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CORPORATE INCOME TAX MEASURES
Income Tax Rates
In prior Budgets, the government announced its intention to reduce the general corporate income tax rate to 8% by 2005. These reductions have been delayed by one year and are now intended to be implemented in a manner which will reduce the general rate to 11% on January 1, 2004, 9.5% on January 1, 2005, and 8% on January 1, 2006.
The rate applicable to manufacturing and processing (M&P), mining, logging, farming and fishing income will be reduced to 10% on January 1, 2004, 9% on January 1, 2005, and 8% on January 1, 2006. The general corporate income tax rate and the M&P rate will therefore be the same as of January 1, 2006.
This delay does not affect the implementation of rate reductions for small business corporations. As a result, the small business corporate tax rate will be reduced to 5.5% on January 1, 2003, 5% on January 1, 2004, and 4% on January 1, 2005.
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Small business tax rate |
General corporate income tax rate |
Tax rate on income from M&P, mining, logging, farming and fishing |
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| Current |
6% |
12.5% |
11% |
| January 1, 2003 |
5.5 % |
12.5% |
11% |
| January 1, 2004 |
5% |
11% |
10% |
| January 1, 2005 |
4% |
9.5% |
9% |
| January 1, 2006 |
4% |
8% |
8% |
Other Measures
The Budget also contained other corporate tax related initiatives, such as:
- A declaration that Ontario would now parallel applicable federal income tax treaties when determining whether non-residents have a permanent establishment in Ontario for corporate income tax purposes, effective for taxation years ending after June 17, 2002.
- A reduction in the mining tax rate to 12% on January 1, 2003, and to 10%, on January 1, 2004, as previously announced.
- Elimination of the existing requirement that corporations must apply to be prescribed as a "financial institution" for capital tax purposes. As a result, financial institutions prescribed federally will be automatically deemed to be financial institutions for Ontario purposes. However, it will be possible to request that this provision not apply.
- Undertaking to announce in next year's Budget a new, multi-year tax reduction plan, including the next steps to be taken towards eliminating the Ontario capital tax.
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