and Revenue Administration
Corporate Tax Act
||February 16, 2012
||Alberta Treasury Board and Finance, Tax and
|For more information:
CT-3R3 / February 2012
TAX ACT INFORMATION CIRCULAR:
ALBERTA CORPORATE TAX INSTALMENTS
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.
Net File for Alberta Corporate Income Tax: effective July 8, 2011, Tax and Revenue Administration (TRA) offers Alberta corporate income tax filers the option of filing returns in electronic format. See Corporate Income Tax - Net File or Frequently Asked Questions.
This information circular describes the requirements for, and the calculation of, Alberta
corporate tax instalments and the procedure for remitting instalments to Alberta Finance,Tax and
Revenue Administration (TRA). The topics discussed include:
- Section 38 of the Alberta Corporate Tax Act (the Act) provides for the
payment of Part 5 tax as discussed below.
Section 39 contains provisions for charging interest to the corporation if its instalments
are late or deficient and on assessed balances outstanding. See Information
Circular CT-4, Interest and Penalties for a discussion of interest and
penalty provisions and policies.
WHEN DOES A CORPORATION PAY ITS ALBERTA INCOME TAX?
- There are 3 different payment patterns for the payment of Part 5 tax under the Act:
a) Part 5 tax must be paid in equal monthly instalments with any balance due by
the end of the second month following the taxation year (the corporation's
balance-due day). This is applicable to any corporation not qualifying under
(b) or (c) below.
b) A Canadian-controlled private corporation is exempt from paying instalments throughout
the taxation year and is permitted to defer payment of its tax, in total, to the end of
the third month following the taxation year-end (its balance-due day)
(i) it claims the Alberta small business deduction and has taxable income not
greater than $500,000 in the current year;
(ii) it claimed the Alberta small business deduction and had taxable income not
greater than $500,000 in the immediately preceding year; or,
(iii) for taxation years commencing after 1994, its tax for the year or its first
instalment base is not greater than $2,000. (First instalment base is defined in paragraph
c) A corporation that is not a
Canadian-controlled private corporation is also exempt from paying instalments throughout the
taxation year and permitted to defer payment of its tax, in total, to the end of the second
month following the taxation year-end (its balance-due day) if its tax for the
year or its first instalment base is not greater than $2,000.
- A new corporation, other than one formed by amalgamation, is not required to pay
instalments during its first taxation year. Payment of its tax in total must be made by
its balance-due day.
WHEN ARE INSTALMENT PAYMENTS REQUIRED TO BE PAID?
- A corporation that is not exempt from paying tax instalments during the taxation year is
liable to pay interest charges if the instalments are not paid on or before the last
day of each month in the taxation year.
The last day of each month is determined as follows:
a) Twelve-month taxation year ending on the last day of a calendar month:
The last day of each month is the last day of each calendar month. For example, the
instalment dates for a corporation with a taxation year from October 1 to September 30
would be October 31, November 30, etc.
b) Twelve-month taxation year ending on a day other than the last day of a calendar month:
The instalment for a month is due on or before the date in that month that corresponds to
the year-end date. For example, instalments for a corporation with a taxation year that
ends on April 15 are due on or before May 15, June 15, etc.
c) Floating tax year-ends and short taxation years - taxation years commencing after June 30, 1995:
Instalment dates are determined by forward-counting from the beginning of the year. A final instalment will be required at year-end if the last day of the year is more than 27 days after the preceding instalment date.
For example, assume a year with a floating year-end from October 29, 2010 to October 26, 2011. Instalments are considered to be due on November 28 (a full month less a day from the year beginning) and on the 28th day of each subsequent month up to September 28, 2011. A final instalment will be due on the last day of the year, October 26, 2011.
In the second example, assume a short taxation year starting on January 1, 2011 and ending on August 21, 2010. Instalments will be due on the last day of each calendar month up to July 31. No instalment will be due in August as the period from the last instalment date (July 31) to the end of the year is less than 28 days.
