Canada – Alberta Abandons Flat Tax Rate; Introduces Progressive Rates, Brackets

Canada – Alberta Abandons Flat Tax Rate; Introduces

The Canadian province of Alberta has introduced tax rate brackets and raised income tax rates for individuals that earn more than C$125,000 per year. Previously all individuals in Alberta were subject to a 10-percent flat tax rate. The rate brackets will be subject to inflation indexing, starting in 2017. The new tax brackets include a personal top marginal bracket of 15 percent that will be phased in for the 2015 tax year.

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Alberta has introduced tax rate brackets and raised income tax rates for individuals that earn more than C$125,000 per year.1  Previously all individuals in Alberta were subject to a 10-percent flat tax rate.  The rate brackets will be subject to inflation indexing, starting in 2017.

WHY THIS MATTERS

Many cross-border workers subject to taxation in Alberta could see their tax liabilities rise with this tax change.  This may mean for some employers higher international assignment costs.

The tax changes may affect cost projections for future assignees and budgeting for international assignments to Alberta or from Alberta where the assignee will be subject to Alberta taxation.  Furthermore, the resultant tax differential may impact tax equalizations.  

The new tax brackets include a personal top marginal bracket of 15 percent that will be phased in for the 2015 tax year (there is also to be an increase in the corporate income tax rate to 12 percent (from 10 percent) effective July 1, 2015), among other changes.  The personal tax rate increases apply to income earned throughout 2015, including all taxable amounts realized after December 31, 2014.  The changes will begin to be implemented on October 1, 2015.  Alberta will increase the payroll withholding rates as of October 1 for individuals to catch up on their tax obligations for 2015.  

These amendments are consistent with election campaign promises made before Alberta's election on May 5, 2015.  Alberta is expected to release a budget in fall 2015.  

RELATED RESOURCE

For the full article, including the 2015 and 2016 personal tax rate table, see “Alberta Hikes 2015 Personal and Corporate Taxes,” in KPMG’s TaxNewsFlash-Canada (June 19, 2015, no. 2015-24), a publication of the KPMG International member firm in Canada.

FOOTNOTES

1  For the June 18, 2015 press release from Alberta’s government and links to Bill 2, see: http://alberta.ca/release.cfm?xID=382115614966E-96E1-ECF5-94576C284D150F61.

The information contained in this newsletter was submitted by the KPMG International member firm in Canada.

© 2016 KPMG LLP, a Canada limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

Flash Alert is an Global Mobility Services publication of KPMG LLPs Washington National Tax practice. The KPMG logo and name are trademarks of KPMG International. KPMG International is a Swiss cooperative that serves as a coordinating entity for a network of independent member firms. KPMG International provides no audit or other client services. Such services are provided solely by member firms in their respective geographic areas. KPMG International and its member firms are legally distinct and separate entities. They are not and nothing contained herein shall be construed to place these entities in the relationship of parents, subsidiaries, agents, partners, or joint venturers. No member firm has any authority (actual, apparent, implied or otherwise) to obligate or bind KPMG International or any member firm in any manner whatsoever. The information contained in herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.

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