DavidR wrote:If you are carrying on an Active business, and you are eligible for small business rates, you deduct a 16% SBD and pay Federal tax of 13.12%. Add Ontario tax (using Ontario as a typical province) of 5.5% for 18.62% total.
If you are carrying on an active business but not eligible for small business rates, you deduct 7% and pay 22.12%. Add Ontario tax of 14.0% for 36.12%
If you are a CCPC earning investment income you add 6.67% and pay 35.79% - of which 26.67% is refundable. After the dividend refund the Federal tax is only 9.12%. Add Ontario of 14.0% for 23.12%.
As promised, I've run the numbers through QT T2 (2005/2006 rates).
Here are the results:
1. for an extra $1,000 in small business income:
FED goes up $131
ONT goes up $55
Total goes up $186 (exactly as you indicated)
2. for an extra $1,000 in interest income:
FED (after Part I refund) goes up $92
ONT goes up $140
Total goes up $232 (exactly as you indicated)
3. for an extra $1,000 in foreign income AND an extra $100 in foreign withholding tax:
- in comparison to scenario 2:
FED (after Part I refund) goes down $26
ONT stays the same
Total goes down $26
Conclusion: you only get a 26% credit of the face value of the withholding tax, instead of 100%. It is still better (and more correct) to report the gross foreign income plus the withholding tax, instead of net foreign income and no withholding.
Hats off and an A+ for you. Shame on me for not being aware of it.