T2 Corporation – Income Tax Guide

2020

T4012(E) Rev. 20
Is this guide for you?
In this guide, we give you basic information on how to this return to report provincial and/or territorial income
complete the T2 Corporation Income Tax Return. This taxes and credits. Corporations with a permanent
return is used to calculate federal income tax and credits. establishment in Quebec or Alberta must file a separate
Corporations that have a permanent establishment in any provincial return.
province or territory other than Quebec or Alberta also use

Our publications and personalized correspondence are available

in braille, large print, etext, or MP3 for those who have a visual
impairment. For more information, go to canada.ca/cra-multiple
-formats or call 1-800-959-5525. If you are outside Canada and
the United States, call us at 613-940-8497. We only accept collect
calls initiated by telephone operators. After your call is accepted
by an automated response, you may hear a beep and experience
a normal connection delay.

This guide uses plain language to explain the most common tax situations. It is provided for information only and does not
replace the law.
La version française de ce guide est intitulée Guide T2 – Déclaration de revenus des sociétés.
Unless otherwise stated, all legislative references are to the Income Tax Act and the Income Tax Regulations.

canada.ca/taxes
What’s new?
2020 provincial and territorial budgets, Schedules 125 and 1 and COVID-19
and federal updates programs
New items in this guide are outlined in colour. These Use Schedule 125, Income Statement Information, and
include changes introduced in the 2020 provincial or Schedule 1, Net Income (Loss) for Income Tax Purposes, to
territorial budgets, or as a result of Canada’s COVID-19 report income from the COVID-19 programs. See pages 26
Economic Response Plan or the Fall Economic Statement. and 35.
This guide may contain changes that had not yet become
law at the time of publishing. Capital cost allowance
An extension of capital cost allowance (CCA) classes 54
Filing and payment deadlines and 55 to used vehicles has been announced. See page 40.
For information on extended deadlines for filing and
The Government has proposed a temporary enhanced
payment due to COVID-19, go to canada.ca/en/revenue
first-year CCA of 100% for eligible new and used fully
-agency/campaigns/covid-19-update/covid-19-filing
electric or hydrogen powered automotive equipment and
-payment-dates.
vehicles that currently do not benefit from the accelerated
rate provided by classes 54 and 55. These vehicles and
Other time limits equipment would be included in new class 56. See page 41.
Go to canada.ca/en/revenue-agency/services/covid-19
-ministerial-orders for information on special measures Flow-through shares
that apply to the following:
The Government has proposed extending by 12 months the
■ normal reassessment period and reassessments beyond timelines for spending the capital that flow-through share
that period. See page 16 issuers raise through these shares. It has also proposed to
apply Part XII.6 tax as if certain expenditures were incurred
■ extension for filing an objection. See page 18
up to one year earlier than the date they were actually
■ scientific research and experimental development. See incurred and to extend the filing and payment deadline for
pages 56 and 78 Part XII.6 tax by one year. See page 54.

Wage subsidy program Tax deferred cooperative shares

The following wage subsidies were set up as financial Under proposed changes, the tax deferral that applies to
support during the COVID-19 pandemic. They are taxable. patronage dividends paid by an eligible agricultural
You have to report the total amount as income in the year cooperative to its members in the form of eligible shares
in which you received the subsidy. issued before 2021 will be extended to eligible shares issued
before 2026. See page 55.
Canada emergency wage subsidy (CEWS) – The CEWS
provides a subsidy equal to 75% of the eligible
remuneration paid by an eligible employer, up to a Canadian journalism labour tax credit
maximum of $847 per week for each eligible employee. For Retroactive to January 1, 2019, changes to the Canadian
more information, go to canada.ca/en/revenue-agency journalism labour tax credit have been announced. See
/services/subsidy/emergency-wage-subsidy. page 125.
Temporary 10% wage subsidy for employers – This
subsidy is a three-month measure that allows eligible Lower rate of Prince Edward Island
employers to reduce the amount of payroll deductions they corporation income tax
must remit to the Canada Revenue Agency (CRA). For
more information, go to canada.ca/temporary-wage Effective January 1, 2021, the Prince Edward Island lower
-subsidy. rate of corporation income tax decreases from 3% to 2%. See
page 93.
For information on other supports that are part of Canada’s
COVID-19 Economic Response Plan, go to canada.ca/en
/department-finance/economic-response-plan. Nova Scotia corporation income tax
rates
Other temporary taxable benefits Effective April 1, 2020, the lower rate of Nova Scotia
You may have received federal, provincial, or territorial corporation income tax decreases from 3% to 2.5% and the
government assistance in the form of grants. This type of higher rate decreases from 16% to 14%. See page 93.
income is taxable and will either be included in income or,
if you elect, reduce your expenses. You may also have Nova Scotia venture capital tax credit
received a government loan. The loan itself is not taxable;
The maximum annual eligible investment is $500,000. See
however, any part of the loan that is forgivable is taxable in
page 94.
the year in which the loan is received.

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Nova Scotia digital media tax credit Manitoba cultural industries printing
This credit, which was scheduled to end December 31, 2020, tax credit
is extended five years to December 31, 2025. See page 95. This credit, which was scheduled to end December 31, 2020,
has been extended one year to December 31, 2021. See
Nova Scotia digital animation tax page 111.
credit
This credit, which was scheduled to end June 30, 2020, is
Manitoba film and video production tax
extended five-and-a-half years to December 31, 2025. See credit
page 95. A new Manitoba Production Company Bonus of 8% is
added to the 30% cost-of-production credit, increasing the
Ontario extended deadlines and other total cost-of-production credit to 38%. This applies to
measures due to COVID-19 productions that start principal photography after
May 31, 2020. See page 112.
Due to delays resulting from COVID-19, Ontario has made
legislative amendments and is introducing regulatory
amendments to temporarily extend some timelines and
Manitoba rental housing construction
amend some requirements for the following refundable tax credit
cultural media tax credits: The minister responsible for this credit is the minister
■ film and television tax credit. See page 102. appointed to administer the Manitoba Housing and
Renewal Corporation Act. It was previously the minister of
■ production services tax credit. See page 103. Housing and Community Development. See page 113.
■ interactive digital media tax credit. See page 104.
■ book publishing tax credit
Manitoba community enterprise
development tax credit
Ontario has extended the reporting period to claim an
Ontario research and development tax credit. This parallels This credit, which was scheduled to end December 31, 2020,
the extension of the reporting deadlines for the federal has been extended one year to December 31, 2021. See
credit. page 113.

Ontario production services tax credit Lower rate of Saskatchewan

Retroactive to June 4, 2015, eligible service contract corporation income tax
expenditures included in determining a corporation’s Effective October 1, 2020, the Saskatchewan lower rate of
expenditure limit must relate to remuneration paid by the corporation income tax temporarily decreases from 2%
corporation, rather than to salary and wages paid to to 0%. It will be restored to 1% effective July 1, 2022, and
Ontario‑based individuals. See page 103. to 2% effective July 1, 2023. See page 113.

Ontario regional opportunities British Columbia credit extension

investment tax credit The deadline to claim the following tax credits was
A new 10% refundable income tax credit is introduced for extended due to COVID-19:
capital investments. A Canadian-controlled private ■ scientific research and experimental development tax
corporation that invests in capital property that becomes credit
available for use on or after March 25, 2020, in specified
regions of Ontario is eligible for the tax credit. See page 107. ■ film and television tax credit
■ productions services tax credit
Manitoba extended deadlines
■ mining exploration tax credit
Consistent with changes to the federal Income Tax Act,
Manitoba extended deadlines for filing documents relating ■ book publishing tax credit
to certain tax credits, objections, appeals and assessments. ■ training tax credit
■ interactive digital media tax credit
Manitoba manufacturing investment
tax credit For more information, go to www2.gov.bc.ca/gov/content
/taxes/tax-changes/whats-new/income-taxes.
This credit, which was scheduled to end December 31, 2020,
has been made permanent. See page 108.

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British Columbia farmers’ food Yukon manufacturing and processing
donation tax credit profits tax credit
This credit, which was scheduled to end December 31, 2020, Effective January 1, 2021, the small business increment
has been extended three years to December 31, 2023. See decreases from 0.5% to 0%. See page 123.
page 116.
Yukon carbon rebate
British Columbia film and television CCA class 54 and class 55 assets have been added to the list
tax credit of eligible assets under the program for non-mining
For tax years starting on or after February 19, 2020, the businesses. See page 123.
filing deadline to claim this credit is now 18 months after
the end of a tax year, reduced from 36 months. See Yukon small business investment tax
page 117. credit
Starting in 2020, not just small, but also medium-sized
British Columbia production services businesses will be allowed to raise money under this
tax credit program. The credit will be renamed the “Yukon business
For tax years starting on or after February 19, 2020, the investment tax credit.” The amount of money a business
filing deadline to claim this credit is now 18 months after can raise in a year will be increased.
the end of a tax year, reduced from 36 months. Effective
July 1, 2020, corporations intending to claim this credit Lower rate of Northwest Territories
must notify Creative BC of their intent within 60 days of corporation income tax
first incurring an accredited BC labour expenditure for the
production. Creative BC must receive this notice before it Effective January 1, 2021, the Northwest Territories lower
issues an accreditation certificate. See page 118. rate of corporation income tax decreases from 4% to 2%. See
page 123.
British Columbia training tax credit
This credit, which was scheduled to end December 31, 2019,
has been extended three years to December 31, 2022. See
page 120.

Lower rate of Yukon corporation

income tax
Effective January 1, 2021, the lower rate of Yukon
corporation income tax decreases from 2% to 0%. See
page 122.

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Table of contents*
Page Page
Before you start ................................................................... 7 Chapter 8 – Page 9 of the T2 return ................................. 82
Summary of tax and credits ............................................... 84
Chapter 1 – Page 1 of the T2 return.................................. 19
Federal tax ............................................................................ 84
Identification ........................................................................ 19
Provincial and territorial tax .............................................. 87
Chapter 2 – Page 2 of the T2 return.................................. 26 Other credits ........................................................................ 124
Attachments ......................................................................... 26 Refund or payment ............................................................. 126
Information schedules and forms ...................................... 27 Payment of balance owing ................................................. 127
Calculation schedules ......................................................... 33 Direct deposit request ......................................................... 127
Mandatory electronic filing for tax preparers ................. 127
Chapter 3 – Page 3 of the T2 return.................................. 34 Certification ......................................................................... 127
Attachments ......................................................................... 35 Language of correspondence ............................................. 128
Additional information ....................................................... 35
Calculating net income or loss ........................................... 35 Related forms and publications ...................................... 129
Losses .................................................................................... 56 List of federal and provincial or territorial
How to complete Schedule 4, Corporation Loss corporation schedules and forms .................................. 129
Continuity and Application............................................ 57
Digital services ................................................................... 133
Taxable income .................................................................... 60
Handling business taxes online ......................................... 133
Chapter 4 – Page 4 of the T2 return.................................. 66 Electronic payments............................................................ 133
Small business deduction ................................................... 66
For more information ........................................................ 134
Chapter 5 – Page 5 of the T2 return.................................. 70
What if you need help?....................................................... 134
General tax reduction .......................................................... 70
Direct deposit....................................................................... 134
Chapter 6 – Pages 6 and 7 of the T2 return ..................... 71 Forms and publications ...................................................... 134
Refundable portion of Part I tax ........................................ 71 Electronic mailing lists ....................................................... 134
Refundable dividend tax on hand ..................................... 71 Teletypewriter (TTY) users ................................................ 134
Dividend refund .................................................................. 72 Service complaints .............................................................. 134
Formal disputes (objections and appeals)........................ 134
Chapter 7 – Page 8 of the T2 return.................................. 74 Reprisal complaint .............................................................. 134
Part I tax ................................................................................ 74 Due dates .............................................................................. 134
Non-resident corporation enquiries ................................. 134
Index ..................................................................................... 136

* For more detailed content listings, see the first page of each chapter.

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Before you start
Page Page
References in this guide .................................................... 8 Partnerships – Limiting deferral of corporation tax ....... 12
AgriStability and AgriInvest programs .......................... 8 Penalties ............................................................................... 13
What happens if you file your return late? ...................... 13
Our service pledge .............................................................. 8
Non-resident corporations ............................................. 13
Who has to file a T2 return? .............................................. 8 Large corporations .......................................................... 13
Resident corporations ......................................................... 8 What happens if you do not comply with mandatory
Non-resident corporations ................................................. 8 Internet filing?.................................................................. 14
Dispositions of taxable Canadian property What happens if you do not report income? ................... 14
(certificates of compliance) ......................................... 8 False statements or omissions ........................................... 14
Non-resident corporations claiming treaty Misrepresentation in tax matters by a third party .......... 14
exemption ...................................................................... 8 Other penalties .................................................................... 14
Rental income from Canada ........................................... 9 Cancel or waive penalties or interest................................ 14
Services rendered in Canada (withholding amount) .. 9 Voluntary Disclosures Program ........................................ 15
How do you file your return? ........................................... 9 Information reporting of tax avoidance
Using tax preparation software ......................................... 9 transactions ...................................................................... 15
T2 Auto-fill ........................................................................ 9 Country-by-country reporting .......................................... 15
Mandatory Internet filing ............................................... 9
What happens after you have filed your return? .......... 15
Corporation Internet Filing ............................................ 10
Enquiries service ................................................................. 16
Filing without a web access code ................................... 10
North American Industry Classification System When can we reassess your return? ................................ 16
(NAICS) codes .............................................................. 10 Normal reassessment period ............................................. 16
Using the returns available on Canada.ca ........................ 10 Extended reassessment period .......................................... 16
T2 Corporation Income Tax Return............................... 10 Non-resident non-arm’s length person ........................ 16
T2 Short Return ................................................................ 10 Provincial income reallocation ...................................... 17
Requirements for information and compliance
When do you have to file your return? ........................... 11
orders ............................................................................ 17
Re-appropriation of T2 statute-barred credits ................. 11
Unlimited reassessment period ......................................... 17
Where do you file your paper return? ............................. 11 Sale or disposition of real estate .................................... 17
Film and media tax credits ................................................. 11 How to request a reassessment ......................................... 17
When and how do corporations pay income tax? ......... 11 How to register a formal dispute ..................................... 18
Instalment due dates ........................................................... 12 Disputing loss determinations .......................................... 18
Balance-due day ................................................................... 12
Keeping records .................................................................. 18

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References in this guide A non-resident corporation also has to file a T2 return in a
number of situations, including:
All legislative references are to the Income Tax Act and the
Income Tax Regulations of Canada, unless stated otherwise. ■ when it has filed Form NR6, Undertaking to File an
This guide does not replace the Income Tax Act or its Income Tax Return by a Non-Resident Receiving Rent
regulations. from Real or Immovable Property or Receiving a Timber
Royalty, to pay Part I tax on the net amount of timber
We also refer to information circulars (ICs) and
royalty income or rental income from real property
interpretation bulletins (ITs) that we publish to give you
under subsection 216(4) for the current year and we
more technical information. A new series of technical
approved it
publications, called the income tax folios, is progressively
replacing the interpretation bulletins. This process is taking ■ when it has filed Form T1288, Application by a
place over several years. To be notified of new or updated Non-Resident of Canada (Corporation) for a Reduction
income tax folios, subscribe to our electronic mailing list in the Amount of Non-Resident Tax Required to Be
at canada.ca/cra-email-lists. Withheld on Income Earned from Acting in a Film or
Video Production, to pay Part I tax on the net amount of
Many of our publications, including forms, schedules, ICs,
acting services under subsection 216.1(1) for the current
ITs, and folios are available at canada.ca/cra-forms
year and we approved it
-publications. A table at the end of this guide lists forms by
number. Even if neither of these requirements applies, a
non-resident corporation may still want to file a return if
AgriStability and AgriInvest programs any of the following situations apply:

The CRA is not involved in administering the AgriStability ■ when it wants to claim a refund
and AgriInvest programs for corporations. For more ■ when it wants to elect to pay Part I tax on the net amount
information on these programs, go to agr.gc.ca/agristability of timber royalty income or rental income from real
and agr.gc.ca/agriinvest. property under subsection 216(1) for the current year
■ when it wants to elect to pay Part I tax on the net amount
Our service pledge of acting services under subsection 216.1(1) for the
The CRA will process 95% of T2 corporation income tax current year
returns filed electronically within 45 days.
Note
Non-resident corporations must file their T2 return,
Who has to file a T2 return? schedules, and the General Index of Financial
Resident corporations Information in Canadian funds only. They are not
eligible to file in a functional currency per section 261.
All corporations—including non-profit organizations,
tax-exempt corporations, and inactive corporations—have If you have questions about non-resident returns, go
to file a T2 return for every tax year, even if there is no tax to canada.ca/taxes-international-business.
payable. The only exceptions to this rule are tax-exempt
Crown corporations, Hutterite colonies, and corporations Dispositions of taxable Canadian property (certificates
that were registered charities throughout the year. of compliance)
A non-resident corporation that disposes of taxable
Non-resident corporations Canadian property must notify the CRA and may be
required to get a certificate of compliance under
A non-resident corporation has to file a T2 return if, at any
section 116. For details, see Information Circular IC72-17,
time in the year, one of the following situations applies:
Procedures Concerning the Disposition of Taxable
■ it carried on business in Canada Canadian Property by Non-residents of Canada –
Section 116.
■ it had a taxable capital gain
A non-resident corporation that has a taxable capital gain
■ it disposed of taxable Canadian property, unless the or disposed of taxable Canadian property, including a
disposition meets all the criteria listed below in the corporation that may have received a certificate of
section “Dispositions of taxable Canadian property compliance from the CRA, has to file a return, unless the
(certificates of compliance)” disposition meets all the following criteria:
This requirement applies even if the corporation claims that ■ no tax is payable under Part I for the tax year
any profits or gains realized are exempt from Canadian
income tax due to the provisions of a tax treaty. ■ the corporation is not liable to pay any amount under the
Act for any previous tax year (other than an amount
Business is defined in subsection 248(1) and the extended covered by adequate security under section 116 or 220)
meaning of carrying on business (in Canada) is defined in
section 253. ■ each taxable Canadian property disposed of in the tax
year is one of the following:
The references to taxable capital gain do not include any
gain resulting from the disposition of shares that are listed – excluded property under section 116
on a designated stock exchange (other than taxable
Canadian property).

8 canada.ca/taxes
 – property for which a certificate was issued under receives for the acting services of the actor in a film or video
section 116 production in Canada. This withholding tax represents the
final tax liability for these acting services. The corporation
Taxable Canadian property excludes shares of corporations,
may elect not to be taxed under Part XIII at the 23% rate
and certain other interests, that, during the 60-month
by filing a return of income under Part I for the year. A
period ending at the time of determination, do not derive
non-resident corporation that has received a reduction
their value principally from real or immovable property
(filed Form T1288) of this withholding tax from the CRA
situated in Canada (including Canadian resource property
still has to file a return.
and timber resource property).
Note
Non-resident corporations claiming treaty exemption Send your Canadian T2 return that you elected to file
If you carried on a treaty-protected business in Canada, under section 216.1 to the tax services office that
had a taxable capital gain, or disposed of a taxable processed application Form T1288 and issued the
Canadian property that was treaty-protected property reduction. Write “Actor’s election” at the top of page 1 of
during the year (as defined in section 248), you have to the return.
complete all of the following lines on your return: Reference
Section 153
■ lines 001 to 082 of page 1
■ lines 164, 170, and 171 of page 2 How do you file your return?
■ lines 270 to 289 (except line 271) of page 3 Using tax preparation software
■ lines 780 to 990, if applicable, of page 9 Over 90% of corporations file their return electronically. To
do so, you must use CRA-certified software. We certify
For each of the questions asked at lines 164, 170, and 171
commercial software to ensure that it meets our
on page 2 of the return to which your response is yes,
specifications. To find a list of certified software, visit
complete the appropriate form or schedule and attach it to
Canada.ca and search for “certified software corporations.”
your return. In addition, you have to complete Schedule 91,
Information Concerning Claims for Treaty-Based A return prepared by certified software can then be
Exemptions. electronically filed using:
■ the CRA’s Corporation Internet Filing service
Rental income from Canada
Rental income from Canada is subject to a 25% withholding ■ My Business Account, at canada.ca/my-cra-business
on the gross rental income under Part XIII, unless the rate is -account, if you are a business owner
reduced by a reciprocal tax treaty. A non-resident
■ Represent a Client, at canada.ca/taxes-representatives, if
corporation can elect to be taxed under Part I on its net
you are an authorized representative or employee
rental income by filing a T2 return under subsection 216(1)
within two years of the end of the tax year. If the If you cannot file electronically, you can print the T2 Bar
non-resident corporation has filed Form NR6, Undertaking Code Return and mail it to the CRA.
to File an Income Tax Return by a Non-Resident Receiving
Rent from Real or Immovable Property or Receiving a Note
Timber Royalty, it must file a T2 return under Do not send the T2 bar code by fax. We do not accept it.
subsection 216(4) within six months of the tax year end. For If you file through an electronic transmitter, you have to
more information, see IT393R2 – Election Re: Tax on Rents authorize the transmitter by completing a T183 CORP,
and Timber Royalties Non-Residents. Information Return for Corporations Filing Electronically,
Note for each tax year. Do not send this form to us, but keep it in
If you file a T2 return under section 216, include only case we ask for it later.
rental income. If you have any other income, file a
second T2 return. T2 Auto-fill
T2 Auto-fill is a secure service that lets corporations and
Reference
Guide T4144, Income Tax Guide for Electing Under Section 216
authorized representatives download information from
the CRA to their tax preparation software. Using this
service will ensure that certain return and account balances
Services rendered in Canada (withholding amount)
will match CRA’s data. For more information on what
A non-resident corporation is subject to a 15% withholding
T2 Auto-fill delivers, go to canada.ca/auto-fill-my
under Regulation 105 on any fee or other amount paid to it
-t2-return.
for services rendered in Canada (regardless of whether the
services are provided by an employee of the corporation or This service is not mandatory for certified software
are sub-contracted to another party). This withholding is products. Some include it and others do not. If you have
held on account of any potential tax liability that the questions on the availability of the service, contact the
corporation may have to Canada. The corporation’s tax software product company.
liability is determined when its Canadian income tax return
is assessed. Mandatory Internet filing
A corporation related to a non-resident actor is subject to All corporations with annual gross revenue of more than
a 23% withholding tax under Part XIII on all amounts it $1 million have to file their T2 return electronically, except

canada.ca/taxes 9
for insurance corporations, non-resident corporations, provided by NAICS codes for economic analysis and fiscal
corporations reporting in functional currency, and policy responses.
corporations that are exempt from tax payable under
The integration of NAICS codes into T2 commercial tax
section 149 of the Income Tax Act. Corporations are subject
preparation software packages means that corporations
to a penalty for non-compliant returns. For more
have to pick their main revenue-generating business
information see page 14.
activity directly from a drop-down list or a simple search.
Active corporations that file their T2 returns either by
Corporation Internet Filing
Internet or on paper using 2D bar codes must choose the
Most corporations, including non-resident corporations, appropriate codes to describe their main
insurance corporations, and corporations claiming a revenue-generating business activity.
scientific research and experimental development (SR&ED)
amount, can file their return electronically. Corporations using the return available on our website do
not have to enter a NAICS code.
You must use CRA-approved software that has been
certified for Corporation Internet Filing. By filing Avoid errors
electronically, you will receive immediate confirmation that It is important that you select the most accurate business
the CRA has received your return, enjoy faster processing activity the first time, since the first year’s code is carried
and refunds, save on mailing costs, and help the forward to following years, allowing for a simple validation
environment by using less paper. of the description when there is no change in the main
business activity.
The T2 Attach-a-doc service allows corporations to attach
supporting documentation such as certificates when they If you do not select the business activity, problems and
file their T2 return or within 24 hours of filing. This service errors will result when you prepare the T2 return to be
is not mandatory for certified software products. Some transmitted electronically or printed in bar-coded format.
include it and others do not. If you have questions on the
If you have any questions on selecting NAICS codes to
availability of the service, contact the software product
describe your corporation’s main revenue-generating
company.
business activity when filing your T2 return, call the
If you are filing your T2 return electronically, and you Business Enquiries line at 1-800-959-5525.
cannot use the T2 Attach-a-doc service to file your
supporting documents with your return, send them to your Using the returns available on Canada.ca
tax centre (see “Where do you file your paper return” on
Electronic filing of the return results in the quickest
page 11).
processing time, with 95% of notices of assessment issued
When sending paper documents, clearly identify your within six weeks. For information on processing times, go
corporation’s name, business number, and the applicable to canada.ca/cra-processing-times.
tax year-end on the documents.
If you cannot file electronically, we have two types of
If you are filing an election that does not have a prescribed corporation return available for printing.
form or prescribed manner, include it with the notes to
T2 Corporation Income Tax Return
your financial statements on the General Index of Financial
The T2 Corporation Income Tax Return has nine pages.
Information (GIFI) to transmit the election electronically
Any corporation can use it.
with your return, unless otherwise stated on a T2-related
form. T2 Short Return
The T2 Short Return is two pages plus a Schedule 1, Net
For information on your eligibility, available software,
Income (Loss) for Income Tax Purposes, a Schedule 8,
and more, go to canada.ca/corporation-internet.
Capital Cost Allowance (CCA), and a Schedule 50,
Shareholder Information. The T2 Short Return is a simpler
Filing without a web access code version of the T2 Corporation Income Tax Return. Two
You can file corporation returns online without a categories of corporations are eligible to use this return:
web access code using “Transmit a return” through:
■ You can use this return if the corporation is a
■ My Business Account at canada.ca/my-cra-business Canadian-controlled private corporation (CCPC)
-account, if you are the business owner throughout the tax year and this year, it has either a nil
■ Represent a Client at canada.ca/taxes-representatives, if net income or a loss for income tax purposes.
you are an authorized representative or employee ■ You can also use this return if the corporation is exempt
from tax under section 149 (such as a non-profit
North American Industry Classification System (NAICS) organization).
codes
All certified tax preparation software for T2 returns uses In addition, the corporation must meet all of the following
self-identified NAICS codes. conditions to use this return:

NAICS codes are hierarchical numerical codes designed to ■ it has a permanent establishment in only one province or
provide common definitions and descriptions of our territory (see page 88)
industries and business activities. NAICS codes are up to ■ it is not claiming any refundable tax credits (other than a
six digits long. The Government of Canada as well as the refund of instalments it paid)
governments of the provinces and territories use the data

10 canada.ca/taxes
■ it did not receive or pay out any taxable dividends supporting documents. Complete a separate form for each
unique business number.
■ it is reporting in Canadian currency
You can also use the “Enquiries service” in My Business
■ it does not have an Ontario transitional tax debit
Account at canada.ca/my-cra-business-account. You will
■ it does not have an amount calculated under section 34.2 have to provide the same details requested on Form RC431
in your enquiry. Keep the requested documents in case we
If the corporation does not fit into either of the above ask for them later.
categories or does not meet all of the above conditions, file
a regular T2 return. For more information, see the form or go to canada.ca
/t2-reappropriation.
When do you have to file your return?
For information on extended filing deadlines due to
Where do you file your paper return?
COVID-19, go to canada.ca/en/revenue-agency/campaigns The tax centres in Winnipeg, Sudbury, and Summerside
/covid-19-update/covid-19-filing-payment-dates. process corporation tax returns. To find out where to mail
your return, go to canada.ca/cra-tso-contact-information or
File your return within six months of the end of each tax call 1-800-959-5525.
year. The tax year of a corporation is its fiscal period.
When the corporation’s tax year ends on the last day of a Film and media tax credits
month, file the return by the last day of the sixth month Film Services Units at the CRA provide services to
after the end of the tax year. corporations that may be entitled to receive the Canadian
When the last day of the tax year is not the last day of a film or video production tax credit, the film or video
month, file the return by the same day of the sixth month production services tax credit, or other available provincial
after the end of the tax year. or media tax credits. For more information, including the
location and contact number for the Film Services Unit
The CRA offers a mobile app that lets you create reminders serving your area, go to canada.ca/taxes-film.
of dates that are important for your business. For more
information on the CRA Business Tax Reminders app, go
to canada.ca/cra-mobileapps. When and how do corporations pay
income tax?
Examples For information on extended payment deadlines due to
COVID-19, go to canada.ca/en/revenue-agency/campaigns
Tax year-end Filing deadline /covid-19-update/covid-19-filing-payment-dates.
March 31 September 30
June 30 December 31 Corporations have to pay income tax in monthly or
August 31 February 28 quarterly instalments, unless the total of Part I, Part VI,
September 23 March 23 Part VI.1, and Part XIII.1 taxes payable for either the
October 2 April 2 previous year or the current year is $3,000 or less.
The balance of tax the corporation owes for a tax year is
When the filing due date falls on a Saturday, Sunday, or due within either two or three months of the end of that tax
public holiday recognized by the CRA, your return is year, depending on the circumstances of the corporation.
considered on time if we receive it or if it is postmarked on
Interest and penalties apply to late payments. To be on
or before the next business day. For information on public
time, you have to make instalment payments and other
holidays, go to canada.ca/cra-due-dates.
payments on or before the due date by using one of the
You must file your return on time. If you do not, we can several methods for making payments:
charge penalties on any return that was not sent by the
■ your financial institution’s online or telephone banking
filing due date. See page 13 for details.
services
Note
■ the CRA’s My Payment service at canada.ca/cra-my
You must file a return no later than three years after
-payment
the end of a tax year to receive a tax refund.
■ by using My Business Account and selecting “Calculate
Re-appropriation of T2 statute-barred credits instalment payments.” Once you have finished the
step-by-step process, you will be provided the option to
Under subsection 221.2(1), the minister of National
select a “Proceed to pay” button to pay instalments
Revenue may use discretion to re-appropriate
towards your account. Currently only available for
T2 statute-barred credits to an established debt on an
account associated with the same business number and business owners
administered by the CRA. ■ by pre-authorized debit using My Business Account
at canada.ca/my-cra-business-account
To request the re-appropriation of a T2 statute-barred
credit, send us a completed Form RC431, Request for ■ by credit card, PayPal or Interac e-transfer through one
Re-appropriation of T2 Statute-barred Credits, with all the of CRA’s third-party service providers

canada.ca/taxes 11
■ in person at a Canadian financial institution or, for a fee, – the total of the taxable incomes of all the associated
at a Canada Post retail outlet. To do so, you have to use a corporations for their last tax year ending in the
remittance form, which you can request online in previous calendar year does not exceed the total of
My Business Account at canada.ca/my-cra-business their business limits for those tax years (if the
-account corporation is associated with any other corporation
during the tax year)
Note
Remittance vouchers have a Quick Response (QR) code The business limit is provided at “Line 410 – Business
printed on them that contains all the information you limit” on page 68. For more information about allocating
need to pay with cash or debit at a Canada Post retail the business limit among associated corporations, see
outlet. “Schedule 23” on page 28.
For more information, go to canada.ca/payments or contact Note
your financial institution. For determining balance-due days, the taxable income
for the previous year of corporations and associated,
We consider the payment to have been made on the day we
subsidiary, and predecessor corporations means taxable
receive it, and not on the day you send it.
income before applying loss carrybacks.
When the due date falls on a Saturday, Sunday, or public
Special rules apply to determine the balance-due day of a
holiday recognized by the CRA, we consider your payment
new corporation formed after an amalgamation or of a
to be on time for calculating instalment interest and penalty
parent corporation after it receives the assets of a subsidiary
if we receive it on the next business day. For information on
corporation that is winding-up. For more information, go
public holidays, go to canada.ca/cra-due-dates.
to canada.ca/en/revenue-agency/services/tax/businesses
Note /topics/corporations/corporation-payments/paying-your
Sometimes, penalties and interest on late payments can -balance-corporation-tax or see Guide T7B–Corp,
be cancelled or waived. For more information, see Corporation Instalment Guide.
“Cancel or waive penalties or interest” on page 14. Reference
Sections 125 and 157
Instalment due dates
Instalment payments for Parts I, VI, VI.1, and XIII.1 taxes Partnerships – Limiting deferral of
are due on the last day of every complete month of a corporation tax
corporation’s tax year. The first payment is due one month Under section 34.2, a corporation may have to accrue
minus a day from the starting date of the corporation’s tax additional income in respect of a partnership (other than
year. The rest of the payments are due on the same day of dividends for which a deduction is available under
each month that follows. section 112 or 113), when the fiscal period of the
Eligible small-CCPCs can make quarterly instalment partnership begins in the corporation’s tax year and ends in
payments, instead of monthly ones. For more information, a following tax year. The corporation is then required to
see Guide T7B–Corp, Corporation Instalment Guide. accrue income under the adjusted stub period accrual
(ASPA) regime for the portion of the partnership’s fiscal
You can view your instalment due dates by using the period that falls in the corporation’s tax year (the stub
“Calculate instalment payments” service through: period). These rules do not affect a corporation’s capital
■ My Business Account at canada.ca/my-cra-business dividend account which is to be determined without
-account, if you are the business owner reference to section 34.2.

