43 How is tax payable calculated for a corporation and why is the source of the income (ABI, AII, Specified Investment Business Income etc.) important?
Amer Bassi
Public corporations are not impacted by the Additional Refundable Tax or the Small Business Deduction. Assuming a public corporations income is earned in Canada it is taxed at 15%. The calculation for a CCPC is a bit more complex.
Tax payable calculation for a CCPC:
| Basic Part I tax – ITA 123(1) | (38%)(Taxable income) |
| Less: Federal abatement for provincial tax, ITA 124(1)
Income earned outside of Canada is not eligible for the abatement |
(10%)(Taxable income earned in Canada) |
| Add: Additional refundable tax (ART) on CCPC Aggregate Investment Income (AII), ITA 123.3 | 10 2/3% * Passive income |
| Less: General rate reduction, ITA 123.4
General rate reduction applies to active business income not eligible for SBD |
(13%)(Taxable income not impacted by SBD or AII) |
| Less: Small business deduction, ITA 125(1).
Available for ABI eligible for the SBD |
(19%)(Taxable Income eligible for SBD) |
| Part I tax payable | $ ___________ |
As you can see, clearly identifying the different types of income (ABI <= SBD, ABI > SBD, passive income) is imperative when calculating a corporation’s tax payable. Each source of income determines what should be applied when calculating the tax payable for a corporation.
Interactive content (Author: Saundarya Pradhan, January 2020)
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References and Resources:
- ITA 123(1), 124(1), 123.3, 123.4, 125(1), 125(7), 129(1)
- “Taxation Primer”, 2019 edition, author: CPA Canada, p.39-41.
January 2020
