Tax and Revenue Administration Alberta Corporate Tax Act Information Circular CT-2R4

CT-2R4 / July 2011

ALBERTA CORPORATE TAX ACT INFORMATION CIRCULAR:
FILING REQUIREMENTS

Please note:  Net File for Alberta Corporate Income Tax:  effective July 8, 2011, Tax and Revenue Administration (TRA) will offer Alberta corporate income tax filers the option of filing returns in electronic format.  See Corporate Income Tax - Net File or view the Frequently Asked Questions.

NOTE: This information circular 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 information circular and governing legislation, the legislation takes precedence.

This information circular is intended to help corporations and their representatives decide whether the corporation is required to file an Alberta corporate income tax AT1 return and, if so, how to file it. Topics covered include:

• Who has to file an AT1 return
• Who is is not required to file
• Definition of a permanent establishment
• When an AT1 return has to be filed
• When a corporation has to file information under section 36.2 of the Alberta Corporate Tax Act
• If a return is not filed on time
• Establishing a taxation year
  • Amalgamations
  • Change of control of a corporation
  • Change in status from or to Canadian-controlled Private Corporation (CCPC)
  • Corporations in receivership, liquidation, bankruptcy
• Who has to file Alberta election form AT107, AT108 or AT109 (Transfers of property
  • Exception for qualified parties
  • Filing of Alberta election forms (AT107, AT108 and AT109)
  
  

WHO HAS TO FILE AN AT1 RETURN

1. Unless it is exempt, a corporation is required to file an Alberta corporate income tax return if it had a permanent establishment in Alberta at any time during the taxation year.  “Permanent establishment” is explained in paragraphs 4 and 5, below.
   
   

WHO IS NOT REQUIRED TO FILE

2. A corporation is exempt from filing an AT1 return for a taxation year if it meets all of the following criteria in the year. The corporation

1. is a Canadian-controlled private corporation;
2. has permanent establishments only in Alberta;
3. has no taxable income before:
   1. applying losses carried back from a following year, or
   2. excluding any amount resulting from the exercise of an option in a following year;
4. is not claiming a refund of tax instalments;
5. gross revenue for the year less than $500,000;
6. has no amounts to report on Schedule 5, Royalty Tax Deduction;
7. filed a federal return;
8. had discretionary tax account balances (e.g. undepreciated capital cost, reserves, losses) throughout the year were the same for Alberta purposes as they were for federal purposes;
9. is not claiming the royalty tax credit and has not received royalty tax credit instalments for the taxation year; and
10. is not claiming an Alberta scientific research and experimental development (SRED) tax credit.

A corporation exempt from filing an Alberta return under these rules is still required to file a federal return.

3. Under section 35 of the Alberta Corporate Tax Act (the Act), certain corporations are not required to pay tax on their taxable incomes. These corporation are not required to file an AT1 return for a taxation year if, throughout the year, they did not have to pay Alberta tax on their taxable income. Examples are crown, pension, and non-profit corporations. However, an Alberta return is required, if a corporation is claiming a royalty tax credit or an Alberta SRED tax credit.

DEFINITION OF A "PERMANENT ESTABLISHMENT"

4. According to the Act, a corporation has a permanent establishment in Alberta if it meets any of the following requirements. The corporation

• has a fixed place of business in Alberta, including a branch, office, workshop, factory, warehouse, farm, mine, timber land or oil well;
• has no fixed place of business, but Alberta is the principal place in which the corporation's business is conducted;
• carries on business in Alberta through an agent or employee who has general authority to contract for the corporation or who regularly fills orders from a stock of the corporation's merchandise in Alberta;
• owns land in Alberta and has a permanent establishment elsewhere in Canada;
• uses substantial machinery or equipment in Alberta;
• is an insurance corporation registered or licensed to do business in Alberta; or
• is resident in Canada and does not otherwise have a permanent establishment in Canada, but is deemed to have a permanent establishment in Alberta if it has its registered office in Alberta or its articles, charter or bylaws designate Alberta as its office or registered office.