■ Represent a Client at canada.ca/taxes-representatives, if Since the ASPA income inclusion in a tax year is an
you are an authorized representative or employee estimate of the stub period income, the corporation is
entitled to claim that same amount in the immediately
following tax year. Both the ASPA income inclusion and
Balance-due day the treatment of that same amount in the following year are
Generally, all corporation taxes (with the exception of subject to the characterization rules under
Part III and Part XII.6) are due two months after the end of subsection 34.2(5). They are deemed to have the same
the tax year. However, the tax is due three months after the character and be in the same proportions as the partnership
end of the tax year if the following conditions apply: income that they relate to. As such, the claim in the
immediately following tax year may be a deduction or a
■ the corporation is a CCPC throughout the tax year;
deemed allowable capital loss, whichever applies. A
■ the corporation is claiming the small business deduction corporation may have ASPA in respect of more than one
for the tax year, or was allowed the small business partnership and, in such cases, the ASPA rules apply to the
deduction in the previous tax year; and either of the corporation on a partnership-by-partnership basis.
following applies:
In general, a corporation (other than a professional
– the corporation’s taxable income for the previous tax corporation) has to include in its income for a tax year its
year does not exceed its business limit for that tax year ASPA for a partnership if all of the following apply:
(if the corporation is not associated with any other
■ the corporation has a significant interest in the
corporation during the tax year)
partnership at the end of the last fiscal period of the
partnership that ends in the tax year

12 canada.ca/taxes
■ another fiscal period of the partnership begins in the tax Penalties
year and ends after the tax year of the corporation
What happens if you file your return late?
■ at the end of the tax year, the corporation is entitled to a If you file your return late, a penalty applies. The penalty
share of an income, loss, taxable capital gain, or is 5% of the unpaid tax that is due on the filing deadline,
allowable capital loss of the partnership for the fiscal plus 1% of this unpaid tax for each complete month that
period referred to in the preceding bullet the return is late, up to a maximum of 12 months.
A corporation has a significant interest in a partnership if The corporation will be charged an even larger penalty if
the corporation, or the corporation together with affiliated we issued a demand to file the return under
or related parties, is entitled to more than 10% of the subsection 150(2) and if we assessed a failure to file penalty
partnership’s income or loss (or assets, net of liabilities, if for the corporation in any of the three previous tax years.
the partnership were to cease to exist). The penalty is 10% of the unpaid tax when the return was
These rules apply to any corporation (described above), due, plus 2% of this unpaid tax for each complete month
that is a member of a partnership, even if the partnership that the return is late, up to a maximum of 20 months.
has a member that is an individual or a professional References
corporation that is subject to the 1995 rules limiting deferral Subsections 162(1) and 162(2)
for unincorporated businesses.
The definition of adjusted stub period accrual in Non-resident corporations
subsection 34.2(1) gives the formulas for calculating a A non-resident corporation will be subject to a failure to file
corporation’s ASPA in respect of a partnership. The ASPA penalty equal to the greater of:
formula allows the corporation to designate two reductions. ■ $100
The first designation concerns qualified resource expenses
incurred by the partnership during the corporation’s stub ■ $25 for each complete day that the return is late, up to a
period. The second allows a corporate partner to make a maximum of 100 days
discretionary designation to reduce its ASPA to reflect its This penalty applies if the amount calculated is more than
knowledge of the actual partnership income for the stub the amount of penalty usually applied under
period. Once filed, the designations cannot be amended or subsections 162(1) and (2), as discussed above.
revoked. If the amount of the discretionary designation is
too high, creating an income shortfall, the corporation may Reference
Subsection 162(2.1)
be subject to an additional income inclusion. The additional
income inclusion may increase if the shortfall is above
a 25% threshold. Large corporations
A large corporation has to file the T2 Corporation Income
Under certain conditions, a corporation (other than a Tax Return and, if applicable, a Schedule 38, Part VI Tax on
professional corporation) that becomes a member of a Capital of Financial Institutions. If a corporation fails to file
partnership in a tax year may make a designation to these returns, in addition to any other penalty as applicable,
apportion its income from the partnership between two tax we will charge a penalty for each complete month that the
years: returns are late, up to a maximum of 40 months. The
■ the tax year in which the fiscal period of the partnership penalty will be the sum of the following amounts:
began ■ 0.0005% of the corporation’s taxable capital employed in
■ the tax year in which the fiscal period of the partnership Canada at the end of tax year
ends ■ 0.25% of the Part VI tax payable by the corporation
To calculate the income inclusion under section 34.2 and, if [before the deductions in subsection 190.1(3)]
applicable, the income shortfall adjustment and additional To identify the corporation as a large corporation, answer
amount under section 34.3, use Schedule 71, Income yes to the question at line 233 on page 2 of the return.
Inclusion for Corporations that Are Members of Single-Tier
Partnerships, or Schedule 72, Income Inclusion for Notes
Corporations that Are Members of Multi-Tier Partnerships. A corporation is a large corporation if the total taxable
These are worksheets and you do not have to file them with capital employed in Canada at the end of the tax year by
your return. To report the amounts, file a completed it and its related corporations is over $10 million.
Schedule 73, Income Inclusion Summary for Corporations To determine if the total taxable capital employed in
that Are Members of Partnerships, with your return. Canada of the corporation and its related corporations is
Note greater than $10 million use whichever one of the
Schedules 1, 6, and 7 are affected by the various rules in following schedules that applies:
section 34.2 and the amounts reported on Schedule 73 – Schedule 33, Taxable Capital Employed in Canada –
(as applicable). For example, the amount entered on Large Corporations
line 275 of Schedule 73 reporting the total taxable capital
gains under section 34.2 must also be entered on – Schedule 34, Taxable Capital Employed in Canada –
Schedule 6. Financial Institutions
References – Schedule 35, Taxable Capital Employed in Canada –
Sections 34.2, 34.3, and 249.1 Large Insurance Corporations

canada.ca/taxes 13
 A corporation with a permanent establishment in References
Newfoundland and Labrador that is a financial IC01-1, Third-Party Civil Penalties
Section 163.2
institution, as defined under provincial legislation, has
to file Schedule 305, Newfoundland and Labrador
Capital Tax on Financial Institutions. See Other penalties
“Newfoundland and Labrador capital tax on financial We can also charge penalties for late or incomplete
institutions” on page 91. instalment payments and for not providing information on
Reference
an authorized or prescribed form.
Section 235 The most common forms are:

What happens if you do not comply with ■ Form T106, Information Return of Non-Arm’s Length
Transactions With Non-Residents (see page 31)
mandatory Internet filing?
We will charge a $1,000 penalty for non-compliance if a ■ T5013 FIN, Partnership Financial Return and T5013 SUM,
corporation that is required to file electronically does not Information Slips Summary (see page 30)
comply with the requirement. ■ T5018 SUM, Summary of Contract Payments
Reference
Subsection 162(7.2)
■ Form T1134, Information Return Relating to Controlled
and Not-Controlled Foreign Affiliates, Form T1135,
Foreign Income Verification Statement, Form T1141,
What happens if you do not report income? Information Return in Respect of Contributions to
We will charge a penalty if a corporation does not report an Non-Resident Trusts, Arrangements or Entities, and
amount equal to or greater than $500 that is required to be Form T1142, Information Return in Respect of
included in computing its income on its return in a tax year Distributions from and Indebtedness to a Non-Resident
and any of the three previous tax years. Trust (see “Foreign Property” on page 31)
This penalty will not be applied if the corporation is liable ■ Form T661, Scientific Research and Experimental
under subsection 163(2) for the same unreported amount. Development (SR&ED) Expenditures Claim, Part 9,
Claim preparer information (see page 56)
The repeated failure to report income penalty is equal to the
lesser of: References
Sections 162 and 163.1
■ 10% of the amount you did not report on your return for
the tax year Cancel or waive penalties or interest
■ 50% of the difference between the understated tax The CRA administers legislation, commonly called
payable (and certain overstated refundable tax credits) taxpayer relief provisions, that allows the CRA discretion to
related to the amount you did not report and the amount cancel or waive penalties or interest when taxpayers cannot
of tax withheld related to the amount you did not report meet their tax obligations due to circumstances beyond
References their control.
Subsections 163(1) and 163(1.1)
The CRA’s discretion to grant relief is limited to any period
that ended within 10 calendar years before the year in
False statements or omissions which a request is made.
We will charge a penalty if a corporation, either knowingly
For penalties, the CRA will consider your request only if it
or under circumstances of gross negligence, makes a false
relates to a tax year or fiscal period ending in any of the
statement or omission on a return. The penalty is the
10 calendar years before the year in which you make your
greater of either $100 or 50% of the amount of understated
request. For example, your request made in 2021 must
tax.
relate to a penalty for a tax year or fiscal period ending
Reference in 2011 or later.
Subsection 163(2)
For interest on a balance owing for any tax year or fiscal
Note period, the CRA will consider only the amounts that
If a corporation is charged a penalty for making a false accrued during the 10 calendar years before the year in
statement or omission under subsection 163(2), the which you make your request. For example, your request
corporation cannot be charged a penalty on the same made in 2021 must relate to interest that accrued in 2011 or
amount for failing to report income under later.
subsection 163(1).
To make a request, fill out Form RC4288, Request for
Misrepresentation in tax matters by a Taxpayer Relief – Cancel or Waive Penalties or Interest. For
more information about relief from penalties or interest and
third party how to submit your request, go to canada.ca/taxpayer
We will charge a penalty if a person advises or helps -relief.
another person to file a false return or knowingly allows a
References
taxpayer to submit false tax information. Subsection 220(3.1)
IC07-1R, Taxpayer Relief Provisions

14 canada.ca/taxes
Voluntary Disclosures Program ■ the advisor or promoter has or had confidential
protection with respect to the transaction
The Voluntary Disclosures Program (VDP) gives you a
second chance to correct a tax return you previously filed ■ the taxpayer or the advisor or promoter (including any
or to file a return that you should have filed. This has to be non-arm’s length parties) has or had contractual
done before we start any enforcement action or protection for the transaction (other than as a result of
investigation against you. certain types of fees)
Applications are processed under one of the two programs: A reportable transaction does not include a transaction that
the limited program and the general program. is, or is part of, a series of transactions that includes the
acquisition of a tax shelter or issuance of a flow-through
The limited program limits the level of relief for share for which an information return has been filed with
corporations who intentionally avoided their tax the minister under subsection 237.1(7) or 66(12.68),
obligations. Under this program, corporations will not be respectively.
referred for criminal prosecution or charged gross
negligence penalties. However, they will be charged other Form RC312, Reportable Transaction Information Return,
must be filed on or before June 30 of the calendar year
penalties and interest as applicable.
following the calendar year in which the transaction first
The general program provides relief to corporations that became a reportable transaction for the person.
want to correct unintentional errors. Under this program If the RC312 is not filed as and when required, the
corporations will not be charged penalties and will not be reassessment period will be extended by three years after
referred for criminal prosecution related to the information the date, if any, that the information return will have been
being disclosed. The CRA will provide partial interest relief filed. A waiver for this extended reassessment period may
for the years preceding the three most recent years of be filed with the CRA within this additional three-year
returns required to be filed. period. The scope of an assessment, reassessment, or
For more details on the VDP, get the most recent version of additional assessment during the extended reassessment
period for a taxpayer’s tax year is limited to the extent that
Information Circular IC00-1, Voluntary Disclosures
it can reasonably be regarded as relating to the deduction,
Program, or go to canada.ca/taxes-voluntary-disclosures.
claim, or tax benefit.
If you want, you can discuss your situation first on a Failure to report could result in suspension of the tax
no-name or hypothetical basis. To speak with a CRA benefit, a penalty for failure to report, or both.
official, contact General Enquiries at 1-800-959-5525. For
complex technical reporting issues or questions, you will be File this return separately from your tax return. Before you
referred to a CRA official in a specialized area. This file it, make a copy for your records. Mail the original or
pre-disclosure discussion does not constitute acceptance amended return, and any related information to:
into the VDP anymore. Winnipeg Tax Centre
The process of making disclosures on a no-name basis has Data Assessment and Evaluation Programs
ended. Validation and Verification Section
Foreign Reporting Returns
66 Stapon Road
Information reporting of tax avoidance Winnipeg MB R3C 3M2
transactions Reference
Section 237.3
Taxpayers, advisors and promoters who engage in or who
are entitled to certain fees in relation to certain tax
avoidance transactions are subject to reporting Country-by-country reporting
requirements. Country-by-country reporting applies to multinational
Also, under provincial legislation: enterprise groups that have a total consolidated group
revenue of €750 million or more, as reflected in their
■ Ontario corporations are subject to the same consolidated financial statements in the immediately
requirements for reportable transactions entered into preceding fiscal year.
after May 1, 2014, or reportable transactions that are part
of a series of transactions completed after May 1, 2014 If the ultimate parent entity or surrogate parent entity of
such a multinational enterprise group is resident in
■ British Columbia corporations are subject to the same Canada, it has to file Form RC4649, Country-by-Country
requirements for reportable transactions entered into Report, with the CRA. This has to be done no later than
after February 20, 2018, or reportable transactions that 12 months after the end of the reporting fiscal year.
are part of a series of transactions completed after
February 20, 2018 You can file Form RC4649 electronically with CRA certified
software. File the form separately from your tax return.
A transaction is reportable if it is an avoidance transaction Failure to file this form could result in a penalty. The form
as defined in subsection 245(3) of the federal Act for is also available on our website. Before you send the
purposes of the general anti-avoidance rule (GAAR) and completed form, make a copy for your records.
has at least two of the following three characteristics:
■ the advisor or promoter has or had an entitlement to
certain types of fees

canada.ca/taxes 15
If you file a paper version of the form, mail the original or For information on extended time limits that apply to
amended form, and any related information to: different reassessment periods due to COVID-19, go to
canada.ca/en/revenue-agency/services/covid-19
The Canada Revenue Agency
-ministerial-orders and select Explanatory Note: Time
International and Large Business Directorate
Limits and Other Periods Act – Income Tax provisions.
International Tax Division
344 Slater Street
6th floor Normal reassessment period
Ottawa ON K1A 0L5 We can usually reassess a return for a tax year:
For more information, see Guide RC4651, Guidance on ■ within three years of the date we sent the original notice
Country-by-Country Reporting in Canada, and of assessment for the tax year, if the corporation was a
Form RC4649. CCPC at the end of the year
References ■ within four years of the date we sent the original notice
Sections 162 and 233.8 of assessment for the tax year, if the corporation was not
a CCPC at the end of the year
What happens after you have filed
your return? Extended reassessment period
After we receive your return, we send it to Corporation The normal reassessment period can be extended for an
Services of the responsible tax centre for processing. To find extra three years for several reasons, including any of the
your tax centre, go to canada.ca/cra-tso-contact following:
-information. ■ if you want to carry back a loss or credit from a later
After we assess your return: tax year

■ we send an email notification that there is mail for you to ■ when a non-arm’s length transaction involving the
view in your secure online account, if you registered to corporation and a non-resident affects the corporation’s
receive email notifications through tax
My Business Account at canada.ca/my-cra-business ■ if the corporation pays an amount or receives a refund of
-account, or foreign income or profits tax
■ we mail a notice of assessment ■ when a reassessment of another taxpayer’s tax for any of
As soon as you get the notice of assessment, compare it to the above reasons affects the corporation’s tax
your copy of the corporation’s return. Contact us if you ■ if a reassessment of another tax year (it must be a prior
need us to clarify or explain any part of the assessment. tax year if the reassessment relates to a loss or credit
You can call the telephone number provided in the CRA’s carryback) for any of the above reasons affects the
correspondence. If you do not have contact information, go corporation’s tax
to canada.ca/cra-contact.
■ if the reassessment results from a non-resident
Enquiries service corporation’s allocation of revenue or expenses for the
Canadian business or from a notional transaction, such as
You can ask an account-related question online and we will “branch advance,” between the non-resident corporation
provide an answer online. You can also view answers to and its Canadian business
common enquiries online.
■ to give effect to the application of the non-resident trust
We will try to respond within 10 business days, depending rules in section 94 or to the application of the foreign
on the complexity of the question. To view the response, investment rules under sections 94.1 and 94.2
select the “Mail” link under the “View” tab.
■ if the income is related to a foreign affiliate of the
With the “Enquiries service” you can also make other corporation (for tax years of the corporation starting after
online requests, such as ordering more remittance February 26, 2018)
vouchers.
To access these online services, go to: Non-resident non-arm’s length person (extra six years)
For losses incurred in a particular tax year that ends after
■ My Business Account at canada.ca/my-cra-business February 26, 2018, the reassessment period for a preceding
-account, if you are a business owner tax year to which those losses are carried back is extended
■ Represent a Client at canada.ca/taxes-representatives, if six years beyond the normal reassessment period if both of
you are an authorized representative or employee the following apply:
■ the losses are reduced as a result of a reassessment made
When can we reassess your return? to the particular tax year beyond the normal
reassessment period for the year
Within certain time limits, we can reassess your return or
make additional assessments of tax, interest, and penalties. ■ the reassessment to the particular tax year is made as a
These time limits vary, depending on the type of consequence of a transaction involving the corporation
corporation and the nature of the reassessment. and a non-arm’s length non-resident person

16 canada.ca/taxes
Provincial income reallocation (extra one year) Sale or disposition of real estate
If the reassessment results from a provincial income The CRA may at any time reassess an income tax return
reallocation, the normal reassessment period can be beyond the normal reassessment period for any of the
extended for one year from the later of: following reasons:
■ the day on which the CRA is advised of the provincial ■ the corporation does not report in its income tax return a
reassessment sale or other disposition of a real or immovable property
that is capital property of the corporation
■ 90 days after the notice of the provincial reassessment
was mailed ■ the corporation does not file an income tax return but the
CRA issues an assessment of tax (for example, after a
Requirements for information and compliance orders review of a corporation that did not file a return)
For challenges made after December 13, 2018, a ■ the corporation owned the capital property directly or
“stop-the-clock” rule is introduced for requirements for indirectly through a partnership and the partnership did
information served to corporations and for compliance not report the sale or other disposition in the partnership
orders. information return
This rule extends the reassessment period of a corporation Under this extended reassessment period, the reassessment
by the period of time during which the requirement or is limited to amounts reasonably relating to the unreported
compliance order is contested. The period generally starts or previously unreported disposition of real or immovable
when the corporation challenges the requirement for property that is capital property of the corporation or
information or compliance order and ends on the final partnership, as the case may be.
disposition of the application (including any appeals).
If the corporation does not report the disposition in its
Note initial return for the tax year, but later amends its return
Since January 1, 2020, the CRA can send requirements (for example by filing a request for adjustments under
for information, including those for foreign-based subsection 245(6)), the CRA may still make a reassessment
information, to banks and credit unions electronically, outside of the normal reassessment period within
rather than delivering them in person or by registered or three years of the amendment being filed.
certified mail. Written consent of the bank or credit
union is required before requirements can be sent References
Subsections 152(3.1), 152(4), and 152(4.1)
electronically. IC75-7, Reassessment of a Return of Income

Unlimited reassessment period How to request a reassessment

We can reassess a return at any time for any of the You can request a reassessment electronically using the
following reasons: latest commercial tax preparation software packages, or
■ the corporation has made a misrepresentation because of send a letter to the tax centre that serves the corporation. If
neglect, carelessness, wilful default, or fraud in either you send a letter, state the name of the corporation, the
filing the return or supplying information required by business number, the tax year, and any details that apply.
the Act With your letter, include any relevant supporting
information, such as revised financial statements or the
■ the corporation filed Form T2029, Waiver in Respect of General Index of Financial Information (GIFI) and
the Normal Reassessment Period or Extended schedules. If you are preparing your return using tax
Reassessment Period, with a tax services office before the preparation software, submit the bar codes that contain the
normal reassessment period expires. Form T2029 can be information needed to reassess your return. Do not send
filed up to three more years after the end of the normal the entire T2 return.
reassessment period if the waiver applies to one of the
situations previously described under “Extended To ask to carry back a loss or tax credit to a prior tax year,
reassessment period” file whichever of the following schedules apply:

■ the reassessment is to carry back losses or certain tax ■ Schedule 4, Corporation Loss Continuity and
credits and deductions where a prescribed form Application, to ask to carry back a loss
requesting the amendment has been filed on time ■ Schedule 21, Federal and Provincial or Territorial Foreign
■ a court instructs us to reassess Income Tax Credits and Federal Logging Tax Credit, to
ask to carry back foreign tax credits on business income
Note
If you want to revoke a waiver that was previously filed ■ Schedule 31, Investment Tax Credit – Corporations, to
to extend the normal reassessment period for a certain ask to carry back an investment tax credit
tax year, file Form T652, Notice of Revocation of Waiver, ■ Schedule 42, Calculation of Unused Part I Tax Credit, to
at your tax services office. The revocation will take effect ask to carry back a Part I tax credit
six months after you file Form T652.

canada.ca/taxes 17
You can file these schedules with the return on which you For more information about objections and appeals, see
report the loss or earn the credit, or you can forward them Guide P148, Resolving your dispute: Objection and appeal
separately to the tax centre that serves the corporation. rights under the Income Tax Act or go to canada.ca/cra
Reference
-complaints-disputes.
Subsection 152(6)
Disputing loss determinations
How to register a formal dispute The formal process of resolving a dispute does not usually
apply to loss amounts under dispute, because there is no
Many misunderstandings are caused by a lack of
tax, interest, or penalty involved.
information or by a simple miscommunication. That’s why
we say: “Talk to us.” However, a corporation may request a loss determination if
it does not agree with the amount of the losses assessed by
If you have new or additional information, you or your
the CRA. The CRA will determine the amount of the loss
authorized representative can ask for a change online at
and confirm in writing by issuing Form T67AM, Notice of
My Business Account, Represent a Client, or by writing to
Determination/Redetermination of a Loss.
us. Many disputes are resolved this way.
Once the corporation has received the notice of
If you disagree with an assessment or a determination, you
determination, it can file an objection within 90 days after
can make a formal objection.
the date of the notice.
Filing an objection is the first step in the formal process of
Note
resolving your dispute. You have 90 days after the date of
You cannot request a loss determination if the CRA
the notice of assessment or determination to file an
assessed your loss to be the same as what you reported.
objection.
If the corporation asks, we will make determinations of the
For information on extended time limits, due to COVID-19,
following amounts:
that apply to notices of objection, go to canada.ca/en
/revenue-agency/services/covid-19-ministerial-orders and ■ a non-capital loss
select Explanatory Note: Time Limits and Other Periods
Act – Income Tax provisions. ■ a net capital loss

You can file an objection: ■ a restricted farm loss

■ online in My Business Account at canada.ca/my-cra ■ a farm loss

-business-account, or in Represent a Client at ■ a limited partnership loss
canada.ca/taxes-representatives, by selecting “Register a
formal dispute (Notice of Objection)” under Send any requests for loss determinations to your tax
“Corporation Income Tax” services office or tax centre.
References
■ by mail, using Form T400A, Notice of Objection – Income Subsections 152(1.1) and 152(1.2)
Tax Act, or writing to the chief of appeals at your
Appeals Intake Centre (see appendix B of Guide P148)
Keeping records
In all cases, you have to explain why you disagree and
include all relevant facts and supporting documents. Keep your paper and electronic records for six years from
the end of the last tax year that they relate to. If you file
For large corporations, your objection must: your income tax return late, keep your records for six years
from the date you file your return.
■ reasonably describe each issue
Certain records must be kept longer. These include minute
■ specify for each issue the relief you are seeking,
books, which have to be kept until sometime after
expressed as the amount of a change in the income,
dissolution. However, if you want to destroy your records
taxable income, loss, taxes payable, refundable amounts,
early, complete Form T137, Request for Destruction of
and overpayments or balance of unclaimed outlays,
Records. For more information, go to canada.ca/taxes
expenses, or other amounts of the corporation
-records.
■ provide facts and reasons the corporation relied on for References
each issue Subsections 230(4), 230(4.1), 230(5), and 230(6)
Regulation 5800
Reference
IC78-10, Books and Records Retention/Destruction
Section 165

A large corporation that objects to an assessment will have

to pay 50% of the disputed amount. A corporation is a large
corporation if the total taxable capital employed in Canada
at the end of the tax year by the corporation and its related
corporations is over $10 million. The corporation also has to
pay the full amount of taxes not in dispute.
Reference
Subsection 225.1(7)

18 canada.ca/taxes
Chapter 1 – Page 1 of the T2 return
Page Page
Identification ....................................................................... 19 Line 070 – Is this the first year of filing after
Signing up for email notifications when filing your incorporation? .................................................................. 22
T2 return ............................................................................ 19 Line 071 – Is this the first year of filing after
Line 001 – Business number (BN) ...................................... 19 amalgamation?................................................................. 23
Line 002 – Corporation’s name .......................................... 19 Line 072 – Has there been a wind-up of a subsidiary
Lines 010 to 018 – Address of head office ......................... 19 under section 88 during the current tax year? ............. 23
Lines 020 to 028 – Mailing address .................................... 19 Line 076 – Is this the final tax year before
Lines 030 to 038 – Location of books and records ........... 20 amalgamation?................................................................. 23
Lines 040 and 043 – Type of corporation at the end of Line 078 – Is this the final return up to dissolution? ...... 23
the tax year........................................................................ 20 Line 079 – If an election was made under section 261 .... 23
Lines 060, 061, 063, 065 – To which tax year does this Lines 080 to 082 – Is the corporation a resident of
return apply? .................................................................... 21 Canada? ............................................................................ 24
Line 066 – Is the date on line 061 a deemed tax Line 085 – If the corporation is exempt from tax
year-end according to subsection 249(3.1)? .................. 22 under section 149 ............................................................. 24
Line 067 – Is the corporation a professional
corporation that is a member of a partnership? ........... 22

Identification how to know if an email notification is from the CRA, go

to canada.ca/cra-business-email-notifications.
Accurately complete page 1 of your return, so we can
properly identify the corporation and process the return
more quickly. You cannot use the Corporation Internet
Line 001 – Business number (BN)
Filing service to change the corporation’s head office The BN is a 15-character number composed of three parts.
address or mailing address. The first nine characters identify your business. The “RC”
identifies the corporation income tax program. The last
You can change the mailing, physical, and books and four characters identify the particular program account.
records address of the corporation by:
On line 001, enter your BN for income tax purposes.
■ using the “Manage addresses” service through: Enter ”0001” as the program account identifier unless we
– My Business Account at canada.ca/my-cra-business have advised you to use a different one. You will find the
-account, if you are the business owner corporation’s BN on previous notices of assessment,
account statements, or remittance forms. For more
– Represent a Client at canada.ca/taxes-representatives, information, go to canada.ca/business-number.
if you are an authorized representative or employee
Note
■ calling 1-800-959-5525 If you are a non-resident corporation that needs a BN,
you have to give us a copy of your certificate of
Signing up for email notifications when filing incorporation or amalgamation before we can assign
your T2 return a BN to you. You also have to give us documentation for
any amendments that may have taken place.
Corporations that use tax preparation software can register
for email notifications by sending us an email address and
agreeing to electronic delivery of correspondence when Line 002 – Corporation’s name
they file their return. Once we have processed your return, Enter the full name of the corporation. Do not use
we will send you a registration email notification to the abbreviations, and make sure the punctuation is correct.
email address you gave us, confirming your registration.
If you register for email notifications for your T2 account, Lines 010 to 018 – Address of head office
the CRA will send you an email when notices, letters, or Line 010 – Has this address changed since the last time
statements are available for viewing in we were notified?
My Business Account (separate registration is required) and If you answer no, do not complete lines 011 to 018.
when other important changes are made on your account.
To register for My Business Account, go to canada.ca/my Lines 011 to 018
-cra-business-account. Enter the new head office address of the corporation,
If you signup for email notifications, the CRA will not including the street number, street, city, province/
send these documents to you through Canada Post. territory/state, and postal code or zip code in the
appropriate area. Complete line 017, if it applies.
If you don’t want to receive email notifications anymore,
log into My Business Account and select “Notification Lines 020 to 028 – Mailing address
preferences” to remove your email address.
Complete this area if the corporation’s mailing address is
For more information on how to register for email different from its head office address.
notifications, the types of notifications you can receive, and

canada.ca/taxes 19
Line 020 – Has this address changed since the last time ■ it is not controlled directly or indirectly by any
we were notified? combination of persons described in the three previous
If you answer no, do not complete lines 021 to 028. conditions
■ if all of its shares that are owned by a non-resident
Lines 021 to 028 person, by a public corporation (other than a prescribed
Enter the new mailing address of the corporation by venture capital corporation), or by a corporation with a
completing lines 021 to 028. Complete line 027, if it applies. class of shares listed on a designated stock exchange
If the corporation’s mailing address changes, you can were owned by one person, that person would not own
change this address: sufficient shares to control the corporation

■ online through My Business Account at canada.ca ■ no class of its shares of capital stock is listed on a
/my-cra-business-account or through Represent a Client designated stock exchange
at canada.ca/taxes-representatives Note
■ by writing to your tax centre as soon as possible A CCPC that has elected under subsection 89(11) not to
be a CCPC for certain purposes should tick box 1 when
filling line 040.
Lines 030 to 038 – Location of books and
records References
Subsections 89(1), 89(11), 89(12), and 125(7)
Complete this area if the corporation’s books and records IT-458, Canadian-Controlled Private Corporation
address is different from its head office address.
Box 2 – Other private corporation
The corporation is an other private corporation if it meets
Line 030 – Has the location of books and records
all of the following requirements at the end of the tax year:
changed since the last time we were notified?
If you answer no, do not complete lines 031 to 038. ■ it is resident in Canada
If this is your first year of filing after incorporation or ■ it is not a public corporation
amalgamation, you must tick yes and complete
■ it is not controlled by one or more public corporations
lines 031 to 038.
(other than a prescribed venture capital corporation, as
defined in Regulation 6700)
Lines 031 to 038
Enter the address of the location where the corporation ■ it is not controlled by one or more prescribed federal
keeps its books and records by completing lines 031 to 038. Crown corporations (as defined in Regulation 7100)
Complete line 037, if it applies. ■ it is not controlled by any combination of corporations
described in the two previous conditions
Lines 040 and 043 – Type of corporation at References
the end of the tax year Subsection 89(1)
Line 040 Regulations 6700 and 7100

Tick the box that describes the corporation type at the end Box 3 – Public corporation
of the tax year. The corporation type determines whether The corporation is a public corporation if it is resident in
or not the corporation is entitled to certain rates and Canada and meets either of the following requirements at
deductions. See the following for details. the end of the tax year:
Reference ■ it has a class of shares listed on a designated Canadian
IT-391, Status of Corporations
stock exchange
Box 1 – Canadian-controlled private corporation (CCPC)
■ it has elected, or the minister of National Revenue has
The corporation is a CCPC if it meets all of the following
designated it, to be a public corporation and the
requirements at the end of the tax year:
corporation has complied with prescribed conditions
■ it is a private corporation under Regulation 4800(1) on the number of its
shareholders, the dispersing of the ownership of its
■ it is a corporation that was resident in Canada and was shares, the public trading of its shares, and the size of the
either incorporated in Canada or resident in Canada corporation
from June 18, 1971, to the end of the tax year
If a public corporation has complied with certain prescribed
■ it is not controlled directly or indirectly by one or more conditions under Regulation 4800(2), it can elect, or the
non-resident persons minister of National Revenue can designate it, not to be a
■ it is not controlled directly or indirectly by one or more public corporation.
public corporations (other than a prescribed venture References
capital corporation, as defined in Regulation 6700) Subsections 89(1) and 248(1)
Regulations 4800(1) and 4800(2)
■ it is not controlled by a Canadian resident corporation
that lists its shares on a designated stock exchange Box 4 – Corporation controlled by a public corporation
outside of Canada The corporation is a corporation controlled by a public
corporation if it is a Canadian subsidiary of a public

20 canada.ca/taxes
corporation. This type of corporation does not qualify as a purposes, the beginning of a day is 00:00 and the end of a
public corporation for determining the type of corporation. day is 23:59.
Box 5 – Other corporation Hours and minutes should only be entered when the event
The corporation is an other corporation if it does not fall results in the corporation (or successor) starting a tax year
within the other categories. Examples of other corporations on the same day the previous tax year ends. In the
include general insurers and Crown corporations. following example, see how to report hours and minutes
for a multiple amalgamation on the same day.
Note
Credit unions or cooperative corporations should tick
box 1 at line 040 if they meet the definition of a Example
Canadian-controlled private corporation under Two predecessor corporations amalgamate (yes at line 076)
subsection 125(7) (without reference to on January 15, 2020 at 09:44. Both have a TYS of
subsections 137(7) or 136(1) respectively). January 1, 2020.
Both predecessors will report:
Line 043 – If the type of corporation changed during the
tax year, provide the effective date of the change ■ line 060 (TYS) as 2020-01-01 00:00
Indicate the effective date of the change. Do not include ■ line 061 (TYE) as 2020-01-15 09:43
other types of changes in this section, such as the change
from active to inactive status. The new corporation (yes at line 071) is also a final to
amalgamation (yes at line 076) on January 15, 2020 with its
A change of corporation type may bring significant tax final to amalgamation taking place at 17:27.
consequences. For example, certain calculations on the
return depend on whether the corporation was a private The new/predecessor corporation will report:
corporation or a CCPC throughout the tax year, at any time
■ line 060 (TYS) as 2020-01-15 09:44
in the tax year, or at the end of the tax year.
■ line 061 (TYE) as 2020-01-15 17:26
Note
If the corporation changed from, or to, a CCPC, see
line 066. Do not complete line 043 if you answer yes at Lines 060 and 061 – Tax year start and tax year-end
line 066 and you are filing a tax return with a deemed The corporation’s tax year is its fiscal period. A fiscal period
tax year-end because of subsection 249(3.1). cannot be longer than 53 weeks (371 days).
In the spaces provided, enter the first and last days of the
Lines 060, 061, 063, 065 – To which tax year tax year. If the particular time of day applies, enter the
does this return apply? hours and minutes to specify the time. The first day of this
Specify hours and minutes tax year has to be the day after the last day of the previous
When using Corporation Internet Filing, you can now tax year. You have to file a return for every calendar year.
specify hours and minutes in the tax year-end (TYE) at A new corporation may choose any tax year-end as long as
line 061 when the TYE has changed for any of the following its first tax year does not exceed 53 weeks from the date it
reasons (you answered yes at the line number in brackets): was either incorporated or formed as a result of an
■ acquisition of control under subsection 249(4) when amalgamation.
electing not to apply subsection 256(9) (line 063) Make sure the financial statements or the General Index of
■ change to the TYE when changing from a Canadian- Financial Information (GIFI) you attach to the return match
controlled private corporation to another type of the tax year of the return.
corporation under subsection 249(3.1) (line 066) Note
■ first year after amalgamation (line 071) A professional corporation that is a member of a
partnership and that carries on business in Canada
■ final year before amalgamation (line 076) has to have a December 31 year-end.
Note Generally, unless you have received approval to change the
You can also specify hours and minutes in the tax year fiscal period, the corporation’s fiscal period is the same
start (TYS) at line 060 when the TYE in the prior year from year to year. To change a fiscal period, write a letter to
had specified hours and minutes (you answered yes at your tax services office asking for approval and include
any of the above line numbers in brackets in the details to explain the reasons for the change. If you do not
current TYE or answered yes at line 063 or 066 in the include the reasons for requesting the change, the
prior TYE). processing of your request may be delayed.
You can also specify hours and minutes in the date entered In some situations, you do not need approval to change the
at line 065, which is the date of the acquisition of control fiscal period. These situations include any of the following:
resulting in the application subsection 249(4).
■ the corporation has wound-up and you are filing its final
Time is to be reported by the 24-hour clock. You do not return with an abbreviated fiscal period
need to specify the hours and minutes if the time of
the TYS is 00:00 or the TYE is 23:59 (11:59 pm). For CRA

canada.ca/taxes 21
■ the corporation has to end its tax year at a certain time Line 066 – Is the date on line 061 a
because it is emigrating to another country, becoming deemed tax year-end according to
exempt from tax, or ceasing to be exempt from tax
subsection 249(3.1)?
■ a person or group of persons acquired control of the If at any time a corporation becomes or stops being a
corporation under subsection 249(4) Canadian-controlled private corporation (CCPC) for any
Note reason other than an acquisition of control,
A corporation that becomes bankrupt must get our subsection 249(3.1) provides that the tax year of the
approval to change its fiscal period. corporation is deemed to end immediately before that
change. You do not need the minister’s approval for the
References changed tax year.
IT-364, Commencement of Business Operations
IT-454, Business Transactions Prior to Incorporation File a return for the tax year that ends immediately before
the change. The next tax year is deemed to start on the date
Lines 063 and 065 – Has there been an acquisition of that the corporation type changed, and the corporation can
control resulting in the application of subsection 249(4) choose any tax year-end within the next 53 weeks.
since the tax year start on line 060?
If the change occurs up to seven days after the end of an
If you answer yes, enter on line 065 the date the control
established tax year and there has not been an acquisition
was acquired.
of control and the corporation has not become or stopped
There is an acquisition of control when, during the tax year, being a CCPC, within those seven days the corporation can
a person or group of persons acquired control of the choose to extend the tax year up to the time the change
corporation. occurred. In this case, attach a letter to your return that says
you are making an election under paragraph 249(3.1)(c).
When control is acquired, subsection 249(4) provides that
the tax year of the corporation ends immediately before
that control is acquired. You do not need approval for the Line 067 – Is the corporation a professional
changed tax year. corporation that is a member of a
File a return for the tax year that ends immediately before
partnership?
control is acquired. The next tax year starts at the time A professional corporation is a corporation that carries on
control is acquired, and the corporation can choose any tax the professional practice of an accountant, dentist, lawyer,
year-end within the next 53 weeks. (including a notary in the province of Quebec), medical
doctor, veterinarian, or chiropractor.
If control is acquired up to seven days after the end of an
established tax year, generally a corporation can choose to Billed-basis accounting for professional corporations
extend the tax year up to the time control is acquired. In
For tax years that begin after March 21, 2017, professional
this case, attach a letter to your return that says you are
corporations are not allowed to use billed-basis accounting
making an election under paragraph 249(4)(b).
anymore. That is, they are no longer permitted to elect to
Where shares of a corporation are transferred to an estate exclude the value of work in progress at the end of a tax
because of a death, there is no acquisition of control. In year from business income for that year.
general, this also applies when the transfer is made to a
As a transitional measure, where a corporation has elected
related person. As a result, there is no deemed tax year-end
to use billed-basis accounting for its last tax year that
and no tax return is required to be filed. For more
begins before March 22, 2017, the inclusion of work in
information, see subsection 256(7).
progress is phased into income as follows:
Notes
■ for the first tax year of the corporation that begins after
The acquisition of control under subsection 256(9) of a
March 21, 2017, 20% of the lesser of the cost and the fair
corporation is usually deemed to occur at the beginning
market value of work in progress will be taken into
of the day on which the acquisition takes place.
account for determining the value of inventory held by
However, the particular time of day that the acquisition
the business under the ITA
of control took place will be recognized if the
corporation makes an election under subsection 256(9). ■ this rate will increase progressively to reach 100% at the
To elect under subsection 256(9), include a note with end of the fifth tax year that begins after March 21, 2017
your return for the tax year ending immediately before
control was acquired and enter the hours and minutes Line 070 – Is this the first year of filing after
that specify the time of day at line 065. incorporation?
The deeming rule does not apply when determining the If you answer yes, you have to file Schedule 24, First-Time
status of a corporation as a small business corporation or Filer After Incorporation, Amalgamation, or Winding-up of
a Canadian-controlled private corporation at the time of a Subsidiary into a Parent, with your return. If you do not
the transaction that caused the change of control. The file Schedule 24, the processing of your return may be
status of the corporation will not change until the actual delayed.
time of the acquisition.
See chapters 2 and 3 for other schedules you may have to
attach to your return.

