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We were told that Federal
corporate tax rates will decrease to 15% by 2011. Also, if the provinces cooperate, the
combined rates will come down to 25% and Canada would have the lowest tax rate among
the G7. Initially, I could not figure
out how all this would affect the overall taxes the corporations have to pay
and what if the corporation is a SBC enjoying the reduction in tax rates, both
Federal and Provincial, for the first $400,000.
So, I prepared the two schedules below to show what will happen to the
tax rates for 2007 to 2012 for Investment Corporations, Small Business
Corporations, Manufacturing Corporations and other Corporations (Schedule A), and also what happens to the combined
taxes if all after tax earnings are paid out as dividends (Schedule B).
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Ontario & Federal Corporate
Tax Rates after the October 2007 Budget (Schedule A)
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Upto $400,000
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INVESTMENT CCPC *
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Active Income SBC
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Other
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Manufacturing Income
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Income Trusts
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2007
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Federal
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35.79%
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13.12%
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22.12%
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22.12%
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Ontario
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14.00%
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5.50%
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14.00%
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12.00%
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Total
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49.79%
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18.62%
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36.12%
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34.12%
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2008
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Federal
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34.67%
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11.00%
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19.50%
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19.50%
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Ontario
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14.00%
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5.50%
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14.00%
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12.00%
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Total
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48.67%
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16.50%
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33.50%
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31.50%
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2009
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Federal
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34.67%
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11.00%
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19.00%
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19.00%
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Ontario
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14.00%
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5.50%
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14.00%
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12.00%
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Total
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48.67%
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16.50%
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33.00%
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31.00%
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2010
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Federal
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34.67%
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11.00%
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18.00%
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18.00%
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Ontario
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14.00%
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5.50%
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14.00%
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12.00%
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Total
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48.67%
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16.50%
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32.00%
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30.00%
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2011
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Federal
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34.67%
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11.00%
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16.50%
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16.50%
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Ontario
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14.00%
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5.50%
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14.00%
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12.00%
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Total
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48.67%
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16.50%
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30.50%
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28.50%
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2012
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Federal
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34.67%
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11.00%
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15.00%
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15.00%
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28.00%
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Ontario
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14.00%
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5.50%
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14.00%
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12.00%
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Total
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48.67%
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16.50%
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29.00%
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27.00%
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28.00%
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* CCPC with investment income will
receive a refund at the rate of 33.3% of the dividend when paying dividends
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Combined
Corporate and Personal Tax Rates (Schedule B)
Assuming Corporation Distributes all Income
AND
Shareholders are Individuals and are in the Top Tax Bracket
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INVESTMENT CCPC *
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Up to $400K Active Income SBC**
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Other
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Manufacturing Income
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2007
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48.29%
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44.12%
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51.83%
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50.32%
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2008
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47.52%
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42.67%
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49.40%
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47.88%
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2009
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47.52%
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42.67%
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48.42%
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46.88%
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2010
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47.52%
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42.67%
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47.18%
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45.63%
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2011
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47.52%
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42.67%
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46.02%
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44.47%
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2012
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47.52%
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42.67%
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44.85%
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43.30%
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* Dividends are paid to maximize
refund of Refundable Dividend Tax on Hand
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** Ignores Ontario claw-back
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