Canada: Increases To Alberta Tax Rates

Last Updated: June 23 2015
Article by Kim G.C. Moody and Kenneth Keung

For better or worse, on June 18, 2015, Alberta's newly elected NDP provincial government released Bill 2, which immediately received First Reading in the Legislature and passed. Even though the Bill is still not law, it will undoubtedly pass into law soon. Bill 2 contains corporate and personal tax increases that are, quite frankly, shocking. While "shocking" may not be a correct description, especially since the NDP had campaigned on the tax increases that are contained in the Bill, many Alberta tax practitioners, like us, are still shocked that such abrupt increases are actually going to see the light of day.

Premier Notley has recently cranked up the rhetoric surrounding her new government's tax policies. For example, she has called Alberta's flat tax an "unfortunate experiment". Even the name of Bill 2 – "An Act to Restore Fairness to Public Revenue" – is telling. It is clear that the new provincial NDP government plans to implement its ideological tax platform and we are concerned that the policy foundations may negatively affect Alberta's resource, technology, innovation and entrepreneurial sectors. Although it is tempting to provide a rebuttal to some of the recent rhetoric and policy implementation – especially given that all of the practitioners in our firm are students of tax policy –, this short article is not the proper forum to debate tax policy or ideologies.

The table below illustrates the relevant tax changes contained in Bill 2 that will be phased in over a two year period. For the personal tax changes, the table reflects the highest marginal rate that will become applicable for Alberta resident individuals whose income is in excess of $300,000. However, personal income tax rate increases will actually be applicable to anyone who has income in excess of $125,000. Such increases are phased in over four graduated rate brackets that reach the maximum for income in excess of $300,000.

Combined federal and provincial personal tax (based on Alberta proposed legislation)

2014 2015 2016
Ordinary income 39.00% 40.25% 44.00%
Capital gains 19.50% 20.13% 22.00%
Eligible dividends 19.29% 21.02% 26.19%
Non-eligible dividends 29.36% 30.84% 35.72%

Combined federal and provincial corporate tax (based on Alberta proposed legislation)

2014 2015 2016
General rate income 25.00% 26.00% 27.00%
CCPC – active business income 14.00% 14.00% 14.00%

These tax rate increases are significant. While we are big believers that tax should never "wag the tail of the dog", it is clear that the dog will be "ruffed-up" by these tax rate increases. A wide range of planning matters will be impacted – even "vanilla" planning, such as owner-manager remuneration, to complex planning, such as capital deployment for businesses. Entrepreneurs and owner-manager businesses should carefully consider the following non-exhaustive list of tax considerations in light of the proposed tax increases in Alberta:

  1. Owner-manager remuneration planning – are income splitting strategies available to combat the personal tax rate increases? Are there additional deferral strategies that should be considered?
  1. Dividend payments – can dividend payments be deferred in order to avoid the increased personal tax rates? Alternatively, should dividend payments be accelerated into 2015 to avoid the significant jump in rates for 2016?
  1. Investment income earned within a corporation – investment income earned by a Canadian-Controlled Private Corporation ("CCPC") is subject to the refundable tax regime whereby an additional level of corporate tax is levied, but is refundable to the extent that sufficient taxable dividends are paid to the CCPC shareholders. Such a system is designed to provide tax integration between a CCPC and its shareholders with respect to certain types of investment income.

After 2015, tax integration in Alberta with respect to investment income earned by a CCPC which is ultimately paid out to its shareholders will no longer be achieved. The incremental cost of using a CCPC to earn investment income and pay such amounts out to its shareholders will approximate to 5%. This is a very significant penalty, and careful planning will need to be done. For example, it may make sense to have the CCPC incur the corporate refundable tax and not pay out sufficient taxable dividends to its shareholders to trigger the corporate refund. This strategy will increase the balance of the corporate refundable tax account (known as the "refundable dividend tax on hand" account), which may present future planning opportunities.

