Income Tax Facts. Income taxes are a tax imposed on the income of individuals, businesses or other legitimate entities. It is based on various income systems that have different applied rates. Income taxes can be federal or , Provincial. Taxes required for businesses are usually called “corporate tax,” “profit tax” or “corporate income tax.” Individuals are normally taxed on their full income with deductions allowed. Corporate income is taxed on the net income. This is the gross revenue minus expenses and other deductions. Income taxes have some interesting details and history.
Individuals residents in Canada pay taxes to both Federal and Provincial governments. The various rates are based on taxable within a certain brackets of income.
Federal individual tax rates for 2015:
- 15% on the first $44,701 of taxable income, +
- 22% on the next $44,700 of taxable income (on the portion of taxable income over $44,701 up to $89,401), +
- 26% on the next $49,185 of taxable income (on the portion of taxable income over $89,401 up to $138,586), +
- 29% of taxable income over $138,586.
Corporations resident in Canada pay taxes to both Federal and Provincial governments. The tax rate is based on a flat rate on taxable income. Provincial governments generally follow the Federal rules and apply their own tax rate. Your actual corporate tax rate is based on the combination of both the Federal and provincial tax rates.
Federal corporate tax rates for 2015:
The basic rate of Part I tax is 38% of your taxable income, 28% after federal tax abatement.
After the general tax reduction, the net tax rate is:
- 15% effective January 1, 2012
- 16.5% effective January 1, 2011
- 18% effective January 1, 2010
For Canadian-controlled private corporations (i.e. CCPC) claiming the small business deduction, the net tax rate is 11%.