5. In some cases, it may not be clear if a corporation meets any of the above criteria. For instance, a corporation may not be sure whether the authority granted to an agent constitutes "general authority to contract" or whether the equipment it uses in Alberta is "substantial" equipment. These types of questions can usually be answered only after an analysis of all of the relevant facts. Interpretation Bulletin CTIB-1, "Taxability of a Corporation in Alberta on the Basis of Permanent Establishment" provides more information about the criteria for permanent establishment. Tax and Revenue Administration (TRA) will give an opinion on the question of permanent establishment if the corporation provides the relevant facts. For further information, please contact
   

   TAX SERVICES
   TAX AND REVENUE ADMINISTRATION
   9811 109 STREET
   EDMONTON, AB  T5K 2L5

   Phone:	780-427-9425
   	310-0000-780-427-9425 (Alberta toll free)
   Fax:	780-427-0348

   
   
6. A corporation that stops its normal business activity, but continues to carry out financial transactions from a place in Alberta is normally considered to be maintaining a permanent establishment in Alberta. The level of financial transaction activity can be minimal, for example, payment of property taxes, infrequent receipt of interest or other revenue, occasional dispositions of property or efforts to dispose of property. A corporation with even little business activity in Alberta during a year should file an AT1 return for the year unless it is not required to, as explained in paragraph 2, above.

WHEN AN AT1 RETURN HAS TO BE FILED

7. A complete AT1 return must be filed with TRA within six months from the end of the corporation's taxation year. A return is considered to be filed on the date it is received by TRA. The return may be sent by mail, fax, or courier service or hand-delivered to TRA.
   
   
8. A complete return can be filed in one of the following formats:
   
   i)    an AT1 and applicable schedules; or
   ii)   Alberta return and schedule information (RSI); or
   iii ) Alberta Net File return, if the corporation does not need to file schedules 12 to 21.
   
   If the return submitted to TRA is not complete, the corporation will be asked to provide a complete return.  If it does not comply, the corporation may be prosecuted.  Any refund interest to which a corporation may be entitled will not begin until the required information is received by TRA.  
   
   
9. When a taxation year-end falls on the last day of the month, the filing due-date is the last day of the sixth month after the corporation’s taxation year-end.  When the taxation year-end falls on a date other than a month-end date, the filing due-date is the same numeric date in the sixth month following the year-end.  For example, a return for the year ending June 30 must be filed by December 31 of that year.  A return for the year ending August 15 must be filed by February 15 of the next year.
   
   If the filing due-date falls on a week-end or a holiday, it is considered filed on time on the next business day on which TRA's offices are open.
   

WHEN A CORPORATION HAS TO FILE INFORMATION UNDER SECTION 36.2 OF THE ALBERTA CORPORATE TAX ACT

10. Under section 36.2 of the Act, a corporation is required to file information with TRA if it becomes aware that amended information needs to be filed or that its tax return contained errors. This includes all of the following situations.

1. The Canada Revenue Agency (CRA), Ontario Ministry of Revenue (before its harmonization with CRA) or Quebec Ministry of Revenue has (re)assessed the corporation's return or has issued a (re)determination of a loss. In this case, the corporation must file a copy of the notice of (re)assessment or (re)determination issued by the other jurisdiction, and any supporting information, within 90 days from the later of the date of the (re)assessment or (re)determination or the required filing date of the AT1 return as noted in paragraph 7. TRA does not require a copy of the notice of (re)assessment or (re)determination if the action taken by the other jurisdiction does not affect the calculation of Alberta tax or credits.
   
   
2. The corporation discovers within the normal reassessment period an error made on a previously-filed AT1 return. See Information Circular CT-6, Reassessments, for more information about reassessment periods. If this happens, the corporation must file an amended AT1 return or send a letter describing the error within 90 days from the later of the date the error was discovered and the required filing date of the AT1 return, as noted in paragraph 7.
   