- The Alberta tax used in the calculation of instalments is the tax determined under Part
5 of the Act. No deduction may be made for refundable tax credits provided for
under Part 6 of the Act.
- Instalments paid over a twelve-month taxation year may be calculated under any one of the
12 instalments, each 1/12 of the estimated Alberta tax payable for the year.
12 instalments, each 1/12 of the corporation's "first instalment base".
2 instalments, each 1/12 of the corporation's "second instalment base"
followed by 10 instalments, each 1/10 of the amount by which the "first instalment
base" exceeds the sum of the first two instalments.
In general, the "first instalment base" of a corporation is its Part 5
Alberta tax payable for the immediately preceding taxation year and its "second
instalment base" is its Part 5 Alberta tax payable for the second preceding taxation
year. Refinements to this general rule are discussed in paragraphs 9 through 15 below.
- For purposes of calculating interest on deficient instalments, actual tax payable
for the year is used in option 1 of the paragraph above.
Therefore, a corporation will be assessed interest on deficient instalments only if it
bases its instalments on an estimate less than the actual tax payable and the
resulting instalments are less than those that would have been required under either of
the other two options.
- The monthly instalment amount determined in paragraph 6 can be affected by various
situations as described in the following paragraphs.
Instalments for a short taxation year
- A corporation with a current taxation year of less than 12 months should remit its
instalments over the shorter period. The instalment for each month in the year may be
calculated as if the taxation year were 12 months long. An example is provided in
- In this example, it is assumed that the corporation has applied for, and obtained,
permission from Canada Revenue Agency for a change in its taxation year-end. The following data
Taxation Year - January 1, 2010 to
June 30, 2010
Alberta tax payable:
|year ended December 31, 2008
|year ended December 31, 2009
six months ended June 30, 2010
For each month of the six-month taxation year, the corporation would calculate its
instalments as if the year were twelve months long. Its minimum instalments would be the
lowest of the following:
6 instalments, each $1,000 ($12,000/12)
6 instalments, each $1,500 ($18,000/12)
(i) 2 instalments, each $1,250 ($15,000/12); and
(ii) 4 instalments, each $1,550 ([$18,000-$2,500]/10)
Assuming the corporation chose option 1 above, it would remit $6,000 in instalments
during the year. The remaining $6,000 balance would be due by its balance-due day.
Instalments based on a short preceding year
- The first instalment base, described in paragraph 6, is subject to adjustment if the
immediately preceding year was less than 365 days. Similarly, the second instalment base
is subject to adjustment if the second preceding year was less than 365 days. If the short
year was greater than 182 days, the tax for that year is annualized by
multiplying it by the ratio that 365 is to the number of days in the short year. If the
short year was less than 183 days, the tax for that year is substituted by the greater of the tax for:
a) that year annualized; and
b) the last preceding year that did exceed 182 days. (If that year was not 365
days, the tax for that year must also be annualized.)
- In the calculation of instalments, a corporation formed by amalgamation will be treated
as a continuation of the predecessor corporations. In its first year, its first instalment
base is the sum of the Alberta taxes payable by the predecessor corporations for their
last taxation year and its second instalment base is the sum of the Alberta taxes payable
by the predecessor corporations for their second last taxation year. If a relevant
taxation year of a predecessor corporation was less than 365 days, its tax for that year
must be adjusted according to the rules in paragraph 11.
- Where a subsidiary is wound up into a parent corporation and subsection 88(1) of the
federal Income Tax Act (the federal Act) applies, the parent corporation must,
in the calculation of instalments subsequent to the wind-up distribution, take into
account the instalment bases of the subsidiary. In the taxation year in which the wind-up
distribution occurs, the parent's first instalment base and second instalment base must
include the first and second instalment bases, respectively, of the subsidiary. In the
a) the parent's first instalment base is determined by the formula:
P + (S x N/12)
P = the parent's Part 5 tax payable for the year in which the wind-up distribution
S = the subsidiary's Part 5 tax payable for the year preceding the year of wind-up
N = the number of months preceding the wind-up distribution in the parent's taxation
year in which the wind-up occurred; and
b) the parent's second instalment base will be the amount that was its first instalment
base for the year in which the wind-up distribution occurred.
