Corporate Income Tax

Corporate Income Tax Overview

Corporations operating in Alberta are required to file Alberta corporate tax returns in addition to filing with Canada Revenue Agency (CRA).

Tax and Revenue Administration (TRA), Alberta Treasury Board and Finance, administers the Alberta Corporate Tax Act, that provides for the calculation of:

• Alberta corporate income tax for corporations with a permanent establishment in Alberta, including Alberta deductions and credits such as the Alberta royalty tax deduction, Alberta small business deduction, Alberta foreign investment income tax credit, Alberta political contributions tax credit and scientific research and experimental development (SR&ED) tax credit (see below*);
• Alberta royalty tax credit (ARTC) for corporations that pay eligible Alberta crown royalties (see below**);
• Alberta royalty credit for individuals and trusts (RCIT) that pay eligible Alberta crown royalties (see below**); and
• Insurance corporations tax payable by corporations carrying on the business of insurance in Alberta.

Announcements

• Net File option 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 and Frequently Asked Questions.  The following Corporate Income Tax documents have also been updated to reflect this new filing option:
  • Information Circular CT-2R4, Filing Requirements
  • Information Circular CT-4R4, Interest and Penalties
  • Software Certified for AT1 Net File Return Format for 2008 and Subsequent Taxation Years
  • Corporate Tax Form AT100 - Preparing and Filing the Alberta Corporate Income Tax Return (AT1 and Schedules for 1998 and Subsequent Taxation Years)
    
    
• Refund Interest Rate Change Questions and Answers updated November 25, 2010, and Special Notices added:
  • Vol. 5, No. 33, Refund Interest Rate Reduction Grandfathering Treatment for Objections
    
  • Vol. 5, No. 34, Reassessment of Alberta Objections with Unresolved Matters
    
    
• Refund interest rate reduction (posted February 9, 2010)
  
  Effective 12:01 a.m. February 10, 2010, the quarterly rates used to calculate refund interest will be reduced by 50 per cent.  The reduced rates apply to assessments and reassessments issued after that time for all taxation years. For more information, see Special Notice Vol. 5, No. 31, Refund Interest Rate Reduction or see the "Refund Interest Q&As".
  
  
• Alberta to adopt functional currency reporting (posted December 15, 2008)
  
  Alberta will parallel a federal decision to adopt functional currency reporting for tax purposes, allowing functional currency reporting for Alberta corporate income tax filings. This change is expected to ease compliance and promote more representative financial reporting.
  
  Similar to the federal decision, this change will be effective for taxation years after December 13, 2007. Corporations will be able to determine their Alberta tax results in their functional currency if they are also reporting federally in that currency for the same taxation year. At this time, Alberta is examining its approach to calculating the amounts payable in Canadian dollars, which may differ from the federal calculation of the amounts.
  
  
• *The Alberta Corporate Income Tax Act, incorporating the Alberta scientific research and experimental development (SR&ED) tax credit provision, received first reading in the Alberta Legislature on November 6, 2008. For information about the program, please see the comprehensive list of questions and answers relating to this new tax credit first announced in Alberta's Budget 2008.   See also: SR&ED Guide and related forms, and Information Circular SRED-1.
  
  
• Budget 2008, The Right Plan for Today and Tomorrow, tabled on April 22, 2008, increased the small business threshold from $430,000 to $460,000, effective April 1, 2008. The threshold increased to $500,000 on April 1, 2009.
  
  
• **As announced by the Alberta government on September 21, 2006, (Energy Minister confirms end of Alberta Royalty Tax Credit Program) Alberta discontinued its ARTC and RCIT programs for corporations, individuals and trusts effective January 1, 2007. See Special Notice Vol. 5 No. 21, Discontinuance of Alberta Royalty Tax Credit (ARTC) and Royalty Credit for Individuals and Trusts (RCIT) Programs.

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Background

Corporate income tax has been levied by the province since the 1940s. All incorporated businesses with a permanent establishment (e.g., office, mine, farm, oil well, etc.) in Alberta at any time in a taxation year pay income tax on the portion of their taxable income allocated to Alberta. Corporate income tax revenue for 2007-08 is projected to be $3.1 billion.

The Alberta calculation of taxable income parallels the federal calculation, although taxpayers may claim different discretionary deductions such as capital cost allowances for federal and provincial purposes. The allocation of income among provinces is generally standardized across the country.

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Small Business Deduction

Canadian-controlled private corporations not in an associated group may claim a small business deduction on active business income (i.e., non-investment income) up to the small business threshold of $460,000 (see Announcements above). Canadian-controlled private corporations in an associated group share the maximum small business threshold. For more information about the small business deduction, see information circular CT-17, Alberta Small Business Deduction.

On September 20, 2006, the Alberta government announced, among other changes, that an increase in the small business threshold to $500,000 will be phased in by 2009. For more information, please read Government enhances corporate dividend tax credit and small business income threshold.

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Alberta Royalty Tax Deduction

Crown royalties are paid by companies to the provincial government for the right to extract natural resources owned by Albertans. Responding to federal resource tax changes that came into effect January 1, 2003, Alberta amended its Corporate Tax Act.

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Alberta Royalty Tax Credit (ARTC)

The Alberta Royalty Tax Credit (ARTC) was a royalty program administered through the income tax system. It returned a percentage of a specified amount of Alberta crown royalties paid in a year on conventional oil and gas production. Both the percentage, or credit rate, and the specified amount varied over time.

Most recently, the credit rate reflected fluctuations in quarterly oil and gas prices. Maximum benefits ranged from $500,000, calculated at 25 per cent of eligible royalties up to $2 million when the reference price exceeded $210, to $1.5 million or 75 per cent of eligible royalties when the price was $100 or less.

This program was discontinued effective January 1, 2007, as noted above.

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Insurance Corporations Tax

The Insurance Corporations Tax is payable by insurance companies for business transacted in Alberta during the year.  The rates are two per cent on premiums for life, accident and sickness insurance, and three per cent on premiums for other types of insurance.

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Alberta Scientific Research and Experimental Development (SR&ED) Tax Credit

Alberta's scientific research and experimental development tax credit program provides a refundable tax credit to corporations for SR&ED expenditures incurred in Alberta by the corporations.

For more information, see Information Circular SRED-1, the SR&ED Guide and related forms and Frequently Asked Questions about the SR&ED Tax Credit.

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