and Revenue Administration
Corporate Tax Act
Special Notice Vol. 5 No. 32
||April 30, 2010
||Alberta Treasury Board and Finance, Tax and
|For more information:
5 No. 32 / April 2010
SPECIAL NOTICE - ALBERTA CORPORATE TAX AMENDMENT ACT, 2010
NOTE: This special notice is intended to explain legislation and provide specific information. Every effort has been made to ensure the contents are accurate. However, if a discrepancy should occur in interpretation between this special notice and governing legislation, the legislation takes precedence.
Bill 8 - the Alberta Corporate Tax Amendment Act, 2010 (the Act) received Royal Assent on March 25, 2010. The Act provides for the following:
Several technical amendments have been made to clarify the rules on functional currency reporting, including:
- A corporation that makes, or revokes, an election on functional currency reporting for purposes of the federal Income Tax Act is deemed to have made, or revoked, the election for purposes of the Alberta Corporate Tax Act (ACTA).
- A corporation’s tax instalments must be determined based on tax payable in Canadian currency.
- A corporation’s tax payable for the year must be converted to Canadian currency using the average exchange rate for
the taxation year as referenced in the Alberta Corporate Tax Regulation.
- The average exchange rate for the taxation year is the average of the rate of exchange quoted by the Bank of Canada
at noon on each business day in the taxation year.
- Amounts the ACTA deems to have been paid on an account, except for scientific research and experimental
development (SR&ED) tax credits, are to be converted to Canadian currency using the spot rate for that day.
- Alberta specific rules have been adopted for the carry-back of losses:
- Amounts carried back from a functional currency year to a Canadian currency year are to be converted at
the spot rate on the last day of the corporation’s last Canadian currency year. Amounts so deducted are to
be converted back to functional currency at the same rate to determine the amounts available for deduction in any other year.
- Amounts carried back from a reversionary (Canadian) year to a functional currency year are to be converted
at the average exchange rate for the functional currency year to which they are applied. Amounts so deducted
are to be converted back to Canadian currency at the same rate to determine the amounts available for deduction in any other year.
- Amounts carried back from a reversionary year to a Canadian currency year remain in Canadian currency and do not need to be converted.
- Anti-avoidance rules similar to the federal rules have been adopted.
- The Act clarifies that the following amounts are converted to a corporation’s functional currency at the average exchange rate for the year:
- the corporation’s business limit for the year,
- the corporation’s maximum expenditure limit for the year, and
- the dollar amounts used to calculate the political contributions tax credit.
The functional currency changes apply to taxation years that begin after December 13, 2007.
Small Business Deduction
Technical amendments to the small business deduction have been made because the federal business limit was raised to $500,000 effective January 1, 2009. These amendments ensure that the business limit used in a corporation’s Alberta corporate tax return remains at previously established levels.
If the Alberta small business limit is higher than the federal small business limit, any agreement filed with the Minister of Finance to allocate the Alberta small business limit among associated corporations must allocate at least the amounts allocated on the agreement filed with the Canada Revenue Agency.
If the Alberta small business limit is less than the federal small business limit, any agreement filed with the Minister of Finance to allocate the Alberta small business limit among associated corporations cannot allocate a higher proportion of the business limit than the proportion allocated to the corporation as in the agreement filed with the Canada Revenue Agency.
The changes that relate to the small business deduction are effective January 1, 2009.
Political Contributions Tax Credit
The ACTA has been changed to reflect current practice that corporations do not need to send in receipts on amounts included in the total contributions used to calculate the political contributions tax credit. Instead, the receipts are to be retained by the corporation and provided if requested by Tax and Revenue Administration (TRA), who administers the ACTA on behalf of the Minister.
Required Electronic Filing
A new section has been added requiring prescribed corporations to file their Alberta corporate tax returns by way of electronic filing (e-file). The regulation prescribing the corporations required to e-file will be made after consultation and closer to the implementation of the e-file initiative.
Assessments and Reassessments
A waiver of time limit to assess or reassess may now be filed for an additional three years after the normal reassessment period in those circumstances set out under section 43(1)(b) of the ACTA.
The changes to the waiver provisions described above are effective March 12, 2009.
The ACTA follows the federal mark-to-market rules related to financial institutions. Generally, the mark-to-market changes for financial institutions applies for taxation years beginning after December 31, 2001.
The reassessment time limit has been clarified where a corporation has filed the required information with TRA related to a federal assessment which includes an SR&ED tax credit. TRA may reassess until the later of 12 months after the corporation files the federal information with TRA or the end of the normal reassessment period for SR&ED claims.
Procedures for a corporation to appeal the decision of a notice of objection have been changed. Specifically, an appeal to the court is started by filing a notice of appeal and attached notice of objection with the clerk of the court of a judicial district with which the corporation appealing has a permanent establishment. The corporation must also provide the Minister with a copy of the filed notice of appeal.
Waiver of Penalties and/or Interest
The ACTA has been amended to extend the time limit to allow a waiver of penalties and/or interest in certain circumstances. A corporation may apply for a waiver within
- 10 calendar years from the end of the taxation year to which the penalties and/or interest relates, or
- 12 months from the date the penalties and/or interest are assessed by Alberta.
TRA may waive penalties and/or interest at any time if an application has been made by the corporation within the time period set out above.
Amendments also allow waiver of penalties and/or interest without an application by the corporation. In these cases, TRA must do so within the time limits set out above.
The changes to the waiver provisions are effective May 24, 2006, the date the 10-year time limit was originally introduced into this provision.
Refund Interest Rate Reduction
Effective 12:01 a.m. February 10, 2010, the quarterly rates used to calculate refund interest were reduced by 50 per cent. The reduced rates apply to assessments and reassessments issued after that time for all taxation years.
Please see Special Notice Vol. 5 No. 31 for further information about this change.
Change in Permanent Establishment
The ACTA contains rules for corporations that move to Alberta from Ontario or Quebec and may have discretionary deduction balances different from their federal amounts. The ACTA has been changed to accommodate the move to federal administration of Ontario’s corporate income tax.
Corporations coming to Alberta from Ontario in 2009 will use the federal balances at the beginning of the taxation year to determine the Ontario portion of the opening balances for Alberta purposes. If a corporation had more than one 2009 taxation year; the rules will only apply to the first 2009 taxation year.
Except as noted above, changes are effective March 25, 2010.