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Insights Tax Highlights: Canadian Corporations and Individuals (2016)
October 13, 2016

Tax Highlights: Canadian Corporations and Individuals (2016)

The following are the tax highlights for corporations and individuals for 2016:

Corporate Income Tax
Starting in 2016

  • Taxation of Canadian Controlled Private Corporations (CCPS):
    • CCPC rate decreased from 11% to 10.5% ↓ 
    • CCPC refundable investment tax rate increased from 6⅔%  to 10⅔% ↑ 
    • After 2015,refundable Part IV tax rate and dividend refund rate on taxable dividends paid by a corporation increased from 33⅓%  to 38⅓% ↑  
  • After March 21, 2016, tax planning structures to multiply the small business deduction will be nullified
  • As at January 1, 2017, eligible capital property (ECP) regime will be replaced with a new capital cost allowance pool
  • Effective for eligible R&D (research and development) expenditures incurred in taxation years ending after May 31, 2016:
    • Ontario Research and Development Tax Credit (ORTDC) rate will be decreased from 4.5 to 3.5% ↓ 
    • Ontario Innovation Tax Credit (OITC) rate reduced from 10% to 8% ↓ 

Personal Income Tax
Starting in 2016

  • The federal tax rate on taxable income:
    • Over $200,000 is increased from 29% to 33% ↑ 
    • Between $45,282 and $90,563 reduced from 22% to 20.5% ↓. For single Canadians in this tax bracket, average tax savings will amount to $330 per year. For couples, these savings will be $540, on average.
  • The combined federal and Ontario marginal tax rate on additional income:
    • Over $220,000 is increased from 49.53% to 53.53% ↑ 
    • Between $86,177 and $90,563 reduced from 39.41% to 37.91% ↓  
  • The family tax cut (income-splitting) tax credit up to $2,000 ↓ is eliminated
  • The contribution limit for tax-free savings accounts (TFSA) is decreased from $10,000 to $5,500 ↓ 
  • The children’s fitness credit (allowing a claim up to $1,000 per child in eligible physical activity fees per year) will be decreased by 50% in 2016 and eliminated after December 31, 2016
  • The children’s art credit (allowing a claim up to $500 per child of eligible art activity fees per year) will be decreased by 50% in 2016 and eliminated after December 31, 2016

For the details, please refer to the 2016 Federal Budget Brief.

To discuss these and other federal budget initiatives and how they may affect your financial planning and taxes, please contact Fiona Zheng, CPA, CGA at +1 (905) 731-8977.

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