Tax Relief for Canadian Small Business

Computer cost:

The Government of Canada using Taxpayers money is starting an advertising campaign promoting the 100% capital cost allowance for computers.

“We know it is important for Canadian businesses to remain competitive in today’s changing world,” said The Honourable Keith Ashfield, Minister of National Revenue, “That’s why our Government brought in measures like this one, and many others in Canada’s Economic Action Plan. These temporary measures will help Canadian businesses through this challenging economic time, and make sure they have the tools they need for the future.”

Announced in Canada’s Economic Action Plan, this temporary tax relief measure allows Canadian businesses to claim a 100% capital cost allowance deduction for eligible computer hardware, including systems software, acquired after January 27, 2009, and before midnight, January 31, 2011.

The CCA rate for computer was increased from 55% to 100% with no half year rule in 2009, as a result a full write-off can be claimed in the first tax year that CCA deductions are available.

Apprenticeship:

A corporation can earn an input tax credit equal to 10% of the eligible salaries and wages paid to eligible apprentices employed in the business in the tax year and after May 1, 2006, to a maximum credit of $2,000, per year, per apprentice.

An eligible apprentice is one who is working in a prescribed trade in the first two years of their apprenticeship contract. This contract is registered with Canada or a province or territory under an apprenticeship program designed to certify or license individuals in the trade. A prescribed trade will include the trades currently listed as Red Seal Trades.

Tax Credit for Child Care Space:

An employer carrying on business in Canada, other than a child care services business, can claim a non-refundable tax credit to create one or more new child care spaces in a new or existing licensed child care facility for the children of their employees and for other children in the community. The non-refundable tax credit is equal to the lesser of $10,000 or 25% of the eligible expenditure incurred after March 18, 2007, per child care space created. Eligible expenditures include the cost of depreciable property (some exclusion apply), and the amount of specified start-up costs, acquired or incurred only to create the new child care space at a licensed child care facility.

Small Business Tax Deduction:

For Canadian-controlled private corporations claiming the small business deduction, the net federal tax rate is 11% effective January 1, 2008, down from 12%. The annual amount of active business income eligible for the reduced rate (referred to as the small business limit) was increased from $400,000 to $500,000, effective January 1, 2009.

Corporation Tax Rate Reduction:

The corporation net federal tax rate will decrease as follows:

18% effective January 1, 2010;
16.5% effective January 1, 2011;
15% effective January 1, 2012.

Generally, provinces and territories have two rates for corporate income tax – a lower rate and a higher rate.

Lower rate

The lower rate applies to either:
the income eligible for the federal small business deduction; or
the income based on limits established by the particular province or territory.

Higher rate

The higher rate applies to all other taxable income.

British Columbia corporate tax for lower rate is 2.5% and for higher rate is 10.5% effective January 1, 2010.