On November 6, 2019, Finance Minister Rod Phillips delivered Ontario’s fall economic statement. The Ontario government is projecting that the province’s 2019-2020 deficit will be $1.3 billion less than originally forecasted in the spring. The government is committing to more spending for health care and will reserve the decision to cut spending for other programs.
The only significant income tax measure announced in the fall economic update is a reduction to the corporate income tax rate for small businesses from 3.5% to 3.2%. Canadian-controlled private corporations are eligible for a reduced corporate income tax rate on the first $500,000 of their active business income. The tax rate reduction is effective January 1, 2020 and the reduction will be prorated for corporations with a fiscal year that differs from the calendar year. As a result of the reduction to the small business tax rate, the government is also proposing to reduce the dividend tax credit for non-eligible dividends received by an individual. The proposed reduction to the tax credit is from 3.2863% of the amount of the taxable (grossed-up) dividend to 2.9863%. Non-eligible dividends are dividends paid from a corporation’s retained earnings subject to the small business tax rate.
In addition to the change to the small business tax rate, the Ontario government is proposing to reduce the aviation fuel tax rate in Northern Ontario from 6.7 cents per litre to 2.7 cents per litre effective January 1, 2020 and is also proposing a change to the calculation of refund interest under the Gasoline Tax Act.
Please contact your Crowe BGK advisor to assist you should you have any questions.