Income Tax Act
First Session, Forty-second Parliament,
64-65 Elizabeth II, 2015-2016
STATUTES OF CANADA 2016
CHAPTER 11
An Act to amend the Income Tax Act
ASSENTED TO
December 15, 2016
BILL C-2
RECOMMENDATION
His Excellency the Governor General recommends to the House of Commons the appropriation of public revenue under the circumstances, in the manner and for the purposes set out in a measure entitled “An Act to amend the Income Tax Act”.
SUMMARY
This enactment amends the Income Tax Act to reduce the second personal income tax rate from 22% to 20.5% and to introduce a new personal marginal tax rate of 33% for taxable income in excess of $200,000. It also amends other provisions of that Act to reflect the new 33% rate. In addition, it amends that Act to reduce the annual contribution limit for tax-free savings accounts from $10,000 to its previous level with indexation ($5,500 for 2016) starting January 1, 2016.
Available on the Parliament of Canada Web Site at the following address:
http://www.parl.gc.ca
64-65 Elizabeth II
CHAPTER 11
An Act to amend the Income Tax Act
[Assented to 15th December, 2016]
Her Majesty, by and with the advice and consent of the Senate and House of Commons of Canada, enacts as follows:
R.S., c. 1 (5th Supp.)
Income Tax Act
1 (1) Subsection 117(2) of the Income Tax Act is replaced by the following:
Rates for taxation years after 2015
(2) The tax payable under this Part by an individual on the individual’s taxable income or taxable income earned in Canada, as the case may be (in this subdivision referred to as the “amount taxable”) for a taxation year is
(a) 15% of the amount taxable, if the amount taxable is equal to or less than the amount determined for the taxation year in respect of $45,282;
(b) if the amount taxable is greater than $45,282, but is equal to or less than $90,563, the maximum amount determinable in respect of the taxation year under paragraph (a), plus 20.5% of the amount by which the amount taxable exceeds $45,282 for the year;
(c) if the amount taxable is greater than $90,563, but is equal to or less than $140,388, the maximum amount determinable in respect of the taxation year under paragraph (b), plus 26% of the amount by which the amount taxable exceeds $90,563 for the year;
(d) if the amount taxable is greater than $140,388, but is equal to or less than $200,000, the maximum amount determinable in respect of the taxation year under paragraph (c), plus 29% of the amount by which the amount taxable exceeds $140,388 for the year; and
(e) if the amount taxable is greater than $200,000, the maximum amount determinable in respect of the taxation year under paragraph (d), plus 33% of the amount by which the amount taxable exceeds $200,000 for the year.
(2) Subsection (1) applies to the 2016 and subsequent taxation years.
2 (1) The formula in subsection 118.1(3) of the Act is replaced by the following:
A × B + C × D + E × F
(2) The descriptions of C and D in subsection 118.1(3) of the Act are replaced by the following:
C
is the highest individual percentage for the year;
D
is the lesser of
(a) the amount, if any, by which the individual’s total gifts for the year exceeds $200, and
(b) the amount, if any, by which the individual’s amount taxable for the year for the purposes of subsection 117(2) exceeds the first dollar amount (as adjusted for the year in accordance with section 117.1) referred to in paragraph 117(2)(e);
E
is 29%; and
F
is the amount, if any, by which the individual’s total gifts for the year exceed the total of $200 and the amount determined for D.
(3) Subsections (1) and (2) apply to gifts made after 2015.
3 (1) Subparagraph (b)(i) of the definition tax otherwise payable under this Part in subsection 120(4) of the Act is replaced by the following:
(i) the highest individual percentage for the year multiplied by the individual’s split income for the year
(2) Subsection (1) applies to the 2016 and subsequent taxation years.
4 (1) Subsection 120.4(2) of the Act is replaced by the following:
Tax on split income
(2) There shall be added to a specified individual’s tax payable under this Part for a taxation year the highest individual percentage for the year multiplied by the individual’s split income for the year.
(2) Subsection (1) applies to the 2016 and subsequent taxation years.
5 (1) Paragraph 122(1)(a) of the Act is replaced by the following:
(a) the highest individual percentage for the taxation year multiplied by the trust’s amount taxable for the taxation year,
(2) Subsection (1) applies to the 2016 and subsequent taxation years.
6 (1) The portion of section 123.3 of the Act before paragraph (a) is replaced by the following:
Refundable tax on CCPC’s investment income
123.3 There shall be added to the tax otherwise payable under this Part for each taxation year by a corporation that is throughout the year a Canadian-controlled private corporation an amount equal to 10 2/3% of the lesser of
(2) Subsection (1) applies to taxation years that end after 2015 except that, for taxation years that end after 2015 and begin before 2016, the reference to “10 2/3%” in the portion of section 123.3 of the Act before paragraph (a), as enacted by subsection (1), is to be read as a reference to the percentage determined by the formula
6 2/3% + 4% (A/B)
where
A
is the number of days in the taxation year that are after 2015; and
B
is the total number of days in the taxation year.