22 canada.ca/taxes
 Note any of the corporation’s property under his or her control.
The tax year of a new corporation cannot be longer than By getting the certificate, the responsible representative will
53 weeks from the date it was incorporated. avoid being personally liable for the unpaid taxes, interest,
and penalties. Include Schedule 100, Balance Sheet
If this is your first year of filing after incorporation, you
Information, with the final return, which shows how the
must tick yes at line 030 and complete lines 031 to 038.
assets were distributed.

Line 071 – Is this the first year of filing after Note

amalgamation? If you want to dissolve your corporation, you should
send an application for dissolution to the government
If you answer yes, you have to file Schedule 24, First-Time body that governs the affairs of your corporation.
Filer After Incorporation, Amalgamation, or Winding-up of
a Subsidiary into a Parent, with your return. If you do not Once the corporation has been dissolved, you should send
file Schedule 24, the processing of your return may be us the articles of dissolution. Otherwise, we consider that
delayed. the corporation still exists, and it will have to file a return
even if there is no tax payable.
Note
The tax year of a new corporation cannot be longer than Once the corporation is dissolved, any refunds to which the
53 weeks from the date it was amalgamated. corporation would be entitled revert to the Crown and
cannot normally be issued to the corporation or its
If this is your first year of filing after amalgamation, you representatives unless the charter is reinstated.
must tick yes at line 030 and complete lines 031 to 038.
If the charter is not reinstated, a refund can be issued if all
Line 072 – Has there been a wind-up of a returns have been filed up to the date of dissolution for all
revenue lines (T2, GST, and other levies returns) and the
subsidiary under section 88 during the refund is issued to one of the following:
current tax year?
■ the sole shareholder of the corporation
If you answer yes, you have to file Schedule 24, First-Time
Filer After Incorporation, Amalgamation, or Winding-up of ■ a legal representative of the corporation when there are
a Subsidiary into a Parent, with your return. If you do not multiple shareholders
file Schedule 24, the processing of your return may be
If these conditions are not met, the refund will remain with
delayed.
the Crown.
Reference
IT-126, Meaning of “Winding up” References
Subsection 159(2)
IC82-6, Clearance Certificate
Line 076 – Is this the final tax year before
amalgamation? Line 079 – If an election was made under
Predecessor corporations filing their last returns have to section 261
answer yes to this question on their final returns. If the return is not reported in Canadian currency, indicate
When two or more corporations amalgamate, each of the the functional currency used.
predecessor corporations has to file a return for the period Corporations resident in Canada throughout the tax year
ending immediately before the effective date of can elect to report in a functional currency, except for:
amalgamation. The effective date of amalgamation is
governed by corporate law. Generally, the effective date is ■ investment corporations
on the certificate of amalgamation or the letters patent of
■ mortgage investment corporations
amalgamation.
■ mutual fund corporations
Note
We cannot accept returns filed for the period ending just A functional currency is a currency of a country other than
before a date that is not the effective date of Canada that is both:
amalgamation.
■ a qualifying currency (currently, the British pound, the
Reference euro, the Australian dollar, and the U.S. dollar)
S4–F7–C1, Amalgamations of Canadian Corporations
Effective for tax years starting after 2019, it was
Line 078 – Is this the final return up to recommended that the Japanese yen be included in the
definition of qualifying currency. A comfort letter from
dissolution? the Department of Finance was published to this effect.
You have to answer yes if you have already permanently If you elect to report in Japanese yen, attach a copy of the
dissolved your corporation with the incorporating comfort letter when you file T1296, Election, or
authority and you are filing your final return for a tax year Revocation of an Election, to Report in a Functional
ending on the date of dissolution. You will find the date of Currency.
dissolution on the articles of dissolution.
■ the primary currency in which the taxpayer keeps its
The responsible representative has to get a clearance records and books of account for financial reporting
certificate from the tax services office before distributing purposes for the tax year

canada.ca/taxes 23
To elect to report in a functional currency, file Form T1296 – chambers of commerce
within the first 61 days of the tax year to which the election
■ Paragraph 149(1)(l) exempts a club, society, or
applies.
association that is not a charity and that is organized
Note and operated solely for:
Even if you elect to report in a functional currency, you
– social welfare
still have to complete line 840 in Canadian currency.
– civic improvement
You cannot change functional currency. If you cease to
qualify as a functional currency reporter, you must revert to – pleasure or recreation
determining your Canadian tax results in Canadian dollars.
You cannot make the election again. – any purpose other than profit

For more information, go to canada.ca/en No part of these organizations’ income can be payable to,
/revenue-agency/services/tax/businesses/topics or otherwise available for the personal benefit of, any
/corporations/functional-currency or read Income Tax proprietor, member, or shareholder, unless the proprietor,
Folio S5-F4-C1, Income Tax Reporting Currency. member, or shareholder was a club, society, or association
that promotes amateur athletics in Canada.
References
Section 261 You may have to file Form T1044, Non-Profit Organization
S5-F4-C1, Income Tax Reporting Currency (NPO) Information Return, if the organization meets the
definition in paragraph 149(1)(e) or 149(1)(l) and if one of
Lines 080 to 082 – Is the corporation a the following conditions applies:
resident of Canada? ■ the organization received or was entitled to receive
If you answer no, enter the country of residence on line 081 taxable dividends, interest, rentals, or royalties in the tax
and file Schedule 97, Additional Information on year totalling more than $10,000
Non-resident Corporations in Canada. Non-resident
■ the organization’s total assets were more than $200,000 at
corporations have to mail their returns to the Sudbury Tax
the end of the immediately previous tax year
Centre. See page 134 for the address and telephone and
fax numbers. ■ the organization had to file Form T1044 for a previous tax
year
Note
Certain non-resident corporations can file electronically If you have to file an information return for any tax year,
through Corporation Internet Filing and do not have to you will have to file a return for all future tax years.
mail their returns to the Sudbury Tax Centre. Form T1044 has to be filed in the six months following the
end of the tax year. See Guide T4117, Income Tax Guide to
Line 082 – Is the non-resident corporation claiming an the Non-Profit Organization (NPO) Information Return.
exemption under an income tax treaty? References
If you answer yes, file Schedule 91, Information Concerning Subsection 149(12)
Claims for Treaty-Based Exemptions. T4117, Income Tax Guide to the Non-Profit Organization (NPO)
Information Return
For more information about the filing obligations of T1044, Non-Profit Organization (NPO) Information Return
non-resident corporations, see page 8. IT-83, Non-Profit Organizations – Taxation of Income from Property
IT-496, Non-profit Organizations

Line 085 – If the corporation is exempt from Box 2 – Exempt under paragraph 149(1)(j)
tax under section 149 Tick this box if paragraph 149(1)(j) applies.
If the corporation is exempt from tax under section 149, tick Paragraph 149(1)(j) exempts a non-profit corporation for
one of the boxes following this line. scientific research and experimental development (SR&ED)
if it meets all the following conditions:
These corporations, which include non-profit
organizations, do not usually have to pay any corporation ■ the corporation is constituted exclusively for carrying on
income tax because they are exempted by one of the or promoting SR&ED
following paragraphs:
■ no part of the corporation’s income is payable to or
otherwise available for the personal benefit of any
Box 1 – Exempt under paragraph 149(1)(e) or (l)
proprietor, member, or shareholder
Tick this box if one of the two following paragraphs
applies: ■ the corporation did not acquire control of any other
corporation
■ Paragraph 149(1)(e) exempts the following types of
organizations, as long as no part of the income of these ■ the corporation did not carry on any business during the
organizations was payable or otherwise available for the period for which exemption is claimed
personal benefit of proprietors, members, or
shareholders:
– agricultural organizations
– boards of trade

24 canada.ca/taxes
■ the corporation must, in each period for which it claims Box 4 – Exempt under other paragraphs of section 149
exemption, have spent amounts in Canada that are one of Tick this box if the corporation is exempt under any other
the following: paragraph of section 149.
– expenditures on SR&ED directly undertaken by it or In this case, the corporation has to attach to the return all
on its behalf relevant information on this exemption and specify under
which paragraph it is exempt.
– payments to an association, university, college, or
research institution to be used for SR&ED

canada.ca/taxes 25
Chapter 2 – Page 2 of the T2 return
Page Page
Attachments ......................................................................... 26 Form T5004, Claim for Tax Shelter Loss
Financial statements or General Index of Financial or Deduction .................................................................... 30
Information (GIFI) ........................................................... 26 Information slip T5013, Statement of Partnership
Income............................................................................... 30
Information schedules and forms .................................... 27
Schedule 22, Non-Resident Discretionary Trust ............. 30
Schedule 9, Related and Associated Corporations .......... 27
Schedule 25, Investment in Foreign Affiliates ................. 30
When is a corporation associated?................................. 27
Schedule 29, Payments to Non-Residents ........................ 31
Schedule 23, Agreement Among Associated
Form T106, Information Return of Non-Arm’s Length
Canadian-Controlled Private Corporations to
Transactions with Non-Residents ................................. 31
Allocate the Business Limit ............................................ 28
Foreign property ................................................................. 31
Associated corporations with more than one tax
Foreign affiliates .............................................................. 31
year in a calendar year................................................. 28
Beneficiaries of non-resident trusts ............................... 32
Schedule 49, Agreement Among Associated
Transfers to non-resident trusts..................................... 32
‘Canadian-Controlled Private Corporations to
Ownership of foreign property ..................................... 32
Allocate the Expenditure Limit ...................................... 29
Non-resident trusts (NRTs) and offshore
Associated corporations with more than one tax
investment fund property (OIFP) .............................. 32
year in a calendar year................................................. 29
Penalties ............................................................................ 32
Schedule 28, Election not to be Associated Through a
Schedule 50, Shareholder Information ............................. 32
Third Corporation ............................................................ 29
Line 172 – Has the corporation made payments to, or
Schedule 19, Non-Resident Shareholder Information .... 29
received amounts from, a retirement compensation
Schedule 11, Transactions with Shareholders,
arrangement in the year? ................................................ 32
Officers, or Employees .................................................... 29
Line 180 – Schedule 88, Internet Business Activities ...... 32
Schedule 44, Non-Arm’s Length Transactions ................ 30
Schedule 14, Miscellaneous Payments to Residents ....... 30 Calculation schedules........................................................ 33
Schedule 15, Deferred Income Plans ................................. 30
Note
Attachments Certain non-resident corporations do not have to file
Schedules can be organized into two categories: using GIFI. For more information, see Guide RC4088,
General Index of Financial Information (GIFI).
■ information schedules, including general information
schedules and those relating to transactions with GIFI schedules include:
non-residents ■ Schedule 100, Balance Sheet Information
■ calculation schedules, including schedules used to ■ Schedule 125, Income Statement Information, and, if
calculate net income, taxable income, deductions, taxes, necessary, Schedule 140, Summary Income Statement
and credits (You will find Schedule 140 at the end of Schedule 125.)
We provide a complete list of the schedules at the end of ■ Schedule 141, Notes Checklist. Schedule 141 is a set of
this guide. The schedules are available at canada.ca/cra questions designed to determine who prepared the
-forms-publications. You can also get them by calling financial statements and the extent of their involvement,
1-800-959-5525. To file the schedules we do not publish, and to identify the type of information contained in the
such as Schedule 92, gather the requested information and notes to the financial statements
label it with the schedule number in the top right-hand
corner of each page. Use Schedule 125 to report income from the COVID-19
programs. Include the amount you received for the tax
On pages 2 and 3 of the return, we list the most common year on line 8242 – Subsidies and grants.
schedules you may have to attach to your return. If you
respond yes to any of the questions on these pages, attach Note
to your T2 return the schedule that applies, unless Include any notes to the financial statements and the
otherwise instructed. auditor or accountant’s report, if they were prepared.
You should include this information even if you are
Financial statements or General Index of filing your return using tax preparation software. You
can include any notes to the financial statements and
Financial Information (GIFI) auditor or accountant’s report on the GIFI when
Each corporation should include complete financial transmitting your return electronically. For more
statement information for the tax year of the return using information, see “Using tax preparation software” on
the General Index of Financial Information. page 9.
You do NOT have to file paper financial statements or When preparing the first return for a new corporation,
notes to financial statements if you file that year’s T2 return attach all of the following documents:
electronically.
■ Schedule 101, Opening Balance Sheet Information

26 canada.ca/taxes
■ copies of all relevant agreements or the full details on to exercise influence over the shareholder(s) who have
shares issued for anything other than cash consideration, that right or ability. The previous factors are not
if they apply mandatory in determining factual control
■ if it applies, the closing balance sheet of the In general, a corporation is associated with another
proprietorship, partnership, or corporation if the new corporation if it meets one of the following six conditions at
corporation acquired the assets or business, or assumed any time in the tax year. Remember that controlled means
the liabilities of a former proprietorship, partnership, or directly or indirectly in any way.
corporation
Condition 1
Corporations that are inactive throughout the tax year and The corporations are associated if one corporation controls
that do not have balance sheet or income statement the other.
information to report do not have to attach schedules 100,
125, and 141 to their T2 return. However, they will be
Example
accepted if filed.
Corp X owns 100% of the voting shares of Corp Y, which in
The GIFI schedules are to be completed with information turn owns 51% of the voting shares of Corp Z.
from the corporation’s financial statements. These
Corp X is associated with Corp Y because it exerts direct
schedules are laid out with a “column A” where the
control over it.
appropriate GIFI code is entered, and a “column B” where
the corresponding dollar amount is entered. Corp X is associated with Corp Z because it exerts indirect
control over it.
The GIFI is included in all tax preparation software
packages certified by the CRA and in most accounting
software. Condition 2
The corporations are associated if both corporations are
For more information on the GIFI, see Guide RC4088, controlled by the same person or group of persons.
General Index of Financial Information (GIFI).
Corporations may be associated because the same group of
persons controls both corporations, but the members of this
Information schedules and forms group do not act together and have no other connection to
The following section describes the various general each other.
information schedules and forms you may have to
complete. CCPCs that are associated only because of this definition of
a group will NOT be considered associated when:
Schedule 9, Related and Associated ■ calculating the refundable investment tax credit on
Corporations eligible SR&ED expenditures
Complete Schedule 9 if the corporation is related to or ■ calculating the expenditure limit
associated with at least one other corporation.
■ allocating the expenditure limit
Reference
Sections 251 and 256 For this exception to apply, one of the corporations must
have at least one shareholder who is not common to both
When is a corporation associated? corporations.
Association is based on control. Control can be exerted The corporations will continue to be associated for all other
either directly or indirectly in any way. A person or a purposes of the Income Tax Act.
group of persons can control a corporation. Keep in mind
that, in this context, a person can be either an individual or
a corporation. Example
Bob owns 40% of the voting shares of Corp ABC and 30% of
Control includes both de jure control and de facto control. the voting shares of Corp XYZ. Ike owns 20% of the voting
De jure control is the right of control that depends on a shares of Corp ABC and 40% of the voting shares of
person owning enough shares of a corporation to give that Corp XYZ.
person a majority of the voting power. De facto control, or
factual control, occurs when a corporation is subject to any As a group, Bob and Ike control both companies.
direct or indirect influencing that, if exercised, would result Corps ABC and XYZ are associated.
in actual control being exerted.
When determining whether a taxpayer has any direct or Condition 3
indirect influence that, if exercised, would result in factual The corporations are associated if all of the following apply:
control of the corporation, one must: ■ each corporation is controlled by one person
■ take into consideration all factors that are relevant in the ■ that person is related to the person controlling the other
circumstances corporation
■ not be limited to whether the taxpayer has a legally ■ one of those persons owns at least 25% of the issued
enforceable right or ability to make a change in the board shares of any class, other than shares of a specified class,
of directors of the corporation, or the board’s power, or of the capital stock of each corporation

canada.ca/taxes 27
 References
Example Section 251
Billy owns 100% of the issued share capital of Corp AB. He Subsections 256(1), (1.1), (1.2) (2), and (5.1)
also owns 25% of the class A shares (other than shares of a IT-64, Corporations: Association and Control
specified class) of Corp CD, whose controlling shareholder
is Billy’s brother. Schedule 23, Agreement Among Associated
Corps AB and CD are associated. Canadian-Controlled Private Corporations to
Allocate the Business Limit
Condition 4 All CCPCs that are associated have to file Schedule 23.
The corporations are associated if all of the following apply: This schedule is used to:
■ one corporation is controlled by one person ■ identify all the corporations to establish:
■ that person is related to each member of a group of – the date the balance of tax is due (see “Balance-due
persons who controls the other corporation day” on page 12)
■ that person owns at least 25% of the issued shares of any – the calculation of the reduction to the business limit
class, other than shares of a specified class, of the capital
stock of the other corporation ■ allocate a percentage of the business limit to each
associated corporation. The total of all percentages
cannot be more than 100%. The maximum business limit
Example is provided on page 68
Buddy controls Corp AY. His two daughters control
Corp AZ. Buddy also owns 50% of the class A preferred Notes
shares of Corp AZ. Only one of the associated or related corporations needs
to file Schedule 23 for a calendar year. However, if
Corps AY and AZ are associated. Schedule 23 is not already on file with us when we
assess any of the returns for a tax year ending in the
Condition 5 calendar year of the agreement, we will ask for one.
The corporations are associated if all of the following apply:
If the corporation’s tax year is shorter than 51 weeks,
■ each corporation is controlled by a related group prorate the business limit allocated in column 400 of
Schedule 23 based on the number of days in the tax year
■ each of the members of one of the related groups is divided by 365.
related to all members of the other related group
■ one or more persons who are members of both related Associated corporations with more than one tax year in
groups, either alone or together, own at least 25% of the a calendar year
issued shares of any class, other than shares of a specified Special rules apply to determine the business limit for
class, of the capital stock of each corporation associated corporations that have more than one tax year
ending in the same calendar year.
Example For the second or later tax years that end in the same
Anne and her two daughters control Corp One. Anne and calendar year, the business limit is whichever of the
her two sons control Corp Two. Anne owns 33% of the following amounts is less:
common shares in each corporation.
■ the amount allocated to the corporation for the first tax
Corps One and Two are associated. year
■ the amount allocated to the corporation for the later tax
Condition 6 year in question
Under subsection 256(2), two corporations that are not
associated with each other will be considered associated if Make sure the total of the business limits of all associated
they are associated with the same corporation (the third corporations for any tax years that end in the same calendar
corporation). Special rules apply for determining the small year is not more than the maximum allowable business
business deduction. See Schedule 28, Election not to be limit for that calendar year.
Associated Through a Third Corporation, on page 29 for If the corporation’s tax year is shorter than 51 weeks,
details. prorate the business limit as determined above, based on
the number of days in the tax year divided by 365.
Example
Corp AB owns 100% of the issued share capital of Corp CD. Example
It also owns 25% of the class A shares (other than shares of Corp A and Corp B are associated in 2020.
a specified class) of Corp XY, whose controlling
shareholder is Billy. Billy’s brother controls Corp AB. Corp A’s tax year runs from January 1, 2020, to
June 30, 2020.
Corps AB, CD, and XY are associated.
The business limit allocated to Corp A for its June 30, 2020,
tax year is $100,000.

28 canada.ca/taxes
On November 1, 2020, Corp C becomes associated with ending in the same calendar year. Prorate the expenditure
Corp A and Corp B. The tax year-end for Corp C is limit for each tax year ending in the calendar year based on
December 31, 2020. Corp A and Corp B change their the number of days in the tax year divided by 365.
year-ends to match Corp C’s year-end.
Be sure that the amount you prorate for each of the tax
The corporations decide to allocate a $300,000 business years is equal to the amount allocated to the corporation
limit to Corp C for the December 31, 2020, year-end. for the first tax year ending in the calendar year.
Because the total of their business limits cannot be more References
than $500,000, the corporations allocate $90,000 to Corp A Subsections 127(10.3) and 127(10.6)
and $110,000 to Corp B.
Question Schedule 28, Election not to be Associated
What is Corp A’s business limit for each of the two tax Through a Third Corporation
years ending in the 2020 calendar year? File Schedule 28 if a CCPC that is associated with two other
Answer corporations elects under subsection 256(2) for the
Tax year ending June 30, 2020: two other corporations not to be associated with each other
Because the tax year is shorter than 51 weeks, Corp A for the purposes of the small business deduction.
prorates the business limit for the number of days in the tax Note
year as follows: Two corporations (Corps A and B) that are not
$100,000 × 181 days = $49,589 associated with each other are considered associated
365 days under subsection 256(2) if they are associated with the
same corporation (the third corporation).
Note: 365 is not adjusted for a leap year.
When the CCPC (the third corporation) makes this election,
Tax year ending December 31, 2020:
its business limit for the small business deduction is
Because the tax year is shorter than 51 weeks, Corp A
considered to be zero.
prorates the business limit for the number of days in the tax
year. Corp A uses the $90,000 business limit allocated in Investment income received from either of the two other
this tax year, because it is less than the $100,000 business corporations’ active business will be ineligible for the small
limit allocated in its first tax year ending in 2020. business deduction as it will not be treated as active
business income.
Corp A prorates the business limit as follows:
Corps A and B remain associated with the CCPC. They
$90,000 × 184 days = $45,370
must include the taxable capital limit of the CCPC when
365 days
calculating the small business deduction.
Note: 365 is not adjusted for a leap year.
The CCPC has to file a new election for each applicable tax
year.
Reference
Subsection 125(5) Reference
Subsection 256(2)

Schedule 49, Agreement Among Associated

Canadian-Controlled Private Corporations to Schedule 19, Non-Resident Shareholder
Allocate the Expenditure Limit Information
All CCPCs that are associated and have scientific research Complete Schedule 19 if a non-resident shareholder owned
and experimental development (SR&ED) expenditures a voting share of any class of the corporation’s capital stock
have to file Schedule 49. These corporations use this form at any time during the tax year. Do not include non-voting
to: shares.

■ identify all the associated corporations Schedule 11, Transactions with Shareholders,
■ allocate the expenditure limit for the 35% ITC rate on Officers, or Employees
qualifying SR&ED expenditures Complete Schedule 11 if the corporation had transactions
For more details about the ITC, see Line 652 on page 77. with shareholders, officers, or employees.

Note Do not include transactions the corporation carried out in

Only one of the associated or related corporations needs the ordinary course of business, or any transactions listed
to file Schedule 49 for a calendar year. However, if on Form T106, Information Return of Non-Arm’s Length
Schedule 49 is not already on file with us when we Transactions with Non-Residents. See page 31 for details.
assess any of the returns for a tax year ending in the If the corporation is involved in a transfer of property
calendar year of the agreement, we will ask for one. under section 85, make sure to file either Form T2057,
Election on Disposition of Property by a Taxpayer to a
Associated corporations with more than one tax year in Taxable Canadian Corporation, or Form T2058, Election on
a calendar year Disposition of Property by a Partnership to a Taxable
Special rules apply to determine the expenditure limit for Canadian Corporation. File Form T2058 when property is
associated corporations that have more than one tax year

canada.ca/taxes 29
transferred from a partnership. File Form T2057 in all other The promoter has to prepare Form T5003, Statement of Tax
cases. Shelter Information, and send copies to each investor.
Attach copy 2 of Form T5003 to your return.
Schedule 44, Non-Arm’s Length Transactions Use the following guidelines to complete your T2 return
Complete Schedule 44 if all or substantially all of the assets and schedules:
of a non-arm’s length corporation are transferred to or
■ for a gift, use line 311, 313, 314, or 315 of the return,
received by you in the tax year and subsections 85(1), 85(2)
whichever applies
or 142.7(3) applied to any of the transactions.
■ for a limited partnership loss (see page 59), use lines 600
Generally, we consider all or substantially all to be at
to 620 of Schedule 4, and line 222 of Schedule 1
least 90%. You have to evaluate all assets at cost or fair
market value. ■ for a business investment loss, use lines 900 to 950 of
Schedule 6
When this kind of non-arm’s length transaction takes place,
the instalment requirements of the transferee corporation ■ for any other losses or deductions, use lines 395, 396
have to take into account those of the transferor and 705 of Schedule 1
corporation.
Reference
Reference IC89-4, Tax Shelter Reporting
Regulation 5301(8)
Information slip T5013, Statement of
Schedule 14, Miscellaneous Payments to Partnership Income
Residents If you are a member of a partnership, attach to your return
Complete Schedule 14 if you made any of the following a list of all the partnership account numbers assigned to the
payments to residents of Canada: partnerships of which you are a member.
■ royalties for which you have not filed a T5 slip, Corporate partners that receive a T5013 information slip do
Statement of Investment Income not have to file it with their return. They should keep it in
case we ask for it later.
■ research and development fees
Notes
■ management fees
Each partnership has to file a T5013 FIN, Partnership
■ technical assistance fees* Financial Return and T5013 SUM, Information Slips
Summary, for each fiscal period. However, some
■ similar payments
partnerships are exempt from this requirement. For
* Technical assistance fees are payments for technical or more information, see Guide T4068, Guide for the
industrial services related to producing goods or Partnership Information Return (T5013 Forms).
applying processes, formulae, and expertise in the
Except where an election is filed under subsection 249.1(4),
production process.
for the tax year that includes the first day of the first
List only the payments that were more than $100. fiscal period of a business, partnerships with at least one
member who is an individual, a professional
Schedule 15, Deferred Income Plans corporation, or another affected partnership have to
have a December 31 fiscal period end.
Complete Schedule 15 if you deducted from your income
payments you made to deferred income plans, such as: Certain partnerships in a multi-tier partnership structure
also have to have a December 31 fiscal period end unless
■ a registered pension plan a valid multi-tier alignment election was made to align
■ a pooled registered pension plan (see limits and to a common fiscal period. The eligible period to make
conditions in Information Circular IC13-1) this one-time election has ended.

■ a registered supplementary unemployment benefit plan

Schedule 22, Non-Resident Discretionary
■ a deferred profit sharing plan Trust
■ an employees profit sharing plan Complete Schedule 22 if the corporation, a foreign affiliate
the corporation controls, or any other corporation or trust
References
Subsections 146(1) and 147.5(10) that did not deal at arm’s length with the corporation, had a
Paragraphs 20(1)(q) and 147.5(3)(b) beneficial interest in a non-resident discretionary trust
IC13-1, Pooled registered pension plans (PRPP) anytime during the tax year (without reference to
section 94).
Form T5004, Claim for Tax Shelter Loss or
Deduction Schedule 25, Investment in Foreign Affiliates
If you are claiming a loss or deduction from an interest in a Complete Schedule 25 if the corporation is resident in
tax shelter, file Form T5004 with your return. Canada and holds shares in one or more foreign affiliates,
as defined in subsection 95(1).

