22 June 2015 Global Tax Alert News from Americas Tax Center EY Americas Tax Center The EY Americas Tax Center brings together the experience and perspectives of over 10,000 tax professionals across the region to help clients address administrative, legislative and regulatory opportunities and challenges in the 33 countries that comprise the Americas region of the global EY organization. Copy into your web browser: http://www.ey.com/us/en/ Services/Tax/Americas-Tax- Center---borderless-clientservice Canada increases corporate and personal income tax rates Executive summary On 18 June 2015, Finance Minister Joe Ceci tabled Bill 2, An Act to Restore Fairness to Public Revenue. The bill will give effect to a 2% corporate income tax rate increase and a new system of progressive personal income taxes. As has a majority government, Bill 2 is now considered to be substantively enacted for financial reporting purposes. Following is a brief summary of the tax measures in Bill 2. Detailed discussion Business tax measures Corporate tax rates Effective 1 July 2015, the general corporate tax rate will increase to 12% (from 10%). No changes are proposed to the small business rate or to the $500,000 smallbusiness limit.
s current and proposed future corporate income tax rates are summarized in Table A. Table A: Proposed Rates Current Rate 2015 2016 and after Small-business tax rate 3% 3% 14% 3% 14% General corporate tax rate 10% 11%* 26% 12% 27% *The general corporate rate is prorated based on a 31 December year end. Financial reporting implications International Financial Reporting Standards (IFRS) requires the use of substantively enacted tax rates (US GAAP enacted tax rates) to measure current and deferred income taxes. Accordingly, IFRS financial statements prepared after 18 June 2015 must reflect the 12% general corporate income tax rate when measuring deferred tax assets and liabilities. For US GAAP financial statements, the date of enactment will apply. Corporations that prepare their financial statements in accordance with Accounting Standards for Private Enterprises will also have to reflect this rate change if they have elected to use the future income taxes method of accounting for income taxes. In the first quarterly reporting subsequent to this change, corporations should consider whether separate disclosure of the impact of this rate change on their deferred income tax assets and liabilities is required. Personal tax Personal income tax rates has had a flat tax system for several years, meaning that personal income of an individual resident in is taxed at a single rate (10%) rather than at progressive rates. Bill 2 will replace the flat tax with a system of progressive rates, beginning in 2015, with transitional provisions for calendar 2015, such that one-quarter of the rate increases will apply. Corollary tax rate revisions will be made to the taxation of trusts and the tax on split income. 2 Global Tax Alert Americas Tax Center
As outlined in Table B, the new system will affect taxpayers earning more than $125,000 a year. The newly added income brackets will be indexed starting in 2017. Table B Proposed Rates Current Rate 2015 2016 and after Up to $44,701 10% 10% 25% 10% 25% $44,702 to $89,402 10% 10% 32% 10% 32% $89,402 to $125,000 10% 10% 36% 10% 36% $125,001 to $138,586 10% 10.5% 36.5% 12% 38% $138,587 to $150,000 10% 10.5% 39.5% 12% 41% $150,001 to $200,000 10% 10.75% 39.75% 13% 42% $200,001 to $300,000 10% 11% 40% 14% 43% Over $300,000 10% 11.25% 40.25% 15% 44% Political contributions On 15 June 2015, the Minister of Justice and Solicitor General, Kathleen Ganley, tabled Bill 1, An Act to Renew Democracy in. Bill 1 amends the Election Finances and Contributions Disclosure Act to ban corporations and unions from making political contributions, effective 15 June 2015. As a result, the corporate political tax credit will no longer be available. Royalty review The Government has indicated its intention to proceed with an oil and gas royalty review, as pledged during the election. Details surrounding the conduct of the review are currently being developed, including consultations with industry. It is expected that changes to the royalty rates, if any, will not occur until the review is completed. No royalty measures were included in Bill 1 or Bill 2. Global Tax Alert Americas Tax Center 3
For additional information with respect to this Alert, please contact the following: Ernst & Young LLP (Canada), Calgary Alison Jackson +1 403 206 5375 alison.e.jackson@ca.ey.com Dave Van Dyke +1 403 206 5177 dave.a.vandyke@ca.ey.com Dean Radomsky +1 403 206 5180 dean.w.radomsky@ca.ey.com Ernst & Young LLP (Canada), Edmonton Derek Alty +1 780 638 6610 derek.g.alty@ca.ey.com Dustin Burbank +1 780 441 4673 dustin.burbank@ca.ey.com 4 Global Tax Alert Americas Tax Center
EY Assurance Tax Transactions Advisory About EY EY is a global leader in assurance, tax, transaction and advisory services. The insights and quality services we deliver help build trust and confidence in the capital markets and in economies the world over. We develop outstanding leaders who team to deliver on our promises to all of our stakeholders. In so doing, we play a critical role in building a better working world for our people, for our clients and for our communities. EY refers to the global organization, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. For more information about our organization, please visit ey.com. Americas Tax Center 2015 EYGM Limited. All Rights Reserved. EYG No. CM5540 This material has been prepared for general informational purposes only and is not intended to be relied upon as accounting, tax, or other professional advice. Please refer to your advisors for specific advice. ey.com