Computation of Tax: Corporations

• Author: Vern Krishna
• Profession: Professor of Common Law, University of Ottawa Barrister at Law
• Pages: 385-388

385

CHAPTER 14

COMPUTATION OF TAX:

COR P OR AT IONS

The rules that deal w ith the computation of tax payable by corporations

are more detailed and complex than the rules that apply to individuals.

This is because corporate taxation depends upon numerous variables:

(1) type and size of the corporation; (2) ownership structure; (3) type

and source of income; and (4) amount of income earned in a year.

A. GENERAL TAX R ATE

The general basic rate of federal tax payable by a corporation is 38 p ercent

(2011).1 A general rate reduction reduces the federal tax.2 The general

rate reduction does not apply to the income upon which a Canadian-

controlled private corporation (CCPC) claims the small business deduc-

tion.3 In 2011, the general rate reduction was 11.5 percent. By 2012, the

net federal tax is expected to drop to 15 percent.

1 Income Tax Act, RSC 1985, c 1 (5th Supp) [ITA], para 123(1)(a).

2 Ibid, s 123.4(1).

3 Ibid, subs 123.4(2).