New Corporate Single Tax Return started in the 2008 Taxation Year.

September 23, 2008 by Dan White.

Single Administration of Ontario Corporate Tax

Printable version

Transition to a Single Corporate Tax Return

The governments of Canada and Ontario signed a Memorandum of Agreement on October 6, 2006, that will lead to the Canada Revenue Agency (CRA) administering certain Ontario corporate taxes, if the necessary legislation is enacted.

• The CRA will administer the following corporate taxes on behalf of Ontario:
  • Corporate Income Tax
  • Corporate Minimum Tax
  • Capital Tax
  • Special Additional Tax on Life Insurers
• Ontario will continue to administer:
  • Mining Tax
  • Insurance Premiums Tax
  • Electricity Act payments-in-lieu of federal and Ontario corporate taxes
• The CRA will provide the same services to businesses that it currently provides to other provinces under the Tax Collection Agreements. These services include payments processing, returns processing, verification, appeals, rulings, and the collection of accounts receivable.
• Ontario businesses will benefit from one form, one set of rules, one audit and one appeals process.
• The single administration will take effect for taxation years ending after December 31, 2008. This means:
  • Corporate taxpayers will start making blended instalment payments to the CRA in February 2008.
  • Corporate taxpayers will start filing a single T2 Corporate Tax return with the CRA for taxation years ending after December 31, 2008.
• The Ontario Ministry of Revenue will retain responsibility for processing CT23 returns and related matters for tax years ending up to December 31, 2008. The CRA will be responsible for all administrative matters relating to T2 returns for taxation years ending after December 31, 2008.
• The CRA’s administration for Ontario will be similar to federal administration of other provinces’ corporate income tax.
  • The administrative policies and procedures of the CRA will apply to the taxes administered on behalf of the province; and
  • Ontario will harmonize with the federal definition of taxable income
• The CRA and the Ontario Ministry of Revenue are making transition arrangements to ensure that corporations experience a smooth transition. Corporations will be informed of these arrangements once they are finalized.

Early Integration of Corporations Income Tax Return (T2) and Corporations Tax and Annual Return (CT23) Audits and Related Services

• The CRA and the Ontario Ministry of Revenue are also making arrangements to transfer responsibility for the audit of CT23 returns to the CRA before 2009. This means the CRA will audit both the CT23 and the T2 returns in one audit visit. The Ontario Ministry of Revenue will be responsible for processing CT23 reassessments arising from these audits. The start date for the integration of audits is dependent upon the conclusion of human resources and transition agreements, but both organizations are committed to this early improvement for taxpayers.
• To ensure a smooth transition for taxpayers to a single audit, the CRA and Ontario Ministry of Revenue are also discussing the early transfer of activities related to a single audit, such as objections and appeals, interpretations and enquiry services.
• Corporations will be fully informed of transition plans and how they will affect them as the agreements are concluded.

Ontario Legislation

• On December 13, 2006, Ontario tabled the Strengthening Business through a Simpler Tax System Act (Bill 174). If enacted, Bill 174 would implement the Taxation Act, 2006, effective for taxation years ending after 2008. The legislation provides for federal administration of certain Ontario corporate taxes and consolidates into a single statute Ontario’s personal income tax and the corporate taxes that will be administered by the CRA.
• The corporate tax provisions in the Taxation Act, 2006:
  • Provide for CRA administration of Ontario’s corporate income tax, corporate minimum tax, capital tax, and special additional tax on life insurers;
  • Adopt the federal definition of taxable income, as well as federal administration provisions, including payments, collections, and appeals;
  • Continue the resource allowance through a tax credit/debit mechanism;
  • Maintain the current 14% general tax rate, manufacturing and processing credit, small business deduction, surtax, and refundable tax credits;
  • Include a tax credit/debit mechanism for transitioning to federal tax pools; and
  • Harmonize with the federal large corporations tax (LCT) base for non-financial institutions.

The Legislative Assembly of Ontario web site provides access to Bill 174 at the following link: http://www.ontla.on.ca/web/bills/bills_detail.do?locale=en&BillID=522

The Ontario Budget introduced in March 2007 proposes additional measures to further support corporate income tax base harmonization and tax simplification. Highlights on Corporate Tax in the March 2007 Budget can be viewed at (http://www.fin.gov.on.ca/english/tax/notices/ct/6020.html). Detailed information on Corporate Tax Simplification and Harmonization can be found in Chapter III of the Ontario Budget 2007 (http://ontariobudget.ca/english/chpt3.html#4).

Information about Transition

Regular updates on the status of the CRA’s single administration of Ontario’s corporate income tax will be posted on the CRA web site at http://www.cra-arc.gc.ca/whatsnew/items/ctao-e.html and on the Ontario Ministry of Revenue web site at: http://www.fin.gov.on.ca.

Posted in Tax Topics | Print | No Comments »