Tax Insights: Ontario increases personal taxes on some dividends and studies corporate tax incentives

Issue 2013-19

According to Ontario’s fall economic statement, presented today by Finance Minister Charles Sousa, the government will study:

  • an incentive that rewards research and development (R&D) incremental spending
  • ‘pay or play’ tax incentives

Corporate tax rates are unchanged, but top personal income tax rates on non-eligible dividends will increase, commencing 2014.

Ontario will study new tax measures to encourage business investment. These include:

  • replacing existing R&D tax credits with an incentive that rewards R&D incremental spending, which may mean that the future R&D incentives will be calculated on expenditures above a certain base amount
  • ‘pay or play’ tax incentives, such as:
  1. a special corporate tax that could be eliminated or reduced by investing in new equipment or other eligible investment expenses
  2. a payroll tax that could be eliminated or reduced by employer investments in employee training and/or by funding training programs

In addition, Ontario reiterated that it will harmonize with the 2013 federal budget measure that extends accelerated capital cost allowance for manufacturing and processing machinery and equipment to property acquired before 2016.

The 2013 Ontario budget announced that, for expenditures incurred after March 31, 2014, the following apprenticeship trades will no longer be eligible for the apprenticeship training tax credit:

  • Technical Support Agent (634a)
  • Inside Sales Agent (634d)
  • Customer Care Agent (634e)