30 canada.ca/taxes
Schedule 29, Payments to Non-Residents arm’s length at any time in the year and partnerships of
Complete Schedule 29 if the corporation paid or credited which the non-resident person is a member
any of the following amounts to non-residents: ■ the total reportable transactions are more than
1 royalties CAN$1,000,000

2 rents Form T106 consists of the T106 Summary and the

T106 slips. File a separate T106 slip for each non-resident.
3 management fees/commissions
4 technical assistance fees* On Form T106, report all transactions between you and the
non-resident, including those transactions concerning:
5 research and development fees
■ tangible property
6 interest
7 dividends ■ rents

8 film acting payments: ■ royalties and intangible property

– for a motion picture film ■ services
– for a film or videotape for use in connection with ■ advances, loans, or other accounts receivable or payable,
television to or from a non-resident (beginning and ending balances
including gross increases and decreases)
9 other services
* Technical assistance fees are payments for technical or File Form T106 within six months of the end of the
industrial services related to producing goods or reporting corporation’s tax year. Send it to the following
applying processes, formulae, and expertise in the address:
production process. Winnipeg Tax Centre
If the total amount paid or credited to a payee is less than Data Assessment and Evaluation Programs
$100, you do not have to complete this schedule with the Validation and Verification Section
information for that payee. Foreign Reporting Returns
66 Stapon Road
A corporation that makes payments or credits amounts to Winnipeg MB R3C 3M2
non-residents under Regulations 202(1) and/or 105(1) has
to file the applicable information return. Note
If you file Form T106 late, the corporation will be subject
Thin capitalization rules: Disallowed interest treated as a to penalties. When the due date falls on a Saturday,
dividend – Interest disallowed as a deduction under the Sunday, or public holiday recognized by the CRA, your
thin capitalization rules (including amounts paid, credited, return is considered on time if we receive it or if it is
or payable to a non-resident by the corporation or by a postmarked on or before the next business day. For
partnership that the corporation is directly or indirectly a information on public holidays, go to canada.ca/cra-due
member of) will be deemed to be a dividend paid to the -dates.
non-resident. As a result, the corporation has to remit
References
Part XIII tax using the rate that applies to dividend Sections 233.1 and 251
payments. Subsections 162(7) and 162(10)

The corporation may designate, on or before its filing due

date for the tax year, which amounts paid or credited in the Foreign property
tax year as interest to a particular specified non-resident are Foreign affiliates
to be deemed dividends. The designation may be included Note
with the notes to the financial statements. The foreign affiliate dumping rules are intended to
References prevent surplus from being stripped out of Canada
Subsections 18(4), 214(16) and 214(17) without tax. For transactions that occur after
Regulations 105(1) and 202(1) March 18, 2019, these rules, applicable to corporations
resident in Canada controlled by a non-resident
Form T106, Information Return of Non-Arm’s corporation, now also apply to corporations resident in
Length Transactions with Non-Residents Canada that are controlled by a non-resident individual,
non-resident trust or group made up of any combination
Form T106 is an annual information return on which you
of non-resident corporations, non-resident individuals
report the corporation’s activities with certain non-resident
and non-resident trusts that do not deal with each other
persons under section 233.1.
at arm’s length.
File Form T106 if all of the following apply: A corporation resident in Canada, of which a non-resident
■ at any time in the tax year, you were either a resident in corporation is a foreign affiliate at any time in the year,
Canada or a non-resident that carried on business (other must file Form T1134, Information Return Relating to
than as a member of a partnership) in Canada Controlled and Not-Controlled Foreign Affiliates. A
separate supplement has to be filed for each foreign
■ you entered into reportable transactions with a affiliate.
non-resident person with whom you were not dealing at

canada.ca/taxes 31
The corporation has to file Form T1134: resident trusts, they will also have the obligation to
withhold and remit Part XIII tax on amounts paid to
■ within 15 months after the end of its tax year for tax
non-residents. However, the deemed resident trusts
years starting (TYS) before 2020
themselves will not be liable under Part XIII.
■ within 12 months after the end of its tax year for TYS
Also, the resident contributor and/or resident beneficiary
in 2020
are deemed to be jointly, severally, and solidarily liable for
■ within 10 months after the end of its tax year for TYS the trust’s Canadian tax liability and reporting obligations.
after 2020 This means that a corporation that is a resident contributor
or resident beneficiary to a trust is jointly, severally and
You can EFILE Form T1134. For more information about solidarily liable for the Canadian tax liability and reporting
filing, see that form. obligation of that trust.
Beneficiaries of non-resident trusts Corporations with an interest in an OIFP may have to
A corporation may have received, in the year, funds or include an amount in their income as determined under the
property from, or been indebted to, a non-resident trust in Act.
which it had a beneficial interest. If so, you have to For more information about NRTs and OIFP, including the
complete and file Form T1142, Information Return in specific definitions of resident contributor, resident
Respect of Distributions from and Indebtedness to a beneficiary, and offshore investment fund property, call
Non-Resident Trust. us at one of the following numbers:
A separate form has to be filed for each non-resident trust. ■ 1-800-959-8281, from Canada and the continental
Form T1142 contains more information about filing. United States

Transfers to non-resident trusts ■ 613-940-8495, from anywhere else. We only accept collect
A corporation may have transferred or loaned funds or calls initiated by telephone operators. After your call is
property to a non-resident trust. If so, you may have to accepted by an automated response, you may hear a
complete and file Form T1141, Information Return in beep and experience a normal connection delay
Respect of Contributions to Non-Resident Trusts, References
Arrangements or Entities. Section 94.1
Subsections 94(3) and 94(4)
A separate form has to be filed for each non-resident trust.
Form T1141 contains more information about filing. Penalties
There are substantial penalties for not completing and filing
Ownership of foreign property Forms T1134, T1135, T1141, and T1142 by the due date, and
If, at any time in the year, the corporation owned or held for knowingly or under circumstances amounting to gross
specified foreign property where the total cost of all such negligence making false statements or omissions in any of
property was more than CAN$100,000, you have to the information returns.
complete and file Form T1135, Foreign Income Verification
References
Statement. If the total cost of all such property is less than Sections 233.1 to 233.6
CAN$250,000 throughout the year, the corporation may use Subsections 162(7), 162(10), 162(10.1), and 163(2.4)
the simplified reporting method included in Form T1135.
Note Schedule 50, Shareholder Information
Specified foreign property does not include, for Complete Schedule 50 if you are a private corporation and
example: if any shareholder holds 10% or more of your common
and/or preferred shares. Give a maximum of the 10 top
■ foreign investments held in Canadian mutual funds
shareholders and the requested information.
■ property you used or held exclusively in the course of
carrying on your active business Line 172 – Has the corporation made
■ a share of the capital stock or indebtedness of a payments to, or received amounts from,
foreign affiliate a retirement compensation arrangement in
For more information on the property you are required the year?
to report, see Form T1135 or go to canada.ca/cra-foreign To answer this question, tick the yes or no box. No
-income-verification. schedule or form is required.
You can EFILE Form T1135. For more information about
filing, see that form. Line 180 – Schedule 88, Internet Business
Activities
Non-resident trusts (NRTs) and offshore investment
fund property (OIFP) Complete Schedule 88 if your corporation earns income
from one or more web pages or websites. See the schedule
NRTs with a resident contributor or a resident beneficiary
for more information.
are deemed to be resident in Canada throughout the year
for many purposes under the Act including determining
the liability of the trust for tax under Part I. As deemed

32 canada.ca/taxes
Calculation schedules
You may also have to use various calculation schedules to
complete the rest of your return. We list these schedules on
page 2 of the return. You will find details about each of
these schedules in the following chapters.

canada.ca/taxes 33
Chapter 3 – Page 3 of the T2 return
Page Page
Attachments ......................................................................... 35 How to complete Schedule 4, Corporation Loss
Continuity and Application ........................................... 57
Additional information ..................................................... 35
Part 1 – Non-capital losses ................................................. 57
Line 270 – Did the corporation use the International
Determination of current-year non-capital loss .......... 57
Financial Reporting Standards (IFRS) when it
Calculating current-year farm loss ................................ 57
prepared its financial statements? ................................. 35
Continuity of non-capital losses and request for a
Line 280 – Is the corporation inactive? .............................. 35
carryback....................................................................... 57
Lines 284 to 289 – Specify the principal product(s)
Part 2 – Capital losses ......................................................... 58
mined, manufactured, sold, constructed, or
Continuity of capital losses and request for a
services provided, giving the approximate
carryback....................................................................... 58
percentage of the total revenue that each product
Part 3 – Farm losses ............................................................. 58
or service represents ........................................................ 35
Continuity of farm losses and request for a
Line 291 – Did the corporation immigrate to Canada
carryback....................................................................... 58
during the tax year? ......................................................... 35
Part 4 – Restricted farm losses ........................................... 58
Line 292 – Did the corporation emigrate from Canada
Current-year restricted farm loss .................................. 58
during the tax year? ......................................................... 35
Continuity of restricted farm losses and request for
Line 293 – Do you want to be considered as a
a carryback .................................................................... 58
quarterly instalment remitter, if you are eligible? ....... 35
Part 5 – Listed personal property losses .......................... 59
Line 294 – If the corporation was eligible to remit
Continuity of listed personal property loss and
instalments on a quarterly basis for part of the tax
request for a carryback ................................................ 59
year, provide the date the corporation ceased to be
Part 6 – Analysis of balance of losses by year of
eligible ............................................................................... 35
origin ................................................................................. 59
Line 295 – If the corporation’s major business activity
Part 7 – Limited partnership losses................................... 59
is construction, did you have any subcontractors
Current-year limited partnership losses ...................... 59
during the tax year? ......................................................... 35
Limited partnership losses from prior tax years that
Calculating net income or loss ......................................... 35 may be applied in the current year ........................... 60
Schedule 1, Net Income (Loss) for Income Tax Continuity of limited partnership losses that can be
Purposes ............................................................................ 35 carried forward to future tax years ........................... 60
Schedule 6, Summary of Dispositions of Capital Part 8 – Election under paragraph 88(1.1)(f) .................... 60
Property............................................................................. 36
Taxable income ................................................................... 60
Designation under paragraph 111(4)(e) ........................ 36
Line 300 – Net income or (loss) for income tax
Completing Schedule 6 ................................................... 36
purposes ........................................................................... 60
Capital gains reserve ....................................................... 39
Lines 311 to 315.................................................................... 60
Schedule 8, Capital Cost Allowance (CCA) .................... 40
Line 311 – Charitable donations ........................................ 60
Disability-related modifications .................................... 40
Line 313 – Cultural gifts ..................................................... 61
Available-for-use rule...................................................... 40
Line 314 – Ecological gifts .................................................. 62
When is property available for use? .............................. 40
Line 315 – Gifts of medicine ............................................... 62
Election under Regulation 1101(5q) .............................. 40
Line 320 – Taxable dividends deductible under
CCA rates and classes ..................................................... 40
section 112 or 113, or subsection 138(6) ........................ 62
Completing Schedule 8 ................................................... 42
Line 325 – Part VI.1 tax deduction .................................... 64
Schedule 8 examples ........................................................ 47
Line 331 – Non-capital losses of previous tax years ....... 64
List of CCA rates and classes ......................................... 50
Line 332 – Net capital losses of previous tax years ......... 64
Schedule 12, Resource-Related Deductions ..................... 54
Line 333 – Restricted farm losses of previous
Schedule 13, Continuity of Reserves ................................. 54
tax years ............................................................................ 64
Schedule 16, Patronage Dividend Deduction .................. 55
Line 334 – Farm losses of previous tax years................... 64
Schedule 17, Credit Union Deductions ............................. 55
Line 335 – Limited partnership losses of previous
Form T661, Scientific Research and Experimental
tax years ............................................................................ 64
Development (SR&ED) Expenditures Claim ............... 56
Line 340 – Taxable capital gains or taxable dividends
Losses ................................................................................... 56 allocated from a central credit union ............................ 64
Current-year losses .............................................................. 56 Line 350 – Prospector’s and grubstaker’s shares............. 64
Applying losses .................................................................... 56 Line 355 – Section 110.5 additions or
Losses carryback .................................................................. 57 subparagraph 115(1)(a)(vii) additions .......................... 64
Calculating losses when there is an acquisition of Line 360 – Taxable income ................................................. 65
control ................................................................................ 57

34 canada.ca/taxes
Attachments Also, give the approximate percentage of the corporation’s
total revenue that each product or service represents.
See Chapter 2 to complete this section.
Line 291 – Did the corporation immigrate to
Additional information Canada during the tax year?
Provide all the information we request in the “Additional Tick the yes or no box.
information” area of your return.
Line 292 – Did the corporation emigrate from
Line 270 – Did the corporation use the
Canada during the tax year?
International Financial Reporting Standards
Tick the yes or no box.
(IFRS) when it prepared its financial
statements?
Line 293 – Do you want to be considered as a
If the corporation used the IFRS to prepare its financial
quarterly instalment remitter, if you are
statements, answer yes to this question.
eligible?
The IFRS is mandatory for all publicly accountable A small-CCPC is eligible to make quarterly instalment
enterprises. This includes corporations that have calculated payments if it meets certain conditions. To determine if you
their financial statements in accordance with the IFRS but are eligible, see Guide T7B–Corp, Corporation Instalment
have not complied with all aspects of the IFRS. A Guide.
corporation that has issued, or is in a process of issuing,
publicly-traded debt or equity instruments or who holds
assets in a fiduciary capacity for a broad group of outsiders Line 294 – If the corporation was eligible to
is generally considered to be a publicly accountable remit instalments on a quarterly basis for part
enterprise. of the tax year, provide the date the
For the first year when IFRS is adopted, corporations are corporation ceased to be eligible.
required to maintain additional documentation to support Indicate the date that the corporation ceased to be eligible
amounts filed on the General Index of Financial to remit instalments on a quarterly basis.
Information (GIFI) and tax returns. For more information
on IFRS books and records and other IFRS topics, go Line 295 – If the corporation’s major business
to canada.ca/international-financial-reporting-standards activity is construction, did you have any
-ifrs.
subcontractors during the tax year?
Line 280 – Is the corporation inactive? Tick the yes or no box.
Even if a corporation is inactive, which means it has not Major business activity
operated during the tax year, it has to file a return.
All individuals, partnerships, and corporations whose
Note principal business activity is construction have to report
Corporations that are inactive throughout the tax year payments made to subcontractors. For these purposes,
and that do not have balance sheet or income statement construction is defined as erecting, installing, altering,
information to report do not have to attach modifying, repairing, improving, demolishing,
schedules 100, 125, and 141 to their T2 return. However, dismantling, or removing any structure or part, including
they will be accepted if filed. but not limited to buildings, roads, and bridges.

Lines 284 to 289 – Specify the principal Who is a subcontractor?

products mined, manufactured, sold, A subcontractor is an individual, partnership, or
corporation that provides construction services.
constructed, or services provided, giving the
approximate percentage of the total revenue For more information, go to canada.ca/contract-payment
that each product or service represents -reporting-system.
If you file electronically, enter the proper North American
Industry Classification System (NAICS) code before Calculating net income or loss
completing lines 284 to 289. If you do not select the There are several schedules you may have to use to
business activity, you will have problems and errors when calculate the net income or loss for income tax purposes.
you prepare the T2 return to be transmitted electronically This section explains each of those schedules.
or printed in bar-code format.
Break down the business activity into the following Schedule 1, Net Income (Loss) for Income Tax
categories: Purposes
■ the principal products mined, manufactured, sold, or Use Schedule 1 to report income from the COVID-19
constructed programs. Clearly identify each of the COVID-19 subsidies
received on line 605 (for example, “CEWS $15,500”) with a
■ the services provided corresponding “0” entry on line 295.

canada.ca/taxes 35
Generally, the net income (loss) reported on your financial partnership’s capital gain or loss should be reported on
statements will not be the same as the net income (loss) Schedule 6 of the corporate partner.
required for tax purposes. This is because certain income
You may have to use the following schedules to calculate
and expenses reported on your financial statements or the
General Index of Financial Information (GIFI) may not be certain amounts on Schedule 1:
used in the calculation of net income (loss) for tax purposes. ■ Schedule 6, Summary of Dispositions of Capital Property
(on this page)
For example, you do not deduct charitable donations when
determining net income for tax purposes, as you would to ■ Schedule 8, Capital Cost Allowance (CCA) (see page 40)
arrive at net income on your financial statement.
■ Schedule 12, Resource-Related Deductions (see page 54)
Note
Charitable donations are deducted (afterward) from net ■ Schedule 13, Continuity of Reserves (see page 54)
income for tax purposes to arrive at taxable income. ■ Schedule 16, Patronage Dividend Deduction (see
Use Schedule 1 to reconcile the net income (loss) reported page 55)
on your financial statements and the net income (loss) ■ Schedule 17, Credit Union Deductions (see page 55)
required for tax purposes.
■ Schedule 73, Income Inclusion Summary for
Enter net income or loss after income tax and extraordinary Corporations that Are Members of Partnerships (see
items at amount A, page 1 of Schedule 1. Add the taxable page 12)
items and the non-allowable expenses listed on lines 101
to 199 and subtract from this the non-taxable items and ■ Form T661, Scientific Research and Experimental
eligible expenses listed on lines 401 to 499. Development (SR&ED) Expenditures Claim (see page 56)

Additions and deductions identified on lines 101 to 132 Schedule 6, Summary of Dispositions of
and 401 to 418 of Schedule 1 are the most common
additions and subtractions. For other additions and Capital Property
deductions, see pages 3 and 4. You have to complete Schedule 6 if you disposed of capital
property during the tax year and incurred any capital
Some expenses deducted on your income statement are not losses or realized any capital gains. You also have to
allowable for income tax purposes and are not identified on complete this schedule if you claim an allowable business
Schedule 1. In this case, use columns 605 and 295, and investment loss.
line 296, “Other additions,” on page 3.
References
Also, certain items included in income that are not taxable Section 54
are not identified on this schedule. In such cases, complete IT-170, Sale of Property – When Included in Income Computation
IT-448, Dispositions – Changes in Terms of Securities
columns 705 and 395, and line 396, “Other deductions,” on
IT-460, Dispositions – Absence of Consideration
page 4. S3-F4-C1, General Discussion of Capital Cost Allowance
Notes
Only complete lines 203 and 302 if you are converting Designation under paragraph 111(4)(e)
from an accrual basis to a cash basis. Otherwise, these Answer yes or no to the question on line 050, page 1 of
lines should be left blank. Schedule 6.
The deductible portion of expenses you incurred for You can make a designation under paragraph 111(4)(e) if a
food, beverages, and entertainment is only 50% of person or group of persons has acquired control of the
whichever is less: the expenditure actually incurred or corporation. If you make the designation, capital properties
the amount that would be reasonable in the will be considered as having been disposed of immediately
circumstances. before that person or group of persons acquired control of
the corporation.
Eighty percent of expenses for food and beverages
consumed by a long-haul truck driver during an eligible
Completing Schedule 6
travel period are deductible. For more information, see
To help you complete Schedule 6, we have provided the
Guide T4002, Self-Employed Business, Professional,
following explanations that briefly set out the type of
Commission, Farming, and Fishing Income, or go
information we need in each column and each part of the
to canada.ca/taxes-employment-expenses and select
schedule.
“Transportation employees.”
Date of acquisition
A full deduction is allowed for meals provided to an
In this column, give the date you acquired the property.
employee at a temporary construction work camp, if
certain conditions are met. For more information on this Proceeds of disposition
subject, see Guide T4130, Employer’s Guide – Taxable In this column, indicate the proceeds of disposition. The
Benefits and Allowances or go to canada.ca/payroll. proceeds of disposition are usually the selling price of the
property. However, they can also include compensation
Taxable capital gains or allowable capital losses allocated
the corporation received for property that was destroyed,
by a partnership to a corporate partner are not included
expropriated, stolen, or damaged.
on line 129 of Schedule 1 of the corporate partner.
Instead, the corporate partner’s share of the

36 canada.ca/taxes
For a gift or a deemed disposition, the proceeds of fixing-up costs, finder’s fees, commissions, surveyor’s fees,
disposition are usually the fair market value of the property transfer taxes, and other reasonable expenses incurred to
when its owner or use changes. dispose of the property.
References Gain (or loss)
Section 54 In the last column, enter the amount of the gain or loss as
S3-F3-C1, Replacement Property
instructed.
Adjusted cost base
A capital gain results when the proceeds of disposition of a
In this column, indicate the cost of the property you used to
capital property are more than the ACB and any related
calculate any capital gain or loss. This amount is called the
outlays or expenses. A capital loss occurs when the
adjusted cost base (ACB). The ACB is the original cost of
proceeds of disposition are less than the ACB and the
the property that has been adjusted to reflect certain
related outlays and expenses. However, if depreciable
transactions or occurrences that took place after acquiring
property is disposed of, it will result in a terminal loss, not
the property.
a capital loss. See “Column 9 – Undepreciated capital cost”
The cost of a capital property may be the actual cost, a on page 44 for more details about terminal losses.
deemed cost, or the valuation-day value of the property.
In certain cases, when you dispose of a building and the
The nature of the property and the circumstances under
land on which it stands, and the building is disposed of for
which you acquired it determine which cost of the capital
less than its undepreciated capital cost, you may have to
property you should use.
reduce the gain on the sale of the land by the terminal loss
References on the sale of the building.
Subsections 53(1) and 53(2)
Reference
The cost of property acquired after 1971 is usually the Subsection 13(21.1)
actual cost of acquiring it, including the purchase price plus
Categories of capital property
any related costs, such as commissions, legal fees, and other
There are six categories of capital property you may have
reasonable expenses. It also includes the cost of additions
disposed of during the tax year. The categories are:
and improvements to the property. It does not include
current expenses, such as maintenance and repair costs. ■ shares
Special rules apply when determining the cost of capital ■ real estate
property owned on December 31, 1971. According to these
rules, tax is not assessed and losses are not allowed for any ■ bonds
gain or loss that arose before that date. ■ other properties
When deductions from the cost base of a property (other ■ personal-use property
than a partnership interest) reduce the balance to a negative
amount at any time in the tax year, you are considered to ■ listed personal property
have realized a capital gain equal to the amount of the The first six parts of Schedule 6 reflect these six categories
negative balance, and the ACB becomes nil. of capital property.
You cannot use later additions to the ACB to reduce Part 1 – Shares
previous gains on the property that resulted from a In this part, list the shares disposed of during the tax year.
negative balance. You can only consider these additions Give the number of shares, the name of the corporation in
when you determine future gains or losses. which the shares were held, and the class of the shares.
Reference
Subsection 40(3)
Usually, disposing of a share of the capital stock of a
corporation will result in a taxable capital gain or an
Paragraphs 53(1)(e) and 53(2)(c) outline the rules for allowable capital loss. However, if the corporation that is
determining the ACB of a partnership interest. disposing of the share is in the business of trading shares,
the resulting gain or loss is considered business income or
You have to reduce the ACB of a partnership interest by the
loss.
amount of any share purchase tax credit, and one-half of
any scientific research and experimental development tax If a share is converted because of a merger or an
credit the partnership allocated to the corporation. amalgamation, subsection 248(1) deems a disposition to
have occurred.
Note
Interests in a partnership that a limited partner or an Under paragraph 112(3)(b), a corporation (the shareholder)
inactive partner holds are subject to the negative ACB must reduce the losses from the disposition of shares held
rule. as capital property by certain dividends received for those
shares. This is called a stop-loss rule. Generally, this rule
Outlays and expenses
does not apply when the shareholder owns less than 5% of
In this column, enter the amount of outlays and expenses
the shares and has held these shares for over a year.
you deducted when calculating a gain or loss. You can
deduct most cash outlays the corporation used to put a On line 160, enter the total adjustment for such losses
property into saleable condition when you calculate a gain identified in Part 1.
or loss. You can also deduct expenses incurred when
Reference
disposing of the property. These expenses include certain IT-328, Losses on Shares on Which Dividends Have Been Received

canada.ca/taxes 37
Part 2 – Real estate Transactions in foreign currency or foreign currency futures
In this part, list all real estate disposed of during the tax that do not form part of the business operations can be
year. Give the municipal address of each property. considered capital dispositions.
Dispositions of non-depreciable real property (unless the References
property is inventory) may result in a capital gain or loss. Subsection 39(2)
IT-95, Foreign Exchange Gains and Losses
However, dispositions of depreciable property may result
in a capital gain, a recapture of CCA, or a terminal loss. For dispositions of depreciable property, a capital gain
See ”Column 9 – Undepreciated capital cost” on page 44 results if the proceeds are more than the capital cost.
for details about terminal losses and recaptures. However, losses on depreciable property do not result in
capital losses. These losses are terminal losses. See
Enter the total amount of gain or loss realized on
“Column 9 – Undepreciated capital cost” on page 44 to find
disposition of real estate at amount B.
out more about terminal losses.
Reference
IT-218, Profit, Capital Gains and Losses From the Sale of Real Estate, Enter the total amount of gain or loss realized on
Including Farmland and Inherited Land and Conversion of Real Estate disposition of other properties at amount D.
From Capital Property to Inventory and Vice Versa
Part 5 – Personal-use property
Part 3 – Bonds In this part, describe any personal-use property you
In this part, list all bonds disposed of during the tax year. disposed of during the tax year.
Give the face value, the maturity date, and the issuer’s
name for each type of bond. Personal-use property of a corporation is property owned
mainly for the personal use or enjoyment of an individual
When you make a capital disposition of a debt obligation, who is related to the corporation.
the amount of any realized discount or bonus received is
usually considered a capital gain. Similarly, a premium Use the $1,000 rule to determine gains and losses when you
paid is considered a capital loss, either when the obligation dispose of personal-use property. According to this rule, if
matures or on the date you dispose of the obligation. the adjusted cost base is less than $1,000, it is considered to
be $1,000. As well, when the proceeds of disposition are less
Enter the total amount of gain or loss realized on than $1,000, they are considered to be $1,000.
disposition of bonds at amount C.
The $1,000 rule will not apply when donors acquire
Reference personal-use property as part of an arrangement in which
IT-479, Transactions in Securities
the property is gifted to a qualified donee, such as a
Part 4 – Other properties registered charity.
In this part, describe any capital property disposed of
You cannot deduct losses on dispositions of personal-use
during the tax year that you have not already reported in
property (other than listed personal property or a debt that
Parts 1, 2, and 3.
is personal-use property) from your income.
Other property includes capital debts established as bad
Enter the total amount of gain realized on disposition of
debts, debts in respect of the disposition of personal-use
personal-use property at amount E.
property established as bad debts, as well as amounts that
arise from foreign currency transactions. Reference
Subsection 46(1)
When an amount receivable on a capital account becomes
a bad debt and you elect on your return to have the Part 6 – Listed personal property
provisions of subsection 50(1) applied, a deemed In this part, describe any listed personal property disposed
disposition occurs at the end of the year. You are of during the tax year.
considered to have reacquired the debt immediately Listed personal property is a special category of
afterwards at a cost of nil. This usually allows the personal-use property that usually increases in value. The
corporation to claim a bad debt as a capital loss in the year. following is a complete list of the different types of listed
Any later recovery of that debt will result in a capital gain. personal property:
References
Subsection 50(1)
■ prints, etchings, drawings, paintings, sculptures, or other
IT-159, Capital Debts Established to be Bad Debts similar works of art
You can deduct, per subsection 50(2), capital losses in ■ jewellery
respect of bad debts relating to the disposition of ■ rare folios, rare manuscripts, or rare books
personal-use property to a person with whom you deal at
arm’s length. ■ stamps
The amount of the loss cannot be more than the amount of ■ coins
the gain reported on the disposition of the personal-use
If you incur losses from disposing of listed personal
property.
property, you can only deduct these losses from capital
Reference gains realized from disposing of listed personal property.
Subsection 50(2)
On line 655, enter the amount of listed personal property
Foreign exchange gains or losses from buying or selling losses from previous years you want to apply against
capital properties are capital gains or capital losses. current-year net listed personal property gains. Also, enter

38 canada.ca/taxes
this amount on line 530 of Schedule 4, Corporation Loss ■ for the third year 2/5 of the capital gain
Continuity and Application.
■ for the fourth year 1/5 of the capital gain
You can apply any unabsorbed losses in the current year to
Add the reserve amount you deducted in a tax year to
reduce similar net gains realized in the three preceding
income in the following tax year.
years, and in the following seven years. See “Part 5 – Listed
personal property losses” on page 59 for more details. Add the reserve opening balance and subtract the reserve
closing balance on lines 880 and 885 of Schedule 6.
At amount F, enter the total amount of gains or losses
realized on disposition of listed personal property minus Show the continuity of capital gain reserves on Schedule 13,
the amount of line 655. Continuity of Reserves. See page 54 for details.
Part 7 – Property qualifying for and resulting in an References
allowable business investment loss Subparagraphs 40(1)(a)(ii) and 40(1)(a)(iii)
Subsection 40(1.01)
Generally, a business investment loss arises from the arm’s
length disposition (or deemed disposition) of: Part 8 – Capital gains or losses
When completing this part, line 875 is the capital gains
■ shares of a small business corporation
dividends. Capital gains dividends under
■ certain debts owed to the corporation by a small business paragraphs 130.1(4)(a) and (b) and 131(1)(a) and (b) are
corporation, certain bankrupt corporations, or certain considered to be capital gains. These paragraphs apply to
wound-up corporations (these corporations have to deal mortgage investment corporations and mutual fund
with the corporation at arm’s length) corporations. If you received any capital gains dividends in
the tax year, enter them on this line.
A small business corporation is defined in subsection 248(1).
Line 880 is the balance at the beginning of the year of the
Complete Part 7 to claim an allowable business
capital gains reserve from Schedule 13. This amount should
investment loss (ABIL).
include any amount from the last tax year of predecessor
At amount G, enter the ABIL (total of column 7 multiplied corporations after amalgamation or wind-up.
by 1/2). Enter this amount on line 406 of Schedule 1.
Part 9 – Taxable capital gains and total capital losses
Generally, a zero inclusion rate applies for capital gains
Capital gains reserve arising as a result of a gift to qualified donees of certain
Often, you will not receive part of the proceeds of securities or of environmentally sensitive land. The zero
disposition, usually for real property, until after the end of inclusion rate is restricted to only part of the capital gain if
the year. In these cases, you can defer part of the capital the taxpayer is entitled to an advantage or benefit in respect
gain to the year the corporation is due to receive the of a gift.
proceeds by setting up a capital gains reserve. By using
reserves, you can spread a capital gain over a maximum of When completing this part, line 895 is the full amount of
five years. capital gains realized on donations of a security listed on a
designated stock exchange, a share or unit of a mutual
Generally, a corporation that has made a gift of a fund, an interest in a segregated fund, or a prescribed debt
non-qualifying security to a qualified donee may claim a obligation made to a qualified donee.
reserve for any gain realized on this security. The reserve
claimed by the corporation cannot exceed the eligible Generally, if you donate property to a qualified donee that
amount of the gift. The eligible amount of a gift is the is included in a flow-through share class of property, and
amount by which the fair market value of the property that you have an exemption threshold for the flow-through
is the subject of the gift exceeds the amount of the share class of property, you may be deemed to have an
advantage, if any, in respect of the gift. additional capital gain from the disposition of another
capital property subject to the 50% inclusion rate.
A reserve can only be claimed if the donation is not
deducted for tax purposes and the donee does not dispose Amounts under section 34.2 (the adjusted stub period
of the security or the security does not cease to be a accrual regime) that have the character of capital are to be
non-qualifying security. This reserve can only be claimed in entered in this part of Schedule 6 and not on line 130 of
tax years ending within 60 months of making the gift. Schedule 1.

The reserve must be included in income if the corporation Since these amounts are deemed to be taxable capital
becomes a non-resident or tax exempt. gains/allowable capital losses under the rules in
section 34.2 and so already reflect the 50% inclusion rate,
The reserve that you can claim in a tax year cannot be more they are multiplied by 2 on Schedule 6 to calculate the total
than the lesser of the following two amounts: capital gains or losses of the corporation.
A. Capital gain × Amount not due until after Amount U is the capital gain or loss for the year. If the
Proceeds of disposition the end of the year amount is a loss, enter it on line 210 of Schedule 4. If the
and amount is a gain, multiply it by 1/2 and enter it at
amount W of Schedule 6 and line 113 of Schedule 1.
B. ■ for the year of disposition 4/5 of the capital gain
References
■ for the second year 3/5 of the capital gain Paragraphs 38(a.1), 38(a.2), and 40(12)

canada.ca/taxes 39
You can deduct an ABIL from all sources of income for the ■ immediately before the corporation disposes of the
year. If any balance remains after the year the loss occurs, property
it becomes part of the non-capital loss. You can carry the
■ when the corporation can use the property to either
non-capital loss back 3 tax years and carry it forward 10 tax
produce a saleable product or perform a saleable service
years.
A building is considered available for use on the earliest of
If you are unable to deduct an ABIL as a non-capital loss
the following dates:
within this allowed time frame, the unused part becomes a
net capital loss, and you can carry it forward indefinitely to ■ when the corporation uses all or substantially all of the
reduce taxable capital gains. building for its intended purpose
Include all unused ABIL after the applicable carry-forward ■ when construction of the building is completed
period in Part 2, “Capital losses,” of Schedule 4. See
page 58, for more details. ■ the beginning of the first tax year that starts at
least 358 days after the tax year during which the
References corporation acquired the property
Paragraph 39(1)(c)
S4-F8-C1, Business Investment Losses ■ immediately before the corporation disposes of the
property
Schedule 8, Capital Cost Allowance (CCA) ■ when the corporation acquires a replacement property,
Paragraph 20(1)(a) allows a corporation to deduct part of if it is replacing one it involuntarily disposed of
the capital cost of certain depreciable property from (for example, expropriation) that it either acquired
income it earned in the year from a business or property. before 1990 or had already become available for use
This deduction is called capital cost allowance.
Note
Complete Schedule 8 to calculate CCA. If a corporation acquires a property for a long-term
When a tax year is shorter than 12 months, you generally project, it can elect to limit the impact of the
have to prorate the CCA. available-for-use rule. This election is not available for
rental buildings. To make this election, send us a
Under Part XI of the Income Tax Regulations, depreciable completed Form T1031, Subsection 13(29) Election in
property is grouped into prescribed classes. Schedule II of Respect of Certain Depreciable Properties, Acquired for
the Regulations contains a complete list of these prescribed use in a Long Term Project, with your return.
classes.
References
A maximum rate is prescribed for each class. Apply the Subsections 13(26) to 13(32)
prescribed rate to the undepreciated capital cost of the class
at year-end to determine the maximum CCA you can claim. Election under Regulation 1101(5q)
You can deduct any amount up to the maximum that is Line 101 – Is the corporation electing under
available for the year. Regulation 1101(5q)?
Tick the yes or no box.
Disability-related modifications This election allows you to include certain property usually
You can deduct outlays and expenses you incur for eligible included in classes 8 and 43 in a separate class. You have to
disability-related modifications made to a building in the have acquired each property at a capital cost of at least
year you paid them, instead of having to add them to the $1,000. The types of properties that qualify for this election
capital cost of your building. Eligible disability-related include manufacturing and processing property,
modifications include changes you make to accommodate photocopiers, and electronic communications equipment,
wheelchairs. You can also deduct expenses paid to install or such as facsimile transmission devices or telephone
get disability-related devices and equipment. equipment.
You can claim this as “Other deductions” on Schedule 1, You can elect to classify a property in a separate class or
Net Income (Loss) for Income Tax Purposes. several properties in one or more than one separate class.

