Ontario continues to make progress to ensure the fairness and effectiveness of Ontario’s tax system, including proposed measures to cut the small business Corporate Income Tax (CIT) rate, transform the Apprenticeship Training Tax Credit (ATTC), enhance the property tax and assessment system, and address the underground economy.
Cutting the Small Business Corporate Income Tax Rate
The government remains committed to Ontario’s small business deduction that reduces the Ontario general CIT rate for small Canadian-controlled private corporations on their first $500,000 of active business income.
To provide increased support for small businesses and help them become more competitive, the government proposes to cut the small business CIT rate by 22 per cent, from 4.5 per cent to 3.5 per cent, effective January 1, 2018. The tax rate reduction would be prorated for taxation years straddling January 1, 2018.
Correspondingly, Ontario’s non-eligible dividend tax credit rate would be decreased by one percentage point to 3.2863 per cent as of January 1, 2018.
The federal government has also proposed to cut its small business CIT rate from the current 10.5 per cent to 10.0 per cent, effective January 1, 2018, and then to 9.0 per cent, effective January 1, 2019.
With the proposed federal changes, the combined federal–Ontario CIT rate for small business would be reduced from the current 15.0 per cent to 12.5 per cent as of January 1, 2019.
The combined effect of the Provincial and federal tax cuts is a considerable corporate tax advantage for Ontario’s small businesses.
Internationally, the combined federal–Ontario CIT rate for small business would be the lowest among G7 member countries. The preferential tax rate for small businesses allows them to retain more earnings that can be reinvested to support growth and job creation.
Further details on Ontario’s support for small businesses are provided in Chapter II: Creating Opportunities for Everyone.
Modernizing Employer Support for Apprenticeship Training
The ATTC is a refundable tax credit available to businesses that hire and train eligible apprentices in designated construction, industrial, motive power and certain service trades. The ATTC provides up to $5,000 per qualified apprentice per year for the first 36 months of an apprenticeship program.
With the announcement of the new Graduated Apprenticeship Grant for Employers (GAGE), as described in Chapter II: Creating Opportunities for Everyone, the government is proposing to eliminate the ATTC for employers with apprentices who register in an apprenticeship program after November 14, 2017. Employers with apprentices already registered in an eligible apprenticeship program on or before November 14, 2017 would continue to be eligible to receive the ATTC for up to 36 months.
Land Transfer Tax on Unregistered Dispositions
This summer, stakeholders provided feedback on a variety of Land Transfer Tax issues regarding unregistered dispositions of a beneficial interest in land, including reporting and payment schedules that better meet business needs.
An amendment to the Land Transfer Tax Act is proposed to authorize regulations prescribing rules with greater flexibility than the current requirement to pay tax within 30 days of the date of an unregistered disposition of land. For example, qualifying taxpayers could be allowed to file returns quarterly without incurring liability for interest. Further details will be provided at a later date.
Other issues raised in the consultation this past summer are under review.
Summary of Measures
TABLE 5.1 2017 Tax Measures
|Cutting the Small Business CIT Rate1
(Reduced Government Revenue)
|Winding Down the Apprenticeship Training Tax Credit (ATTC)2
(Reduced Government Spending)
Table 5.1 Footnotes:
 Net of Personal Income Tax impact based on dividend tax credit and rate changes.
 The ATTC wind-down is part of the move to the new GAGE. Please see Chapter II: Creating Opportunities for Everyone for more information.
Note: Numbers are rounded to the nearest $5 million.
Chart 5.1: Corporate Income Tax Rates for Small Business — Ontario and G7 Member Countries
This bar chart shows that in 2019, the proposed combined federal–Ontario Corporate Income Tax (CIT) rate of 12.5 per cent for small businesses would be below the current 2017 small business CIT rates of G7 member countries: France—15.0 per cent, United Kingdom—19.0 per cent, United States—19.8 per cent, Japan—21.4 per cent, Italy—27.8 per cent, and Germany—30.2 per cent. The United Kingdom, Italy and Germany do not have a separate, preferential CIT rate for small businesses.