The Government of Alberta is shifting the corporate tax landscape. The province is cutting its corporate tax rate from 10% to 8%, which will be effective July 1, 2020. Premier Jason Kenney is calling the change “the largest infrastructure build” in the province’s history. Since last year, the government has been working to lower Alberta’s corporate tax rate. It originally planned to cut the rate to 8% by the year 2022.
SR&ED tax credit
In Alberta, businesses can claim a nonrefundable tax credit for eligible SR&ED expenses. To qualify, a company must have a permanent establishment in the province, carry out qualifying SR&ED activities, and be subject to corporate tax. The tax credit must be claimed on federal form T661, and must be reported on the corporation’s income tax return.
The Innovation Employment Grant (IEG) was introduced to encourage corporations to invest in research and development in Alberta. The program primarily targets small and medium-sized enterprises (SMEs) that have less than $10 million in taxable capital. Larger corporations are not eligible. Eligible expenditures must have occurred in Alberta after December 31, 2020, and must match the federal SR&ED tax incentive program.
To claim an SR&ED tax credit, a company must engage in a project that advances knowledge in a field or technology. The work must be systematic, undertaken by qualified personnel, and must advance the technical baseline. In some cases, marginal improvements can qualify. If these requirements are met, the company will receive a cheque.
While the SR&ED tax credit can help a business, it must be used properly. Business owners should consult a tax professional for the best results. A Canadian business can claim up to 64% of the eligible expenditure in tax credits. However, the credit may be as high as 20%. Therefore, if a company is able to justify the expenditures in its business plan, it is more than likely eligible for the Alberta SR&ED tax credit.
Qualifying corporations must file a form with the Provincial Minister within fifteen months after the completion of the taxation year. If the company’s total assets are over $50 million, the basic rate of credit tax will be 28%. For companies with assets of between $50 million and $75 million, the rate will be reduced on a straight-line basis.
Combined federal-provincial corporate tax rate
Previously, the combined federal-provincial corporate tax rate for companies in Alberta was nearly tax neutral. However, this has changed. The current combined federal-provincial corporate tax rate for Alberta is now lower than the rate for businesses in 44 US jurisdictions. This makes Alberta’s corporate tax regime competitive for new investment.
Alberta’s tax system is similar to that of most other provinces in Canada and is based on a progressive tax structure. Generally, businesses pay a certain percentage of their annual income, but these rates do not remain static, and increase each year according to inflation.
The combined federal-provincial corporate tax rate for the province of Alberta is 25%. This rate is based on the taxable income for a 12-month period ending December 31, 2022. It applies to income from manufacturing and processing. The rate for other income is lower, but it depends on the type of business.
The combined federal-provincial corporate tax rate for Manitoba is 30%. In addition, businesses can also pay a 9% tax rate if they are Canadian-controlled. This corporate tax rate is applicable to companies that make more than $100,000 a year, and those that meet certain criteria.
For corporations, investment income comes in many forms. This includes dividends, capital gains, royalties, and other income from property. This income is separate from the active main business income of the corporation. This income is usually passive, and it can make up a significant portion of the firm’s total income.
The combined federal-provincial corporate tax rate for Saskatchewan and Alberta varies according to the type of business. For example, a corporation can reduce its federal tax by using the Small Business Deduction. For businesses that meet certain conditions, the deduction is equal to a percentage of the annual revenue. In addition, this deduction may not apply if the company has less than CAD 50 million of assets and CAD 100 million in gross revenue.
As an Alberta resident, you may qualify for tax credits, including those for political contributions or tuition. Check with a financial expert if you have any questions about the tax credits available to you.
CCPC tax credit
The CCPC tax credit is an opportunity for corporations to receive a refund of corporate tax instalments. If your corporation has taxable income of under $500k, you can choose the “exempt” option on line 092 of the Alberta Corporate Income Tax Return and select the appropriate check box on Form Alberta Tax Instalments.
A CCPC may qualify for this credit if its income is primarily from its active business. However, if your income is derived from passive investment, you are unlikely to qualify for this tax credit. Fortunately, there are a number of options for businesses to receive a CCPC tax credit.
A CCPC with a December 31 year-end must file a corporation income tax return within six months. In the event that your corporation’s year-end falls on a later date, you have a maximum of 53 weeks to file a return. But if you’re unable to file your corporate income tax return within these dates, you may be faced with late payment penalties.
Besides the CCPC tax credit, the province of Alberta offers several other tax benefits for small businesses. For example, the province offers an innovation employment grant, and can also provide a tax credit to small businesses. A small business deduction can also be claimed by Canadian-controlled private corporations on the income generated by active business activities. This benefit applies to companies that own a permanent establishment in Alberta.
Another tax credit available to CCPCs is the Scientific Research and Experimental Development Tax Credit. This tax credit is refundable and can be claimed for a corporation’s taxable income. The credit is available to businesses that make investments in research and development. If you qualify for the credit, you will get a reduction of up to two percentage points of your taxable income.
Small business tax rate
Small business owners in Alberta have a choice in the tax rate they pay. Unlike federal taxes, the provincial government offers a small business tax rate that is competitive and fair. The small business rate is based on the active business income you generate. This rate can be as low as 8%, making it one of the most affordable in the country.
This rate will be based on your active business income up to the Business Limit. In most cases, the limit is $500,000. The deduction is based on the percentage of revenue generated from your active business in the province. In order to qualify for the deduction, your business must be a Canadian controlled private corporation with a permanent establishment in the province.
Small businesses in Alberta may benefit from the Innovation Employment Grant. The grant was introduced as part of Alberta’s Recovery Plan. It is aimed at supporting small and medium-sized enterprises and encouraging economic growth. The grant provides up to 20% of qualifying R&D expenditures. This makes Alberta a very attractive place to invest in if you’re in business here.
Small businesses in Alberta are subject to two rates. One rate is the federal small business tax rate, while the other is the small business tax rate. A CCPC’s tax rate is 9%, while a sole proprietorship is subject to a 38% federal tax rate. These two rates can vary depending on location and business structure.
Small business tax rates in Alberta are very competitive. You can save up to $7,500 each year by incorporating a small business. The rate changes as you reach $500,000 in taxable income. You’ll also get the benefit of publicly funded health care. Taking into consideration the costs of running a business, the small business tax rate in Alberta is one of the best in the country.