Available-for-use rule This election can allow you to claim a terminal loss, which
The available-for-use rule determines the earliest tax year in is any remaining undepreciated capital cost at the time of
which you can claim CCA for depreciable property. disposition of the properties in this class. For more
information on terminal losses, see “Column 9 –
Undepreciated capital cost.”
When is property available for use?
Property other than a building is considered available for
CCA rates and classes
use at the earliest of several dates. The following are some
examples of these dates: Zero-emission vehicles
For zero-emission vehicles (ZEVs) acquired after
■ when the corporation first uses the property to earn March 18, 2019, two new CCA classes are added. Class 55
income was created for zero-emission vehicles otherwise included
in class 16, essentially automobiles for lease or rent and
■ the beginning of the first tax year that starts at
taxicabs, with the same CCA rate of 40%. Class 54 was
least 358 days after the tax year during which the
created for zero-emission vehicles that would otherwise be
corporation acquired the property
included in class 10 or 10.1, essentially other automobiles,

40 canada.ca/taxes
with the same CCA rate of 30%. The CCA still applies on a ■ 7/8 times the net addition to the class for property
declining-balance basis. that becomes available for use in 2024 or 2025
A corporation may elect to not include in class 54 or 55 a ■ 3/8 times the net addition to the class for property
vehicle that would otherwise be a zero-emission vehicle. that becomes available for use after 2025 and
When such an election is filed, the vehicle will no longer be before 2028
considered to be a zero-emission vehicle. As a result, the
■ suspend the existing CCA half-year rule
vehicle will be included in its usual CCA class 10, 10.1
or 16. A corporation has to file this election with the Multiply the result by the prescribed CCA rate of 30% for
minister of National Revenue in its return of income for the class 54 and 40% for class 55.
tax year in which the vehicle is acquired.
The CCA will apply to any remaining balance for the new
An eligible zero-emission vehicle is essentially a motor classes using the set rate for each class.
vehicle for use on streets and highways (excluding a trolley
bus or vehicle operated only on rails). It must be fully These measures do not change the total amount that can be
electric, or a plug-in hybrid that has a battery capacity of at deducted over the life of the vehicle, it just allows a larger
least 7 kWh, or fully powered by hydrogen. It must not deduction in the first year.
have been used, or acquired for use, for any purpose before A zero-emission passenger vehicle is an automobile that is
it was acquired by the corporation. included in class 54. When the capital cost of a
An extension of classes 54 and 55 to used vehicles has been zero-emission passenger vehicle is more than a prescribed
announced. amount ($55,000 (plus sales taxes) for 2019), the capital cost
of the vehicle is deemed to be the prescribed amount. This
It cannot be a vehicle: amount will be reviewed annually.
■ for which the Government of Canada paid assistance If a zero-emission passenger vehicle is disposed of to a
under a prescribed program such as the federal purchase person or partnership with which the corporation deals at
incentive announced in the 2019 federal budget arm’s length and its cost is more than the prescribed
(presently there is only one prescribed program) amount, the proceeds of disposition will be adjusted based
on a factor equal to the prescribed amount as a proportion
■ that the corporation elected not to include in class 54
of the actual cost of the vehicle. But for dispositions made
or 55
after July 29, 2019, based on proposed legislation, the actual
■ for which an amount has been deducted as CCA or a cost of the vehicle will be adjusted for payment or
terminal loss has been claimed by another person or repayment of Government assistance.
partnership
New class 56
In addition, a zero-emission vehicle has to be acquired, and The Government has proposed a temporary enhanced first
become available for use, after March 18, 2019, and year capital cost allowance (CCA) of 100% for eligible
before 2028. An enhanced first-year CCA is available as zero-emission automotive equipment and vehicles (other
follows: than motor vehicles) that currently do not benefit from the
accelerated rate provided by classes 54 and 55. These
■ 100% after March 18, 2019, and before 2024
vehicles and equipment would be included in new class 56.
■ 75% after 2023 and before 2026 They would have to be acquired after March 1, 2020, and
become available for use before 2028
■ 55% after 2025 and before 2028
The enhanced CCA would apply only for the tax year in
For the enhanced first-year allowance, the following step which the equipment or vehicle first becomes available for
should be done before calculating the CCA: use. It would be subject to the following phase-out:
■ increase the net capital cost addition to the new class for ■ 100% after March 1, 2020, and before 2024
property that becomes available for use before 2028 as
follows: ■ 75% after 2023 and before 2026
– For class 54, increase the capital cost addition by an ■ 55% after 2025 and before 2028
amount equal to:
To be eligible for the enhanced first year allowance, a
■ 2 1/3 times the net addition to the class for property vehicle or equipment must be automotive (that is,
that becomes available for use before 2024 self-propelled) and fully electric or powered by hydrogen.
Vehicles or equipment that are powered partially by
■ 1 ½ times the net addition to the class for property electricity or hydrogen (which includes hybrid vehicles and
that becomes available for use in 2024 or 2025 vehicles that require human or animal power for
■ 5/6 times the net addition to the class for property propulsion) would not be eligible.
that becomes available for use after 2025 and Class 56 captures automotive equipment that is not
before 2028 designed for use on highways or streets such as
– For class 55, increase the capital cost addition by an zero-emission aircraft, watercraft, trolley buses and railway
amount equal to: locomotives. Additions or alterations may qualify if they
convert automotive equipment (other than a motor vehicle)
■ 1 ½ times the net addition to the class for property into a zero-emission property.
that becomes available for use before 2024

canada.ca/taxes 41
The CCA would be deductible on any remaining balance An enhanced deduction will also generally apply to eligible
on a declining balance basis at a rate of 30%. Canadian development expenses and Canadian oil and gas
property expenses incurred after November 20, 2018, and
An election would be available to not include the vehicle or
before 2028.
equipment in class 56. As a result, the property would then
be included in the class for which it would otherwise be The accelerated investment incentive applies to property
eligible. for which CCA is calculated on a declining-balance basis
(including class 14.1, intangible property), as well as
Class 56 excludes property for which CCA or a terminal
property with straight-line depreciation (for example,
loss has previously been claimed by another person or
leasehold improvement, patents, and limited period
partnership where the equipment was acquired by the
licences).
corporation on a tax-deferred “rollover” basis or it was
previously owned or acquired by the corporation or a In certain situations, rules related to limited partners,
non-arm’s length person or partnership. specified leasing properties, specified energy properties
and rental properties can restrict a CCA deduction, or a loss
Accelerated investment incentive property
for such a deduction, that would otherwise be available.
Accelerated investment incentive property (AIIP) is a
These rules continue to apply.
property (other than property included in class 54 or 55)
that is acquired by the corporation after November 20, 2018, The accelerated investment incentive does not change the
and becomes available for use before 2028 and that meets total amount that can be deducted over the life of the
one of the following conditions: property, it just allows a larger deduction in the first year.
■ no person or partnership (including the corporation) has For more information, go to canada.ca/taxes-accelerated
claimed capital cost allowance (or a terminal loss) for the -investment-income.
property Reference
it has not been transferred to the corporation on a Regulation 1104(4)
■
S3-F8-C2, Tax Incentives for Clean Energy Equipment
tax-deferred “rollover” basis
■ it was not previously owned or acquired by the Completing Schedule 8
corporation or a non-arm’s length person or partnership This section explains how to complete each column of
Schedule 8. Use a separate line for each class of property.
The following measures are available to AIIP:
Reference
■ Accelerated investment incentive – Providing an S3-F4-C1, General Discussion of Capital Cost Allowance
enhanced first-year allowance for certain eligible
property that is subject to the CCA rules. In general, the Column 1 – Class number
incentive will be made up of two elements: Identify each class of property with the assigned class
number.
– an increase up to 50% of the net capital cost addition to
a class for property that becomes available for use Generally, you have to group all depreciable property of
before 2024 the same class together. Then, calculate CCA on the
undepreciated capital cost of all the property in that class.
– suspending the existing CCA half-year rule (and
equivalent rules for Canadian vessels and class 13 However, sometimes you have to maintain property of the
property) for property that becomes available for use same class in separate lines. For example, list on separate
before 2028. lines property that you would usually group in the same
class but use to earn income from different sources. Also,
Note list on a separate line each class 10.1 passenger vehicle and
Under the half-year rule, in general, property other property you elected to identify in a separate class under
than AIIP or ZEVs, acquired during the tax year, is Regulation 1101(5q).
eligible for only 50% of the normal maximum CCA for Note
the year. You can claim full CCA for that property in If a class number has not been provided in Schedule II
the next tax year. See Regulation 1100(2). of the Income Tax Regulations for a particular class
■ Full expensing for manufacturers and processors – of property, use the subsection provided in
Allowing businesses to immediately write off the full Regulation 1101 or 1100.
cost of machinery and equipment used for the Reference
manufacturing or processing of goods (class 53 or Regulations 1100 and 1101
property included in class 43 and acquired after 2025, if
Column 2 – Undepreciated capital cost (UCC) at the
the property would have been included in class 53 if it
beginning of the year
had been acquired in 2025).
Enter the amount of the undepreciated capital cost at the
■ Full expensing for clean energy investments – Allowing end of the previous tax year.
businesses to immediately write off the full cost of
Column 3 – Cost of acquisitions during the year
specified clean energy equipment (classes 43.1 and 43.2).
For each class, enter the total cost of depreciable property
A phase-out will begin for property that becomes available you acquired in the tax year. Depreciable property is
for use after 2023. considered acquired when it becomes available for use. See
page 40 for more information on the available-for-use rule.

42 canada.ca/taxes
The cost of acquisitions generally means the full cost of December 31, 2016, and that property had been eligible
acquiring the property, including legal, accounting, capital property before January 1, 2017
engineering, and other fees. Land is not a depreciable
■ repayment of GST/HST input tax credit previously
property, and is therefore not eligible for CCA.
claimed
List any acquisitions that are not subject to the 50% rule,
■ government assistance repaid in the year that previously
separately. See Regulations 1100(2) and (2.2) for more
reduced the capital cost
information about these types of acquisitions.
Also include in column 5 depreciable property transferred
Do not enter section 85 transfers in this column.
upon amalgamation or upon the wind-up of a subsidiary,
References and depreciable property transferred under section 85.
Regulations 1100(2) and (2.2)
Show the amounts that reduce the capital cost in brackets.
Column 4 – Cost of acquisitions from column 3 that are Do not include them as income.
accelerated investment incentive property (AIIP) or
zero-emission vehicles (ZEV) Note
For each class, enter the total cost of AIIP that you acquired A corporation that receives an amount of
during the year. They are included in column 3 and shown non-government assistance to buy depreciable property
separately in column 4. has the option of either reducing the capital cost of the
property by this amount, or including it in its income.
AIIP generally means a property, other than a
zero-emission vehicle included in class 54 or 55, acquired References
Subsections 13(7.1), 13(7.4), and 13(21)
after November 20, 2018 and becomes available for use Paragraph 12(1)(x)
before 2028.
Column 6 – Amount from column 5 that is assistance
Note received or receivable during the year for a property,
Classes 54 and 55 should be reported in column 4, even subsequent to its disposition
if they are not accelerated investment incentive property. Enter the total amount of assistance you received (or were
They are treated as such for the purposes of Schedule 8. entitled to receive) after the disposition of a property, if
Reference such assistance would have decreased the capital cost of the
Regulation 1104(4) property if received before the disposition by virtue of
Column 5 – Adjustments and transfers paragraph 13(7.1)(f).
In some cases, you will have to adjust the capital cost of a That amount is included in column 5 because it reduces the
property. In column 5, enter the amounts that will either capital cost of a property. It is also reported separately in
reduce or increase the capital cost. column 6.
Reduce the capital cost of a property by the following References
amounts: Subsection 13(21)
Paragraph 13(7.1)(f)
■ goods and services tax/harmonized sales tax (GST/HST)
input tax credit claimed or entitled to be claimed, or Column 7 – Amount from column 5 that is repaid during
rebate received or entitled to be received in the year the year for a property, subsequent to its disposition
Enter the following amounts in column 7:
■ federal investment tax credits (ITCs), other than SR&ED
ITCs, used to reduce taxes payable or claimed as a refund ■ legally required repayment of assistance made after the
in the previous tax year disposition of a property that would have otherwise
increased the capital cost of the property if made before
■ reduction of capital cost after the application of section 80 the disposition by virtue of paragraph 13(7.1)(d)
■ provincial or territorial ITCs received or entitled to be ■ legally required repayment of inducements,
received in the current year reimbursements, allowances or other forms of financial
assistance contemplated in paragraph 12(1)(x) made after
■ government assistance received or entitled to be received
the disposition of a property that would have otherwise
in the year
increased the capital cost of the property if made before
■ deemed decrease, under subsection 13(40), to the the disposition by virtue of paragraph 13(7.4)(b)
undepreciated capital cost of class 14.1 where you
These amounts are included in column 5 as they increase
acquired property of that class through a non-arm’s
the capital cost of a property. They are also reported
length transfer and the property had been eligible capital
separately in column 7.
property of the transferor before January 1, 2017
References
Add to the capital cost of the property: Subsection 13(21)
Paragraphs 13(7.1)(d), 13(7.4)(b), and 12(1)(x)
■ deemed increase, under subsection 13(39), to the Regulation 1100(2.2)
undepreciated capital cost of class 14.1 where you
disposed of property of that class after Column 8 – Proceeds of dispositions
For each class, you usually enter the total proceeds of
disposition received or are entitled to be received for
property disposed of during the year. However, if you

canada.ca/taxes 43
disposed of the property for more than its capital cost, enter ■ subtract the amount in column 7
the capital cost, not the actual proceeds of disposition. Reference
A capital gain results when you dispose of a depreciable Regulation 1100(2.2)
property for more than its capital cost. However, losses on Column 11 – Net capital cost additions of AIIP and ZEV
depreciable property do not result in capital losses. They acquired during the year
may result in terminal losses. For details about terminal Subtract the amount in column 10 from the amount in
losses, see column 16. column 4 and enter the difference.
Column 9 – UCC Reference
To calculate the amount you have to enter in column 9, do Regulation 1100(2.2)
the following: Column 12 – UCC adjustment for AIIP and ZEV acquired
■ add the amounts in columns 2 and 3 during the year
The undepreciated capital cost is adjusted in order to
■ either subtract or add the amount in column 5 (subtract if include an accelerated CCA component for accelerated
it is a negative amount, or add if it is a positive amount) investment incentive property and zero-emission vehicles
■ subtract the amount in column 8 acquired during the year.

You cannot claim CCA in the following situations: Multiply the net capital cost of additions from column 11
by 0.5 unless a different factor is provided in the legislation.
■ the amount in column 9 is positive, and no property is
References
left in that class at the end of the tax year (a terminal Regulation 1100(2.2)
loss)
Column 13 – UCC adjustment for property acquired during
■ the amount in column 9 is negative (a recapture of CCA) the year other than AIIP and ZEV (previously known as the
Terminal loss 50% rule)
A terminal loss results when you dispose of all the Generally, property acquired during the tax year was only
property in a particular class and there is an amount of eligible for 50% of the normal maximum CCA for the year.
undepreciated capital cost left in column 9. You have to You could claim full CCA for that property in the next tax
deduct the terminal loss from income. If applicable, enter year.
the positive amount from column 9 in column 16. For Fall Economic Statement 2018 changed that by establishing
details, see example 1 under the heading “Schedule 8 a suspension of the 50% rule in certain conditions.
examples” that follows.
To apply the 50% rule, the undepreciated capital cost of the
Recapture of CCA property has to be adjusted. This adjustment is equal to
If the amount in column 9 is negative, you have a recapture half of the net amount of additions to the class (the net cost
of CCA. A recapture of CCA occurs when the proceeds of acquisitions minus the proceeds of dispositions). Enter
of disposition in column 8 are more than the total of this amount in column 13. For details, see example 3 under
columns 2 and 3, plus or minus the amount in column 5 the heading “Schedule 8 examples” that follows.
of that class.
When applying the 50% rule, the net amount of additions
You have to add the recapture to income. If applicable, must take into account some adjustments in columns 6
enter the negative amount from column 9 in column 15 as a and 7. However, do not reduce the net amount of additions
positive. For details, see example 2 under the heading by the ITC claimed in the previous tax year and included in
“Schedule 8 examples” that follows. column 5.
The recapture and terminal loss rules do not apply to Certain properties acquired through non-arm’s-length
passenger vehicles in class 10.1 transfers or butterfly transfers (which occur in the course of
Once you have entered the recapture or terminal loss from certain reorganizations) are exempt from the 50% rule. The
column 9 in column 15 or 16, do not complete columns 17 accelerated investment incentive property and the
and 18 for that line. zero-emission vehicles (class 54 and 55) are also exempt
from the 50% rule. For special rules and exceptions, see
Column 10 – Proceeds of disposition available to reduce Income Tax Folio S3-F4-C1, General Discussion of Capital
the UCC of AIIP and ZEV Cost Allowance.
When an AIIP or a ZEV and a property other than AIIP and
ZEV are purchased during the year and a disposition To calculate the amount you have to enter in column 13, do
occurs, the disposition first offsets the property other than the following:
AIIP and ZEV before reducing the undepreciated capital ■ subtract the amount in column 4 from the amount in
cost of the AIIP or the ZEV. column 3
To calculate the amount you have to enter in column 10, do ■ subtract the amount in column 6
the following:
■ add the amount in column 7
■ add the amounts in columns 8 and 6
■ subtract the amount in column 8
■ subtract the amount in column 3
■ add the amount in column 4

44 canada.ca/taxes
■ multiply the result by 0.5 Column 15 – Recapture of CCA
References
Enter the amount of recapture from column 9, if applicable.
Regulations 1100(2) and 1100(2.2) Be sure you include the recapture as income. Enter the total
of amounts from column 15 on line 107 of Schedule 1.
Column 14 – CCA rate
Enter the prescribed rate that applies, as provided for The recapture rules do not apply to passenger vehicles in
under Part XI of the Regulations. If a specific rate has not class 10.1.
been provided for a particular class of property, enter N/A References
in this column. Subsections 13(1) and 13(2)

Enter a rate only if you are using the declining balance Column 16 – Terminal loss
method. In this method, the CCA is calculated by Enter the terminal loss from column 9, if applicable. Deduct
multiplying a constant rate by the diminishing balance the terminal loss from income. Enter the total of amounts
every year. from column 16 on line 404 of Schedule 1.
Note The terminal loss rules do not apply to:
Some asset classes use the straight-line method to
■ passenger vehicles in class 10.1
calculate the CCA. In this method, the CCA is calculated
by dividing the original amount by the number of years ■ property in class 14.1, unless you have stopped carrying
that corresponds to the life expectancy of the property. on the business to which it relates
Therefore, the deducted amount stays the same from
one year to the other (except the first and last year, if the ■ limited-period franchises, concessions, or licences in
half-year rule applies for property acquired before class 14 if, at the time of acquisition, the property was a
November 21, 2018) and you do not have to enter a rate. former property of the transferor or any similar property
attributable to the same fixed place of business, and you
had jointly elected with the transferor to have the
Example replacement property rules apply
Declining balance method – The capital cost of an asset
Reference
other than an AIIP or ZEV is $780,000. The rate for the class Subsection 20(16.1)
is 10% with a half-year rule.
Column 17 – CCA
First year: To claim the maximum CCA for each class, multiply the
10% × $780,000 = $78,000 result of column 9 plus column 12 minus column 13 by the
$78,000 ÷ 2 = $39,000 CCA (half-year rule) rate in column 14. Enter the result of this multiplication in
Second year: column 17. You do not have to claim the maximum
$780,000 – $39,000 = $741,000 (undepreciated capital cost) allowable CCA. You can claim any amount up to the
$741,000 × 10% = $74,100 CCA maximum.

Third year: If the tax year is less than 365 days, prorate the CCA claim
$741,000 – $74,100 = $666,900 (undepreciated capital cost) for all property except for those classes of property that
$666,900 × 10% = $66,690 CCA Regulation 1100(3) excludes. The exceptions in
Regulation 1100(3) include:
And so on for the following years.
■ class 14 assets
Straight-line method – The capital cost of an asset other
than an AIIP or ZEV is $780,000. Its life expectancy is ■ class 15 assets
10 years and the half-year rule does not apply. Therefore, ■ timber limits and cutting rights
the capital cost allowance will be $78,000 per year
($780,000 ÷ 10). ■ industrial mineral mines
■ certified productions
Class 13 (property that is a leasehold interest) uses the
■ Canadian film or video productions
straight-line method (with the half-year rule for property
acquired before November 21, 2018). ■ certain mining equipment in classes 28 and 41
An accelerated investment incentive applies to class 13 for To determine the maximum CCA claim, multiply the
property acquired after November 20, 2018. See Accelerated maximum CCA for a complete year by the number of days
investment incentive property on page 42. in the tax year divided by 365.
If a disposition of all leasehold interests in class 13 occurs References
during the amortization period, the terminal loss is claimed Regulation 1100(3)
S4-F15-C1, Manufacturing and Processing
in the year it occurs if the lessee does not acquire a
depreciable property that is a leasehold interest before the The total of all amounts in column 17 is the CCA claim for
end of the year. the tax year. Deduct this amount on line 403 of Schedule 1.
For more information on the half-year rule, see Income Tax
Folio S3-F4-C1, General Discussion of Capital Cost
Allowance.

canada.ca/taxes 45
 Notes Column 18 – UCC at the end of the year
If you want to change the amount of CCA claimed in a Subtract the amount in column 17 from the amount in
tax year, send a written request within 90 days of the column 9 and enter the difference.
date on the notice of assessment or notice of
When there is a recapture of CCA or a terminal loss for a
reassessment. Only under certain circumstances can we
particular class in the year, the undepreciated capital cost at
make adjustments after the 90-day period has expired.
the end of the year is always nil.
For more information, see Information Circular IC84-1,
Revision of Capital Cost Allowance Claims and Other
Permissive Deductions.

46 canada.ca/taxes
Schedule 8 examples

Example 1: Terminal loss

An import-export business decided to sell its warehouse, because it is better to lease instead. The business received $60,000
for the warehouse. At the end of the 2020 tax year, the business had no more assets in class 3.
The business’s Schedule 8 for its 2020 tax year looks like this:
1 2 3 4 5 6 7 8 9

Class Undepreciated capital Cost of acquisitions Cost of acquisitions Adjustments and Amount from column 5 Amount from Proceeds of UCC
number cost (UCC) at the during the year from column 3 that are transfers (show amounts that is assistance column 5 that is dispositions (column 2 plus
beginning of the year (new property accelerated investment that will reduce the received or receivable repaid during the column 3 plus or
must be available incentive property undepreciated capital during the year for a year for a property, minus column 5
for use) (AIIP) or zero-emission cost in brackets) property, subsequent subsequent to its minus column 8)
vehicle (ZEV) to its disposition disposition

200 201 203 225 205 221 222 207

3 $65,000 $60,000 $5,000

10 11 12 13 14 15 16 17 18

Proceeds of Net capital cost UCC adjustment for UCC adjustment for property CCA rate % Recapture of CCA Terminal loss CCA UCC at the end
disposition available additions of AIIP and AIIP and ZEV acquired during the year (for declining balance of the year
to reduce the UCC of ZEV acquired during acquired during the other than AIIP and ZEV method, the result of (column 9
AIIP and ZEV the year (column 4 year (column 11 (0.5 multiplied by the result column 9 plus column 12 minus column
(column 8 plus minus column 10) multiplied by the of column 3 minus column 4 minus column 13, 17)
column 6 minus (if negative, enter “0”) relevant factor) minus column 6 plus multiplied
column 3 plus column 7 minus column 8) by column 14 or a lower
column 4 minus (if negative, enter “0”) amount)
column 7)
(if negative, enter
“0”)

224 212 213 215 217 220

n/a $5,000

The amount in column 16 is a terminal loss.

The import-export business deducts the $5,000 terminal loss from its income (line 404 of Schedule 1).

canada.ca/taxes 47
Example 2: Recapture of CCA
A clothing company bought a sewing machine before November 21, 2018, for $15,000. Now, because of the company’s
overwhelming success in the retail end of the business, it has decided to concentrate solely on retailing. As a result, the
company sold its sewing machine in 2020 for $18,000 (but the proceeds of disposition in column 8 cannot be more than
$15,000, the capital cost). At the beginning of 2020, the undepreciated capital cost of the sewing machine was $10,800.
The company’s Schedule 8 for its 2020 tax year looks like this:
1 2 3 4 5 6 7 8 9

Class Undepreciated capital Cost of acquisitions Cost of acquisitions Adjustments and Amount from column 5 Amount from Proceeds of UCC
number cost (UCC) at the during the year from column 3 that are transfers (show amounts that is assistance column 5 that is dispositions (column 2 plus
beginning of the year (new property accelerated investment that will reduce the received or receivable repaid during the column 3 plus or
must be available incentive property undepreciated capital during the year for a year for a property, minus column 5
for use) (AIIP) cost in brackets) property, subsequent subsequent to its minus column 8)
or zero-emission to its disposition disposition
vehicle (ZEV)

200 201 203 225 205 221 222 207

8 $10,800 $15,000 ($4,200)

10 11 12 13 14 15 16 17 18

Proceeds of Net capital cost UCC adjustment for UCC adjustment for property CCA rate % Recapture of CCA Terminal loss CCA UCC at the end
disposition available additions of AIIP and AIIP and ZEV acquired during the year (for declining balance of the year
to reduce the UCC of ZEV acquired during acquired during the other than AIIP and ZEV method, the result of (column 9
AIIP and ZEV the year (column 4 year (column 11 (0.5 multiplied by the result column 9 plus column 12 minus column
(column 8 plus minus column 10) multiplied by the of column 3 minus column 4 minus column 13, 17)
column 6 minus (if negative, enter “0”) relevant factor) minus column 6 plus multiplied by column 14
column 3 plus column 7 minus column 8) or a lower amount)
column 4 minus (if negative, enter “0”)
column 7)
(if negative, enter
“0”)

224 212 213 215 217 220

n/a $4,200

The amount in column 15 is the recapture of CCA.

The clothing company includes the $4,200 recapture in its income (line 107 of Schedule 1). The capital gain is $18,000
minus $15,000, which equals $3,000.

48 canada.ca/taxes
Example 3: 50% rule
In the 2020 tax year, a bookstore bought a photocopier from a non-arm’s length person (the photocopier is then not
considered AIIP) to help keep up with the paperwork, and started using it right away. The copier cost $10,000. The
bookstore has to apply the 50% rule when it calculates the amount of CCA it can deduct for its tax year ending in 2020.
The bookstore’s Schedule 8 for its 2020 tax year looks like this:
1 2 3 4 5 6 7 8 9

Class Undepreciated capital Cost of acquisitions Cost of acquisitions Adjustments and Amount from column 5 Amount from Proceeds of UCC
number cost (UCC) at the during the year from column 3 that are transfers (show amounts that is assistance column 5 that is dispositions (column 2 plus
beginning of the year (new property accelerated investment that will reduce the received or receivable repaid during the column 3 plus or
must be available incentive property undepreciated capital during the year for a year for a property, minus column 5
for use) (AIIP) cost in brackets) property, subsequent subsequent to its minus column 8)
or zero-emission to its disposition disposition
vehicle (ZEV)

200 201 203 225 205 221 222 207

8 $14,000 $10,000 $24,000

10 11 12 13 14 15 16 17 18

Proceeds of Net capital cost UCC adjustment for UCC adjustment for property CCA rate % Recapture of CCA Terminal loss CCA UCC at the end
disposition available additions of AIIP and AIIP and ZEV acquired during the year (for declining balance of the year
to reduce the UCC of ZEV acquired during acquired during the other than AIIP and ZEV method, the result of (column 9
AIIP and ZEV the year (column 4 year (column 11 (0.5 multiplied by the result column 9 plus column 12 minus column
(column 8 plus minus column 10) multiplied by the of column 3 minus column 4 minus column 13, 17)
column 6 minus (if negative, enter “0”) relevant factor) minus column 6 plus multiplied by column 14
column 3 plus column 7 minus column 8) or a lower amount)
column 4 minus (if negative, enter “0”)
column 7)
(if negative, enter
“0”)

224 212 213 215 217 220

$5,000 20 $3,800 $20,200

canada.ca/taxes 49
Example 4: Accelerated investment incentive property
A grocery store bought refrigeration equipment to store fruits and vegetables for $20,000 during its tax year. The tax year
starts on December 1, 2019, and ends on November 30, 2020.
All properties bought during the tax year qualify for the accelerated investment incentive and are referred to as AIIP. They
are reported in column 3 and column 4.
The amount of AIIP subject to the CCA deduction is $20,000 plus an additional relevant factor of 50% (calculated in
column 12) for a total amount of $30,000. AIIP are also not subject to the half-year rule.
Without the accelerated investment incentive, the amount of property bought during the tax year subject to the CCA
deduction would be $10,000 as the half-year rule would apply.
The accelerated investment incentive allows the grocery store to claim up to three times the amount of CCA otherwise
deductible in the first year.
The grocery store’s Schedule 8 for its 2020 tax year looks like this:
1 2 3 4 5 6 7 8 9

Class Undepreciated capital Cost of acquisitions Cost of acquisitions Adjustments and Amount from column 5 Amount from Proceeds of UCC
number cost (UCC) at the during the year from column 3 that are transfers (show amounts that is assistance column 5 that is dispositions (column 2 plus
beginning of the year (new property accelerated investment that will reduce the received or receivable repaid during the column 3 plus or
must be available incentive property undepreciated capital during the year for a year for a property, minus column 5
for use) (AIIP) cost in brackets) property, subsequent subsequent to its minus column 8)
or zero-emission to its disposition disposition
vehicle (ZEV)

200 201 203 225 205 221 222 207

8 $45,000 $20,000 $20,000 $65,000

10 11 12 13 14 15 16 17 18

Proceeds of Net capital cost UCC adjustment for UCC adjustment for property CCA rate % Recapture of CCA Terminal loss CCA UCC at the end
disposition available additions of AIIP and AIIP and ZEV acquired during the year (for declining balance of the year
to reduce the UCC of ZEV acquired during acquired during the other than AIIP and ZEV method, the result of (column 9
AIIP and ZEV the year (column 4 year (column 11 (0.5 multiplied by the result column 9 plus column 12 minus column
(column 8 plus minus column 10) multiplied by the of column 3 minus column 4 minus column 13, 17)
column 6 minus (if negative, enter “0”) relevant factor) minus column 6 plus multiplied by column 14
column 3 plus column 7 minus column 8) or a lower amount)
column 4 minus (if negative, enter “0”)
column 7)
(if negative, enter
“0”)

224 212 213 215 217 220

$20,000 $10,000 20 $15,000 $50,000

50 canada.ca/taxes
Example 5: AIIP and non-AIIP
A potato producer bought tractors for $200,000 during its tax year. The tax year starts on July 1, 2018, and ends on
June 30, 2019.
Properties that qualify for the accelerated investment incentive (bought after November 20, 2018) are referred to as AIIP and
equal to $150,000. They are included in column 3 and reported separately in column 4.
The amount of AIIP subject to the CCA deduction is $150,000 plus an additional relevant factor of 50% (calculated in
column 12) for a total amount of $225,000. AIIP are also not subject to the half-year rule.
Properties bought during the year that are not AIIP ($50,000, which is the difference between columns 3 and 4) are not
eligible for any enhancement from column 12 and are subject to the half-year rule calculation in column 13.
The producer’s Schedule 8 for its 2019 tax year looks like this:
1 2 3 4 5 6 7 8 9

Class Undepreciated capital Cost of acquisitions Cost of acquisitions Adjustments and Amount from column 5 Amount from Proceeds of UCC
number cost (UCC) at the during the year from column 3 that are transfers (show amounts that is assistance column 5 that is dispositions (column 2 plus
beginning of the year (new property accelerated investment that will reduce the received or receivable repaid during the column 3 plus or
must be available incentive property undepreciated capital during the year for a year for a property, minus column 5
for use) (AIIP) cost in brackets) property, subsequent subsequent to its minus column 8)
or zero-emission to its disposition disposition
vehicle (ZEV)

200 201 203 225 205 221 222 207

10 $450,000 $200,000 $150,000 $650,000

10 11 12 13 14 15 16 17 18

Proceeds of Net capital cost UCC adjustment for UCC adjustment for property CCA rate % Recapture of CCA Terminal loss CCA UCC at the end
disposition available additions of AIIP and AIIP and ZEV acquired during the year (for declining balance of the year
to reduce the UCC of ZEV acquired during acquired during the other than AIIP and ZEV method, the result of (column 9
AIIP and ZEV the year (column 4 year (column 11 (0.5 multiplied by the result column 9 plus column 12 minus column
(column 8 plus minus column 10) multiplied by the of column 3 minus column 4 minus column 13, 17)
column 6 minus (if negative, enter “0”) relevant factor) minus column 6 plus multiplied by column 14
column 3 plus column 7 minus column 8) or a lower amount)
column 4 minus (if negative, enter “0”)
column 7)
(if negative, enter
“0”)

224 212 213 215 217 220

$150,000 $75,000 $25,000 30 $210,000 $440,000

canada.ca/taxes 51
List of CCA rates and classes
The following chart is a partial list and description of the most common capital cost allowance (CCA) classes. You will find
a complete list in Schedule II of the Income Tax Regulations.
Class Description CCA
number rate
1 Most buildings made of brick, stone, or cement acquired after 1987, including their component parts such as 4%
electric wiring, lighting fixtures, plumbing, heating and cooling equipment, elevators, and escalators (additional
allowance of 6% for buildings used for manufacturing and processing in Canada and 2% for buildings used for
other non-residential purposes, for buildings acquired after March 18, 2007)
3 Most buildings made of brick, stone, or cement acquired before 1988, including their component parts as listed in 5%
class 1 above
6 Buildings made of frame, log, stucco on frame, galvanized iron, or corrugated metal that are used in the business 10%
of farming or fishing, or that have no footings below ground; fences and most greenhouses
7 Canoes, boats, and most other vessels, including their furniture, fittings, or equipment 15%
8 Property that is not included in any other class such as furniture, calculators and cash registers (that do not record 20%
multiple sales taxes), photocopy and fax machines, printers, display fixtures, refrigeration equipment, machinery,
tools costing $500 or more, and outdoor advertising billboards and greenhouses with rigid frames and plastic
covers
9 Aircraft, including furniture, fittings, or equipment attached, and their spare parts 25%
10 Automobiles (except taxis and others used for lease or rent), vans, wagons, trucks, buses, tractors, trailers, drive in 30%
theatres, general purpose electronic data processing equipment (for example, personal computers) and systems
software, and timber cutting and removing equipment
10.1 Passenger vehicles costing more than $30,000 if acquired after 2000 30%

12 Chinaware, cutlery, linen, uniforms, dies, jigs, moulds or lasts, computer software (except systems software), 100%
cutting or shaping parts of a machine, certain property used for earning rental income such as apparel or
costumes, and videotape cassettes; certain property costing less than $500 such as kitchen utensils, tools, and
medical or dental equipment acquired after May 1, 2006
13 Property that is a leasehold interest (the maximum CCA rate depends on the type of leasehold and the terms of n/a
the lease)

52 canada.ca/taxes
 Class Description CCA
number rate
14 Patents, franchises, concessions, and licences for a limited period – the CCA is limited to whichever is less: n/a
■ the capital cost of the property spread out over the life of the property
■ the undepreciated capital cost of the property at the end of the tax year
Class 14 also includes patents, and licences to use patents for a limited period, that you elect not to include
in class 44
14.1 As of January 1, 2017, intangible capital property, previously known as eligible capital property, including 5%
goodwill, trademarks, franchises, concessions, or licences for an unlimited period, patents and licences to
use patents for an unlimited period, that you elect not to include in class 44. For each tax year that ends
before 2027, an additional 2% CCA is allowed for property acquired before 2017 (maximum $500)
16 Automobiles for lease or rent, taxicabs, and coin-operated video games or pinball machines; certain tractors 40%
and large trucks acquired after December 6, 1991, that are used to haul freight and that weigh more than
11,788 kilograms
17 Roads, sidewalks, parking-lot or storage areas, telephone, telegraph, or non-electronic data communication 8%
switching equipment
29 Machinery and equipment acquired after March 18, 2007, and before 2016 that is used in Canada mainly to 50%
manufacture and process goods for sale or lease
38 Most power-operated movable equipment acquired after 1987 used for moving, excavating, placing, or 30%
compacting earth, rock, concrete, or asphalt
43 Machinery and equipment acquired after February 25, 1992, that is used in Canada mainly to manufacture 30%
and process goods for sale or lease. Also see class 53
43.1 Clean energy generation and energy conservation equipment not included in class 43.2, including 30%
mid-efficiency, fully or partially fossil-fuelled cogeneration systems; electric vehicle charging stations set up to
supply more than 10 kW but less than 90 kW of continuous power
43.2 Clean energy generation and energy conservation equipment acquired before 2025 50%
44 Patents and licences to use patents for a limited or unlimited period that the corporation acquired after 25%
April 26, 1993—however, you can elect not to include such property in class 44 by attaching a letter to the
return for the year the corporation acquired the property. In the letter, indicate the property you do not want to
include in class 44
46 Data network infrastructure equipment that supports advanced telecommunication applications, acquired 30%
after March 22, 2004 – it includes assets such as switches, multiplexers, routers, hubs, modems, and domain
name servers that are used to control, transfer, modulate and direct data, but does not include office
equipment such as telephones, cell phones or fax machines, or property such as wires, cables or structures
50 General-purpose computer equipment and systems software acquired after March 18, 2007, that is not used 55%
principally as electronic process control, communications control, or monitor equipment, and the systems
software related to such equipment, and data handling equipment that is not ancillary to general-purpose
computer equipment
53 Machinery and equipment acquired after 2015 and before 2026 that is used in Canada mainly to manufacture 50%
and process goods for sale or lease
54 Property that is a zero-emission vehicle that is not included in class 16 or 55. In general terms, this class 30%
would include zero-emission vehicles acquired after March 18, 2019, and before 2028, that would otherwise
be included in class 10 or 10.1. Includes zero-emission passenger vehicles, which have a capital cost
limitation (initially set at $55,000)
55 Property that is a zero-emission vehicle that would otherwise be included in class 16. The vehicle is acquired 40%
after March 18, 2019, and before 2028. Does not include “zero-emission passenger vehicles” and, as such,
does not have any capital cost limitation
56 New and used fully electric or hydrogen powered automotive equipment and vehicles that are acquired and 30%
available for use after March 1, 2020, and before 2028, and that currently do not benefit from the accelerated
rate provided by classes 54 and 55

canada.ca/taxes 53
Schedule 12, Resource-Related Deductions ■ Eligible small oil and gas corporations will no longer be
You have to complete the appropriate parts of Schedule 12 allowed to treat the first $1 million of CDEs as CEEs
if you are claiming any of the following deductions on when renounced to shareholders under a flow-through
Schedule 1: share (FTS) agreement. The measure will include
expenses incurred in 2019 that could have been deemed
■ Canadian development expenses to be incurred in 2018 because of the look-back rule.
Expenditures incurred under FTS agreements entered
■ Canadian exploration expenses, including Canadian
into after 2016 and before March 22, 2017 will still be
renewable and conservation expense (CRCE)
allowed this treatment, if the expenses are incurred
■ Canadian oil and gas property expenses after 2018 and before April 2019.
■ depletion Schedule 12 gives details for the calculations required.
■ foreign exploration and development expenses
Flow-through shares
■ specified foreign exploration and development expenses The Fall Economic Statement 2018 introduced an
accelerated rate for Canadian development expenses (CDE)
■ foreign resource expenses
that a flow-through share (FTS) investor receives from a
An accelerated investment incentive is available for eligible principal business corporation. This tax measure applies to
Canadian development expenses (CDE) and Canadian oil accelerated CDE renounced under FTS agreements entered
and gas property expenses (COGPE) incurred after into after November 20, 2018, for CDE incurred after the
November 20, 2018, and before 2028. The accelerated CDE agreement date and before 2028.
or COGPE does not include expenses incurred by a
A principal business corporation needs to inform the
predecessor corporation that a successor corporation is
investor that the renounced amount meets the above
entitled to claim. It also does not include an expense that is
conditions in order for the investor to benefit from the
a cost for Canadian resource property you, or a partnership
permissive accelerated rate for these renounced expenses.
in which you are a member, acquired from a person or
partnership with which you do not deal at arm’s length. If you have invested in an FTS after November 20, 2018,
and have received a statement of resource expenses from a
The incentive will be phased out for expenses made
principal business corporation, you may generally
after 2023. For more information, go to canada.ca/taxes
claim CDE at the rate of 45% in the tax year in which they
-accelerated-investment-income.
are renounced to you and, thereafter, at a rate of 30%.To
calculate the amount of the CDE deduction you are entitled
Canadian development expenses and Canadian
to claim, see Schedule 12.
exploration expenses
For expenses incurred after 2018: The Government has proposed the following measures for
issuers of flow-through shares:
■ Qualifying expenditures associated with the drilling or
completing of an oil or gas discovery well (a previously ■ to extend, by 12 months, the period to incur eligible
unknown petroleum or natural gas reservoir), flow-through share expenses under the general rule and
expenditures in building a temporary access road to, or the look-back rule. When using the general rule, the
in preparing a site for any such well, will be classified as extension would apply to agreements entered into after
Canadian development expenses (CDEs) instead of February 2018 and before 2021. When using the
Canadian exploration expenses (CEEs). Expenditures look-back rule, the extension would apply to agreements
incurred before 2021 (excluding expenses that are entered into in 2019 or 2020
deemed because of the look-back rule to have been
■ to apply Part XII.6 tax as if expenditures were incurred
completed on December 31, 2020) in connection with an
up to one year earlier than the date they were actually
obligation that was committed to in writing (including a
incurred. The additional 10% Part XII.6 tax will apply if
commitment to a government under the terms of a
amounts are not actually spent by the end of 2021 (if the
license or permit) by the corporation before
agreement was entered into in 2019) or 2022 (if the
March 22, 2017, will continue to be classified as CEE. agreement was entered into in 2020). The relief from
■ Drilling expenditures can continue to be classified Part XII.6 tax would apply to agreements entered into
as CEEs, or reclassified as CEEs, if one of the following in 2019 or 2020
situations applies: References
Part XII of the Regulations
– the well has been abandoned in the year or within Sections 65 and 66
six months after the year without having produced
otherwise than for specified purposes
Schedule 13, Continuity of Reserves
– the well has not produced within the 24 months after You have to complete Schedule 13 to show the continuity
the drilling of the well is completed, otherwise than for of deductible reserves. Indicate, on the appropriate lines,
specified purposes the prior-year and the current-year reserves as well as the
– the minister of Natural Resources has certified that the reserve transferred from an amalgamation or wind-up. If
relevant costs associated with drilling the well are your corporation or the predecessor corporation deducted a
expected to be more than $5 million and it will not reserve amount last year, add that amount to current-year
produce within 24 months income and establish a new reserve amount.

