|Download the budget analysis as a PDF file.|
On Tuesday, March 29, 2011, Ontario’s Minister of Finance, Dwight Duncan, presented the province’s 2011 budget. The budget does not change personal income tax rates, the previously announced corporate income tax rate reductions or Harmonized Sales Tax rates. It does include numerous technical amendments, many of which are intended to improve the administration of the tax system, although few details are provided.
Please contact your PwC adviser or any of the individuals listed on pwc.com/ca/taxcontacts for more information on how the budget will affect you or your corporation.Business Tax Measures | Personal Tax Measures | Other Tax Measures
Corporate income tax rates
The budget does not revise corporate income tax rates. The following table shows previously announced decreases.
Combined corporate income tax rates
The following combined federal/Ontario rates apply to December 31 year ends:
Ontario Book Publishing Tax Credit
The Ontario Book Publishing Tax Credit is a 30% refundable tax credit available to Ontario book publishing corporations for qualifying expenditures related to publishing and promoting a book by a Canadian author. For expenditures incurred after March 29, 2011, the period for qualifying marketing expenditures will start one year before and end one year after the date of publication. This replaces a 12-month period.
Functional currency – Mining
For taxation years beginning after December 31, 2010, mine operators in Ontario that calculate their Canadian tax results using a functional currency other than the Canadian dollar under the Canadian Income Tax Act (the Act) can elect under the Ontario Mining Tax Act to file their Ontario mining tax returns in that functional currency. The election applies until the mine operator revokes its functional currency election under the Act or otherwise ceases to meet the conditions under the functional currency rules in the Act or the rules to be included in the Ontario Mining Tax Act.These amendments will be of significant benefit to Ontario mine operators because they will no longer have to prepare a separate set of Canadian-dollar financial statements solely for the purpose of filing the Ontario mining tax return.
Research and development
The federal government is reviewing its support for business innovation, including both direct support of research and development (R&D) and the scientific research and experimental development (SR&ED) tax program. Ontario will work with the federal government to improve the effectiveness of federal R&D tax support by strengthening administration, enhancing collaboration between the business and education sectors, and making the system fairer for small businesses that perform R&D.
Taxation of corporate groups
In November 2010, the federal government released a consultation paper on whether a formal system for the taxation of corporate groups should be implemented in Canada. See our Tax Memo “Taxation of Corporate Groups—Consultation Paper Released” at www.pwc.com/ca/taxmemo.
Ontario supports this initiative provided it increases the competitiveness of Canada’s corporate tax system and ensures that the provinces receive the revenues to which they are entitled.
Personal income tax rates
Top 2011 personal tax rates
The budget does not change personal tax rates. Top combined 2011 personal tax rates follow.
The table below shows the combined federal and Ontario income tax payable at various income levels and the additional tax due to the health premium.
Dividend tax rates
As a result of previously announced changes, top personal tax rates on dividends will increase as follows:
Children’s Activity Tax Credit
The budget provides a reminder that, commencing 2010, the Children’s Activity Tax Credit allows parents to claim a refundable tax credit of up to $50 for each child under 16 who is enrolled in a physical activity or other qualifying program. An additional $50 credit is available for children under 18 who qualify for the disability tax credit.
Two measures will assist individuals with low incomes:
Ontario will continue to work with the federal, provincial and territorial governments to expand coverage, promote innovation and enhance retirement savings opportunities. As stated in its October 2010 discussion paper, Ontario is committed to strengthen the retirement system with:
The budget confirms the province’s intention to:
The budget announced the following measures to improve the administration of the tax system:
Promotional wine and beer
Retroactive to July 1, 2010, exemption from beer and wine taxes will be provided for up to 10,000 litres of wine, wine coolers or beer distributed annually without charge by Ontario manufacturers. The exemption will be pro-rated based on the manufacturers’ sales year. Beer distributed without charge will be ineligible for the small beer manufacturers’ tax credit.
Ontario will amend its provincial statutes to: