Canada Income Taxes

Last partial update, March 2009

Canada's federal corporate tax in 2009 is 19%. For small Canadian controlled private corporations claiming the small business reduction, the rate is 11%.
The provincial income tax rates for 2009 are 10%-16%.
For individuals the 2009 federal tax rates are progressive, from 15% to 29%.
The maximum provincial tax rates for individuals are 10% -24%.

Individual's Federal Income Tax Rates 2009

Income (CAD) %
1-38,832 15
38,833-77,664 22
77,665-126,264 26
126,265 and over 29

Canada Capital Gains

Capital gains for companies and individuals are taxed on 50% of the gain.

Residence

A company is resident if incorporated in Canada or when having its management in Canada
. Individuals are regarded as Canadian residents if residing in Canada in general.
For nonresidents, when staying in Canada at least for 183 days in a calendar year.
Resident companies and individuals pay Canadian federal and provincial income tax for their worldwide income too.

Canada Business Deductions

Losses

A business loss can be carried forward for 20 years and back for three years.

Depreciation

Fixed assets are generally depreciated on the declining balance method.
Rates are 10% for certain buildings, 30% for heavy construction equipment and 20% for cars and machinery.

Transfer Pricing

Transfer between a non arm's length nonresident should be at the same price as when dealing with arm's length side. Companies must keep documents and file reports regarding such transactions.

Thin Capitalisation

Interest paid for a loan from a related nonresident to a Canadian company is deductible only if the loan to equity ratio does not exceed 2:1 ratio.

Consolidated Returns

Consolidated returns are not allowed in Canada.Each company has to file seperately.

Canada Deduction at Source

Tax withholding rates for payments to nonresidents are:
Dividends - 25%.
Interest - 25%.
Royalties - 25%.
Note : Rates may be reduced by double taxation treaties .

For more info please see www.cra-arc.gc.ca