Alberta Advantage: Reduced Corporate Tax Rate Effective July 1, 2020

Bennett Jones LLP

Bennett Jones LLP

On June 29, 2020, the Government of Alberta introduced Alberta's Recovery Plan which will, among other things, reduce Alberta's general corporate income tax rate to 8%, effective July 1, 2020.

Alberta's previously announced "Job Creation Tax Cut" (Bill 3) has already reduced Alberta's corporate rate from 12% to 11%, effective July 1, 2019, and from 11% to 10%, effective January 1, 2020. The current 10% rate was scheduled to be reduced to 9% on January 1, 2021 and to 8% on January 1, 2022. The Government has thus accelerated the scheduled reductions by a year and half. As a result, the combined Federal-Alberta general corporate tax rate will immediately drop from 25% to 23%. As summarized in the following table, Alberta will now have the lowest general corporate tax rate in Canada by a significant margin:

Province Current Provincial Rate Current Combined Federal-Provincial Rate
Alberta 8% 23%
Ontario 11.5% 26.5%
Quebec 11.5% 26.5%
Northwest Territories 11.5% 26.5%
British Columbia 12% 27%
Manitoba 12% 27%
Nunavut 12% 27%
Saskatchewan 12% 27%
Yukon 12% 27%
New Brunswick 14% 29%
New Scotia 14% 29%
Newfoundland & Labrador 15% 30%
Prince Edward Island 16% 31%

In support of the rate reductions, the Government has explained:

"The most powerful way to create new jobs is to make Alberta a magnet for new business investment with the most attractive tax rates in Canada. The Job Creation Tax Cut is estimated to positively impact more than 100,000 businesses, of which 75% are small businesses."

"The Job Creation Tax Cut is essential to Alberta’s recovery, ensuring our province has a competitive tax regime for job creators."

"When Alberta’s corporate income tax reaches eight per cent, British Columbia’s corporate income tax will be 50% higher at 12 per cent."

"Alberta will be among the most competitive business jurisdictions in North America, with by far the lowest corporate tax rate in Canada and the seventh lowest compared to American states."

"This [tax rate] is expected to increase investment by $4 billion per year by 2023 and could add 55,000 jobs by 2022. Our economy has changed, but the fundamental benefits of the tax reductions remain."

"As employers work to recover from COVID-19 they can be confident that Alberta will be the best place in Canada – by far – to locate, bringing with them jobs and prosperity."

"Investors can be confident that Alberta is serious about being the most competitive jurisdiction to invest and do business"

While not announced, it is expected that the Alberta tax credit for dividends paid out of income taxed at the general corporate tax rate (eligible dividends) will also be adjusted to correspond with the accelerated reduction. Alberta's small business tax rate remains at 2%.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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