54 canada.ca/taxes
Complete Schedule 13 as follows: Parts 1, 2, and 3 of Schedule 16 give details on how to
calculate the allowable patronage dividend deduction.
Part 1 – Capital gains reserves Enter this deduction on line 416 of Schedule 1.
Establish the continuity of reserves for each different If you are claiming a patronage dividend deduction, you
property. Unlike other reserves, you have to report the total also have to complete Part 5 of Schedule 16 entitled
capital gain reserves that you and the predecessor “Calculation of income from an active business carried on
corporation deducted last year. Add the current-year in Canada (ABI).” Enter the amount from line 124 at
reserve on Schedule 6 to calculate the current-year capital line 400 of the return.
gain. See page 36 for more details.
File a completed copy of this schedule with your return.
Part 2 – Other reserves Note
In this part, establish the continuity of the following Eligible members of agricultural cooperative
reserves: corporations can defer including in income patronage
■ reserve for doubtful debts dividends in the form of tax deferred cooperative shares
issued before 2021 to the year of their disposal.
■ reserve for undelivered goods and services not rendered
(except for reclamation obligations) Under proposed changes, this measure will apply to
eligible shares issued before 2026.
■ reserve for prepaid rent
However, a member may elect to have an amount
■ reserve for returnable containers included in income before the disposition of the shares.
■ reserve for unpaid amounts To make this election, the member must send a letter
specifying the amount to be included in income with
■ other tax reserves their return for the particular tax year.
Enter, on line 125 of Schedule 1, the total of the balance of References
your reserve at the beginning of the year (line 270 of Sections 135 and 135.1
IT-362, Patronage Dividends
Schedule 13) plus the amount of reserve transferred on
wind-up/amalgamation (line 275 of Schedule 13).
Schedule 17, Credit Union Deductions
Enter, on line 413 of Schedule 1, the balance at the end of
As a credit union, you may claim allocations for bonus
the year (line 280 of Schedule 13).
interest payments and allocations in proportion to
Note borrowing. If so, complete Schedule 17.
The balance at the beginning of the year of reserves from
Note
financial statements and the balance at the end of the
Ontario, Manitoba, Saskatchewan, and British Columbia
year of reserves from financial statements should not be
provide a provincial tax reduction for credit unions. For
entered on Schedule 13. Enter these amounts on line 414
details, see the provinces’ specific sections on pages 99,
and line 126 of Schedule 1 respectively.
108, 114, and 115 respectively.
References
IT-152, Special Reserves – Sale of Land A credit union can deduct from its income for a tax year
IT-154, Special Reserves both the total of all bonus interest payments and the
IT-442, Bad Debts and Reserves for Doubtful Debts payments it made to its members for allocations in
proportion to borrowing. It can also deduct payments made
Schedule 16, Patronage Dividend Deduction in the 12 months after the end of the tax year. However, the
Complete Schedule 16 if you are claiming a patronage credit union cannot deduct an amount if it could have
dividend deduction. This deduction is for payments made deducted it in the previous tax year.
to customers for allocations in proportion to patronage. An The allocation in proportion to borrowing for a tax year
allocation in proportion to patronage entitles a customer to means an amount a credit union credits to a member that is
receive payment calculated at a rate relating to the quantity, entitled to, or will receive, this amount.
quality, or value of either goods or products sold or
services rendered. On Schedule 17, you have to calculate the payment made in
proportion to borrowing at a rate that is related to one of
Corporations have to pay amounts that qualify for this the following:
deduction either during the tax year, or in the 12 months
that follow the tax year. ■ the amount of interest payable by the member on money
the member borrowed from the credit union
An agricultural cooperative corporation for a particular tax
year can deduct patronage dividends issued in the form of ■ the amount of money the member borrowed from the
tax deferred cooperative shares, but deductions cannot be credit union
more than 85% of its income for that year that is You have to calculate the bonus interest payment at a rate
attributable to business done with its members. that is related to one of the following:
Corporations other than credit unions and cooperative ■ the interest payable by the credit union on money
corporations cannot deduct patronage dividends paid to standing to the member’s credit
non-arm’s length persons.
■ the amount of money standing to the member’s credit

canada.ca/taxes 55
The amount the credit union credited to the member has to 12 months after your filing due date for the tax year in
bear the same rate as the interest or money that the credit which the SR&ED expenditures were made, you cannot
union similarly credited to all other members of the credit claim SR&ED expenditures and an ITC for that year. For
union of the same class. more information, see “Line 652 – Investment tax credit” on
page 77.
Complete the appropriate parts of Schedule 17 to calculate
this deduction. Add lines 305 and 315 of Schedule 17 and When a corporation is a member of a partnership that
enter the result on line 315 of Schedule 1. incurs SR&ED expenditures, the partnership has to file
References
Form T661 along with the T5013 FIN, Partnership Financial
Subsections 137(2) and 137(6) Return, and T5013 SUM, Information Slips Summary. Each
partner that receives an information slip T5013, Statement
Form T661, Scientific Research and of Partnership Income, showing its share of the
expenditures, does not have to file it with its return. They
Experimental Development (SR&ED) should keep it in case we ask for it later.
Expenditures Claim
References
For information on extended time limits for filing SR&ED Subsections 37(1), 149(7), 149(7.1), 162(5.1), and 248(1)
prescribed forms due to COVID-19, go to canada.ca/en Regulation 2900
/revenue-agency/services/covid-19-ministerial-orders and T4088, Scientific Research and Experimental Development (SR&ED)
Expenditures Claim – Guide to Form T661
select Explanatory Note: Time Limits and Other Periods
Act – Income Tax provisions.
Losses
We publish Guide T4088, Scientific Research and
Experimental Development (SR&ED) Expenditures Claim – Current-year losses
Guide to Form T661, which gives details on how to A corporation may not always have net income to report.
complete Form T661. For more information, go Instead, it may have incurred a loss for the year. The
to canada.ca/taxes-sred. different types of losses a corporation can incur are:
File Form T661 if you carry on business in Canada and have ■ non-capital loss
incurred expenditures for scientific research and
experimental development (SR&ED) you carried on in ■ farm loss
Canada and for some salary or wage expenditures ■ restricted farm loss
for SR&ED carried on outside Canada.
■ limited partnership loss
To avoid delays in processing, use the most recent version
of Form T661. ■ capital loss
A corporation has to file Form T661 to identify an The application and continuity of the first four losses are
expenditure and support its characterization as SR&ED, as calculated on Schedule 4, Corporation Loss Continuity and
well as any claim preparer information. Application. Information on how to complete Schedule 4
follows this section.
If the corporation does not provide, in this way,
information about the expenditure, it may not deduct that Capital losses are determined on Schedule 6, Summary of
amount as an SR&ED expenditure. Dispositions of Capital Property. For information on how to
complete this schedule, see page 36.
If the corporation does not provide complete and accurate
claim preparer information, a $1,000 penalty applies.
However, the SR&ED claim will not be disallowed for this Applying losses
reason. When a SR&ED claim preparer participates in A corporation can apply unused losses and deduct them
preparing the claim, the corporation and the SR&ED claim from income it earned in the current tax year or in previous
preparer are liable, together or separately, for the tax years.
$1,000 penalty.
Note
Current SR&ED expenditures form a special pool that you You can choose whether or not to deduct an available
can deduct in the current year. You can also carry forward loss from income in a tax year. You can deduct losses in
to any future year the expenditures in that pool as long as any order. However, for each type of loss, make sure to
you have not deducted them before. deduct the oldest available loss first.
If the SR&ED expenditures have been included in your You can view non-capital loss balances using the “View
income statement, enter the amount on line 118 of return balances” service through:
Schedule 1. Enter the SR&ED expenditures claimed in the
■ My Business Account at canada.ca/my-cra-business
year on line 411 of Schedule 1.
-account, if you are the business owner
Form T661 summarizes the costs for all SR&ED projects.
■ Represent a Client at canada.ca/taxes-representatives, if
You have to complete the form and place it on top of the
you are an authorized representative or employee
return for the tax year you incur SR&ED expenditures.
File Form T661 whether or not you claim an ITC. If you do
not file Form T661 and Schedule 31, Investment Tax
Credit – Corporations, on or before the day that is

56 canada.ca/taxes
Losses carryback the amount is exempt from tax in Canada by virtue of
You can use losses in any order, but consider the following: one of Canada’s tax treaties, multiplied by 1/2

■ a current-year non-capital loss or farm loss can reduce Subtotal – if the result is positive, enter ”0”
any kind of income or taxable dividends subject to deduct
Part IV tax for the three previous years section 110.5 or subparagraph 115(1)(a)(vii) – addition
■ a net capital loss can reduce taxable capital gains for foreign tax deductions – any amounts added to the
included in your income for the three previous years taxable income to use foreign tax deductions you could
not otherwise deduct from Part I tax. For details, see
■ a restricted farm loss can reduce farming income for the line 355 on page 64
three previous years
add
■ a listed personal property loss can reduce capital gains
incurred on listed personal property for the current-year farm loss – whichever is less: the net loss
three previous years from farming or fishing included in the income, or the
non-capital loss before deducting the farm loss
Except for net capital losses, you cannot use other year
losses to create or increase a non-capital loss for the tax Calculating current-year farm loss
year. The current-year farm loss is whichever of the following
Use Schedule 4 to request the carryback of any losses to amounts is less:
prior years. If you do not attach your request to the return, ■ the loss from farming or fishing that is more than the
you can send it separately to your tax centre. farming or fishing income for the year
■ the amount of the current-year non-capital loss as
Calculating losses when there is an
calculated in Part 1 of Schedule 4 before you deduct the
acquisition of control farm loss for the year
Following an acquisition of control, special rules apply for
calculating and deducting net capital losses, non-capital Enter the farm loss calculated on line 310 of Schedule 4.
losses, and farm losses. You will find more information The farm loss can also include an amount allocated from a
about these rules on Schedule 4 and at lines 063 and 065 on partnership.
page 22. Also, see the following references for details.
If the result after the calculation shown under Part 1 is
References negative, enter this result (as positive) on line 110 of
Subsections 111(4) and 111(5)
IT-302, Losses of a Corporation – The Effect That Acquisitions of Control, Schedule 4 as the current-year non-capital loss.
Amalgamations, and Windings-Up Have on Their Deductibility –
After January 15, 1987
Note
You cannot use prior-year losses to create or increase a
current-year non-capital loss, except with net capital
How to complete Schedule 4, losses of other years.
Corporation Loss Continuity and References
Application Subsection 111(8)
IT-302, Losses of a Corporation – The Effect That Acquisitions of Control,
Part 1 – Non-capital losses Amalgamations and Windings-Up Have on Their Deductibility –
After January 15, 1987
Determination of current year non-capital loss
To determine the current-year non-capital loss, you have to Continuity of non-capital losses and request for a
complete Part 1 as follows: carryback
Net income (loss) for income tax purposes – income from Use this area to establish the continuity of non-capital
all sources minus losses from business and property, plus losses and to carry back a current-year non-capital loss to
or minus the adjustments on Schedule 1; prior years.

deduct The current-year non-capital loss can reduce any kind of

income or taxable dividends subject to Part IV tax for the
net capital losses deducted in the year – net capital
20 following tax years and for the 3 previous tax years. The
losses from previous years used to reduce taxable
loss expires after the carry-forward period.
capital gains included in income
When completing this part, line 105 is the amount of
taxable dividends deductible – taxable dividends
non-capital losses transferred from a predecessor
received, deductible under section 112 or 113 or
corporation after amalgamation or a subsidiary after
subsection 138(6) (for details, see line 320 on page 63)
wind-up where not less than 90% of the issued shares in
amount of Part VI.1 tax deductible – unused Part VI.1 each class were, immediately before the wind-up, owned
tax deductible in the taxable income calculation by the corporation. This amount is the unused non-capital
losses available to be carried forward at the end of the tax
amount deductible as prospector’s and grubstaker’s
year of the predecessor corporation or subsidiary ending
shares – paragraph 110(1)(d.2) – the amount deductible
immediately before the amalgamation or wind-up, minus
is the value of any shares received from a corporation
any expired amount.
on disposition of a right or a mining property, except if

canada.ca/taxes 57
Line 150 is an amount received under subsection 111(10) as The result of this part is the closing balance of available
a fuel tax rebate that reduced non-capital loss for a previous capital losses you carry forward to future years (line 280).
year, and any other adjustments not previously mentioned. The net capital loss amount will be calculated at the 50%
These adjustments would apply to corporations that have inclusion rate.
undergone an acquisition of control and whose losses that
accrued before the acquisition of control are not deductible Part 3 – Farm losses
after the acquisition of control.
Continuity of farm losses and request for a carryback
Line 140 is the amount of debt forgiveness under section 80 Use this part to establish the continuity of farm losses and
that reduces the non-capital losses balance. Losses have to to carry back a current-year farm loss to previous years.
be reduced in the order established by section 80. Farm losses include losses from farming and fishing
businesses.
The result of this part is the closing balance of non-capital
losses you carry forward to future years (line 180). Farm losses will expire after 20 tax years following the year
of the loss.
Complete Part 6 to establish the balance of non-capital
losses by year of origin. When completing this part, line 305 is the amount of farm
losses transferred from a predecessor corporation after
Part 2 – Capital losses amalgamation or subsidiary after wind-up where not less
than 90% of the issued shares in each class were,
Continuity of capital losses and request for a carryback
immediately before the wind-up, owned by the
The current-year capital loss is calculated on Schedule 6.
corporation. This amount is the unused farm losses
See page 36 for more details. Complete this part to establish
available to carry forward at the end of the tax year of the
the continuity and the application of capital losses.
predecessor corporation or subsidiary ending immediately
To establish the continuity, you have to enter the amount of before the amalgamation or wind-up minus any expired
capital losses and not the amount of net capital losses amount.
available. The inclusion rate will be used only when the
Line 350 is any other adjustments not previously
loss is applied. You have to indicate the balance of any
mentioned. These adjustments would apply to corporations
previous-year capital losses carried forward.
that have undergone an acquisition of control and whose
The net capital loss can reduce taxable capital gains losses that accrued before the acquisition of control are not
included as income for the three previous tax years and deductible after the acquisition of control.
indefinitely for future years.
Line 340 is the amount of debt forgiveness under section 80
When completing this part, line 205 is the amount of capital that reduces the farm losses balance. Losses have to be
losses transferred from a predecessor corporation after reduced in the order established by section 80.
amalgamation or a subsidiary after wind-up where not less
The result of this part is the closing balance of farm losses
than 90% of the issued shares of each class were,
you carry forward to future years (line 380).
immediately before the wind-up, owned by the
corporation. This amount is the unused capital losses Complete Part 6 to establish the balance of farm losses by
available to carry forward at the end of the tax year of the year of origin.
predecessor corporation or subsidiary ending immediately
before the amalgamation or wind-up, including any Part 4 – Restricted farm losses
amount of the allowable business investment loss (ABIL)
Current-year restricted farm loss
expired as non-capital loss for the predecessor corporation
or the subsidiary, divided by the inclusion rate for the tax If your chief source of income is neither farming nor a
year in which the ABIL was incurred. combination of farming and some other subordinate source
of income, the loss arising from the farming activity that
Line 250 is the amount of any other adjustments not you can deduct is restricted. An amount of farm loss
previously mentioned. These adjustments would apply to allocated from a partnership may also be restricted.
corporations that have undergone an acquisition of control
and whose losses that accrued before the acquisition of The limit of deductible farm losses for a year is $17,500.
control are not deductible after the acquisition of control. Enter your amount on line 410 of Schedule 4 and add it to
These adjustments would also apply to corporations whose your income on line 233 of Schedule 1.
losses that occurred after the acquisition of control are not
References
deductible before the acquisition of control. Subsection 31(1)
Line 240 is the amount of debt forgiveness under section 80 IT-232, Losses – Their Deductibility in the Loss Year or in Other Years
that reduces the capital losses balance. Losses have to be
reduced in the order established by section 80. Continuity of restricted farm losses and request for
a carryback
Line 220 is the amount of ABIL earned as non-capital losses Use this part to establish the continuity of restricted farm
in the 11th previous year that has not been used against losses and to carry back a current-year restricted farm loss
taxable income in the previous 10 years, multiplied by 2. to prior years.
On the appropriate line (lines 951 to 953), enter the amount The current-year restricted farm loss can reduce farm
of capital loss you carry back to prior years. income for the 20 following tax years and for the 3 previous
tax years. The loss expires after the carry-forward period.

58 canada.ca/taxes
When completing this part, line 405 is the amount of Part 7 – Limited partnership losses
restricted farm losses transferred from a predecessor Current-year limited partnership losses
corporation after amalgamation or a subsidiary after
Use this part to calculate the current-year limited
wind-up where not less than 90% of issued shares in each
partnership losses that cannot be deducted in the year, but
class were, just before the wind-up, owned by the
can be carried forward to other years.
corporation. This amount is the unused restricted farm
losses available to carry forward at the end of the tax year The amount of partnership loss allocated to a limited
of the predecessor corporation or subsidiary ending just partner is reported on an information slip T5013, Statement
before the amalgamation or wind-up minus any expired of Partnership Income. If the limited partner does not
amount. receive this slip because the partnership is exempt from
filing, you have to file the partnership’s financial statements
Line 440 is the amount of debt forgiveness under section 80
with the return to prove the corporation’s share of the
that reduces the restricted farm losses balance. Losses have
partnership loss for the year.
to be reduced in the order established by section 80.
Report the amount in the corporation’s tax year that the
Line 450 is the amount of any other adjustments not
partnership’s fiscal period ends in.
previously mentioned. These adjustments would apply to
corporations that have undergone an acquisition of control The part of a partnership loss that a limited partner can
and whose losses that accrued before the acquisition of deduct in determining net income for income tax purposes
control are not deductible after the acquisition of control. may be restricted.
The result of this part is the closing balance of restricted For tax years that end after February 26, 2018, it was
farm losses you carry forward to future years (line 480). clarified that the at-risk rules apply to a partnership that is
itself a limited partner of another partnership and that a
Complete Part 6 to establish the balance of restricted farm
corporation’s available non-capital loss and limited
losses by year of origin.
partnership loss carry forward balances have to be adjusted
as if these rules applied in the preceding years.
Part 5 – Listed personal property losses
In column 606, enter the corporation’s at-risk amount at the
Continuity of listed personal property loss and request
fiscal period ending of the partnership (column 602). The
for a carryback
amount entered in column 604 is from a business (other
Use this part to establish the continuity of listed personal than a farming or fishing business) or from property.
property losses. You can carry a current-year listed
personal property loss against net capital gains incurred on In general terms, you have to calculate a limited partner’s
the same kind of property back to the three previous tax at-risk amount as follows:
years and forward to the seven following tax years.
the adjusted cost base of its partnership interest
A listed personal property loss cannot be transferred.
plus
When completing this part, line 530 is the amount of
its share of the current-year’s income from the
prior-year listed personal property losses applied in the
partnership
current year to reduce the net capital gain incurred in the
current year on the same kind of property (enter this minus
amount on line 655 of Schedule 6).
all amounts the partner owes to the partnership, and
Line 550 is the amount of adjustments. These adjustments any amount or benefit to which the partner is entitled
would apply to corporations that have undergone an that is intended to protect it from the loss of its
acquisition of control and whose losses that accrued before investment
the acquisition of control are not deductible after the
In general, interests in partnerships that were operating on
acquisition of control.
a regular and continuous basis on February 25, 1986, and
The result of this part is the closing balance of listed continuously thereafter, are exempt from the at-risk rules.
personal property losses you carry forward to future years However, partnership interests may lose their exempt
(line 580). status if, after February 25, 1986, there has been either a
substantial contribution of capital to the partnership or
Complete Part 6 to establish the balance of listed personal
substantial partnership borrowings.
property losses by year of origin.
The difference between the corporation’s share of the actual
Part 6 – Analysis of balance of losses by year loss of the partnership and the corporation’s at-risk amount
of origin (reduced by any investment tax credit, farming losses and
resource expenses the partnership allocated to the
Use this part to show by year of origin the balance of losses corporation for that fiscal period) is called a limited
you can carry forward to future years. Enter each loss by partnership loss. This amount is entered in column 620.
year of origin, starting with the current year and going
down to the 20th previous year.

canada.ca/taxes 59
Add the total of column 620 to line 222 of Schedule 1. Enter income or loss from the income statement. Show the
all those losses in column 670 to establish the continuity of amount of any loss in brackets.
losses.
Note
References On Schedule 1, do not deduct charitable donations,
Subsection 96(2.1) taxable dividends, net capital losses, non-capital losses,
IT-232, Losses – Their Deductibility in the Loss Year or in Other Years
farm losses, or restricted farm losses from other years.
You have to deduct these items from net income for
Limited partnership losses from prior tax years that
income tax purposes to arrive at taxable income.
may be applied in the current year
Complete this part if you want to apply limited partnership
losses from previous years to reduce any kind of income in Lines 311 to 315
the current year. However, the deductible amount in The amount deductible by the corporation will generally be
respect of each partnership is limited to the difference the eligible amount. The eligible amount of a gift is the
between the balance of losses for that partnership and the amount by which the fair market value of the property that
corporation’s at-risk amount for that partnership after is the subject of the gift exceeds the amount of the
deducting the amounts specified under advantage, if any, in respect of the gift. For more
subparagraph 111(1)(e)(ii). information on the tax treatment of charitable gifts, see
Pamphlet P113, Gifts and Income Tax.
Continuity of limited partnership losses that can be
carried forward to future tax years Line 311 – Charitable donations
Limited partnership losses can be carried forward Complete Schedule 2, Charitable Donations and Gifts, if,
indefinitely to future years. during the tax year, you made charitable donations, or
For this part, column 664 is the amount of limited unused charitable donations were transferred from a
partnership losses transferred from a predecessor predecessor corporation after amalgamation or from a
corporation after amalgamation, or a subsidiary after subsidiary corporation after wind-up.
wind-up, where not less than 90% of the issued shares in The eligible amount of gifts to Canada, a province, or a
each class were, immediately before the wind-up, owned territory that was deductible before the 2016 tax year under
by the corporation. This amount is the unused limited paragraph 110.1(1)(b) is now deductible as charitable gifts
partnership losses available to carry forward at the end of under paragraph 110.1(1)(a) on line 311.
the tax year of the predecessor corporation or subsidiary
ending immediately before the amalgamation or wind-up. You can claim a deduction from net income for charitable
donations made to any of the following qualified donees:
The result of this part is the amount of limited partnership
losses you carry forward to later years (column 680). ■ registered charities (including registered national arts
service organizations)
Part 8 – Election under paragraph 88(1.1)(f) ■ registered journalism organizations (since
Further to a winding-up of a subsidiary, the part of a January 1, 2020)
non-capital loss, restricted farm loss, farm loss, or limited ■ registered Canadian amateur athletic associations
partnership loss incurred by the subsidiary is deemed to be
the parent corporation’s loss for its tax year starting after ■ registered housing corporations resident in Canada set
the winding-up has begun. up only to provide low-cost housing for the aged
Paragraph 88(1.1)(f) allows the parent corporation to elect ■ registered Canadian municipalities
that this loss is deemed to be a loss from its tax year
■ registered municipal or public bodies performing a
previous to the year mentioned above.
function of government in Canada
Tick box 190 if you are making an election under
■ the United Nations or its agencies
paragraph 88(1.1)(f).
■ universities outside Canada, of which the student body
Taxable income ordinarily includes students from Canada, that have
applied for registration with the CRA (these universities
The following section explains how to calculate the are no longer required to be prescribed in Schedule VIII
deductions you may be able to claim to reduce net income. of the Regulations)
You will use these amounts to arrive at your taxable
income. ■ registered foreign charities to which Her Majesty in right
of Canada had made a gift
Line 300 – Net income or (loss) for income tax ■ Her Majesty in right of Canada, a province, or a territory
purposes References
On line 300, enter the net income or loss for income tax Subsections 149(1) and 149.1(1)
purposes, as you calculated on Schedule 1. If you did not The maximum amount of charitable donations that a
have to make any adjustments to the net income or loss corporation can deduct is equal to 75% of its net income
from the financial statements or the General Index of (line 300).
Financial Information (GIFI), enter on line 300 the net

60 canada.ca/taxes
This limitation can be increased by the following amounts: Where a corporation makes a gift of a non-qualifying
security, that gift has to be ignored for the charitable
■ 25% of the taxable capital gains arising from gifts of
donations deduction. However, if the donee disposes of
capital property made in the year and included in taxable
the security within 60 months, for consideration other
income for the year; this amount is multiplied by the
than another non-qualifying security of any person, or
eligible amount of the gift divided by the corporation’s
the security ceases to be a non-qualifying security of the
proceeds of disposition for the gift
corporation within 60 months, the corporation will be
■ 25% of all taxable capital gains in the year from the treated as having made the gift at that later time.
disposition in a previous year of a non-qualifying
A non-qualifying security generally includes:
security of a corporation that is making a gift to a
qualified donee ■ an obligation of the corporation or a non-arm’s length
person
■ 25% of whichever is less:
■ a share of the corporation or a share issued by a
– the amount of recapture, included in the income of the
corporation with which the corporation does not deal
year, arising from the donation of a prescribed class of
at arm’s length
depreciable property
■ the corporation’s beneficial interest in a trust in
– the eligible amount of the gift divided by the
certain circumstances
corporation’s proceeds of disposition for the gift,
multiplied by the lesser of the capital cost and the ■ any other security issued by the corporation or a
proceeds of disposition of the property minus any non-arm’s length person
outlays and expenses made for the purpose of making
Specifically excepted from this definition are obligations,
the disposition
shares, and other securities listed on designated stock
Charitable donations are deducted in the order they were exchanges and deposits with financial institutions.
made (first-in, first-out rule).
Monetary gifts to Canada should be made payable to the
If you are reporting nil net income or a loss for the year, Receiver General. Send the gift, along with a note stating
you cannot claim donations to create or increase a loss. that the money is a gift to Canada, to:
However, you can carry forward unused charitable Place du Portage
donations and claim them in any of the five following tax Phase III
years. 11 Laurier Street
Gatineau QC K1A 0S5
Note
On line 255 of Schedule 2, enter the amount of any other If you made such a gift, you should have been provided
adjustments (these adjustments would apply to with an official donation receipt.
corporations that have undergone an acquisition of References
control and whose donations carryforward that accrued Paragraph 110.1(1)(a)
before the acquisition of control are not deductible after Subsections 40(1.01), 110.1(1.1), and 248(31)
the acquisition of control).
Complete Part 1 of Schedule 2 to calculate the total Line 313 – Cultural gifts
donations available and the charitable donations closing Complete Part 3 of Schedule 2 if, during the tax year, one of
balance. the following occurred:
Complete Part 2 of Schedule 2 to calculate the maximum ■ you donated cultural gifts
deduction allowable and to determine the amount to claim
■ the cultural gifts were transferred from a predecessor
for charitable donations including gifts of capital property.
corporation after amalgamation or from a subsidiary
On line 311, enter the amount you want to apply against corporation after wind-up
taxable income. This amount cannot be more than the lesser
You can claim a deduction from net income for a gift of
of:
certified cultural property that you made to a designated
■ the total donations available institution or public authority. The most you can deduct is
the total eligible amount of the gifts donated in the current
■ the maximum deduction allowable
tax year and any undeducted amounts from the
Complete Part 6 of Schedule 2 to establish the continuity of five previous years.
charitable donations.
If the eligible amount of cultural gifts is more than your net
You do not have to file receipts with your return. However, income for the year minus other donations you claim, you
you have to keep them in case we ask for them later. can carry the excess forward for up to five years.
Notes Donations made after March 18, 2019, no longer require
When a credit union calculates its income for purposes that property be of national importance (that is, have a
of the 75% limit, it has to add back any amounts it direct connection with Canada’s cultural heritage) to
previously deducted for bonus interest payments and qualify for the enhanced tax incentives for donations of
payments for allocations in proportion to borrowing. cultural property. Enhanced tax incentives include an
enhanced charitable donation deduction and an income tax

canada.ca/taxes 61
exemption for any capital gains arising on the disposition that is certified by the minister of Environment and Climate
of the property. Change (ECC) as ecologically sensitive.
For gifts of certified cultural property made after For gifts made after March 21, 2017, for land in the province
February 10, 2014, if the certified cultural property is of Quebec, donations of personal servitudes that run for at
acquired as part of a gifting arrangement that is a tax least 100 years can qualify as ecological gifts.
shelter, the fair market value (FMV) of the property is
The eligible amount of a gift of ecologically sensitive land
deemed to be the lesser of the FMV of the property
and, consequently, the corporate donor’s proceeds of
otherwise determined and its cost to the donor. For more
disposition are considered to be the amount determined by
information about the deemed FMV rule, see
the minister of ECC.
Pamphlet P113, Gifts and Income Tax.
Ecologically sensitive land must be protected and should
Note
not be used for other purposes. A tax of 50% of the fair
On line 455 of Schedule 2, enter the amount of any other
market value of the land will be charged to recipients who
adjustments (these adjustments would apply to
change the use of the land or dispose of it without the
corporations that have undergone an acquisition of
consent of the minister of ECC.
control and whose donations carryforward that accrued
before the acquisition of control are not deductible after The maximum deduction you can claim is the total of gifts
the acquisition of control). made during the current tax year plus the unclaimed gifts
from the 10 previous tax years, if the gift was made on or
Cultural gifts are deducted in the order they were made
after February 11, 2014.
(first-in, first-out rule).
If the amount of ecological gifts is more than your net
On line 313, enter the eligible amount for cultural gifts you
income for the year minus any other donations you claim,
want to apply against taxable income.
you can carry the excess forward for up to 10 years, if the
Complete Part 6 of Schedule 2 to establish the continuity of gift was made on or after February 11, 2014. For gifts of
cultural gifts. ecologically sensitive land made before February 11, 2014,
the carry-forward period was 5 years.
The Cultural Property Export Review Board will issue you
a certificate containing prescribed information. The Note
qualified donee will issue a receipt. You do not have to file On line 555 of Schedule 2, enter the amount of any other
receipts and certificates with your return. However, keep adjustments (these adjustments would apply to
them in case we ask for them later. corporations that have undergone an acquisition of
References
control and whose donations carryforward amounts that
Paragraph 110.1(1)(c) built up before the acquisition of control are not
Subsection 110.1(1.1) and 248(31) deductible after the acquisition of control).
IT-407, Dispositions of Cultural Property to Designated Canadian
Institutions Deduct ecological gifts in the order they were made
(first-in, first-out rule).
Line 314 – Ecological gifts On line 314, enter the amount of ecological gifts you want
Complete Part 4 of Schedule 2 if, during the tax year, one of to apply against taxable income.
the following occurred:
Complete Part 6 of Schedule 2 to establish the continuity of
■ you made certified ecological gifts ecological gifts.
■ the ecological gifts were transferred from a predecessor For an ecological gift, you must get a certificate issued by
corporation after amalgamation, or from a subsidiary the minister of ECC and a Certificate for Donation of
corporation after wind-up Ecologically Sensitive Land. The qualified donee will issue
a receipt. You do not have to file the receipt or the
You can claim a deduction from net income for certified two certificates with your return. However, keep them in
ecological gifts made to Canada, a province, territory or case we ask for them later.
Canadian municipality, municipal or public bodies
performing a function of government in Canada or an References
Paragraph 110.1(1)(d)
approved registered charity. Subsections 110.1(5), 110.1(1.1), and 248(31)
For ecological gifts made after March 21, 2017:
■ the requirement to approve recipients of ecologically
Line 315 – Gifts of medicine
sensitive land on a gift-by-gift basis is extended to Notes
recipients that are municipalities and municipal and For gifts of medicine made after March 21, 2017, the
public bodies performing a function of government. They additional deduction for gifts of medicine is ended. You
were previously automatically eligible recipients, can carry forward unused deductions in the five
without the need for approval following tax years after the gift has been made. If you
are reporting nil net income or a loss for the year, you
■ private foundations are no longer allowed to receive gifts cannot claim the deduction to create or increase a loss.
of ecologically sensitive land
The end of the additional deduction does not affect the
An ecological gift is a gift of land (including a covenant, an general income tax treatment of donations, including
easement, or, in the case of land in Quebec, a real servitude)

62 canada.ca/taxes
 gifts of medicine, that corporations make to registered Complete Part 6 of Schedule 2 to establish the continuity of
charities. the gifts of medicine.
Complete Part 5 of Schedule 2 if, during the tax year, one of References
the following occurred: Paragraph 110.1(1)(a.1)
Subsections 110.1(8) and 110.1(9)
■ you made a gift of medicine before March 22, 2017 Regulation 3505

■ you are applying an additional deduction available for Line 320 – Taxable dividends deductible
carryforward
under section 112 or 113, or
■ your gifts of medicine were transferred from a subsection 138(6)
predecessor corporation after amalgamation, or from a
Complete Schedule 3, Dividends Received, Taxable
subsidiary corporation after wind-up
Dividends Paid, and Part IV Tax Calculation, if you either
For eligible gifts of medicine made before March 22, 2017, received or paid dividends. For details on how to complete
you can claim the additional deduction from net income if Schedule 3, see Parts 3 and 4 of Schedule 3 on page 73 and
the gift was made to a registered charity for charitable “Line 712 – Part IV tax payable” on page 85.
activities carried on outside Canada. An eligible gift was a
When calculating taxable income, you can deduct, under
gift of medicine that was part of the corporation’s inventory
section 112, any of the following types of taxable dividends
immediately before being donated, that qualified as a drug
received:
within the meaning of the Food and Drugs Act, and
generally met the requirements of that Act, but was not a ■ dividends from a taxable Canadian corporation, or from
food, cosmetic, or device (as those terms are used in that a corporation resident in Canada and controlled by the
Act), a natural health product (as defined in the Natural receiving corporation
Health Products Regulations) or a veterinary drug.
■ dividends (or a portion of them) from a non-resident
The registered charity had to be one that, in the opinion of corporation (other than a foreign affiliate) that has
the minister for International Development, met conditions carried on business in Canada continuously since
prescribed by regulation. (If no such minister had been June 18, 1971
appointed, the opinion of the minister of Foreign Affairs
was required.) Also, the eligible gift of medicine had to be The following types of taxable dividends received are not
available for the donee’s use at least six months before its deductible under section 112:
expiration date as defined in the Food and Drug ■ dividends from a corporation that is exempt from Part I
Regulations (Food and Drugs Act). tax
The maximum deduction you can claim is the lesser of: ■ dividends on collateralized preferred shares (loss rental
■ the cost to the corporation of the gifts of medicine plans)

■ 50% of the amount, if any, by which the proceeds of ■ dividends that are part of a dividend rental arrangement,
disposition of the donated medicine exceeded the cost to as defined in subsection 248(1)
the corporation of the medicine ■ dividends on term preferred shares received by certain
multiplied by financial institutions

■ the eligible amount of the gift divided by the proceeds of ■ dividends on shares guaranteed by a specified financial
disposition for the gift institution, as described in subsection 112(2.2)
References
If the amount of the gifts of medicine minus any other Subsections 112(1), 112(2), and 112(2.1) to 112(2.9)
donations you claim is more than your net income for the
year, you can carry the excess forward for up to five years. Section 113 contains the authority and the limitations
concerning the deduction of dividends received from
Note foreign affiliates.
On line 655 of Schedule 2, enter the amount of any other
adjustments (these adjustments would apply to Subsection 138(6) contains the authority for a life insurer to
corporations that have undergone an acquisition of deduct the taxable dividends received from taxable
control and whose donations carryforward amounts that Canadian corporations, other than dividends on term
accrued before the acquisition of control are not preferred shares that are acquired in the ordinary course of
deductible after the acquisition of control). its business.

