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Substantively enacted corporate income tax rates

corporate income tax ratesErnst and Young’s tables of substantively enacted corporate income tax rates have been updated to December 31, 2016. The tables are prepared on a monthly basis and you can subscribe to them on Knotia.ca.

The determination of the substantively enacted date of a corporate income tax rate change follows the guideline provided in EIC-111 (generally first reading in the House of Commons for majority governments and third reading in the House of Commons for minority governments).

When tax rate changes are considered enacted or ”substantively enacted”, the effect of the change in corporate income tax rate is reflected in the period in which the changes are enacted or “substantively enacted”. The effect of the change is recorded in income as a component of deferred tax expense in the period that includes the date of enactment or substantive enactment. For example, if a Bill becomes “substantively enacted” on December 31, the tax rate changes should be reflected in the corporation’s financial statements for the quarter that includes December 31.

As explained by Liam Fitzgerald, PwC Management Services LP,

for accounting purposes, knowing which income tax changes are considered “substantively enacted” for Canadian purposes and “enacted” for U.S. purposes can be important.

Under Canadian generally accepted accounting principles (GAAP), which include International Financial Reporting Standards (IFRS), and U.S. GAAP, a future tax asset or liability is measured using the future tax rate and tax law expected to apply to taxable income in the periods when the underlying temporary difference is expected to be settled or realized (or simply reversed).

For purposes of calculating future tax balances:

  • Canadian GAAP requires the use of future tax rates and tax laws that were “enacted” or “substantively enacted” at the balance sheet date; and
  • U.S. GAAP requires the use of “enacted” tax rates and tax laws.

Certain changes to some provinces corporate income tax rates are in the works, and as stated in EY’s report, include the following:

  • Saskatchewan’s proposal to reduce the general corporate income tax rate from 12% to 10%. The government confirmed in its 2014-15 budget (tabled on 19 March 2014) that it remains committed to implementing this rate reduction; but no specific timeline was announced. While this proposal was not included in the province’s 2016-17 budget (tabled on 1 June 2016), it is our [EYs] understanding that the province will implement the reduction when the province’s finances can sustain the change.
  • New Brunswick’s proposal to reduce the small business corporate income tax rate to 2.5% by 2018.

The tables for substantively enacted corporate income tax rates can be found on Knotia.ca (subscription required).

Small business tax rate

For tax years that end after 2015, the small business tax rate will be reduced from 11% to 9% over four years as follows:

  • 10.5% effective January 1, 2016;
  • 10% effective January 1, 2017;
  • 9.5% effective January 1, 2018; and
  • 9% effective January 1, 2019.

The tax rate reduction will be prorated for tax years that straddle calendar years.

More information on corporate income tax rates among other information can be found on the Canada Revenue Agency website.


Source: Knotia, EYEP and/or E&Y LLP and/or CPA Canada

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Yosie Saint-Cyr, LL.B., Managing Editor

Managing Editor at First Reference
Yosie Saint-Cyr, LL.B., is a trained lawyer called to the Quebec bar in 1988 and is still a member in good standing. She practised business, employment and labour law until 1999. For over 17 years, Yosie has been the Managing Editor of the following publications, Human Resources Advisor, Human Resources PolicyPro, HRinfodesk and Accessibility Standards PolicyPro from First Reference. Read more
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