and Revenue Administration
Corporate Tax Act
Special Notice Vol. 5 No. 41
||March 3, 2015
||Alberta Treasury Board and Finance, Tax and
|For more information:
5 No. 41 / March 2015
CORPORATE TAX ACT SPECIAL NOTICE:
ADMINISTRATION OF THE QUALIFYING ENVIRONMENTAL TRUST TAX AND ALBERTA QET TAX CREDIT
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.
As explained in Special Notice Vol. 5 No. 40, Alberta’s tax legislation now includes the Qualifying Environmental Trust (QET) tax regime, effective for taxation years ending after December 31, 2013.
A QET is a special type of trust under the federal Income Tax Act (the federal Act) that is maintained solely for the purpose of accumulating funds to finance the future reclamation of a qualifying site in Canada, such as an oil sands mine or a pipeline. A QET enables a corporation to claim a tax deduction in the year for amounts set aside for future reclamation. Corporations required to pre-fund reclamation may use a QET for this purpose so that contributions to the trust are tax deductible.
A QET resident in Alberta is required to pay Alberta tax on its trust income for the year at Alberta’s corporate tax rate. A corporation that is a beneficiary of the QET also is required to report and pay tax on its share of the QET’s income for the year. To offset the second level of tax on the QET’s income, the corporation may claim a refundable Alberta QET tax credit equal to the corporation’s share of the amount of Alberta tax paid by the QET.
Payment and Filing Requirements of the QET Tax
Every QET resident in Alberta at the end of a taxation year must pay tax equal to its income for the year, as calculated under the federal Act, multiplied by the Alberta corporate tax rate of 10 percent. The taxation year of a QET is the calendar year. As the QET tax will be administered by the Canada Revenue Agency, a QET resident in Alberta should follow the federal income tax laws and policies for filing returns and making payments in respect of the QET tax.
Claiming the Alberta QET Tax Credit
A corporation that is a beneficiary of a QET may claim an Alberta QET tax credit equal to the amount of Alberta tax paid by the QET on the corporation’s share of the QET’s income. The Alberta QET tax credit is administered by Alberta Treasury Board and Finance, Tax and Revenue Administration (TRA). In order to be entitled to the Alberta QET tax credit, the corporation must apply for the credit on line 087 of form AT1, “Alberta Corporate Income Tax Return”. For further information on filing the AT1 return, refer to Information Circular CT-2, Filing Requirements.
In addition to the AT1 return, a corporation that applies for an Alberta QET tax credit will not be entitled to the credit unless it also submits to TRA a letter or statement from the respective QET specifying the
- amount of trust income subject to Alberta tax as reported by the QET for federal tax purposes,
- amount of Alberta tax paid by the QET for the relevant taxation year,
- corporation’s share of the QET’s income subject to Alberta tax, and the
- corporation’s share of the Alberta tax paid by the QET on the corporation’s share of the QET’s income subject to Alberta tax.
The QET should issue such a letter or statement to each beneficiary corporation or to each partnership of which the beneficiary corporation is a member. The letter or statement should be sent to TRA by the corporation at the time the respective AT1 return is filed.
For a corporation that is a member of a partnership, the Alberta QET tax credit will include the total of all amounts that can be reasonably considered to be the corporation’s share of the relevant tax credit in respect of the partnership. For this purpose, if the partnership were a person and its fiscal period were its taxation year, the relevant tax credit in respect of a partnership is the amount that would be the Alberta QET tax credit of the partnership for its taxation year that ends in the particular year.
Application of the Alberta QET Tax Credit
A corporation entitled to an Alberta QET tax credit is deemed to have made a payment for the particular year on account of its tax payable equal to its Alberta QET tax credit for the particular year. The Alberta QET tax credit is a refundable tax credit, but will be first applied, effective as of the corporation’s balance-due day, against the corporation’s Alberta tax payable for the particular year. Any remaining balance will be applied, effective the later of the corporation’s balance-due day for the particular year and the day on which the corporation’s application for the Alberta QET tax credit was received by TRA, against other amounts owing by the corporation. Such other amounts may include interest, penalties, or tax from another taxation year, or any other amount owing to the Crown. Any remaining balance thereafter will be refunded to the corporation.