Chapter 5 - Page 5 of the T2 return

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• General tax reduction
  • General tax reduction for Canadian-controlled private corporations (CCPCs)
  • General tax reduction

General tax reduction

A general tax reduction is available on qualifying income. This reduction is:

• 9% effective January 1, 2009;
• 10% effective January 1, 2010;
• 11.5% effective January 1, 2011; and
• 13% effective January 1, 2012.

For tax years that straddle a calendar year, the rate is prorated based on the number of days in each calendar year.

Corporations benefit from the general tax reduction only on taxable income that is subject to a rate of 38%.

The reduction does not apply to income that benefits from preferential corporate tax treatment, such as:

• income eligible for the small business deduction and Canadian manufacturing and processing income;
• income eligible for the deduction for the generation of electrical energy for sale or the production of steam for sale;
• income eligible for the additional deduction for credit unions; and
• investment income subject to the refundable tax provisions.

For tax years beginning after October 31, 2011, the reduction does not apply to income earned from a personal service business.

The reduction will not apply to a corporation that was, throughout the year, an investment corporation, a mortgage investment corporation, or a mutual fund corporation.

Reference
Subsection 123.4(1)

General tax reduction for Canadian-controlled private corporations (CCPCs)

If you are a CCPC throughout the tax year, complete this area of page 5 to calculate the reduction. Enter the resulting amount on line 638 on page 7.

Note
If you are a corporation that is, throughout the year, a cooperative corporation (within the meaning assigned by subsection 136(2)) or a credit union, enter zero on line F.

Reference
Subsection 123.4(2)

General tax reduction

Do not complete this area if you are a CCPC, an investment corporation, a mortgage investment corporation, a mutual fund corporation, or a corporation that has income not subject to the corporation tax rate of 38%.

All other corporations complete this area of page 5 to calculate the reduction.

Enter the general tax reduction on line 639 on page 7.

Reference
Subsection 123.4(2)

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