Tax and Revenue Administration - Frequently Asked Questions (FAQs)
Corporate Income Tax - Refund Interest FAQs
See also: Alberta Corporate Tax Special Notice Vol. 5, No. 31: Refund Interest Rate Reduction.
- What is the change to refund interest that was announced?
- What is refund interest and its purpose?
- How is refund interest calculated?
- When is refund interest calculated?
- Why do corporations overpay their taxes?
- How is this change implemented?
- Will my corporation be affected by the retroactive aspect of this change?
- Does this change affect the amount of refund interest a corporation has already received for an earlier taxation year?
- Are there any exceptions to this change?
- What if my corporation was reassessed with the reduced refund interest rates in the resolution of an objection filed with TRA before the budget change?
- My corporation filed a notice of objection with TRA before February 10, 2010, but has been reassessed since then as a result of federal adjustments or a loss carry-back. My corporation’s objection has not yet been resolved. Will the grandfathering provision apply to the reassessment issued?
- Will the rate change affect my corporation if I request a transfer of funds between two taxation years now?
Effective 12:01 a.m. February 10, 2010, the quarterly rates at which refund interest is calculated will be reduced to 50 per cent of the rates previously in effect. Going forward, quarterly rates will be set at 50 per cent of the 90-day federal Treasury Bill rate.
The reduced rates apply to assessments and reassessments issued after that time for all taxation years.
Refund interest is paid to corporations by government when they overpay corporate income taxes to Alberta Treasury Board and Finance, Tax and Revenue Administration (TRA). Paying refund interest on tax overpayment is required by the Alberta Corporate Tax Act.
Refund interest is calculated by multiplying the amount of tax the corporation overpays (that is, the amount of tax paid by the corporation minus the tax payable assessed or reassessed for the corporation) by the relevant quarterly refund interest rates, from the time the tax was overpaid to when the tax overpayment is repaid to the corporation.
Refund interest is calculated on assessment or reassessment of a corporation’s tax payable when a corporation has overpaid its corporate income tax.
Corporations overpay their taxes for a number of reasons, including
- to stop interest from being charged, for example, on amounts in dispute,
- the application of loss carry-backs,
- omissions or errors that lead to a downward reassessment, or
- make higher than necessary instalments when the current tax payable is less than that previously estimated.
The change is implemented by dividing by two the refund interest rates in effect prior to this change for each quarter since 1981. The revised rates will be used in interest calculations for assessments and reassessments completed after 12:01 a.m. February 10, 2010.
All corporations will receive a lower rate of refund interest on assessments and reassessments issued after the effective date, regardless of taxation year assessed or reassessed.
Does this change affect the amount of refund interest a corporation has already received for an earlier taxation year?
The calculation of refund interest received for an assessment or reassessment issued before February 10, 2010, will not change unless there is a reassessment of the amount of tax payable after February 9, 2010 for the taxation year.
In these situations, refund interest will be recalculated and excess amounts received, based on the difference between the old and the new interest rates, will have to be repaid.
Corporations may want to consider the potential impact of taxpayer-requested adjustments, such as amended returns or loss carry-backs before requesting such adjustments from TRA. For example, the application of a loss carry-back to a year where a refund of tax was previously paid to the corporation could potentially generate an amount payable by the corporation. This would be due to the re-calculation of refund interest on reassessment using the reduced rates outlined above.
TRA will process requested adjustments as necessary without considering the potential impact of the change in refund interest rates.
Grandfathering treatment will be given reassessments issued in response to matters raised before February 10, 2010, in Alberta notices of objection received by Tax and Revenue Administration (TRA). The refund interest rates before the 50 per cent reduction will apply to the reassessments processed to resolve the matters raised in the objections.
What if my corporation was reassessed with the reduced refund interest rates in the resolution of an objection filed with TRA before the budget change?
Where TRA has already issued a reassessment for an objection filed before February 10, 2010, we will adjust the interest using the refund interest rates before the 50 per cent reduction and refund the difference. TRA expects to make interest adjustments to all affected corporations before May 31, 2011, as noted in Special Notice Vol. 5 No. 33, Refund Interest Rate Reduction Grandfathering Treatment for Objections. TRA will notify your corporation of the interest adjustments made to your account at the time the adjustments are made. If you have not obtained your interest adjustment by May 31, 2011, contact Information Services at the telephone number, mail or email address shown on the special notice.
My corporation filed a notice of objection with TRA before February 10, 2010, but has been reassessed since then as a result of federal adjustments or a loss carry-back. My corporation’s objection has not yet been resolved. Will the grandfathering provision apply to the reassessment issued?
Grandfathering is available only for reassessments processed to resolve matters raised before February 10, 2010, in an Alberta objection filed with TRA. The reduced refund interest rates continue to apply to any reassessment issued on matters raised after February 9, 2010, in an Alberta objection.
Any reassessment issued after a notice of objection has been filed nullifies the notice of objection. This includes a reassessment issued as a result of federal adjustments or a loss carry-back. However, if the matters raised before February 10, 2010, in an Alberta objection have not been resolved in the reassessment that is issued and the corporation has re-filed an objection to the new reassessment on the unresolved matters, TRA will ensure that the refund interest rates used in any further reassessment of those unresolved matters are those in place before the 50 per cent reduction.
TRA has also changed its administrative practice regarding processing reassessments when matters under objection are not yet resolved. Please refer to Special Notice Vol. 5 No. 34, Reassessment of Alberta Objections with Unresolved Matters, for more information.
Will the rate change affect my corporation if I request a transfer of funds between two taxation years now?
No, transfer of funds is just an adjustment on your corporate account unless it causes an assessment or a reassessment to be processed after 12:01 a.m. February 10, 2010.