Corporate Tax

Ch. 12 Taxable Income and Tax Payable for Corporations

I. Calculation of Net Income For Tax Purposes and Taxable Income

- Corporations follow the applicable ordering rules of Section 3 in computing NITP

Net Income for Tax Purposes

Less: Div C deductions

Taxable Income

Most of the Div. C deductions for corporations are DIFFERENT from the Div. C deductions for individuals.

Div C deductions for Corporations: 1. Charitable donations 2. Dividends received from taxable Canadian corporations 3. Use of loss carryovers from subsequent or prior taxation years

1) Charitable donations

- For individuals tax credit

- For corporations deduction to get to Taxable Income

- For both - limited to 75% of NITP, 5 year CF of unused amounts

2) Dividends received from taxable Canadian corporations ITA 112(1) or foreign affiliates ITA 113(1) ( foreign company where taxpayer and related parties own more than 10% of the shares).

- are deducted to get to Taxable Income

(therefore, NO IMPACT ON TAXABLE INCOME)

- Why?

- Gross-up of dividends? - Ch 7 dividend > integration

Sole proprietor Corporation
1 level of tax 1 level of tax Another level of tax as a dividend to the man

2

3) Loss carryovers from subsequent or prior taxation years

- Same rules as for individuals

II. Corporate Tax Rate

Depends on: 1) type of corporation 2) Type of income the corporation has

2 broad categories of “Taxable Canadian Corporations”

Public Corporation - ITA 89(1) Private Corporations - ITA 89(1)

-resident in Cda, listed on a prescribed stock - resident in Cda, not a public corporation, exchange in Canada not controlled by public