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Ontario's Corporate Tax Rate Freeze Not Substantively Enacted 

Canadian Tax Adviser

 

April 10, 2012

 

Although the 2012 Ontario budget proposed to freeze the general corporate tax income tax rate at 11.5% until the budget is balanced, Ontario's Bill 55 does not contain legislation to remove the reductions currently enacted for 2012 and 2013. As a result, the corporate tax rate freeze will not be considered to be substantively enacted for accounting purposes. It is expected that legislation to freeze the general corporate tax income tax rate will be forthcoming soon.

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. The budget forecasts that Ontario should return to a balanced budget in 2017-18. The budget stated the corporate tax rate reductions would resume at that time.

 

KPMG observations
We understand that the Ontario government must procedurally first amend the Taxpayer Protection Act before it can introduce legislation to remove the corporate rate reductions already passed into law. After the Taxpayer Protection Act is amended, Ontario will then have to introduce another bill (in 2012) to amend Ontario's Taxation Act, 2007 to remove or defer the reductions currently enacted for 2012 and 2013.

 

For more information, contact your KPMG adviser.

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