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Flaherty Outlines Canadian 2010 Tax Changes

by Mike Godfrey,, Washington

31 December 2009

Jim Flaherty, Canadian Minister of Finance, has outlined tax relief measures that will come into force during 2010, as part of the government’s attempt to support economic recovery.

"These measures build on our government’s record of tax relief to help businesses remain competitive globally and allow Canadians to keep more of their hard-earned money," explained Flaherty, continuing:

"The actions taken by our government since 2006 will reduce the taxes that Canadians and businesses pay by CAD220bn over 2008–09 and the following five fiscal years."

The measures coming into effect in 2010 include the following:

  • A reduction from 19% to 18% of the federal general corporate income tax rate;
  • The introduction of an increase from 10% to 25% in the pension surplus threshold under the Income Tax Act, which applies to both federally and provincially regulated defined benefit pension plans. The new surplus threshold will apply to employer contributions made to Registered Pension Plans after 2009 in respect of employment periods after 2009;
  • Changes associated with the Fifth Protocol to the Canada-United States Tax Convention, including the final step in the phased elimination of withholding tax on non-arm’s length interest paid between the two countries – the rate drops from 4% in 2009 to 0% on January 1, 2010.

"As we prepare to enter the second phase of our Economic Action Plan, measures introduced by our government since coming to office will help Canadians and businesses as they recover from the global economic recession and will help foster a stronger economic recovery," Flaherty concluded.

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