   
3. The corporation originally believed it was exempt from filing an AT1 return, but within the normal reassessment period determined that it was not exempt. If this happens, the corporation must file an AT1 return within 90 days from the later of the date of the determination of the requirement to file and the required filing date of the AT1 return as noted in paragraph 7.

11. If the corporation does not file the above information, the normal reassessment period is extended indefinitely until the corporation does so. If the corporation has provided a return or information under section 36.2 of the Act, TRA, acting on behalf of the Minister of Finance, has until the later of the end of the normal reassessment period or twelve months from the date the information is received in which to assess or reassess.
    
    
12. If TRA becomes aware of an assessment action by another jurisdiction before a corporation has provided the information to TRA, TRA may (re)assess, issue a notice that no tax is payable for the year, or determine the corporation’s entitlement and amount of any refundable tax credit.  When TRA exercises this authority, section 36.2 of the Act will no longer apply to that assessment action. 

IF THE RETURN IS NOT FILED ON TIME

13. The corporation must always ensure its return is filed on time. If not, a late-filing penalty may be assessed. The late-filing penalty is based on the amount of tax owing on the filing due-date.

14. The amount of tax owing on the filing due-date is calculated as:

• tax for the year that was unpaid on the filing due-date plus royalty tax credit amounts paid or applied for the year, 
  
  minus
  
  
• the total of:
  
  • the royalty tax credit the corporation is entitled to,
  • repayments of royalty tax credit the corporation was not entitled to, and
  • Alberta scientific research and experimental developmental tax credit.

15. The late-filing penalty is calculated as:           

1. five percent of the amount of tax unpaid on the filing due-date, plus
   
   
2. one percent of tax unpaid on the filing due-date for each complete month, not exceeding 12, between the filing due-date and actual filing date.

16. Under certain circumstances, a late-filing penalty will not be charged.  When a mailed return is received by TRA within five business days of the filing due-date, a late-filing penalty is not charged.  When a couriered return is received by TRA within one business day of the filing due-date, a late-filing penalty is also not charged.
    
    
17. If a corporation did not file a return believing it was exempt from filing and later determines it was not exempt from filing, TRA will use the corporation's filing date with the CRA to determine if a late-filing penalty should be assessed.
    
    

IF A RETURN IS REQUIRED BUT NOT FILED

18. If a person does not file a return as required by the Act, the person is guilty of an offence and may be fined $1,000 to $25,000, or jailed up to 12 months, or both fined and imprisoned.

19. Section 45(1) of the Act allows TRA to issue an assessment different from a filed return or that is an estimate of tax payable.  However, the latter is usually only issued when requests to file had been ignored.  Such an assessment is valid and binding and payment will be enforced.
    
    
    

ESTABLISHING A TAXATION YEAR

20. Corporations are required to use the same taxation year for Alberta corporate tax as for federal income tax.  A new corporation, incorporated or amalgamated, may choose any date as its fiscal year-end.  The first year-end must be no later than 53 weeks from the incorporation or amalgamation date.  The following year-ends can be no more than 53 weeks apart.

21. Once established and accepted, a year end cannot be changed without permission from the CRA. If the CRA allows a year-end change, it will also be accepted for Alberta corporate income tax.

22. Certain events as described in paragraphs 23 to 29 automatically trigger a year-end. After this, the corporation is free to select a new taxation year-end within the guidelines discussed in paragraph 20.

Amalgamations

23. If two or more corporations are amalgamated to form a new corporation, each predecessor corporation's final taxation year-end will be immediately before the date of the amalgamation, as noted on the certificate of amalgamation. An AT1 return is required to be filed by each predecessor corporation, unless exempt from filing, for the period between the day after its last tax year-end and the date of the amalgamation.

24. The new corporation formed by amalgamation assumes liability for the obligations of the predecessor corporations and is required to file the predecessor corporations' tax returns and pay their taxes.

Change of control of a corporation

25. When control of the corporation is acquired by a person or group of persons that did not previously control the corporation, the taxation year of the acquired corporation ends immediately before the acquisition. A return is required to be filed for this taxation year-end unless the corporation is exempt from filing.
    