Gifts of medicine are deducted in the order they were made On line 320, enter the amount of taxable dividends (as per
(first-in, first-out rule). Schedule 3) deductible from taxable income under
section 112, or 113, or subsection 138(6). This amount is the
On line 315, enter the amount for gifts of medicine you total of column 240 of Schedule 3.
want to apply against your current year taxable income.
Note
A dividend does not include stock dividends received
from a non-resident corporation.

canada.ca/taxes 63
By deducting taxable dividends received from net income Line 334 – Farm losses of previous tax years
or loss amount shown on line 300, you can create or On line 334, enter the farm losses you are carrying forward
increase a non-capital loss for the year. from previous years to reduce taxable income from line 330
Reference of Schedule 4.
IT-269, Part IV Tax on Taxable Dividends Received by a Private
Corporation or a Subject Corporation On line 340 of Schedule 3, enter the amount of the
current-year farm loss, and on line 345, enter the previous
Line 325 – Part VI.1 tax deduction years’ farm losses that you are using to reduce dividends
subject to Part IV tax.
A corporation that pays Part VI.1 tax on dividends it paid
on taxable preferred shares and short-term preferred shares The total of those two amounts has to be entered on line 335
can deduct 3.5 times the Part VI.1 tax the corporation has to of Schedule 4 as the amount applied. For details, see “How
pay. For details on how to calculate Part VI.1 tax, see to complete Schedule 4, Part 3 – Farm losses” on page 58.
“Line 724 – Part VI.1 tax payable” on page 87. References
Paragraphs 111(1)(d), 186(1)(c), and 186(1)(d)
On line 325, enter the Part VI.1 tax times 3.5.
Reference
Paragraph 110(1)(k)
Line 335 – Limited partnership losses of
previous tax years
Line 331 – Non-capital losses of previous tax On line 335, enter the deductible amount of limited
years partnership losses from previous years that were applied
against other incomes in the current year from Part 7 of
On line 331, enter any non-capital losses carried forward Schedule 4. See page 60 for more details.
from previous years to reduce taxable income from line 130
of Schedule 4. Reference
Paragraph 111(1)(e)
On line 330 of Schedule 3, enter the amount of current-year
non-capital losses, and on line 335, enter the non-capital Line 340 – Taxable capital gains or taxable
losses from previous years to be used to reduce dividends
dividends allocated from a central credit
subject to Part IV tax.
union
The total of those two amounts has to be entered as an If a central credit union has made an election under
applied amount on line 135 of Schedule 4. For details, see subsection 137(5.1), amounts allocated to a member credit
“How to complete Schedule 4, Part 1 – Non-capital losses” union as taxable dividends or net non-taxable capital gains
on page 57. may be claimed by that member as a deduction from
References taxable income under paragraph 137(5.2)(c). Enter these
Paragraphs 111(1)(a), 186(1)(c), and 186(1)(d) amounts on line 340.

Line 332 – Net-capital losses of previous tax Line 350 – Prospector’s and grubstaker’s
years shares
On line 332, enter the amount of net capital losses from You can deduct 1/2 of the value of any shares received
previous years that you applied against taxable capital gain from a corporation after disposition of a right or a mining
incurred in the year. This amount is the capital loss entered property, except if the amount is exempt under a tax treaty.
on line 225 of Schedule 4 that you multiply by 50%. See
Reference
“How to complete Schedule 4, Part 2 – Capital losses” on Paragraph 110(1)(d.2)
page 58 for details.
Note Line 355 – Section 110.5 additions or
A net capital loss can create a non-capital loss in the year subparagraph 115(1)(a)(vii) additions
you apply it, because the net capital loss is not limited to
You can use foreign tax deductions to reduce Part I tax that
reducing the taxable income, but to reducing the taxable
you would otherwise have to pay. Under section 110.5 and
capital gain in that year.
subparagraph 115(1)(a)(vii), a corporation that cannot
References deduct its foreign income tax deductions (for example, if it
Section 38
has no Part I tax payable for the year) can choose to add an
Subsections 111(1.1) and 111(8)
Paragraph 111(1)(b) amount to its taxable income. In this way, the corporation
can use these otherwise non-deductible foreign tax
deductions.
Line 333 – Restricted farm losses of previous
tax years The amount you add to income for this purpose forms part
of the non-capital loss. See page 57 for details.
On line 333, enter the amount you want to apply to reduce
the current-year farm income. On line 430 of Schedule 4, However, you cannot add an amount under section 110.5 if
enter the amount of restricted farm loss used. For details, that addition increases any of the following deductible
see page 58. amounts:
Reference ■ the small business deduction
Paragraph 111(1)(c)

64 canada.ca/taxes
■ the manufacturing and processing profits deduction Line 360 – Taxable income
■ the federal logging tax credit To calculate this amount, subtract all the deductions you
entered on lines 311 to 350 from the net income for income
■ the investment tax credit (ITC) tax purposes on line 300. Add, if it applies, section 110.5 or
■ the share-purchase tax credit subparagraph 115(1)(a)(vii) additions (line 355). Enter the
taxable income on line 360.
■ the SR&ED investment tax credit
If the result is a loss, enter “0” on line 360.
If the corporation is an authorized foreign bank, you cannot
add an amount under subparagraph 115(1)(a)(vii) if that Note
addition increases any of the following deductible If you want to carry back a current-year loss to a
amounts: previous tax year, see “How to complete Schedule 4” on
page 57 for details.
■ the federal logging tax credit
■ the ITC
On line 355, enter the amount you added to income under
section 110.5 or subparagraph 115(1)(a)(vii).

canada.ca/taxes 65
Chapter 4 – Page 4 of the T2 return
Page Page
Small business deduction ................................................. 66 Specified farming or fishing income ............................. 67
Avoidance of the business limit and taxable capital Specified shareholder...................................................... 68
limit .................................................................................... 66 How to calculate income from an active business
Preventing multiplication of the small business carried on in Canada ................................................... 68
deduction .......................................................................... 66 Specified partnership income ........................................ 68
Line 400 – Income from active business carried on in Line 405 – Taxable income for the SBD ............................ 68
Canada............................................................................... 66 Line 410 – Business limit .................................................... 68
Active business income ................................................... 67 Line 426 – Reduced business limit .................................... 69
Specified investment business ....................................... 67 Assignment of the business limit under
Personal services business .............................................. 67 subsection 125(3.2)........................................................... 69
Specified corporate income ............................................ 67 Line 430 – Small business deduction ................................ 69

Small business deduction Preventing multiplication of the small

Corporations that were Canadian-controlled private business deduction
corporations (CCPCs) throughout the tax year may be able To address concerns about partnership structures that
to claim the small business deduction (SBD). The SBD multiply access to the SBD, the specified partnership
reduces Part I tax that the corporation would otherwise income rules also apply, for example, to partnership
have to pay. structures in which a CCPC provides services or property
to a partnership during the tax year of the CCPC, where the
The SBD is 19% of whichever of the following amounts is CCPC or a shareholder of the CCPC is a member of the
less: partnership. A similar measure also applies for corporate
■ the income from active business carried on in Canada structures that multiply access to the SBD.
(line 400)
the taxable income (line 405)
Line 400 – Income from active business
■
carried on in Canada
■ the business limit (line 410)
Complete Schedule 7, Aggregate Investment Income and
■ the amount on line 428, which is the reduced business Income Eligible for the Small Business Deduction, to
limit on line 426 from which you deduct the amount of determine the following amounts:
the business limit you assigned under subsection 125(3.2)
■ the aggregate investment income and foreign investment
The basic rate of Part I tax being 38% of your taxable income for determining the refundable portion of Part I
income, 28% after the federal tax abatement, the SBD rate tax (see “Refundable portion of Part I tax, Lines 440, 445,
results in a 9% tax rate. and 450” on page 71 for details)
Once you have calculated the SBD, enter it on line 430. ■ the specified partnership income for members (or
designated members) of a partnership
The following sections explain each of the above amounts.
■ the income from an active business carried on in Canada
Avoidance of the business limit and taxable for the SBD
capital limit CCPCs may now assign all or part of their business limit
Where two corporations (Corps A and B) are deemed to be under subsection 125(3.2) or specified partnership business
associated because they are associated with the same third limit under subsection 125(8) to another corporation.
corporation (Corp C), but because the third corporation, a Use Schedule 7 to assign all or part of your specified
CCPC, has filed a Schedule 28 election (see page 29), they partnership business limit to another corporation.
are deemed not to be associated with each other for
determining the SBD, the following applies: Also file Schedule 7 if another corporation assigned all or
part of its business limit to your CCPC or if a member of a
■ investment income derived from Corp C that is deemed partnership assigned all or part of the member’s specified
by subsection 129(6) to be active business income is not partnership business limit to your CCPC.
eligible for the SBD and is taxed at the general
corporation income tax rate If you are assigning all or part of your business limit to
another corporation, report it on page 4 of the T2 return.
■ Corps A and B remain associated with Corp C. They
must include the taxable capital limit of Corp C when Note
calculating the SBD If claiming a deduction for patronage dividends on
line 416 of Schedule 1, complete Part 5 of Schedule 16 to
establish active business income carried on in Canada
(see page 55 for details).

66 canada.ca/taxes
Active business income Deductions in computing income for a personal services
Generally, active business income is income earned from a business are restricted to the following:
business source, including any income incidental to the
■ salary, wages or other remuneration of the incorporated
business.
employee
Income from a specified investment business or from a
■ cost of other benefits or allowances provided to the
personal services business, and income described in
incorporated employee
subparagraph (a)(i) of the definition of specified corporate
income in subsection 125(7) for the year are generally not ■ certain expenses of the corporation associated with
considered active business income and are not eligible for selling property or negotiating contracts
the SBD. The following three sections explain when income
■ legal expenses paid in the year by the corporation in
from these types of businesses may be considered active
collecting amounts owed for services rendered
business income and eligible for the SBD.
Note
Specified investment business
Any expenses denied must be added back on Schedule 1.
A specified investment business is a business with the
principal purpose of deriving income from property, For more information on the factors to take into account
including interest, dividends, rents, or royalties. It also when a person is considered an employee, see
includes a business carried on by a prescribed Guide RC4110, Employee or self-employed? or go
labour-sponsored venture capital corporation, the principal to canada.ca/cpp-ei-rulings.
purpose of which is to derive income from property.
Reference
Except for a prescribed labour-sponsored venture capital Paragraph 18(1)(p)
corporation, income from a specified investment business is Specified corporate income
considered to be active business income, and is therefore Generally, where a CCPC earns income that would
eligible for the SBD if: otherwise be considered as income from an active business
■ the corporation employs more than five full-time from providing property or services to another private
employees in the business throughout the year, or corporation and it (or one of its shareholders) or a person
who does not deal at arm’s length with the CCPC (or one of
■ an associated corporation provides managerial, financial, its shareholders) holds a direct or indirect interest in that
administrative, maintenance, or other similar services to other private corporation, the income would not be
the corporation while carrying on an active business, and considered as being eligible for the SBD unless certain
the corporation would have to engage more than conditions are met.
five full-time employees to perform these services if the
associated corporation were not providing them For more information, see the definition of specified
corporate income in subsection 125(7).
Note
The business a credit union carries on, or the business of Specified farming or fishing income
leasing property other than real property, is not The definition of specified farming or fishing income is
considered specified investment business. replacing the definition of specified cooperative income,
Personal services business which has been retroactively repealed. The definition of
A personal services business is a business that a specified corporate income excludes specified farming or
corporation carries on to provide services to another entity fishing income, so that such income stays eligible for the
(such as a person or a partnership) that an officer or SBD by default.
employee of that entity would usually perform. Instead, an Specified farming or fishing income, of a corporation for a
individual performs the services on behalf of the tax year, means income of the corporation (other than an
corporation. That individual is called an incorporated amount included in its income under subsection 135(7),
employee. patronage dividends), if both of the following conditions
Any income the corporation derives from providing the are met:
services is considered income from a personal services ■ the income is from the sale of the farming products or
business, as long as both of the following conditions are fishing catches of the corporation’s farming or fishing
met: business to another corporation
■ the incorporated employee who is performing the ■ the corporation deals at arm’s length with the other
services, or any person related to him or her, is a corporation
specified shareholder of the corporation
This approach eliminates the requirement that sales have to
■ the incorporated employee would, if it were not for the be to a farming or fishing cooperative corporation in order
existence of the corporation, reasonably be considered an to be excluded from specified corporate income.
officer or employee of the entity receiving the services
However, if the corporation employs more than
five full-time employees throughout the year or provides
the services to an associated corporation, the income is not
considered to be from a personal services business.
Therefore, the income is eligible for the SBD.

canada.ca/taxes 67
 Note If your corporation is a member of a partnership in respect
You have to request a reassessment if, in a previous year of which it filed a Schedule 73, you have to add or deduct
that started after March 21, 2016, you had income that the total active business income determined under
meets the definition of specified farming or fishing section 34.2.
income, but did not meet the definition of specified
If the corporation received an information slip T5013,
cooperative income. The CRA can reassess beyond the
Statement of Partnership Income, that shows its share of
normal reassessment period for this specific purpose.
partnership income or loss, keep it in case we ask for it
You will find information on how to request a
later. Do not include this form with the return. For more
reassessment on page 17.
information, see page 30 and Guide T4068, Guide for the
Partnership Information Return (T5013 Forms).
Specified shareholder
A specified shareholder is a taxpayer who owns, directly or On line 400, enter the total active business income you
indirectly at any time in the year, at least 10% of the issued calculated on Schedule 7.
shares of any class of capital stock of the corporation or a References
related corporation. Subsections 125(1), 125(7), 125(8), and 248(1)
Section 251
How to calculate income from an active business IT-73, The Small Business Deduction
carried on in Canada
Generally, to calculate active business income from Line 405 – Taxable income for the SBD
carrying on a business in Canada, you have to deduct from The taxable income you use to calculate the SBD is usually
net income for income tax purposes any of the following the amount entered on line 360. However, if you have
amounts that apply: claimed a foreign non-business income tax credit, a foreign
business income tax credit, or both, you have to reduce the
■ taxable capital gains minus allowable capital losses
taxable income by:
■ dividends that are deductible from income under
■ 100/28 of the amount that would be deductible as a
sections 112 and 113, and subsection 138(6)
federal foreign non-business income tax credit on
■ property income minus property losses line 632, if that credit was determined without the
refundable tax on the CCPC’s investment income
■ property income from an interest in a trust
(line 604) and without reference to the corporate tax
■ foreign business income reduction under section 123.4, and
■ income from a specified investment business ■ four times the amount that would be deductible as a
federal foreign business income tax credit (line 636) if
■ income from a personal services business that credit was determined without reference to the
■ income described in subparagraph (a)(i) of the definition corporate tax reduction under section 123.4. See page 70
of specified corporate income in subsection 125(7) for the You also have to reduce taxable income by any amount
year where certain conditions are not met that, because of federal law, is exempt from Part I tax.
Specified partnership income On line 405, enter your taxable income for the purposes of
A corporation that is a member (or a designated member) calculating the SBD.
of a partnership has to complete Schedule 7 to calculate its References
active business income. Paragraph 125(1)(b)
Subsection 126(7)
The specified partnership income rules impose a limit on
the amount of active business income earned by a Line 410 – Business limit
corporation as a member or designated member of a
partnership that is eligible for the SBD. The eligible amount The maximum allowable business limit for a corporation
is referred to as specified partnership income and is added that is not associated with any other corporation is
to the corporation’s active business income from other $500,000.
sources, if any. CCPCs that are associated with one or more corporations
For members of a partnership, their specified partnership during the tax year have to file Schedule 23, Agreement
business limit is normally their pro-rata share of a notional Among Associated Canadian-Controlled Private
$500,000 business limit for the partnership. Corporations to Allocate the Business Limit. On this
schedule, a percentage of the business limit is allocated to
For designated members of a partnership, their specified each corporation, and the total of all percentages cannot be
partnership business limit is nil, unless they get an amount more than 100%. See page 28 for details about Schedule 23.
assigned from a member of the partnership.
On line 410, enter the business limit for the year. If
If the partnership incurs a loss from carrying on an active applicable, enter the amount from Schedule 23.
business, you have to deduct the corporation’s share of that
loss from its active business income. This is referred to as a
specified partnership loss.

68 canada.ca/taxes
 Notes Passive income business limit reduction
If the tax year is shorter than 51 weeks, you have to The business limit of a CCPC is also reduced if the CCPC,
prorate the business limit, based on the number of days and any other corporation it is associated with, earn
in the tax year divided by 365, before you enter it on combined income from $50,000 to $150,000 from passive
line 410. investments. The business limit is nil once the combined
income from passive investments is more than $150,000.
If a CCPC is associated with two other corporations and
This income is calculated in Part 2 of Schedule 7, Aggregate
elects for the two other corporations not to be associated
Investment Income and Income Eligible for the Small
with each other for the purpose of the small business
Business Deduction, and is referred to as the adjusted
deduction, it has to file Schedule 28, Election not to be
aggregate investment income.
Associated Through a Third Corporation. For more
details, see page 29. Enter the greater amount of the reduction on line 422 and
References the resulting reduced business limit on line 426.
Subsections 125(2), 125(3), 125(5), and 256(2)
IT-64, Corporations: Association and Control
Use Schedule 23, Agreement Among Associated
Canadian-Controlled Private Corporations to Allocate the
Business Limit, if you are an associated CCPC. For more
Line 426 – Reduced business limit information about this schedule, see page 28.
The reduction in a CCPC’s business limit is the greater of its
Reference
taxable capital business limit reduction and its passive Subsections 125(5.1) and 125(7)
income business limit reduction for the year.
When determining if a CCPC was eligible for the Assignment of the business limit under
temporary 10% wage subsidy for employers, the passive subsection 125(3.2)
income business limit reduction was not to be included in
CCPCs can assign all or part of their business limit under
the calculation of the business limit. This is an exception.
subsection 125(3.2) to another corporation.
Taxable capital business limit reduction Enter the amount of the business limit you assign and the
Large CCPCs that have taxable capital employed in Canada business number of the corporation to which you assign
of $15 million or more do not qualify for the SBD. The such an amount on page 4 of the T2 return. Deduct from
business limit is reduced on a straight-line basis for CCPCs line 426 the amount you assign and enter the result on
that have taxable capital employed in Canada of between line 428.
$10 million and $15 million in the previous year. Similar If another corporation assigned all or part of its business
restrictions apply to any CCPC that is a member of an limit to your CCPC, file Schedule 7.
associated group that has, in total, more than $10 million of
taxable capital employed in Canada. References
Subsections 125(3.1), (3.2), and (7)
To calculate the total taxable capital employed in Canada,
use the schedule that applies: Line 430 – Small business deduction
■ Schedule 33, Taxable Capital Employed in Canada – Multiply the least of lines 400, 405, 410, and 428 by 19%.
Large Corporations Enter the result on line 430 and at amount J on page 8 of the
return.
■ Schedule 34, Taxable Capital Employed in Canada –
Financial Institutions
■ Schedule 35, Taxable Capital Employed in Canada –
Large Insurance Corporations
If your taxable capital employed in Canada is more than
$10 million, file the appropriate schedule with your return.

canada.ca/taxes 69
Chapter 5 – Page 5 of the T2 return
Page Page
General tax reduction ......................................................... 70 General tax reduction ......................................................... 70
General tax reduction for Canadian-controlled
private corporations (CCPCs) ........................................ 70

General tax reduction General tax reduction for Canadian-controlled

A general tax reduction of 13% is available on qualifying private corporations (CCPCs)
income. If you are a CCPC throughout the tax year, complete this
area of page 5 to calculate the reduction. Enter the resulting
Corporations benefit from the general tax reduction only on amount on line 638 on page 8.
taxable income that is subject to a rate of 38%.
Note
The reduction does not apply to income that benefits from If you are a corporation that is, throughout the year, a
preferential corporate tax treatment, such as: cooperative corporation (within the meaning assigned
■ income eligible for the small business deduction and by subsection 136(2)) or a credit union, enter zero at
Canadian manufacturing and processing income amount F.
income eligible for the deduction for the generation of Reference
■
Subsection 123.4(2)
electrical energy for sale or the production of steam for
sale
General tax reduction
■ investment income subject to the refundable tax
Do not complete this area if you are a CCPC, an investment
provisions
corporation, a mortgage investment corporation, a mutual
The reduction also does not apply to income earned from a fund corporation, or a corporation that has income not
personal services business or to a corporation that was, subject to the corporation tax rate of 38%.
throughout the year, an investment corporation, a
All other corporations complete this area of page 5 to
mortgage investment corporation, or a mutual fund
calculate the reduction. Enter the general tax reduction on
corporation.
line 639 on page 8.
Reference
Reference
Subsection 123.4(1)
Subsection 123.4(2)

70 canada.ca/taxes
Chapter 6 – Pages 6 and 7 of the T2 return
Page Page
Refundable portion of Part I tax ...................................... 71 Dividend refund................................................................. 72
Lines 440, 445, and 450 ........................................................ 71 Parts 3 and 4 of Schedule 3 ................................................ 73
Refundable dividend tax on hand ................................... 71
Lines 460, 465, 480, 530, and 545 ........................................ 72

Refundable portion of Part I tax You can include taxable capital gains and allowable capital
losses in a CCPC’s net investment income only if you can
Lines 440, 445, and 450 attribute the gain or loss to a period of time when a CCPC,
The refundable portion of Part I tax is part of the an investment corporation, a mortgage investment
refundable dividend tax on hand (RDTOH). More corporation, or a mutual fund corporation held the
information about RDTOH is in the section that follows. disposed property.
The refundable portion of Part I tax allows a CCPC that has Note
paid Part I tax on investment income to recover part of that Part 2, Adjusted Aggregate Investment Income, of
tax when the corporation pays taxable dividends to its Schedule 7, is used to calculate the small business
shareholders. The refundable portion of Part I tax only deduction for tax years starting after 2018 on page 4 of
applies to corporations that are CCPCs throughout the tax the return.
year.
Part 3 – Foreign investment income calculation
The refundable portion of Part I tax is based on the
The foreign investment income is all income from only
aggregate investment income and foreign investment
sources outside of Canada calculated as follows:
income. You have to determine these amounts by
completing Parts 1 and 3 of Schedule 7, Aggregate add
Investment Income and Income Eligible for the Small
■ the eligible portion of the taxable capital gains for the
Business Deduction.
year that is more than the eligible portion of allowable
capital losses for the year
Part 1 – Aggregate investment income calculation
The aggregate investment income is the aggregate world ■ the total income from property from a source outside
source income calculated as follows: Canada from which the following amounts have been
deducted:
add
– exempt income
■ the eligible portion of the taxable capital gains for the
year that is more than the total of: – taxable dividends deductible after deducting related
expenses
– the eligible portion of allowable capital losses for the
year – business income from an interest in a trust that is
considered property income under paragraph 108(5)(a)
– the net capital losses from previous years which are
applied in the year deduct
■ total income from property (including income from a ■ the total losses for the year from property from a source
specified investment business carried on in Canada other outside Canada
than income from a source outside Canada) from which
On line 445 enter the amount of foreign investment income
the following amounts have been deducted:
that you determined on line 079 of Schedule 7.
– exempt income
Calculate the amount of the refundable portion of Part I tax.
– AgriInvest receipts (include the Quebec amount) For years starting after 2018, enter the amount from line 450
at amount Q in the “Refundable dividend tax on hand”
– taxable dividends deductible after deducting related area on page 7 of your return.
expenses
References
– business income from an interest in a trust that is Subsections 129(3) and 129(4)
considered property income under paragraph 108(5)(a) IT-73, The Small Business Deduction
IT-269, Part IV Tax on Taxable Dividends Received by a Private
deduct Corporation or a Subject Corporation

■ total losses for the year from property (including losses

from a specified investment business carried on in Refundable dividend tax on hand
Canada other than losses from a source outside Canada) Notes
On line 440 enter the amount of aggregate investment For tax years starting after 2018, the calculation of a
income that you determined on line 092 of Schedule 7. private corporation’s dividend refund is based on
two accounts, the eligible refundable dividend tax on
hand (ERDTOH) and the non-eligible refundable

canada.ca/taxes 71
 dividend tax on hand (NERDTOH). They replace the corporation paid a dividend immediately before the
previous RDTOH account. amalgamation or wind-up, subsection 129(1.2) would
have applied to that dividend.
For more information on eligible dividends, go to
canada.ca/taxes-eligible-dividends or see page 84. For tax years starting after 2018, enter the NERDTOH at the
end of the tax year on line 545 and at amount EE in the
Lines 460, 465, 480, 530, and 545 “Dividend refund” area on page 7 of your return. Enter
the ERDTOH at the end of the tax year on line 530 and at
The RDTOH account only applies to corporations that were
amount BB in the same area.
private or subject corporations, which are defined on
page 85. References
Subsections 129(3) and 186(5)
A CCPC generates RDTOH on both the Part I tax it pays on
investment income and on the Part IV tax it pays on
dividends it receives. For any other type of private
Dividend refund
corporation, only the Part IV tax it pays generates RDTOH. Note
For tax years starting after 2018, a private corporation’s
For more information on taxable dividends deductible eligible dividends generate dividend refunds from
under section 112 or 113, or subsection 138(6), see page 62. the ERDTOH. Non-eligible dividends generate dividend
For information on Part IV tax and instructions to complete refunds from the NERDTOH first, and then possibly
Schedule 3, see page 85. from the ERDTOH. The calculation effectively requires a
private corporation to get a refund from its NERDTOH
All or part of the RDTOH at the end of the tax year is account before it gets a refund from its ERDTOH
available as a refund if the corporation pays taxable account, when it pays a non-eligible dividend. A
dividends to the shareholders during the tax year. transitional rule was set to preserve the refundability of
You can view refundable dividend tax on hand balances a corporation’s pre-existing RDTOH.
using the “View return balances” service through: A private or subject corporation may be entitled to a
■ My Business Account at canada.ca/my-cra-business dividend refund for dividends it paid while it was a private
-account, if you are the business owner or subject corporation, regardless of whether it was a
private or subject corporation at the end of the tax year.
■ Represent a Client at canada.ca/taxes-representatives, if
you are an authorized representative or employee Note
To claim a dividend refund or to apply the amount to
To calculate the RDTOH at the end of the tax year, add the another debit for any tax year, including the same tax
following amounts: year, you have to file your income tax return within
■ the RDTOH balance at the end of the previous tax year three years of the end of the tax year. If your income tax
(minus any dividend refund issued to the corporation in return is not filed within three years of the end of the tax
the previous year) year, the dividend refund becomes statute barred, and
will not be issued.
■ the refundable portion of Part I tax from line 450
A dividend refund arises if you pay taxable dividends to
■ Part IV tax calculated on line 360 of Schedule 3 shareholders, and if there is an amount of RDTOH or, for
tax years starting after 2018, an amount of NERDTOH
■ any balance of RDTOH transferred from a predecessor
or ERDTOH at the end of the tax year. To claim a dividend
corporation on amalgamation, or from a wound-up
refund, you have to have made an actual payment to the
subsidiary corporation
shareholders, unless the dividend is considered paid (a
On line 460, enter the RDTOH the parent corporation is deemed dividend).
carrying forward from its previous tax year.
You can make this payment either in cash or with some
Enter on line 465, any dividend refund issued to the other tangible assets at fair market value, including the
corporation in the previous year. following:
For the first tax year of a new corporation formed as a ■ stock dividends
result of an amalgamation, enter on line 480 all RDTOH
■ section 84 deemed dividends
balances being transferred from predecessor corporations.
Do not include this amount on line 460. ■ amounts paid as interest or dividends on income bonds
or debentures that are not deductible when calculating
For a parent corporation that wound up a wholly owned
income
subsidiary, enter on line 480 any RDTOH transferred from
the subsidiary corporation. For tax years starting after 2018 If you lose your private status following a change in
that have established ERDTOH and NERDTOH balances, control, a deemed year-end occurs. This allows you to
enter the amounts transferred as a result of an claim a dividend refund for any dividends paid during
amalgamation or the wind-up of a subsidiary on line 525 the deemed short year.
for the ERDTOH and on line 540 for the NERDTOH.
You have to complete Parts 3 and 4 (if they apply) of
Note Schedule 3 to claim a dividend refund.
You cannot transfer any RDTOH to a new or parent
corporation if, had the predecessor or subsidiary

72 canada.ca/taxes
For tax years starting after 2018, the dividend refund is If the amount of dividends paid includes dividends that do
equal to the total of the following amounts: not qualify for the dividend refund, you have to deduct
these dividends before completing the calculation in Part 3.
■ for eligible dividends, the amount (referred to below as
In this case, complete Part 4 of Schedule 3 to identify
amount 1) that is the lesser of 38 1/3% of the total of all
dividends that do not qualify.
eligible dividends you paid in the year and
your ERDTOH account balance at the end of the year Dividends that do not qualify are:
■ for non-eligible dividends, the total of the two following ■ dividends paid out of the capital dividend account
amounts:
■ capital gains dividends
– the amount that is the lesser of 38 1/3% of the total of
■ dividends paid for shares that do not qualify as taxable
all non-eligible dividends you paid in the year and
dividends, because the main purpose of acquiring the
your NERDTOH account balance at the end of the year
shares was to receive a dividend refund
– the amount that is the lesser of: [subsection 129(1.2)]
■ the amount, if any, by which 38 1/3% of the total of ■ taxable dividends paid to a controlling corporation that
all non-eligible dividends you paid in the year is was bankrupt at any time in the year
more than your NERDTOH account balance at the
Complete Part 3 of Schedule 3 to identify a connected
end of the year
corporation that received taxable dividends that qualify for
■ the amount, if any, by which your ERDTOH account the dividend refund.
balance at the end of the year is more than amount 1
If the dividend refund is more than the amount of Part I tax
The total of taxable dividends paid in the tax year that payable for the year, we deduct the excess from any other
qualify for a dividend refund is equal to the amount on taxes owed under the Income Tax Act. Any balance left
line 460 of Schedule 3. Eligible refundable dividend tax on over is available for a refund.
hand refers to line 530 of the return and non-eligible
If the total dividends paid during the year is different from
refundable dividend tax on hand refers to line 545.
the total of taxable dividends paid for the purpose of the
dividend refund, complete Part 4 of Schedule 3.
Parts 3 and 4 of Schedule 3
References
The following explains how to complete Parts 3 and 4 of Section 129
Schedule 3. Parts 1 and 2 are explained on page 85. Subsection 186(5)
Paragraph 129(1)(a)
If you paid taxable dividends during the year, complete
Part 3 to identify taxable dividends that qualify for the
dividend refund.

canada.ca/taxes 73
Chapter 7 – Page 8 of the T2 return
Page Page
Part I tax ................................................................................ 74 Lines 638 and 639 – General tax reduction ...................... 77
Line 550 – Base amount of Part I tax ................................. 74 Line 640 – Federal logging tax credit ................................ 77
Line 560 – Additional tax on personal services Line 641 – Eligible Canadian bank deduction under
business income ............................................................... 74 section 125.21 ................................................................... 77
Line 602 – Recapture of investment tax credit (ITC) ....... 74 Line 648 – Federal qualifying environmental trust tax
Scientific research and experimental development ..... 74 credit ................................................................................. 77
Child care spaces .............................................................. 74 Line 652 – Investment tax credit........................................ 77
Line 604 – Refundable tax on CCPC’s investment Available-for-use rule ..................................................... 78
income ............................................................................... 75 Investments and expenditures that qualify for an
Line 608 – Federal tax abatement ...................................... 75 ITC ................................................................................. 78
Line 616 – Manufacturing and processing profits Activities that qualify for an ITC on qualified
deduction .......................................................................... 75 property ........................................................................ 78
Lines 620 and 624 – Investment corporation Scientific research and experimental development
deduction .......................................................................... 76 (SR&ED) qualified expenditure pool ........................ 78
Line 632 – Federal foreign non-business income tax SR&ED investment tax credit and refund .................... 79
credit .................................................................................. 76 Apprenticeship job creation tax credit.......................... 79
Line 636 – Federal foreign business income tax credit ... 76 Investment tax credit (ITC) for child care spaces ........ 80
Continuity of unused federal foreign business Investment tax credit (ITC) claim .................................. 80
income tax credits ........................................................ 76 When to complete Schedule 31 ...................................... 80
Carryback or carryforward of unused credits ............. 77 Investment tax credit refund.......................................... 81
Part I tax payable ................................................................. 81

Part I tax – in any other case, the fair market value of the property

Line 550 – Base amount of Part I tax If you did the SR&ED and transferred the qualified
expenditures to a non-arm’s length party according to an
The basic rate of Part I tax is 38% of taxable income. To agreement as described in subsection 127(13), the recapture
determine the base amount of Part I tax, calculate 38% of will be whichever is less:
the taxable income from line 360 of page 3.
■ the ITC earned by the transferee on the qualified
On line 550, enter this base amount. expenditures for the property that was transferred
Reference
Section 123 ■ the amount determined by the formula:
A×B–C
Line 560 – Additional tax on personal
where
services business income (section 123.5)
A corporation must add to its Part I tax payable for a year – “A” is the percentage that the transferee used in
an amount equal to 5% of the corporation’s taxable income determining its ITC
for the year from a personal services business. – “B” is the proceeds of disposition of the property if you
Reference dispose of it to an arm’s length person, or in any other
Section 123.5 case, the fair market value of the property
– “C” is the amount, if any, added to the tax payable
Line 602 – Recapture of investment tax under subsection 127(27) for the property. This allows
credit (ITC) for the situation where you transferred only a portion
Scientific research and experimental development of the cost of the property in an agreement under
A corporation that disposed of a property used in scientific subsection 127(13)
research and experimental development (SR&ED), or If you transferred a portion of the expenditures and
converted it to commercial use, should report a recapture in claimed a portion of that expenditure for ITC purposes,
its income tax return for the year in which the disposition both calculations will apply.
or conversion occurred.
The recapture period for ITCs is 20 years.
If you disposed of a property on which you earned
SR&ED ITC, the recapture will be whichever is less: For more information, see Guide T4088, Scientific Research
and Experimental Development (SR&ED) Expenditures
■ the ITC earned for the property Claim – Guide to Form T661, or go to canada.ca/taxes-sred.
■ the amount determined by applying the percentage you
used in calculating the ITC earned on the property to: Child care spaces
Note
– the proceeds of disposition of the property if you The ITC for child care spaces is eliminated for
dispose of it to an arm’s length person expenditures incurred after March 21, 2017. See page 80.

