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March 9, 2020
2020-5355

Canada: Yukon issues budget 202021

Executive summary

On 5 March 2020, Yukon Premier and Finance Minister Sandy Silver tabled Yukon’s fiscal 2020–21 budget. The budget contains no new taxes but contains an increase in the existing insurance premium tax rate as well as a reduction in the small-business corporate income tax rates.

The Minister projects a surplus of CA$4.1m1 for 2020–21.

The following is a brief summary of the key tax measures.

Detailed discussion

Business tax measures

Corporate tax rates

Effective 1 January 2021, the Yukon small-business corporate income tax rates will be lowered from 2% (or 1.5% on manufacturing and processing profits) to 0%. No changes are proposed to the $500,000 small-business limit.

Yukon’s current and proposed future corporate tax rates are summarized in Table A.

Table A – Corporate tax rates

 

2020

2021

 

Yukon

Federal and Yukon combined

Yukon

Federal and Yukon combined

Small business manufacturing and processing tax rate*

1.50%

10.50%

0.00%

9.00%

Small-business tax rate*

2.00%

11.00%

0.00%

9.00%

General manufacturing and processing tax rate

2.50%

17.50%

2.50%

17.50%

General corporate tax rate

12.00%

27.00%

12.00%

27.00%

* The small-business rate is based on a 31 December year-end.

Other business tax measures

The Minister also proposed the following business tax measure:

  • Small-business investment tax credit: Starting in 2020, the small-business investment tax credit will be expanded to medium-sized businesses and will accordingly be renamed “business investment tax credit.” The amount of money a business will be able to raise under the program in a particular year will also be raised. No further details were provided.

 

Personal tax

Personal income tax rates

The budget does not include any changes to personal income tax rates. However, Yukon will be increasing over four years the basic personal amount to mirror the changes announced at the federal level on 9 December 2019.

The 2020 Yukon personal tax rates are summarized in Table B.

Table B – 2020 Yukon personal tax rates

First bracket rate

Second bracket rate

Third bracket rate

Fourth bracket rate

Fifth bracket rate

$0 to $48,535

$48,536 to $97,069

$97,070 to $150,473

$150,474 to $500,000

Above $500,000

6.40%

9.00%

10.90%

12.80%

15.00%

For taxable income in excess of $150,473, the 2020 combined federal-Yukon personal income tax rates are outlined in Table C.

Table C – Combined 2020 federal and Yukon personal tax rates*

Bracket

Ordinary income**

Eligible dividends

Non-eligible dividends

$150,474 to $214,368***

42.02%

20.67%

35.30%

$214,369 to $500,000

45.80%

25.89%

39.64%

Above $500,000

48.00%

28.92%

42.17%

* The rates exclude the impact, if any, of the proposed increase to the Yukon’s basic personal amount.

** The rate on capital gains is one-half the ordinary income tax rate.

*** An additional federal basic personal amount may be available for individuals with taxable income below $214,368. The additional tax credit is $140 for individuals with taxable income below $150,474; this additional amount is gradually phased out for individuals with taxable income between $150,474 and $214,368, resulting in an additional 0.22% to 0.30% of federal income tax on taxable income in this bracket.

Other tax measures

Insurance premium tax

Effective 1 January 2021, the insurance premium tax rate will increase to 4%.

Endnote

1. Currency references in this Alert are to CA$.

For additional information with respect to this Alert, please contact the following:

Ernst & Young LLP (Canada), Toronto
Ernst & Young LLP (Canada), Montréal
Ernst & Young LLP (Canada), Calgary
Ernst & Young LLP (Canada), Vancouver
Ernst & Young LLP (United States), Canadian Tax Desk, New York

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