1. 
Canada will be ushering in the New Year with a new federal government in place
and, most likely, new taxation rates, both on federal and provincial levels. With this
in mind, there is some planning that should be considered for 2015.
Below is a summary of the top personal tax rates in 2015 and the anticipated 2016
rates, assuming the Liberal party enacts their platform for the 2016 year. It is also
assumed that the BC surtax will be rescinded in 2016 as originally planned.
2015
Personal Rates
Top
Personal
Rate
Capital
Gains
Ineligible
Dividends
Eligible
Dividends
BC 45.80% 22.90% 37.98% 28.68%
AB 40.25% 20.13% 30.84% 21.02%
SK 44.00% 22.00% 34.91% 24.81%
MB 46.40% 23.20% 40.77% 32.26%
ON 49.53% 24.77% 40.13% 33.82%
QC 49.97% 24.99% 39.78% 35.22%
2016
Personal Rates
Top
Personal
Rate
Capital
Gains
Ineligible
Dividends
Eligible
Dividends
BC 47.70% 23.85% 40.61% 31.30%
AB 48.00% 24.00% 40.24% 31.71%
SK 48.00% 24.00% 40.06% 30.33%
MB 50.40% 25.20% 45.69% 37.78%
ON 53.53% 26.77% 45.30% 39.34%
QC 53.31% 26.66% 44.23% 39.83%
Tax Alert – Preparation Key to Managing Tax Rate Increases
Tax Alert – Canada
To find out what MNP can
do for you, please contact
a MNP office in your
region.

2. TAX ALERT - CANADA
As a business owner, this is an opportune time to plan your overall tax situation
given the increasing income tax rates coming in 2016. If you are employed and
are in the highest marginal tax bracket, there is still planning that can be done this
year.
 Prepaying Tax: This is counterintuitive to our previous planning ideas,
but when tax rates are increasing, you may consider taking your dividends
in 2015 versus 2016. This will be valuable especially if you have large
cash needs in the near future. The tax rate on dividends will increase in
most provinces, some higher than others.
 Dividends vs Salaries: Previously, it was typically somewhat more
advantageous to have income earned in a corporation and pay it out as a
dividend. If you make more than $200,000 a year, you will want to discuss
this strategy fully with your advisor to ensure it still makes sense for you.
There are times that we may choose to pay income as salaries or bonuses
versus using a dividend strategy, as the overall tax rate on corporate
income flowed out as dividends has increased, and it now more costly
than just taking salaries. Therefore, the advantage of the deferral will need
to be considered when developing your remuneration strategy, and care
must be taken to consider other personal criteria, such as CPP and the
new Ontario Retirement Pension Plan (ORPP).
 Dividends Increase Your Income More: If you have dividends included
in your personal income, they are generally taxed at lower rates than other
types of income like salaries and interest, to account for the corporate tax
that has already been paid on this income. However, dividends have a
gross-up factor included in them, and the amount that is shown on your tax
return can be up to 38% higher than the actual amount received. This can
have the impact of pushing you into the top tax brackets more quickly, and
could increase your overall tax burden on other income.
 Consider Your Tax Jurisdiction: Many wealthy families have chosen to
be residents of Alberta to benefit from the ‘Alberta Tax Advantage,’ while
having secondary homes elsewhere in Canada. These families will need to
discuss where they should be resident for tax purposes in this new
environment. As Alberta’s top tax bracket taxes income above $300,000,
there are still advantages to paying tax in Alberta, but they are reduced
compared to prior years.
 B.C. Surtax on High Income Earners: The B.C. surtax is slated to be
rescinded in 2016, but to rescind this would cause B.C. to be the lowest
taxed province in Canada. If the province does drop its tax rates, this may
impact where families with homes in both Alberta and B.C. will file.
 Maximize TFSA Contributions: The TFSA contribution limit increased
from $5,500 to $10,000 for 2015. In its campaign platform, the Liberal
government pledged to reduce this limit back to $5,500; therefore, it may
be advantageous to maximize your contribution for 2015.
 Defer Deducting RRSP Contributions: If you have an RRSP contribution
in the first 60 days of 2016 and you are making more than $200,000 per
year, you will likely choose to deduct this in 2016 vs 2015, as the overall
tax benefit of the deduction will be significantly better in 2016.
To find out what MNP can
do for you, please contact
a MNP office in your
region.

3. TAX ALERT - CANADA
 Flow-through Shares: Much like RRSPs, the deduction from renounced
expenses will be better for your 2016 personal tax return than your 2015
return. You may want to acquire flow-through shares in 2016.
 Advanced Planning Techniques: There are also many advanced
planning techniques that could be considered to ensure you are not paying
more than required. If you are planning asset purchases, or looking for
ways to remove cash from your operating companies, there are many
different ideas that could be considered, such as using holding companies
to hold non-essential corporate assets, etc.
The time for planning is now. If you are going to be impacted by these new tax
rates, now is the time to develop your overall tax strategy. In order to determine
the strategy that works best for you and your family, it is recommended you speak
with your local MNP Tax Advisor today.
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