Tax Integration Mechanisms

Tax integration mechanisms are income tax act provisions which ensure that income earned through a corporation is not subject to double taxation and the net tax is the same as if the income was earned directly by the individual. These mechanisms aim to ensure that the combined corporate and personal tax paid on income distributed from a corporation is roughly equal to the tax that would be paid if the income were earned directly by the individual.

The aim of these mechanisms is to ensure that all Canadians within the same tax bracket contribute equally to public finances, regardless of whether they earn income personally or through a corporate structure.

While integration primarily targets corporations, it also extends to other legal entities such as trusts and partnerships, maintaining the same foundational principle of tax neutrality.