  1. Retention of corporate profits that are entitled to the small business tax rate of 14% will provide an even greater deferral than in the past. For example, for 2014, the deferral of retaining corporate profits subject to the small business rate of 14% provided a deferral of 25% when compared to the highest personal tax rate of 39%, that otherwise would have been payable by the shareholder if that profit was paid out as a salary/bonus. Beginning in 2016, this deferral will be 30% (44% highest personal tax rate less 14% corporate rate).
  2. For corporate profits subject to the ordinary rate of 25% in 2014, such deferral was 14%. For 2016 forward, the deferral will be 17% (44% highest personal tax rate less 27% corporate rate). Accordingly, to the extent the corporation's shareholders do not require distributions, consideration should be given to retaining such corporate profits to take advantage of the illustrated deferrals. Retention of such general corporate profits will have the effect of building up the "general rate income pool" or "GRIP". Again, the increased GRIP may present future planning opportunities.
  1. However, the deferrals discussed in #4 and #5 above only apply to those corporations that will not be carrying on a "personal services business" ("PSB"). We have previously written about PSBs and you can get more information here and here. The tax cost for a corporation carrying on a PSB will be an additional 2% as of January 1, 2016. On a flow-through basis, the total tax burden of a PSB structure will be approximately 55% after 2015 (compared to approximately 50% prior to 2015). Caution!
  1. The increased rate structure will make it more expensive to die in Alberta. Accordingly, post-mortem planning for entrepreneurs holding shares of private corporations, while always important to avoid double taxation, will now be even more important. For post-mortem planning after 2015, on a pure tax rate basis, a "pipeline" strategy is preferable so as to obtain capital gains rates of 22.0% as opposed to a subsection 164(6) strategy, which will result in taxable dividend rates of 26.19% or 35.72%. Of course, considerations other than tax rates will need to be taken into account when implementing a post-mortem plan.
  1. For the sale of a business, the old "chestnut" of "sale of shares" or "sale of assets" will need to be revisited closely in light of the recent tax rate changes.
  1. For certain US citizens resident in Alberta, such persons may now find themselves paying excess Canadian tax which will not be fully utilized as a US foreign tax credit. Similarly, US persons who are non-residents of Canada will need to carefully consider the additional Canadian tax on their Canadian source income from Alberta, which may be in excess of the US tax on such income.
  1. For individuals who are considering becoming a non-resident of Canada, such people will be subject to an increased "departure tax" of a maximum of 22% on the appreciation of certain assets (deemed disposed of immediately prior to such a person becoming a non-resident of Canada) after 2015 compared to the 2014 maximum of 19.5%.
  1. Previously, Alberta was a destination of choice for certain Canadians who would deploy capital by way of a trust that would be resident in the province. Such Alberta "provincial rate shopping" plans will be less attractive or eliminated in many cases.

As mentioned, the above list is non-exhaustive. Notwithstanding, the tax landscape in Alberta is certainly different and affected persons should pay careful attention.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Kim G.C. Moody
Kenneth Keung
Events from this Firm
19 Dec 2017, Webinar, Calgary, Canada

By December 19, 2017, the world should know whether or not the US was successful in implementing landmark and historic tax reforms – the largest and most impactful such reforms since 1986. These reforms appear to touch virtually every American individual and business, and will ultimately affect many Canadian individuals and businesses directly or indirectly as well.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:
  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.
  • Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.
    If you do not want us to provide your name and email address you may opt out by clicking here
    If you do not wish to receive any future announcements of products and services offered by Mondaq you may opt out by clicking here

    Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

    Use of

    You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


    Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

    The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


    Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

    • To allow you to personalize the Mondaq websites you are visiting.
    • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
    • To produce demographic feedback for our information providers who provide information free for your use.

    Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

    Information Collection and Use

    We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

    We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

    Mondaq News Alerts

    In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


    A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

    Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

    Log Files

    We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


    This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

    Surveys & Contests

    From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


    If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


    This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

    Correcting/Updating Personal Information

    If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

    Notification of Changes

    If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

    How to contact Mondaq

    You can contact us with comments or queries at

    If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.

    By clicking Register you state you have read and agree to our Terms and Conditions