credit: Commencing 2014, seniors age 70 years or older with incomes of $40,000 or less (indexed after 2014) can claim this refundable tax credit (maximum $40), on fees paid after June 4, 2014, for enrolment in a physical, artistic, cultural or recreational activity. Retirement income: Starting 2014, an individual can split retirement income with a spouse for income tax purposes only: if the individual turned 65 before the year end, or on the date the individual died or ceased to be resident in Canada Flow-through shares: For flow-through shares issued after June 4, 2014, the additional deductions (on top of the base deduction of 100% of the cost of the shares) are reduced: for mining exploration expenses incurred in Quebec to 10% (from 25%) for: the first additional deduction the second additional deduction for surface expenses for oil or gas exploration expenses incurred in Quebec to 20% (from 50%) for certain issue expenses maximum of 12% (formerly 15%) of the issue proceeds of the shares Cultural donations: Incentives for cultural donations made after July 3, 2013, were enhanced: Large donations to cultural organizations An additional 25% non-refundable tax credit can be claimed for an initial cultural donation of at least $5,000 (up to $25,000) made before January 1, 2018 Cultural patronage A 30% non-refundable tax credit can be claimed on donations of at least $250,000 (or at least $25,000 annually over no more than 10 years) to a cultural organization Public artwork Donors of public artwork can claim: 125% of the fair market value (FMV) of the artwork, for artwork installed in certain places accessible to the public, or 150% of the FMV, for artwork installed in certain educational places accessible to students Studio space Donors of buildings that can house artists studios or cultural organizations can claim 125% of the FMV of the buildings Capital régional et coopératif Desjardins (CRCD): The CRCD tax credit rate will decline from 50% to 45% for shares acquired after February 28, Proposed measures are intended to increase investments in CRCDs in territories facing economic difficulties. Quebec Taxation Review Committee: To make the tax system more competitive, the committee will study Quebec s tax system, analyze its tax assistance measures and propose changes, before the budget. 15
20 Individuals Saskatchewan Yukon Ordinary income Top combined rates Capital Dividends gains Eligible Non-eligible 33.33% % 22% 24.81% % 2014 Saskatchewan Basic personal amount $15,378 Indexing factor 0.9% Bracket $0 $43,292 $123,692 Rate 11% 13% 15% Ordinary income Top combined rates Capital Dividends gains Eligible Non-eligible 15.93% to 30.41% 19.29% % 21.20% % 2014 Yukon Basic personal amount $11,138 Indexing factor 0.9% Bracket $0 $43,953 $87,907 $136,270 Rate 7.04% 9.68% 11.44% 12.76% Can be reduced Surtax: 5% of basic territorial for low incomes. tax in excess of $6,000. Highlights of changes Dividends: Non-eligible dividends Dividend gross-up 25% 18% Dividend tax credit (on grossed-up dividend) 4% 3.4% Top combined rate 33.33% 34.91% Highlights of changes Dividends: Non-eligible dividends Dividend gross-up 25% 18% Dividend tax credit (on grossed-up dividend) 4.51% 4.03% Top combined rate 30.41% 32.04% 16
21 Corporations Corporate income tax rates To compute rates for off-calendar year ends, refer to pages 23 to 30. For income not earned in a province or territory, see page 18. For non-resident corporations, the general and M&P rates in the table apply to business income attributable to a permanent establishment in Canada. Different rates may apply to non-residents in other circumstances. Non-resident corporations may also be subject to branch tax (see page 18). The general and M&P rate does not apply to certain types of income. See page 21. Corporations subject to Ontario income tax may also be liable for Ontario corporate minimum tax. See page 27. General and Manufacturing and Processing (M&P) (%) Twelve-month taxation year ended December 31, 2014 Canadian-Controlled Private Corporations (CCPCs) (%) Active business income earned in Canada to $500,000 Investment income Basic federal rate 38 Provincial abatement -10 Less: General rate reduction or M&P deduction -13 n/a Small business deduction -17 n/a Plus: Refundable investment tax n/a 6.67 Federal rate Provincial/ Territorial Combined Provincial/ Territorial Combined Provincial/ Territorial Combined Alberta British Columbia Manitoba or or New Brunswick Newfoundland General 14 H H H 14.5 and Labrador M&P 5 H 20 n/a Northwest Territories Nova Scotia H or or Nunavut Ontario General 11.5 H H H 15.5 M&P 10 H 25 n/a Prince Edward Island 16 H H H Quebec General 8 H H H 26.9 M&P 6.85 H n/a Saskatchewan General M&P n/a Yukon General M&P n/a $500,000 threshold ($425,000 in Manitoba and $350,000 in Nova Scotia): This threshold is shared by associated CCPCs. It is reduced on a straight-line basis for CCPCs that, in the preceding year, had taxable capital employed in Canada (on an associated basis) between $10 million and $15 million. This clawback also applies to all provincial and territorial small business deductions (Ontario has extended this clawback to its small business deduction, for taxation years ending after May 1, 2014). Income above $500,000 ($425,000 in Manitoba and $350,000 in Nova Scotia): A CCPC s active business income above this threshold is subject to the general and M&P rate. Investment income: See Refundable Investment Tax on page 18 for more details. Special rules apply to M&P income in Ontario (see page 27), Quebec (see page 28) and Saskatchewan (see page 30). H Tax holidays are available to certain corporations. See the table on page In Manitoba and Nova Scotia, the lower rate applies to active business income up to $425,000 in Manitoba and $350,000 in Nova Scotia and the higher rate to active business income from these thresholds to $500,