June 28th, 2019
Job Creation Tax Cut (Alberta Corporate Tax Amendment) Act
This Act is designed to reduce the general corporate tax rate by 33%, with the intent of making Alberta more business-friendly. The tax rate will be lowered from 12% starting in July 2019 and reach 8% by 2022.
This section includes a couple definitions, just to make reading this a little easier. If you see an asterisk (*), it means that the term is defined up here. Some of these definitions are not the official ones used in the legislation, they’re just used to make the reading less repetitive. If the definition cites a section of the legislation, it’s an official definition from the legislation.
“Term” - definition
“Small Business Tax Rate” - The small business tax rate applies to the first $500,000 a company makes in taxable income. Prior to the introduction of Bill 3, this was 2%.
“Corporate Tax Rate” - The corporate tax rate refers to the general corporate tax rate, which applies to all taxable income a company makes past $500,000. Prior to the introduction of Bill 3, this was 12%.
“ACTA” - the Alberta Corporate Tax Act.
Section 1 of this Bill indicates that this Act amends the ACTA*, with Section 2 moving to amend Section 21 of the ACTA*, focusing on changing the corporate tax rate* going forward. Previously, the ACTA* established that the corporate tax rate* would change from 10% to 12% from June 30th, 2015 onward. Section 2(a) establishes that the 12% rate will only last until July 1st, 2019. 2(b) (or not 2b) establishes how the corporate tax rate* will change between June 30th, 2019 and January 1st, 2022.
Starting on July 1st, 2019, the corporate tax rate* will be dropped from 12% to 11%, where it’ll remain until December 31st, 2019. On January 1st, 2020, it’ll drop to 10%, where it’ll remain for one full year, ending on December 31st. On January 1st, 2021, it’ll drop again to 9%, where it’ll remain until December 31st of that year. Finally, starting on January 1st, 2022, the corporate tax rate* will be dropped one last time to 8%. If the tax year doesn’t align with the calendar year, you’d pay your taxes proportional to how many days from each year are in being included.
Section 3 amends Section 22 of the ACTA, which covers tax deductions for Canadian-controlled private corporations - in this instance, it’s maintaining the same practice as existed previously, although it’s adjusting it to reflect the changes in the corporate tax rate* over the next few years.