As we have just entered the New Year, it is a good idea to become familiar with the updated 2018 tax rates as the rates may impact the financial decisions you make for you and your business. We will cover the updated rates for GST/HST, corporate income tax, Canada Pension Plan (CPP) and Employment Insurance (EI).
Goods and services tax and harmonized sales tax (GST and HST) are consumption taxes charged on most goods or services provided to consumers. GST is a 5% consumption tax levied by the federal government that is applicable to each province. HST is a combined federal and provincial consumption tax that is applicable to Ontario, Nova Scotia, New Brunswick, Prince Edward Island, and Newfoundland and Labrador. Provinces such as British Columbia, Manitoba, Quebec, and Saskatchewan do not charge HST, however, these provinces levy their own provincial sales tax such as PST, RST, and QST. Alberta, Nunavut, and Northwest Territories charge GST only.
|Province||Effective for 2018||Remark|
|British Columbia||12%||Includes 7% PST|
|Manitoba||13%||Includes 8% RST|
|Newfoundland and Labrador||15%||HST|
|Quebec||14.975%||Includes 9.975% QST|
|Prince Edward Island||15%||HST|
|Saskatchewan||11%||Includes 6% PST|
Corporate Tax Rates
The corporate tax rates will differ depending on the status of your corporation. Below you can see comparison between the general corporate tax rates and small business corporate tax rates for a corporation that qualify for Small Business Deduction (SBD). As part of the Fall Economic Update, the federal government released draft legislation on October 24, 2017 proposing to lower the federal small business tax rate to 10% effective January 1, 2018. Since the change is not substantially enacted, the small business corporate tax rates below do not reflect the proposed legislation. It is important to know that the rules surrounding the eligibility for SBD are complex. You should consult with your accountant to determine which corporate tax rates are applicable to your business.
|Province||General Corporate Tax Rates for 2018||Small Business Corporate Tax Rates for 2018|
|Newfoundland and Labrador||30%||14%|
|Prince Edward Island||31%||15.5%|
CPP Contribution Rates, Maximums and Contributions
As we all know, the Canadian Pension Plan (CPP) is responsible for paying those who are either retired or disabled. It is funded by contributions made by both the employer and the employee at 4.95% of maximum contributory earnings of $52,400. Employees are entitled to non-fundable tax credit and employers can claim a tax deduction for every dollar of CPP contributions made. Starting in 2018, the updated CPP rates and maximum contribution are as follows:
|Year||Maximum Annual Pensionable Earnings||Basic Exemption Amount||Maximum Contributory Earnings||Employee and Employer Contribution Rate (%)||Maximum Annual Employee and Employer Contribution||Maximum Annual Self-Employed Contribution|
EI Premium Rates and Maximums
Employment insurance (EI) provides temporary financial assistance to individuals who have lost their jobs, unable to work due to illness, or to those who cannot work because they need to care for a young child. Starting in 2018, the updated EI rates and maximum premium are as follows:
|Year||Maximum Annual Insurable Earnings||Rate (%)||Maximum Annual Employee Premium||Maximum Annual Employer Premium|