    
26. An exception to this rule occurs if control of a corporation is acquired within the seven days after the end of its last taxation year. In this case, the corporation generally will be allowed to choose to have its last taxation year continue up to the time control was acquired. This election is not available if, in the seven-day period, there was an acquisition of control, a corporate emigration, bankruptcy or the corporation became or ceased to be exempt from tax under paragraph 149(10)(a) of the federal Income Tax Act.
    
    
27. A corporation is not relieved of the obligation to file tax returns or to pay taxes due for past taxation years by a change in its control. Directors or officers of a corporation that has a change in control must ensure that the obligations of the corporation are fulfilled, even if those obligations relate to periods before the control change.

Change in status from or to Canadian-controlled Private Corporation (CCPC)

28. If a corporation becomes or ceases to be a CCPC it is deemed to have a year-end immediately before the change in status with a new tax year beginning on the status change.  If the change in status occurs within seven days of the corporation’s last taxation year, the corporation may choose the option described in paragraph 26.

Corporations in receivership, liquidation, bankruptcy

29. The taxation year of a corporation that becomes bankrupt is deemed to have ended on the day before it became bankrupt.  Other than the change in taxation year, a corporation is not affected by the business being placed in the hands of a receiver, liquidator or trustee.
    
    
30. A trustee, receiver, liquidator or other such person managing or winding-up a corporation is required to file any returns the corporation was required to file, but did not.

WHO HAS TO FILE ALBERTA ELECTION FORM AT107, AT108 OR AT109 (TRANSFERS OF PROPERTY)

31. For transfers of property after May 30, 2001, subsections 85(1), 85(2) and 97(2) of the federal Act apply only if a valid federal election has been made under the federal Act. The amounts elected under the federal Act will apply.

Exception for qualified parties

32. A corporation, or a partnership treated as if it were a corporation with the taxation year as its fiscal period, is a “qualified party” if its Alberta allocation factor for the taxation year is at least 90 per cent.
    
    
33. If both the party acquiring the property and the party disposing of the property are “qualified parties”, they can jointly elect an amount for purposes of the Act that is different from the amount elected under the federal Act.
    
    
34. To qualify, both the party disposing of the property and the party acquiring the property must be qualified parties for the taxation year or fiscal period in which the transaction occurred.  Also, the party acquiring the property must continue to be a qualified party for all of its taxation years or fiscal periods beginning in the 36 months after the end of the taxation year or fiscal period in which the transaction occurred.
    
    
35. The qualified parties may jointly elect one of the following amounts:
    
    
    1. the amount deemed to be the proceeds of disposition and the cost of the property under the federal Act;
       
       
    2. The amount equal to the above amount less the cost of the property under the federal Act plus the cost amount of the property for the purposes of the Alberta Act, both determined immediately before the disposition; and
       
       
    3. any amount that is greater than or equal to the lesser of the above amounts, but less than or equal to the greater of the above amounts.

Filing of Alberta election forms (AT107, AT108 and AT109)

36. Where the parties elect an amount different from the federal amount, one of the applicable Alberta election forms must be filed by the party acquiring the property:

• AT107 - "Alberta Election on Disposition of Property by a Taxpayer to a Taxable Canadian Corporation",
• AT108 - "Alberta Election on Disposition of Property by a Partnership to a Taxable Canadian Corporation",
• AT109 - "Alberta Election on Disposition of Property by a Taxpayer to a Canadian Partnership".
  

37. If the party is a corporation, Alberta election form AT107 or AT108 must be filed by the time the corporation's Alberta corporate income tax return is due for the last taxation year. The last taxation year begins in the 36-month period after the end of the taxation year in which the corporation acquired the property.
    
    
38. If the party is a partnership, all members of the partnership must file Alberta election form AT109 by the time the Alberta corporate income tax return is first due for a corporate member of the partnership for the member's taxation year. The taxation year includes the last fiscal period of the partnership beginning in the 36-month period after the end of the fiscal period in which the partnership acquired the property.

39. Unlike federal elections, no late-filed Alberta elections are permitted.