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Carrying on Business Through a BranchThe Canadian operations of a branch will besubject to Canadian corporate income taxon the net income of the branch. It will alsobe subject to withholding taxes on propertyincome earned by the branch. In addition,the foreign entity will be subject to a branchtax at a rate of 25% of the net profits notreinvested in Canada, unless such rate isreduced by an applicable tax treaty.Carrying on Business Through a SubsidiarySmall Business Rate (onActive Business Incomeor income in excess of$500,000)Manufacturing &Processing Rate15%15%The Canadian government ceased levying acapital tax on large corporations as ofJanuary 1, 2006. In addition, the Canadiangovernment maintains several federal taxincentives to encourage investment inCanada. These include:The operations of a Canadian subsidiary willbe taxed on its net income as a Canadiancompany. In addition, the subsidiary will berequired to pay a withholding tax on interest,royalties and dividends paid to its parent.The rate of such withholding tax will varyaccording to the nature of the income andwhether a tax treaty between Canada andthe country of residence of the parentcompany is applicable.Federal Corporate TaxesThe federal corporate tax rates as ofJanuary 1, 2014 are set out below. Acorporation must meet the requirements ofspecific provisions contained in the ITA toqualify for these rates.General Rate (ActiveBusiness Income orInvestment BusinessIncome)Small Business Rate (onSmall Business Income,up to income threshold)Small Business DeductionLimit15%11%$500,000Scientific Research andExperimental DevelopmentProgram: Businesses involved inscientific research and experimentaldevelopment can apply for taxcredits applicable to expendituressuch as wages, materials andequipment.Film Tax Credit Programs: TheCanada Revenue Agencyadministers two film tax creditprograms to help the film industry inCanada.Natural Resources Tax Incentives:Businesses involved in drilling,exploration, development andproduction of minerals, or oil andgas, may qualify for industry-specifictax incentives. Investors should alsobe aware that each of the fourAtlantic provinces has establishedcertain tax and royalty regimestargeted specifically at the naturalresource sector.Taxation Law 57