Nigel Smith, Author at
Interest and
Regular Income
Capital
Gains
Eligible
Dividends
Non-eligible
Dividends
British Columbia 47.70% 23.85% 31.30% 40.61%
Alberta 47.00/48.00 23.50/24.00 30.33/31.71 39.07/40.24
Saskatchewan 48.00 24.00 30.33 40.06
Manitoba 50.40 25.20 37.78 45.69
Ontario 51.97/53.53 25.98/26.76 37.19/39.34 43.48/45.30
Québec 53.31 26.65 39.83 43.84
New Brunswick 49.30/53.30 24.65/26.65 30.75/36.27 40.69/45.37
Nova Scotia 54.00 27.00 41.58 46.97
Prince Edward Island 51.37 25.69 34.22 43.87
Newfoundland 48.30 24.15 38.47 39.40

‹ B. Combined Federal and Provincial Income Tax Rates for CCPCs (2016) up

 


Small Business
Income up to
$500,000
Active Business
Income between
$400,000 and
$500,000
Investment
Income
British Columbia 13.0% 26.0% 49.7%
Alberta 13.5 27.0 50.7
Saskatchewan 12.5 27.0 50.7
Manitoba 10.5/22.5 27.0 50.7
Ontario 15.0 26.5 50.2
Québec 18.5 26.9/26.8 50.6/50.5
New Brunswick 14.5/14.0 27.0/29.0 50.7/52.7
Nova Scotia 13.5/26.5 31.0 54.7
Prince Edward Island 15.0 31.0 54.7
Newfoundland & Labrador 13.5 29.0 52.7


‹ A. Combined Federal and Provincial Income Tax Rates for General Corporations (2016) up

C. Combined Top Marginal Federal and Provincial Income Tax Rates for Individuals (2016) ›


General M&P
Income
General Active
Business Income
Investment
Income
British Columbia 26.0% 26.0% 26.0%
Alberta 27.0 27.0 27.0
Saskatchewan 25.0 27.0 27.0
Manitoba 27.0 27.0 27.0
Ontario 25.0 26.5 26.5
Québec 26.9/26.8 26.9/26.8 26.9/26.8
New Brunswick 27.0/29.0 27.0/29.0 27.0/29.0
Nova Scotia 31.0 31.0 31.0
Prince Edward Island 31.0 31.0 31.0
Newfoundland & Labrador 20.0 29.0 29.0

 


‹ VII. Tax rates up

B. Combined Federal and provincial income tax rates for CCPCS (2016) ›


Under Canada’s typical income tax treaty, Part XIII tax on royalties is reduced to 10% while a full exemption is available for:

  • software licence fees;
  • payments for the use of, or the right to use, any patent or information concerning industrial, commercial or scientific experience (other than such information provided in connection with a rental or franchise agreement); and

copyright and similar fees in respect of the production or reproduction of any literary, dramatic, musical or artistic work (other than  payments in respect of motion pictures and works on film, videotape or other means of reproduction for use in connection with television).


‹ 4. Rents up

VII. Tax rates ›


There is no treaty exemption or reduction for Part XIII tax upon rents from real property situated in Canada.


‹ 3. Interest up

5. Royalties ›


Interest payments between arm’s-length parties are exempt from Part XIII tax if the interest is not ‘participating debt interest’. This concept refers to debt on which interest is contingent upon the use of, or production from, property in Canada or that is computed by reference to revenue, profit, cash flow, commodity price, etc. or by reference to dividends paid or payable on the shares of a corporation (not necessarily the debtor corporation). In other words, participating debt is debt the interest on which could be characterized as disguised dividends.

Given this exemption from non-resident tax on arm’s length interest payments, there is no tax disincentive to sourcing project financing abroad. When, however, debtor and creditor are not at arm’s length, we must rely upon a tax treaty for a reduction or exemption of the non-resident tax which would otherwise apply at a rate of 25%. Pursuant to recent amendments to the Canada-United States Tax Convention (1980), interest payments between the two countries are wholly exempt from taxation in the source country. Under Canada’s other tax treaties, including those with China and Hong Kong, the typical rate is 10%.


‹ 2. Dividends up

4. Rents ›


The treaty-reduced rate under the typical treaty is 5% if the beneficial owner of the dividends is a corporation that owns at least 10% of the voting stock. This is the case, for example, with the Canada-Hong Kong Income Tax Agreement (2012). Under the Canada-China Income Tax Agreement (1986), however, this rate is 10%. In all other cases, the treaty-reduced rate for dividends is 15%.


‹ 1. Management fees up

3. Interest ›


Canada’s Income Tax Act exempts management fees from Part XIII tax if the non-resident service provider deals at arm’s length with the Canadian payor and provides the service in the ordinary course of its business.

Alternatively, an exemption is available if the fee is charged to reimburse the non-resident for specific expenses incurred for the purpose of performing services for the benefit of the Canadian-resident payor. Such expenses must be particularized (an inclusive fee is not acceptable), there cannot be a mark-up and receipts must be available to substantiate the expenses.

If neither exemption is available then, under Canada’s typical tax treaty, management fees are treated as business profits and are wholly exempt from Canadian income tax if they are not attributable to a Canadian permanent establishment maintained by the non-resident.


‹ C. Investment Income up

2. Dividends ›


Management fees, dividends, interest, rent, royalties and other forms of passive income are subject to withholding at a rate of 25%, subject to reduction by tax treaty. This tax is referred to as Part XIII tax.


1. Management fees

2. Dividends

3. Interest

4. Rents

5. Royalties


‹ B. Goods up

1. Management fees ›



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