Why Ontario - Competitive Business Costs

Taxation

The level of taxation in Canada compares favourably with that of other major industrialized countries. Canada has a comprehensive social security system, as well as excellent public health care, training and educational services. Yet, with all of these publicly financed benefits, corporate and business taxes are still competitive with the U.S. and the G-7 average. [More]

Basic Rates

Bar chart showing the Corporate Tax Rates for Manufacturing for the year 2002

Corporations operating in Ontario are generally taxed at a rate of 33.5 per cent. However, Ontario's manufacturing and resource industries are subject to a lower 12.0 per cent provincial tax rate. When combined with the federal Manufacturing & Processing (M&P) rate of 19.5 per cent, a corporation earning manufacturing income in Ontario is taxed at a rate of only 28 per cent. By way of comparison, this combined rate is generally less than the combined statutory U.S. federal and state tax rates.

Canadian-controlled private corporations carrying on business in Ontario are also eligible for a much more favourable combined federal/Ontario rate of 18.62 per cent on the first C$500,000 of active business income earned. [More]

Corporate Minimum Tax

Ontario's Corporate Minimum Tax (CMT) applies only to groups of companies with gross revenues in excess of C$10 million, or total assets in excess of C$5 million. Income for CMT purposes is based upon the income reported on the company's financial statements, which must be prepared in accordance with generally accepted accounting principles. Financial statement income is adjusted for a few specific items and taxed at a rate of 4 per cent. If the CMT calculation is higher than the corporation's regular Ontario tax, the excess is payable as CMT. This excess may be carried forward for up to 10 years to offset regular Ontario tax in a year to the extent it exceeds the CMT calculation. Seven states in the U.S. have an alternative minimum tax on corporations that is more complex and onerous than Ontario's CMT. [More]

Payroll Taxes

Ontario corporations must collect Employment Insurance premiums and Canada Pension Plan (CPP) contributions, from both the employer and the employee, to provide support for loss of employment (including maternity leave) and retirement. The CPP rate is 4.95 per cent of wages for employers and employees, up to a maximum of C$2,049.30 per employee. For 2008, employees pay Employment Insurance premiums at a rate of 1.73 per cent of wages, ranging up to a maximum of C$711.03 per employee; while employers pay at a rate of 2.42 per cent of wages up to a maximum of C$994.62 per employee. [More]

Goods and Services Tax

The 5 per cent federal Goods and Services Tax (GST), is a tax on final consumption applicable throughout the production and distribution chain, like a European value-added tax. Businesses charge GST on domestic sales, but can recover GST they pay on supplies, inventories, assets and services used to do business. Some goods and services are exempt from the GST such as: exports, basic groceries, prescription drugs, medical devices and agricultural and fishery products. [More]

Retail Sales Tax

The Ontario retail sales tax (RST) of 8 per cent applies to most goods and select services. Significant exemptions include food, children's clothing, and energy, as well as exemptions to production and research and development machinery and equipment. [More]

Land Transfer Tax

Ontario has a land transfer tax of between 0.5 per cent and 2 per cent, depending upon the cost and use of the particular property. For instance, the tax on commercial and industrial property does not exceed 1.5 per cent. Non-residents pay tax on the purchase of all land at the same rate as residents. [More]