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Enhancement to small business deduction under the Income Tax Act Finance Minister Joan Marie Aylward announced today an increase in the small business deduction under the Income Tax Act. The province�s corporate income tax system recognizes and encourages the important role of small business to the Newfoundland and Labrador economy. The general corporate income tax rate is 14 per cent. However, incorporated small businesses are taxed at a rate of five per cent on a portion of their income. For taxation years up to and including 2002, small businesses paid the five per cent tax rate on their first $200,000 of active business income. Beginning in 2003, the portion of income subject to the preferential five per cent rate (the "small business deduction limit") will be increased by $25,000 a year for four years. Consequently, the small business deduction limit will be $225,000 in 2003, $250,000 in 2004, $275,000 in 2005, and $300,000 in 2006 and thereafter. These small business limits will be pro-rated where the taxation year of the corporation does not coincide with the calendar year. In addition, there will continue to be a requirement to allocate these limits among associated corporations. Minister Aylward said: "Small businesses are significant contributors to economic growth and job creation. Decreasing the tax burden for small business will free up capital for reinvestment into the business, creating more economic opportunity and jobs." Media contact: Josephine Cheeseman, Communications, (709) 729-0329. 2003 03 27 3:45 p.m. |
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