Upcoming Changes to Alberta’s Corporate Tax Rate

Authors: Garnet Matsuba, Q.C., Justin Di Liello

In what Premier Jason Kenney is calling the “largest infrastructure build” in Alberta’s history, the Alberta government is set to slash the corporate tax rate from the current 10% to 8%.

While this may seem like familiar news to those keeping an eye on Alberta’s shifting corporate tax landscape since the United Conservative Party was elected as a majority in Alberta last year, Premier Kenney announced on June 29, 2020 that the reduced tax rate will be effective July 1, 2020 – one and a half years ahead of the Government of Alberta’s original proposal to reduce corporate tax rates to 8% by January 1, 2022.

This reduction in corporate tax is just one prong of the Government of Alberta’s recent plan to reboot Alberta’s economy which has recently experienced an unprecedented downturn due to lockdown efforts to reduce the spread of COVID-19, reduced global consumption of oil, and the March 2020 oil price war. In addition to the reduced corporate tax rate, Albertans can expect to see a $10 billion infusion from the Government of Alberta aimed to create jobs in the health care, education, and oil and gas sectors. For more information about the various measures to reboot the economy, read our Government of Alberta Announces Relaunch Grant and Recovery Plan blog.

This accelerated cut to Alberta’s corporate tax regime is an effort to induce more corporations to participate in Alberta’s economy. An 8% corporate tax rate is the lowest provincial corporate tax rate in all of Canada and when combined with federal taxes, it remains lower than that in the majority of U.S. states. This low tax rate will render Alberta a veritable tax haven for many corporations, but the tax cuts might not stop there. While Premier Kenney was silent on the matter in his June 29 announcement, tax practitioners have been theorizing that the province may see corresponding adjustments to dividend tax rates. However, such practitioners have been on standby waiting to review the underlying legislation for these incentives to confirm the effects on the taxation of dividends.