CHOOSING NOT TO CLAIM THE SMALL BUSINESS DEDUCTION (SBD)
this permanent tax cost
In a February 2, 2017 French Technical Interpretation (2016-0674221C6, Labarre, Sylvie), CRA opined that the general rate reduction (Subsection 123.4(1)) will not be available in cases where a corporation chooses not to claim the SBD, even though they have the right to claim such an amount. The general rate reduction provides a 13% tax rate reduction on full-rate taxable income.
Editors’ Comment
As noted in VTN 421(8) a corporation is not required to claim the SBD when eligible. A corporation may do this to enhance the general rate income pool, enabling them to pay out eligible dividends. However, the fact that the corporation would not be able to claim the 13% general rate reduction would significantly increase the combined marginal tax cost.