Canada Updates Income Tax Rates for Provinces, Payroll Deduction Formulas

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By Jared Mondschein

May 16—A guide containing provincial income tax rate changes for British Columbia, New Brunswick, Newfoundland and Prince Edward Island were updated May 16 by the Canadian Revenue Agency.

Pending legislative approval, the changes take effect July 1.

The guide also contains payroll deduction formulas to determine federal, provincial and territorial tax, as well as pension plan contributions, employment insurance premium deductions and new regulations on the purchase of shares of Labor-Sponsored Venture Capital Corporations.

The formulas enable taxpayers to calculate payroll deductions for special cases such as commission, pension income, bonuses and retroactive pay increases.

British Columbia

British Columbia's income tax credit phase-out threshold is increased to C$19,400 ($15,040) from C$19,171 ($14,863). The tax reduction phaseout rate also is increased to 3.56 percent from 3.50 percent of net income. Since these changes are effective Jan. 1, 2016, prorated values will be applied for the remaining six months commencing with the first payroll in July.

New Brunswick

Effective for 2016 and subsequent tax years, the top marginal personal income tax rate of 25.75 percent for taxable income greater than C$250,000 ($193,825) is eliminated and the rate for taxable income over C$150,000 ($116,295) decreased to 20.3 percent from 21 percent. Similar to British Columbia, the changes are retroactively effective Jan. 1 so a prorated tax rate will be applied for the remaining six months commencing with the first payroll in July

Newfoundland and Labrador

Effective for 2016 and subsequent tax years, personal income tax rates increased across all tax brackets. The provincial government also introduced a new levy, officially called the Deficit Reduction Levy, to be effective July 1, 2016, on all incomes greater than C$20,000 ($15,506).

Prince Edward Island

Effective for 2016, the province increased the basic personal amount to C$8,000 ($6,202) from C$7,708 ($5,976). A prorated amount of C$8,292 ($6,428) will be applicable from July 1, 2016 to make up for the first six months of the year.

Federal Budget Proposal on Labor-Sponsored Venture Capital Corporations

In addition, the federal government proposed legislation on Labor-Sponsored Venture Capital Corporations (LSVCCs), a type of mutual fund corporation sponsored by labor organizations, such as labor unions, that make venture capital investments in small and medium-sized businesses.

Effective for 2016 and subsequent tax years, the federal budget proposed restoring a tax credit on purchases of approved shares registered LVSCCs if they are provincially registered. The tax credits for federally registered LSVCCs, however, would remain unchanged and eventually eliminated in 2017. The new tax credit would allow for provincially registered LVSCCs to change their formula to cost the lesser of C$750 ($581) or 15 percent of the amount deducted or withheld during the year for the acquisition by the employee.

To contact the reporter on this story: Jared Mondschein at

To contact the editor responsible for this story: Michael Baer at

For More Information

The guide can be found at

More information on payroll issues in Canada can be found in the Canada country primer.