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Integration—Cost and Benefit of Incorporation for Investment Income / 75

Notes, continued

Eligible dividends are subject to lower rates of personal tax (see the table "Combined

Top Marginal Tax Rates for Individuals—2013"). Canadian-controlled private corporations

(CCPCs) may only pay such dividends to the extent that they have earned active business

income subject to the general corporate tax rate. Therefore, CCPCs that earn only

investment income, capital gains, or ABI eligible for the SBD cannot pay eligible dividends

to their shareholders.

The calculations used in the tables are based upon the following assumptions:

• The corporation is a CCPC with a taxation year beginning January 1, 2013.

• The individual is in the top marginal tax bracket.

• The CCPC may pay out eligible dividends to its shareholder only in respect of ABI in

excess of the SBD. As certain provinces have small business thresholds below the

federal amount, for purposes of this analysis, the table reflects ABI subject to the small

business rate at both the federal and provincial levels (i.e., income earned up to the

provincial threshold amount).

Qué.

N.B.

N.S.

P.E.I.

Nfld.

Tax savings (cost) of incorporation

Investment income

(0.8%)

(0.7%)

(2.8%)

(7.2%)

(3.8%)

Capital gains

(0.4)

(1.3)

(3.5)

(1.8)

Dividends—Eligible

0.0

Dividends—Non-eligible

0.0

ABI eligible for SBD

(0.3)

1.7

4.5

(0.2)

1.8

ABI in excess of SBD

(2.7)

0.6

(5.9)

(3.4)

(2.7)

Tax deferral (pre-payment) from incorporation

Investment income

3.4%

(0.6%)

(0.7%)

(3.3%)

(6.4%)

Capital gains

1.7

(0.3)

(1.6)

(3.1)

Dividends—Eligible

1.9

(8.4)

2.7

(4.6)

(10.9)

Dividends—Non-eligible

5.2

(0.3)

2.9

5.2

(3.4)

ABI eligible for SBD

31.0

29.6

35.5

32.7

27.3

ABI in excess of SBD

23.1

19.1

19.0

16.4

13.3

Current as of September 30, 2013