Highlights
On March 22, 2006, Alberta’s Deputy Premier and Minister of Finance, the Honourable Shirley McClellan, presented the province’s 2006 budget. Most notably, the budget reduces Alberta’s general corporate income tax rate. This and other key tax measures are discussed below.
For more information, please contact your PricewaterhouseCoopers adviser or any of the tax contacts listed on our Web site at www.pwc.com/ca/taxcontacts.
Corporate Tax Measures
General tax rate
Alberta’s general corporate income tax rate (which also applies to manufacturing and processing income) is already among the lowest in Canada, and will decline from 11.5% to 10% on April 1, 2006. However, no mention was made about Alberta’s previously stated long-term goal of reducing the general rate to 8%.
Small business tax rate
The budget does not change Alberta’s small business rate, which will remain at 3% (one of the lowest in Canada) and will continue to apply to active business income of $400,000 or less.
Personal Tax Measures
Personal tax rates
The budget leaves intact the province’s single-rate tax of 10%. As a result, Alberta individual taxpayers will continue to pay tax at Canada’s lowest top combined federal/provincial personal tax rate: 39%.
Personal tax credits
For 2006, Alberta’s personal, spousal and eligible dependant tax credits will rise to $14,899, an additional $100 above indexation.
Dividend tax credit
Alberta will await further details before announcing whether it will mirror federal proposals announced on November 23, 2005, which reduce personal income taxes on certain dividends paid by Canadian-controlled private corporations and on all dividends paid by other Canadian-resident corporations.
Health care insurance premium subsidies
As of April 1, 2006, Alberta will raise the income level under which non-senior individuals, couples and families qualify for full or partial health care insurance premium subsidies by $5,000.
Other Tax Measures
Income trusts
As part of its continuing review of the tax system, Alberta is examining the transformation of corporations to income trusts. This shift means a loss of tax revenue to the province.
School property taxes
School property tax rates will decrease in 2006 by about 7.1%.