- Where all, or substantially all, of the property of one corporation has been transferred
to a non-arm's length corporation and subsection 85(1) or (2) of the federal Act applies,
the transferee must take into account the instalment bases of the transferor. The rules
are parallel to those for wind-ups.
Mutual Fund Corporations
- To determine each instalment to be paid during the taxation year, a mutual fund
corporation may deduct 1/12 of its capital gains refund for the year from each instalment
- A corporation that is subject to the Alberta Corporate Tax Act must remit its Alberta
income tax to TRA. No mechanism exists for crediting the corporation's Alberta account
with any portion of instalments remitted to the federal authorities.
- The following payment options are available for remitting Alberta corporate income tax
a) through Internet payment services provided by major financial institutions in Canada. The effective date of receipt is the date TRA's account is credited. The earliest possible effective date is the next business day. For details on this option, contact your financial institution or TRA.
b) by cheque or money order payable to the
Government of Alberta, mailed, delivered by courier, or hand-delivered to TRA between the hours of 8:15 a.m. and 4:30 p.m., Monday to Friday, except government holidays. The payment is considered received on the date it is actually received by TRA; therefore, mail or courier the payment to TRA with adequate lead time to make sure it is received on, or before the due date.
at most financial institutions in Canada, if accompanied by an original Remittance Advice. The effective date of receipt is the business day stamped on the Remittance Advice by the financial institution.
d) by wire transfer. The effective date of receipt is the business date the funds are received by TRA's bank.
For information on option c), contact TRA at 780-427-3044 or
enter 310-0000, then 780-427-3044 (Alberta toll-free).
For option d), contact your financial institution for further details or call TRA.
Note: Payments must be received by TRA by the due date. Payment effective dates are discussed in Information
Circular CT-4, Interest and Penalties.
Corporations requiring a receipt from TRA must enclose a stamped, self-addressed envelope with the remittance.
- TRA prefers that payments be made in Canadian funds, but will accept payments in certain
other currencies, such as American funds. The payment will be converted to its equivalent
in Canadian funds at the exchange rate in effect on the date of receipt.
- Each remittance paid directly to TRA or through a bank or designated financial
institution should be accompanied by a Remittance Advice. TRA sends a pre-printed
Remittance Advice (form AT10) with a statement of account to a corporation in any
month in which there is a transaction or an assessed balance in the corporation's account.
On the Remittance Advice, the corporation should specify the taxation year to which the
payment is to be applied. If this is not done, the payment will be applied first to
outstanding assessed balances, beginning with the oldest taxation year. Any remainder will
be applied to the most recent unassessed taxation year.
- A royalty tax credit instalment to which a corporation is entitled will be applied to
outstanding assessed balances owing by the corporation. Any remainder of the royalty tax
credit instalment will, at the request of the corporation, be applied, in whole or in
part, to its account as an instalment of Part 5 tax. For corporations that make monthly
applications for royalty tax credit instalments, the account will be credited as of the
later of the date that the application for the royalty tax credit instalment is received
by TRA or the last day of the month for which the application is made.
Corporations that received the maximum royalty tax credit in the previous taxation year
and will receive the maximum credit in the current year may file one application for
instalments at the beginning of the year, rather than monthly. In this case, the
corporation's account will be credited as of the last day of the applicable month.
- TRA will, upon request, provide:
a) a detailed statement of account summarizing the transactions in the corporation's
account over the period specified by the corporation, including all instalment
b) a statement of interest calculations, including interest on instalment transactions,
over a period of time.