Saskatchewan levies provincial corporate income tax under the terms of a tax collection agreement with the federal government (as do other provinces and territories with the exception of Ontario, Quebec and Alberta). Under the tax collection agreement, the federal government administers the provincial income tax system using the same determination of a corporation's taxable income for both federal and provincial tax purposes.

Saskatchewan's corporate income tax is levied as a percentage of the share of a corporation's taxable income that is allocated to the Province. Saskatchewan's general tax rate on corporate taxable income was reduced from 17 per cent to 14 per cent effective July 1, 2006, and will be further reduced to 13 per cent on July 1, 2007 and to 12 per cent effective July 1, 2008.

Saskatchewan small businesses, defined as Canadian-controlled private corporations, pay a reduced rate of 4.5 per cent (commonly known as the small business rate) on eligible business income. The eligible income threshold for the small business tax rate was increased from $300,000 to $400,000 on July 1, 2006, and will be further increased to $450,000 on July 1, 2007 and to $500,000 effective July 1, 2008.

In addition to the tax reduction for small businesses, Saskatchewan provides corporations involved in manufacturing and processing a reduction in the general tax rate to as low as 10 per cent on M&P profits, depending on the extent of the company's presence in the province.

Saskatchewan also provides resource companies with compensation in lieu of full deductibility of provincial royalties and similar taxes for the purposes of provincial income taxation, under the Saskatchewan Royalty Tax Rebate Program. However, as a consequence of the federal government's initiative to re-introduce full deductibility of provincial resource royalties for federal and provincial income taxation, the Saskatchewan Royalty Tax Rebate is no longer necessary and will be allowed to wind down. Commencing January 1, 2007, the carry forward period for any outstanding Royalty Tax Rebate balances will be limited to seven years.

In addition to these tax reduction measures, Saskatchewan also offers tax credits to encourage corporations to make investments in M&P capital assets, research and development activities and film production.

The Saskatchewan corporate income tax system is administered on the Province’s behalf by the Canada Revenue Agency in conjunction with the administration of the federal income tax system. Provincial corporate income tax forms are produced and distributed by the Agency.

For further information about Saskatchewan corporate income tax, please contact:

Canada Revenue Agency
1-800-959-5525

or

Saskatchewan Finance
Taxation and Intergovernmental Affairs Branch
Regina area: 787-6722
Toll free: 1-866-862-6246 (Option 2)

Note: Rate changes are effective July 1st of each year, except the small business rate reduction, which is effective January 1, 2007. The rate changes are applied on a prorated basis for taxation years that straddle their effective dates.

*The M&P profits reduction is calculated by applying the qualifying reduction rate against eligible M&P income. The qualifying reduction rate is determined by multiplying a corporation's Saskatchewan allocation percentage by the maximum reduction allowance. Eligible Saskatchewan M&P income is determined as the Saskatchewan share of a corporation's national M&P income.