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Ontario 11.5% Corporate Rate To Be Substantively Enacted June 20, 2012 

Canadian Tax Adviser

 

June 12, 2012

 

In a surprising manoeuver, the Legislative Assembly of Ontario has passed a motion that will likely lead to substantive enactment of Ontario's general corporate income tax rate of 11.5% for a taxation year ending after June 30, 2012 on June 20, 2012 for purposes of Canadian GAAP and IFRS. The rate freeze will also be enacted for U.S. GAAP purposes on June 20, 2012. As a result, if legislative proceedings unfold as projected, the new 11.5% corporate rate must be recognized in Q2 financial reporting.

Background
The 2012 Ontario budget proposed to freeze the general corporate income tax rate at the current 11.5% level until the budget is balanced. Previously, the government intended to reduce the rate to 11% on July 1, 2012 and to 10% on July 1, 2013. However, Ontario's budget Bill 55 did not contain legislation to remove the reductions currently enacted for 2012 and 2013. As a result, the corporate tax rate freeze will not be substantively enacted for accounting purposes until a new bill is introduced and passed.

 

New motion
A new bill will be introduced on June 20, 2012 to amend subsection 29(2) of the Taxation Act, 2007 to provide that a corporation's basic rate of tax for a taxation year ending after June 30, 2012 is 11.5%. Bill 55, as well as this new bill, are scheduled to be given Royal Assent on June 20, 2012 immediately before the Legislature recesses for the summer.

 

For more information, contact your KPMG adviser.

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