7 (1) Subparagraph 129(1)(a)(i) of the Act is replaced by the following:
(i) 38 1/3% of all taxable dividends paid by the corporation on shares of its capital stock in the year and at a time when it was a private corporation, and
(2) The description of A in subparagraph 129(3)(a)(i) of the Act is replaced by the following:
A
is 30 2/3% of the corporation’s aggregate investment income for the year, and
(3) Subclause (II) of the description of B in subparagraph 129(3)(a)(i) of the Act is replaced by the following:
(II) 8% of its foreign investment income for the year,
(4) The portion of subparagraph 129(3)(a)(ii) of the Act before clause (A) is replaced by the following:
(ii) 30 2/3% of the amount, if any, by which the corporation’s taxable income for the year exceeds the total of
(5) Clause 129(3)(a)(ii)(B) of the Act is replaced by the following:
(B) 100/(38 2/3) of the total of amounts deducted under subsection 126(1) from its tax for the year otherwise payable under this Part, and
(6) Subsection (1) applies to taxation years that end after 2015, except that, for taxation years that end after 2015 and begin before 2016, in computing the amount determined under subparagraph 129(1)(a)(i) of the Act, as enacted by subsection (1), the reference to “38 1/3%” in that subparagraph is to be read as a reference to the percentage determined by the formula
33 1/3% + 5% (A/B)
where
A
is the number of days in the taxation year that are after 2015; and
B
is the total number of days in the taxation year.
(7) Subsections (2) and (4) apply to taxation years that end after 2015, except that, for taxation years that end after 2015 and begin before 2016, in computing the amount determined under each of subparagraphs 129(3)(a)(i) and (ii) of the Act, as amended by subsections (2) and (4), the references to “30 2/3%” in those subparagraphs are to be read as references to the percentage determined by the formula
26 2/3% + 4% (A/B)
where
A
is the number of days in the taxation year that are after 2015; and
B
is the total number of days in the taxation year.
(8) Subsection (3) applies to taxation years that end after 2015, except that, for taxation years that end after 2015 and begin before 2016, in computing the amount determined under subparagraph 129(3)(a)(i) of the Act, as amended by subsections (2) and (3), the reference to “8%” in subclause (II) of the description of B in that subparagraph, as amended by subsection (3), is to be read as a reference to the percentage determined by the formula
9 1/3% – 1 1/3% (A/B)
where
A
is the number of days in the taxation year that are after 2015; and
B
is the total number of days in the taxation year.
(9) Subsection (5) applies to taxation years that end after 2015, except that, for taxation years that end after 2015 and begin before 2016, the reference to “100/(38 2/3)” in clause 129(3)(a)(ii)(B) of the Act, as enacted by subsection (5), is to be read as a reference to the amount determined by the formula
100/(35 + 3 2/3(A/B))
where
A
is the number of days in the taxation year that are after 2015; and
B
is the total number of days in the taxation year.
8 (1) Paragraph 186(1)(a) of the Act is replaced by the following:
(a) 38 1/3% of all assessable dividends received by the particular corporation in the year from corporations other than payer corporations connected with it, and
(2) The portion of subsection 186(1) of the Act after paragraph (b) and before paragraph (c) is replaced by the following:
exceeds 38 1/3% of the total of
(3) Subsections (1) and (2) apply to taxation years of a corporation that end after 2015, except that, for taxation years that end after 2015 and begin before 2016
(a) in the application of subsection 186(1) of the Act, as amended by subsections (1) and (2), to amounts described in paragraphs 186(1)(a) and (b) of the Act that were received by the corporation in the year and before 2016, the references to “38 1/3%” in that subsection 186(1) are to be read as “1/3”; and
(b) amounts deducted by the corporation for the year under paragraphs 186(1)(c) and (d) of the Act
(i) are deemed to have been deducted in respect of amounts described in paragraph 186(1)(a), as enacted by subsection (1), and paragraph 186(1)(b) of the Act that were received by the corporation in the year and after 2015, and
(ii) to the extent that the amounts so deducted exceed the amounts referred to in subparagraph (i), are deemed to have been deducted in respect of amounts described in paragraph 186(1)(a), as enacted by subsection (1), and paragraph 186(1)(b) of the Act that were received by the corporation in the year and before 2016.
9 (1) The definition TFSA dollar limit in subsection 207.01(1) of the Act is amended by striking out “and” at the end of paragraph (b) and by replacing paragraph (c) with the following:
(c) for 2015, $10,000; and
(d) for each year after 2015, the amount (rounded to the nearest multiple of $500, or if that amount is equidistant from two such consecutive multiples, to the higher multiple) that is equal to $5,000 adjusted for each year after 2009 in the manner set out in section 117.1.
(2) Subsection (1) comes into force, or is deemed to have come into force, on January 1, 2016.
10 (1) The definition appropriate percentage in subsection 248(1) of the Act is replaced by the following:
appropriate percentage, for a taxation year, means the lowest percentage referred to in subsection 117(2) for the taxation year; (taux de base pour l’année)
(2) Subsection 248(1) of the Act is amended by adding the following in alphabetical order:
highest individual percentage, for a taxation year, means the highest percentage referred to in subsection 117(2) for the taxation year; (taux d’imposition supérieur pour l’année)
(3) Subsections (1) and (2) apply to the 2016 and subsequent taxation years.
Published under authority of the Speaker of the House of Commons
