Tax Memo: 2009 Ontario Budget

Harmony in Sales Tax and Cuts in Corporate Tax

On Thursday, March 26, 2009, Ontario's Minister of Finance, Dwight Duncan, presented the province's 2009 budget. As expected, the budget introduces a blended sales tax rate of 13% on July 1, 2010. The budget also includes other significant tax changes.

For corporations, the general income tax rate will decrease in stages from 14% to 10% by July 1, 2013, while on July 1, 2010, the manufacturing and processing rate will decline from 12% to 10% and the small business rate will drop from 5.5% to 4.5%. As well, for taxation years ending after June 30, 2010, the Corporate Minimum Tax (CMT) rate will be reduced to 2.7% and the asset and revenue thresholds above which the CMT will apply will increase.

On January 1, 2010, the lowest personal income tax rate will drop, but the thresholds at which the surtax applies will be reduced. Commencing 2010, the dividend tax credit rate will decrease on both eligible and non-eligible dividends, as a result of proposed corporate tax rate reductions.

The budget also enhances several targeted tax incentives, including film and digital media incentives, the Ontario Innovation Tax Credit and tax credits that support employee training.

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