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Taxation Amendment Act, 2012, S.O. 2012, c. 9 - Bill 114

assented to under Taxation Amendment Act, 2012, S.O. 2012, c. 9 - Bill 114

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EXPLANATORY NOTE

This Explanatory Note was written as a reader’s aid to Bill 114 and does not form part of the law.  Bill 114 has been enacted as Chapter 9 of the Statutes of Ontario, 2012.

 

The Bill amends the Taxation Act, 2007 to implement a new personal income tax rate, to make changes to the basic rate of corporate income tax and to make related consequential amendments.

Personal income tax rate

An individual’s basic personal income tax for a taxation year is determined under section 6 of the Act.  Currently, the “highest tax rate” is 11.16 per cent and it applies to an individual’s taxable income that exceeds $73,698 (subject to adjustment for inflation under section 23).  Subsection 6 (1) is re-enacted to provide for a new tax rate that applies to an individual’s taxable income that exceeds $500,000.  The new tax rate is 12.16 per cent for taxation years ending in 2012 and 13.16 per cent for taxation years ending after 2012.  To accomplish this, a new definition of “upper middle tax rate” is added to subsection 3 (1) and the definition of “highest tax rate” in that subsection is amended.  The changes to the definition of “highest tax rate” also affect the tax rate that applies to inter vivos trusts under subsection 7 (1), the tax rate that applies to split income under section 12 and the Ontario capital gains refund for mutual fund trusts under section 105.

An amendment is made to subsection 9 (21) of the Act to provide that the tax credit for charitable donations over $200 continues to be calculated after December 31, 2011 at the rate of 11.16 per cent.  A similar amendment is made to section 14 in connection with the overseas employment tax credit.

Section 23 of the Act is amended to provide that the dollar amounts referred to in subsection 6 (1) as re-enacted, including the new $500,000 threshold, are adjusted for inflation for taxation years ending after 2012.

Corporate income tax rate

A corporation’s basic rate of income tax is set out in subsection 29 (2) of the Act.  Currently, the basic rate of corporate tax is 11.5 per cent for the days in a taxation year after June 30, 2011 and before July 1, 2012, 11 per cent for the days in a taxation year after June 30, 2012 and before July 1, 2013, and 10 per cent for the days in a taxation year after June 30, 2013.  Amendments are made to change the basic rate of corporate income tax to 11.5 per cent for the days in a taxation year after June 30, 2011.

Consequential amendments are made to section 31 of the Act with respect to the Ontario small business deduction and to section 33 with respect to the tax credit for manufacturing, processing and other activities.

 

chapter 9

An Act to amend the Taxation Act, 2007

Assented to June 20, 2012

Her Majesty, by and with the advice and consent of the Legislative Assembly of the Province of Ontario, enacts as follows:

1. (1) The definition of “highest tax rate” in subsection 3 (1) of the Taxation Act, 2007 is repealed and the following substituted:

“highest tax rate” means,

(a) 12.16 per cent in respect of taxation years ending after December 31, 2011 and before January 1, 2013, and

(b) 13.16 per cent in respect of taxation years ending after December 31, 2012; (“taux d’imposition le plus élevé”)

(2) Subsection 3 (1) of the Act is amended by adding the following definition:

“upper middle tax rate” means 11.16 per cent. (“taux d’imposition moyen supérieur”)

2. Subsection 6 (1) of the Act is repealed and the following substituted:

Basic personal income tax, 2012 and subsequent years

(1) The basic personal income tax for a taxation year of an individual ending after December 31, 2011 is the amount determined under the following rules:

1. If the individual’s tax base for the year does not exceed $39,020, the amount of tax payable by the individual is calculated by multiplying the individual’s tax base for the year by the lowest tax rate for the year.

2. If the individual’s tax base for the year exceeds $39,020, but does not exceed $78,043, the amount of tax payable by the individual is calculated using the formula,

A + B

in which,

“A” is the amount calculated by multiplying $39,020 by the lowest tax rate for the year, and

“B” is the amount calculated by multiplying the amount by which the individual’s tax base for the year exceeds $39,020 by the middle tax rate for the year.

3. If the individual’s tax base for the year exceeds $78,043, but does not exceed $500,000, the amount of tax payable by the individual is calculated using the formula,

A + C + D

in which,

“A” is the amount calculated by multiplying $39,020 by the lowest tax rate for the year,

“C” is the amount calculated by multiplying $39,023 by the middle tax rate for the year, and

“D” is the amount calculated by multiplying the amount by which the individual’s tax base for the year exceeds $78,043 by the upper middle tax rate for the year.

4. If the individual’s tax base for the year exceeds $500,000, the amount of tax payable by the individual is calculated using the formula,

A + C + E + F

in which,

“A” is the amount calculated by multiplying $39,020 by the lowest tax rate for the year,

“C” is the amount calculated by multiplying $39,023 by the middle tax rate for the year,

“E” is the amount calculated by multiplying $421,957 by the upper middle tax rate for the year, and

“F” is the amount calculated by multiplying the amount by which the individual’s tax base for the year exceeds $500,000 by the highest tax rate for the year.

3. The definition of “II” in subsection 9 (21) of the Act is repealed and the following substituted:

  “II” is 11.16 per cent, and

4. The definition of “A” in section 14 of the Act is repealed and the following substituted:

  “A” is 11.16 per cent,

5. Paragraph 1 of subsection 23 (1) of the Act is repealed and the following substituted:

1. Subsection 6 (1) with respect to taxation years ending after December 31, 2012.

6. Clauses 29 (2) (c), (d) and (e) of the Act are repealed and the following substituted:

(c) 11.5 per cent multiplied by the ratio of the number of days in the taxation year that are after June 30, 2011 to the total number of days in the taxation year.

7. Clauses 31 (4) (c), (d) and (e) of the Act are repealed and the following substituted:

(c) 7 per cent multiplied by the ratio of the number of days in the taxation year that are after June 30, 2011 to the total number of days in the taxation year.

8. (1) Subsection 33 (1) of the Act is amended by striking out “ending before July 1, 2013” in the portion before the formula.

(2) Clauses (b) and (c) of the definition of “X” in subsection 33 (1) of the Act are repealed and the following substituted:

(b) 0.015 multiplied by the ratio of the number of days in the taxation year that are after June 30, 2011 to the total number of days in the taxation year.

Commencement

9. (1) Subject to subsections (2) and (3), this Act comes into force on the day it receives Royal Assent.

(2) Sections 1, 2, 3, 4 and 5 are deemed to have come into force on January 1, 2012.

(3) Sections 6, 7 and 8 come into force on July 1, 2012.

Short title

10. The short title of this Act is the Taxation Amendment Act, 2012.