74 canada.ca/taxes
The ITC for child care spaces will be recovered against the Line 616 – Manufacturing and processing
taxpayer’s tax otherwise payable if, at any time within the profits deduction
60 months of the day on which the taxpayer acquired the
Corporations that derive at least 10% of their gross revenue
property:
for the year from manufacturing or processing goods in
■ the new child care space is no longer available, or Canada for sale or lease can claim the manufacturing and
processing profits deduction (MPPD). The MPPD reduces
■ eligible property for purposes of this credit is sold or
Part I tax otherwise payable.
leased to another person or converted to another use
The MPPD applies to the part of taxable income that
If the property disposed of is a child care space, the amount
represents Canadian manufacturing and processing profits.
to be recaptured will be the amount that can reasonably be
Calculate the MPPD at the rate of 13% on income that is not
considered to have been included in the original ITC.
eligible for the small business deduction (SBD).
For eligible expenditures, the amount to be recaptured will
Use Schedule 27, Calculation of Canadian Manufacturing
be the lesser of:
and Processing Profits Deduction, to calculate the
■ the amount that can reasonably be considered to have manufacturing and processing profits deduction.
been included in the original ITC
There are two ways to calculate Canadian manufacturing
■ 25% of the proceeds of disposition of the eligible and processing profits: a simplified method for small
property or of its fair market value at the time of manufacturing corporations, and a basic labour and capital
disposition, if the property was disposed of to a employed in qualified activities formula for other
non-arm’s length person corporations. These methods are outlined in Parts 1 and 2
of Schedule 27.
Use Schedule 31, Investment Tax Credit – Corporations, to
calculate the recapture of ITC. Small manufacturing corporations only have to complete
Part 1 of Schedule 27 and are entitled to calculate the MPPD
On line 602, enter the amount of recapture of ITC. on their entire adjusted business income. Essentially, a
References corporation’s adjusted business income is its income from
Subsections 127(27) to (35) an active business it carried on in Canada that is more than
its losses from similar businesses. If the corporation is
Line 604 – Refundable tax on CCPC’s involved in resource activities, it has to reduce the adjusted
investment income business income by its net resource income, its refund
interest, and a portion of its prescribed resource loss.
An additional refundable tax of 10 2/3% is levied on the
Schedule 27 shows how to calculate the adjusted business
investment income (other than deductible dividends) of a
income.
CCPC.
To qualify as a small manufacturing corporation, you have
This additional tax may be part of the refundable portion of
to meet all of the following requirements:
Part I tax on line 450 and would be added to the refundable
dividend tax on hand (RDTOH) or, for tax years starting ■ the activities during the year were mainly manufacturing
after 2018, to the eligible refundable dividend tax on or processing
hand (ERDTOH) or the non-eligible refundable dividend
■ the active business income and that of any associated
tax on hand (NERDTOH). The RDTOH, ERDTOH, and
NERDTOH pool will be refunded when dividends are paid Canadian corporations was not more than $200,000
to shareholders (at a rate of 38 1/3% of taxable dividends ■ you were not engaged in any activities specifically
paid). excluded from manufacturing and processing, as defined
A CCPC with investment income has to calculate this in subsection 125.1(3)
additional tax on page 8 and enter the amount on line 604. ■ you were not engaged in processing ore (other than iron
References ore or tar sands ore) from a mineral resource located
Section 123.3 outside Canada to any stage that is not beyond the prime
Subsections 129(1) and 129(3) metal stage or its equivalent
■ you were not engaged in processing iron ore from a
Line 608 – Federal tax abatement mineral resource located outside Canada to any stage
The federal tax abatement is equal to 10% of taxable income that is not beyond the pellet stage or its equivalent
earned in the year in a Canadian province or territory.
■ you were not engaged in processing tar sands located
The federal tax abatement reduces Part I tax payable. outside Canada to any stage that is not beyond the crude
Income earned outside Canada is not eligible for the federal oil stage or its equivalent
tax abatement.
■ you did not carry on any active business outside Canada
On line 608, enter the amount of federal tax abatement. at any time during the year
Reference Corporations that do not qualify as small manufacturing
Section 124
corporations have to complete Part 2 of Schedule 27. In
Part 2, you will find the basic formula for calculating

canada.ca/taxes 75
Canadian manufacturing and processing profits, as well as subparagraph 115(1)(a)(vii) additions” on page 64 for
detailed instructions on how to complete the schedule. details.
Corporations that produce electricity or steam for sale have To claim this credit, complete Part 1 of Schedule 21.
to complete Parts 10 to 13 of Schedule 27. Calculate the federal foreign non-business income tax credit
for each country separately. Use more than one schedule if
On line 616, enter the amount of the manufacturing and
more space is required.
processing profits deduction determined in Part 9 of
Schedule 27. Add all the allowable foreign non-business income tax
References
credits in column I on Schedule 21. Then, enter the total
Section 125.1 allowable credit or a lesser amount on line 632.
Regulation 5200
References
S4-F15-C1, Manufacturing and Processing
Subsection 126(1)
S5–F2–C1, Foreign Tax Credit
Lines 620 and 624 – Investment corporation
deduction Line 636 – Federal foreign business income
A Canadian public corporation that is an investment tax credit
corporation, as defined in subsection 130(3), can claim a Use Schedule 21, Federal and Provincial or Territorial
deduction from Part I tax that the corporation would Foreign Income Tax Credits and Federal Logging Tax
otherwise have to pay. This deduction is equal to 20% of Credit, to calculate this credit.
the taxable income for the year that is more than the taxed
capital gains for the year. To prevent double taxation, a corporation that pays foreign
tax on income or profits it earned from operating a business
On line 624, enter the investment corporation’s taxed in a foreign country can claim a federal foreign business
capital gains. On line 620, enter the amount of the income tax credit. This credit reduces the Part I tax that the
deduction you are claiming. corporation would otherwise have to pay.
Reference Unlike foreign non-business income tax, you cannot deduct
Section 130
excess foreign business income tax paid as a provincial or
territorial foreign tax credit. However, under section 110.5,
Line 632 – Federal foreign non-business you can increase taxable income so as to claim an otherwise
income tax credit non-deductible foreign business income tax credit. See
Use Schedule 21, Federal and Provincial or Territorial Line 355 on page 64 for details.
Foreign Income Tax Credits and Federal Logging Tax To claim this credit, complete Part 2 of Schedule 21.
Credit, to calculate this credit. Calculate the foreign business income tax credit for each
A federal foreign non-business income tax credit is country separately. Use more than one schedule if more
available to Canadian residents to prevent double taxation space is required.
of any non-business income earned in a foreign country Add all allowable foreign business income tax credits in
that was taxed by that foreign country. The credit is also column J on Schedule 21. Then, enter the total allowable
available to authorized foreign banks on their Canadian credits or a lesser amount on line 636.
banking business from sources in a foreign country. This
credit reduces Part I tax that the corporation would Notes
otherwise have to pay. Foreign business income tax does not include any
foreign tax paid on income that is exempt from tax in
Foreign non-business income includes dividends, interest, Canada under an income tax treaty.
and capital gains. It does not include dividends received
from foreign affiliates, or income from operating a business When calculating income for the year from sources in a
in a foreign country. foreign country, deduct the maximum amount of foreign
exploration and development expense that is deductible
Foreign non-business income tax does not include any on a country-by-country basis.
foreign tax paid on income that is exempt from tax in
Canada under an income tax treaty. References
Subsection 126(2)
As another option, under subsection 20(12), instead of S5–F2–C1, Foreign Tax Credit
claiming a foreign non-business income tax credit, a
corporation can deduct from income all or any part of Continuity of unused federal foreign business income
non-business income tax it paid to a foreign country. tax credits
Complete Part 3 of Schedule 21 if you have a foreign
If, after you claim the federal foreign non-business income
business income tax credit that:
tax credit, there is any foreign non-business income tax left
over, you can claim it as a provincial or territorial foreign ■ expired in the current year
tax credit. See page 90 for details.
■ was transferred from an amalgamation or wind-up
Under section 110.5 and subparagraph 115(1)(a)(vii), you
■ was deducted in the current year, or
can also increase your taxable income so that you can use
an otherwise non-deductible foreign non-business income ■ was carried back to a previous year
tax credit. See “Line 355 – Section 110.5 additions or

76 canada.ca/taxes
You have to establish the continuity and the application of Line 648 – Federal qualifying environmental
the foreign tax credits on business income for each country. trust (QET) tax credit
Use more than one schedule if more space is required.
A corporation that is the beneficiary under a qualifying
environmental trust can claim a tax credit equal to
Carryback or carryforward of unused credits
Part XII.4 tax payable by the trust on that income.
You can carry back any unused foreign business income tax
credit to the 3 previous tax years, and you can carry the A QET is a trust:
credit forward for 10 tax years.
■ whose trustees only include:
To claim a carryback to previous years, complete Part 4 of
– the federal or provincial Crown, or
Schedule 21.
– a corporation resident in Canada and licensed or
Note
authorized under Canadian federal or provincial laws
You can use this credit only to reduce Part I tax on
to carry on the business of providing services as trustee
income originating from the same foreign country.
to the public in Canada

Lines 638 and 639 – General tax reduction ■ that is maintained only to fund the reclamation of a site
in Canada that is, or has been used primarily for, or for
Calculate this reduction on page 5.
any combination of the following:
If you were a CCPC throughout the tax year, enter the
– the operation of a mine
amount on line 638.
– the extraction of clay, peat, sand, shale, or aggregates
If you were a corporation other than a CCPC, an
(including dimension stone and gravel)
investment corporation, a mortgage investment
corporation, a mutual fund corporation, or a corporation – the deposit of waste, or
that has income that is not subject to the corporation tax
– if the trust was created after 2011, the operation of a
rate of 38% enter the amount on line 639.
pipeline
See “General tax reduction” on page 70 for details.
■ that is, or may become within the specified time period,
required to be maintained under:
Line 640 – Federal logging tax credit
– a federal or provincial law
Corporations that have income from logging operations
and have paid logging tax to the province of Quebec or – the terms of a contract entered into with the federal or
British Columbia can claim this credit. provincial Crown, or
Complete Part 5 of Schedule 21, Federal and Provincial or – if the trust was established after 2011, an order of a
Territorial Foreign Income Tax Credits and Federal Logging tribunal constituted under federal or provincial law
Tax Credit, to calculate this credit. On line 640, enter the
credit you calculated on line 580 of Schedule 21 or a lesser and
amount. ■ that is not an excluded trust, as defined under
References subsection 211.6(1) of the Income Tax Act
Subsection 127(1)
Regulation 700 The rate of tax payable by a QET is currently 15%.
On line 648, enter the credit claim up to the amount of
Line 641 – Eligible Canadian bank deduction Part I tax otherwise payable. On line 792 (page 9), enter any
under section 125.21 unused amount.
A Canadian parent bank can claim a deduction for certain Reference
amounts of non-resident withholding tax paid for interest Section 127.41
arising from amounts that the parent bank owes to its
non-resident affiliate. Line 652 – Investment tax credit
The deduction must be net of any of this non-resident A corporation can claim an investment tax credit (ITC) to
withholding tax amount that is available to the eligible reduce Part I tax that it would otherwise have to pay, or in
bank affiliate, or any other person or partnership, as a some cases this credit may be fully or partially refundable.
credit, reduction, or deduction against an amount payable Use Schedule 31, Investment Tax Credit – Corporations, to
to the government of a country other than Canada, or a calculate the ITC.
political subdivision of that country, under its laws and tax
treaties, and any other agreements entered into by it. A corporation earns ITCs by applying a specified
percentage to the cost of acquiring certain property
References
Subsection 95(2.43)
(investments) or on certain expenditures. However, you
Section 125.21 first have to reduce the capital cost of the property or the
expenditure by any government or non-government
assistance you received or will receive for that property or
the expenditure. Any goods and services tax/harmonized

canada.ca/taxes 77
sales tax (GST/HST) input tax credit or rebate received for E. Eligible child care spaces expenditures are defined in
property acquired is considered government assistance. subsection 127(9). The credit is ended for expenditures
incurred after March 21, 2017 (see transitional measures
On page 2 of Schedule 31, we list the percentages you have
on page 80).
to apply to eligible investments and expenditures.
ITC for qualified property
Available-for-use rule
You can earn ITCs on qualified property acquired mainly
A corporation is not considered to have acquired a property
for use in designated activities in the Atlantic region.
or made capital expenditures for earning an investment tax
credit until the property becomes available for use. Designated activities include, among others, the following:
For more information about the available-for-use rule, see ■ manufacturing or processing goods for sale or lease
“When is property available for use?” on page 40.
Note
References Eligible machinery and equipment acquired after 2015
Subsections 13(26) to 13(32) and 127(11.2) and before 2026 for use in Canada mainly for the
manufacturing and processing of goods for sale or lease
Investments and expenditures that qualify for an ITC is included in a new class 53. These assets are qualified
The following investments and expenditures earn an ITC: property for the ITC.
A. the cost of acquiring qualified property ■ logging
A.1 the cost of acquiring qualified resource property ■ farming or fishing
(before 2016—now, only carry-forward amounts are
allowed) ■ storing grain

B. SR&ED qualified expenditure pool ■ harvesting peat

C. pre-production mining expenditures (before 2016) The ITC rate for qualified property is 10%.

D. apprenticeship expenditures In addition, the following rules apply to certain

corporations that lease qualified properties such as
E. eligible child care spaces for expenditures incurred prescribed machinery and equipment or prescribed energy
before March 22, 2017 (see transitional measures on generation and conservation property to lessees who use
page 80) the property in any of the designated activities:
The following are definitions of investments and ■ For a corporation with a principal business of leasing
expenditure that qualify for an ITC: property, lending money, or purchasing conditional sales
A. Qualified property is defined in subsection 127(9). It contracts, accounts receivable, or other obligations,
includes new prescribed buildings, prescribed property acquired for the purposes of leasing it in the
machinery, and equipment or prescribed energy and ordinary course of carrying on business in Canada is
conservation property acquired during the year to use considered qualified property.
in certain activities in Newfoundland and Labrador, ■ For a corporation with a principal business of
Nova Scotia, Prince Edward Island, New Brunswick, manufacturing property that it sells or leases, a property
the Gaspé Peninsula, and prescribed offshore regions is considered qualified property only if the corporation
(Atlantic region). manufactures it and leases it in the ordinary course of its
A.1 Qualified resource property is defined in business in Canada.
subsection 127(9). You can no longer file a claim for this ■ For a corporation with a principal business of selling
credit, since it expired December 31, 2015, and or servicing property, a property is considered qualified
transitional measures expired December 31, 2016. Only property only if it is a type of property that the
unused credits that have not expired can be carried corporation sells or services, and the property is leased in
forward for up to 20 tax years following the tax year in the ordinary course of carrying on business in Canada.
which you made the investment.
B. Qualified expenditures and SR&ED qualified Scientific research and experimental development
expenditure pool are defined in subsection 127(9). (SR&ED) qualified expenditure pool
SR&ED is defined in subsection 248(1). For information on extended time limits for filing SR&ED
prescribed forms due to COVID 19, go to canada.ca/en
C. Pre-production mining expenditures are defined in /revenue-agency/services/covid-19-ministerial-orders and
subsection 127(9). You can no longer file a claim for this select Explanatory Note: Time Limits and Other Periods
credit, since it expired December 31, 2015, and so did Act – Income Tax provisions.
transitional measures. Only unused credits that have
not expired can be carried forward for up to 20 tax You have to file Form T661, Scientific Research and
years that follow the tax year in which you made the Experimental Development (SR&ED) Expenditures Claim,
investment. along with Schedule 31 when making a claim for an ITC
on qualified expenditures for SR&ED. See page 56 for
D. Apprenticeship expenditures are defined in more information.
subsection 127(9).

78 canada.ca/taxes
 Note taxable incomes of all associated corporations before the
You have to identify qualified SR&ED expenditures on application of the specified future tax consequences (for tax
Form T661 and Schedule 31 no later than 12 months after years ending in the same calendar year as the corporation’s
the filing due date for the year the expenditures were previous tax year) is not more than the total of the
incurred (without reference to subsection 78(4)). qualifying income limits of the corporation and the
associated corporations for those previous years.
The SR&ED qualified expenditure pool includes qualified
SR&ED expenditures, that is current expenditures the The qualifying income limit is $500,000. It begins to
corporation incurred in the year plus any qualified decrease when the total taxable capital employed in Canada
expenditures transferred to the corporation under an of the corporation and its associated corporations for the
agreement in subsection 127(13) less any qualified previous tax year reaches $10 million and becomes nil at
expenditures transferred by the corporation under such an $50 million.
agreement (see Form T1146, Agreement to Transfer
CCPCs that meet the definition of qualifying corporation
Qualified Expenditures Incurred in Respect of SR&ED
can also earn ITCs at the enhanced rate of 35% on qualified
Contracts Between Persons Not Dealing at Arm’s Length).
SR&ED expenditures up to their expenditure limit. This
Capital expenditures made after 2013, including allowable ITC can be refunded if it cannot be used in the year to offset
lease costs of equipment, can no longer be claimed for Part I tax. For qualifying corporations, the ITC earned on
SR&ED purposes. Those expenditures are given the SR&ED expenditures that exceed the expenditure limit is
treatment otherwise applicable to such expenditures under earned at the rate of 15%, of which 40% is also refundable.
the Income Tax Act.
Note
References The taxable income mentioned in the definition of
Subsections 37(11) and 127(9)
expenditure limit and qualifying corporation is
determined before taking into consideration the
SR&ED investment tax credit and refund specified future tax consequences. These consequences
You may earn a non-refundable ITC of 15% of the SR&ED include, among others, the carryback of losses from later
qualified expenditure pool at the end of the tax year. years that would have reduced the taxable income for
Some CCPCs can claim the enhanced ITC rate of 35% on the the year in which those losses were applied. For more
SR&ED qualified expenditure pool, up to their expenditure information, see the definition of specified future tax
limit. consequence in subsection 248(1).

The expenditure limit is $3 million and is subject to a Corporations may be associated because the same group of
phase-out based on: the taxable income (for tax years persons controls them, but the members of this group do
ending before March 19, 2019) and the taxable capital not act together and have no other connection to each other.
employed in Canada of the CCPC and its associated CCPCs that are associated only because of the above
corporations for the previous tax year. definition of a group will not be considered associated for
For tax years ending before March 19, 2019, the expenditure the following calculations:
limit begins to decrease when the taxable income before the ■ the refundable ITC on eligible SR&ED expenditures
application of the specified future tax consequences (see
note below) of the CCPC and its associated corporations for ■ calculating the expenditure limit
the previous tax year exceeds $500,000 and becomes nil at ■ allocating the expenditure limit
$800,000 and higher.
For this exception to apply, one of the corporations must
The expenditure limit also begins to decrease when the have at least one shareholder who is not common to both
taxable capital employed in Canada of the CCPC and its corporations.
associated corporations for the previous tax year reaches
$10 million and becomes nil at $50 million and higher. References
Section 127.1
If the corporation is associated with one or more CCPCs, Subsections 127(5) to 127(12) and 248(1)
Regulations 2902 and 4600
you have to allocate the expenditure limit among the
associated CCPCs on Schedule 49, Agreement Among
Associated Canadian-Controlled Private Corporations to Apprenticeship job creation tax credit
Allocate the Expenditure Limit. See page 29 for details A corporation can earn a non-refundable ITC equal to 10%
about Schedule 49. of the eligible salaries and wages paid to eligible
apprentices employed in the business in the tax year to a
CCPCs that do not meet the definition of qualifying maximum credit of $2,000, per year, per apprentice.
corporation can earn ITCs at the enhanced rate of 35% on
qualified SR&ED expenditures up to their expenditure An eligible apprentice is one who is working in a
limit. This ITC can be refunded if it cannot be used in the prescribed trade in the first two years of their
year to offset Part I tax. The ITC earned on SR&ED apprenticeship contract. This contract is registered with
expenditures that exceed the expenditure limit is earned at Canada or a province or territory under an apprenticeship
the rate of 15% and it is not refundable. program designed to certify or license individuals in the
trade.
A qualifying corporation is a CCPC whose taxable income
for the previous tax year before the application of the A prescribed trade will include the trades currently listed
specified future tax consequences (see note below) plus the as Red Seal Trades. For more information about the trades,

canada.ca/taxes 79
go to red-seal.ca. Also, the minister of Finance may in taxpayer, or any person related to a person referred to
consultation with the minister of Employment and Social above.
Development, prescribe other trades.
The credit is not available for any of the ongoing expenses
Eligible salaries and wages are those payable by the of the child care facility such as supplies, wages, salaries, or
employer to an eligible apprentice for the apprentices’ utilities.
employment in Canada in the tax year and during the first
The amount of the credit is added to the ITC pool and is
24 months of the apprenticeship. Eligible salaries or wages
available to reduce the federal taxes payable in the tax year.
do not include qualified expenditures incurred by the
Any unused credits can be carried back 3 years or carried
corporation in a tax year, remuneration based on profits,
forward 20 years.
bonuses, taxable benefits including stock options, and
certain unpaid remuneration. Complete Parts 24 to 28 of Schedule 31 to claim the credit.
Where two or more related employers employ an The credit will be recovered against the taxpayer’s tax
apprentice, special rules apply to ensure that the $2,000 otherwise payable under Part I of the Act if, at any time
limit is allocated to only one employer. within the 60 months of the day on which the taxpayer
acquired the property:
An unused credit can be carried back 3 years, and carried
forward 20 years. ■ the new child care space is no longer available, or
Complete Parts 21 to 23 of Schedule 31 to calculate the ■ property that was an eligible expenditure for this credit is
credit. sold or leased to another person or converted to another
use
Investment tax credit (ITC) for child care spaces
For more information on the recapture, see line 602 on
Note
page 74.
The investment tax credit for child care spaces is
eliminated for expenditures incurred after
Investment tax credit (ITC) claim
March 21, 2017. As a transitional measure, the credit is
available for eligible expenditures incurred before 2020 You can deduct the full amount of ITC against federal Part I
under a written agreement entered into before tax payable. If you are claiming an ITC for a depreciable
March 22, 2017. property, including shared-use equipment, reduce the
capital cost of the property in the next tax year by the
An employer carrying on business in Canada, other than a amount of this year’s ITC. If you are claiming an ITC for
child care services business, can claim a non-refundable tax SR&ED expenditures reduce the pool of deductible SR&ED
credit to create one or more new child care spaces in a new expenditures in the next tax year by the amount of this
or existing licensed child care facility for the children of year’s ITC. For more information, see Schedule 8,
their employees and for other children in the community. “Column 5 – Adjustments and transfers,” on page 43.
The non-refundable tax credit is equal to the lesser of
$10,000 and 25% of the eligible expenditure per child care Note
space created. Eligible expenditures include the cost of A corporation cannot claim an ITC for an expense or
depreciable property (other than specified property), and expenditure incurred in the course of earning income
the amount of specified start-up costs, acquired or incurred if any of that income is exempt income or is exempt from
only to create the new child care space at a licensed child tax under Part I.
care facility. References
Subsections 13(7.1), 37(1), and 127(5)
Eligible depreciable property includes:
You can carry forward ITCs not previously deducted for
■ the building or the part of the building in which the child 20 years, or carry them back 3 years, to reduce Part I tax.
care facility is located Remember that you can only carry back ITCs to a prior year
■ furniture and appliances if you cannot deduct them in the year you earn them.

■ computer and audio-visual equipment Special rules restrict the carryforward and carryback of
ITCs following an acquisition of control.
■ playground structures and equipment
References
Specified child care start-up costs include the initial costs Paragraph 127(5)(a)
for: Subsections 127(9.1), 127(9.2), and 127(36)

■ building permits and architect’s fees When to complete Schedule 31

■ landscaping for the children’s playground Complete Schedule 31 and file it with the return if the
corporation:
■ regulatory inspections and licensing fees
■ acquired any qualified property or incurred any
■ children’s educational material expenditures qualifying for ITC purposes
Eligible expenditures do not include specified property ■ is carrying forward unused ITCs from a previous year
such as motor vehicles, or a property that is, or is located in
or attached to, a residence of: the taxpayer, an employee of
the taxpayer, a person who holds an interest in the

80 canada.ca/taxes
■ is transferring unused ITCs from a predecessor Any ITC you earned in the tax year must first be used to
corporation on amalgamation, or from a subsidiary reduce taxes payable to zero before the remainder can be
corporation on wind-up claimed as a refund.
■ is applying ITCs against Part I tax You have to file Schedule 31 to claim the ITC refund. On
line 780 of your return, enter the ITC refund claim
■ is requesting a carryback of unused ITCs to a previous
calculated on Schedule 31.
tax year, or
■ is requesting a refund of unused ITCs Part I tax payable
Complete Schedule 31 and enter the amount of the ITC for Part I tax payable for the year is the basic Part I tax plus the
the current year on line 652. personal services business income tax and the amount of
recapture of ITC and the refundable tax on the CCPC’s
Note investment income (amount A plus amounts B, C, and H),
Eligibility for an ITC is limited to those expenses or minus any allowable deductions and credits (amount K).
expenditures identified in Schedule 31 filed
within 12 months of the filing due date for the tax year Enter this amount at amount L, and also on line 700 in the
in which the expenses were made or incurred [without “Summary of tax and credits” section on page 9 of your
reference to subsection 78(4)]. return.

Investment tax credit refund

For information about CCPCs claiming a refund of ITC for
scientific research and experimental development, see
“SR&ED investment tax credit and refund” on page 79.

canada.ca/taxes 81
Chapter 8 – Page 9 of the T2 return
Page Page
Summary of tax and credits .............................................. 84 Prince Edward Island ......................................................... 93
Prince Edward Island corporate investment
Federal tax ............................................................................ 84
tax credit ....................................................................... 93
Line 700 – Part I tax payable............................................... 84
Nova Scotia .......................................................................... 93
Line 710 – Part III.1 tax payable ......................................... 84
Nova Scotia political contribution tax credit ............... 93
Eligible dividend .............................................................. 84
Nova Scotia food bank tax credit for farmers .............. 93
General rate income pool (GRIP) ................................... 84
Nova Scotia corporate tax reduction for new small
Low rate income pool (LRIP) ......................................... 84
businesses ..................................................................... 94
Election to not be a Canadian-controlled private
Nova Scotia innovation equity tax credit ..................... 94
corporation .................................................................... 84
Nova Scotia venture capital tax credit .......................... 94
Election to treat excessive eligible dividend
Nova Scotia film industry tax credit ............................. 94
designations as ordinary dividends .......................... 84
Nova Scotia research and development tax credit ...... 95
Line 712 – Part IV tax payable............................................ 85
Recapture of Nova Scotia research and
Dividends subject to Part IV tax .................................... 85
development tax credit ............................................... 95
Definitions......................................................................... 85
Nova Scotia digital media tax credit ............................. 95
Parts 1 and 2 of Schedule 3 ............................................. 85
Nova Scotia digital animation tax credit ...................... 95
Line 716 – Part IV.1 tax payable ......................................... 86
Nova Scotia capital investment tax credit .................... 96
Part 4 of Schedule 43 – Calculation of Part IV.1 tax
New Brunswick ................................................................... 96
payable .......................................................................... 86
New Brunswick small business investor tax credit .... 96
Line 720 – Part VI tax payable............................................ 86
New Brunswick research and development tax credit... 96
Line 724 – Part VI.1 tax payable ......................................... 87
Recapture of New Brunswick research and
Part 1 of Schedule 43 – Calculation of dividend
development tax credit ............................................... 96
allowance....................................................................... 87
Ontario .................................................................................. 96
Part 2 of Schedule 43 – Agreement among
Ontario small business deduction ................................. 97
associated corporations to allocate the dividend
Ontario transitional tax debits and credits................... 97
allowance....................................................................... 87
Ontario corporate minimum tax ................................... 97
Part 3 of Schedule 43 – Calculation of Part VI.1 tax
Ontario special additional tax on life insurance
payable .......................................................................... 87
corporations .................................................................. 98
Schedule 45, Agreement Respecting Liability
Ontario political contributions tax credit ..................... 98
for Part VI.1 Tax ........................................................... 87
Ontario resource tax credit ............................................. 99
Line 727 – Part XIII.1 tax payable ...................................... 87
Ontario tax credit for manufacturing and
Line 728 – Part XIV tax payable ......................................... 87
processing ..................................................................... 99
Provincial and territorial tax ............................................. 87 Ontario credit union tax reduction ............................... 99
Permanent establishment ................................................... 88 Ontario research and development tax credit ............. 99
Line 750 – Provincial or territorial jurisdiction ................ 88 Recapture of Ontario R&D tax credit............................ 100
Line 760 – Net provincial and territorial tax payable ..... 88 Ontario corporate minimum tax credit ........................ 100
Schedule 5, Tax Calculation Supplementary – Ontario community food program donation tax
Corporations ..................................................................... 88 credit for farmers ......................................................... 100
Part 1 of Schedule 5 – Allocation of taxable income .... 88 Ontario qualifying environmental trust tax credit ...... 100
Part 2 of Schedule 5 – Provincial and territorial tax Ontario co-operative education tax credit ................... 101
payable, tax credits, and rebates ................................ 89 Ontario apprenticeship training tax credit................... 101
Dual rates of provincial and territorial income tax ......... 90 Ontario computer animation and special effects
Provincial or territorial foreign tax credits ....................... 90 tax credit ....................................................................... 102
Newfoundland and Labrador ............................................ 91 Ontario film and television tax credit ........................... 102
Newfoundland and Labrador capital tax on Ontario production services tax credit ......................... 103
financial institutions .................................................... 91 Ontario interactive digital media tax credit ................. 104
Newfoundland and Labrador political contribution Ontario book publishing tax credit ............................... 105
tax credit ........................................................................ 91 Ontario innovation tax credit......................................... 106
Newfoundland and Labrador venture capital tax Ontario business-research institute tax credit ............. 106
credit .............................................................................. 91 Ontario regional opportunities investment tax
Newfoundland and Labrador direct equity credit .............................................................................. 107
tax credit ........................................................................ 92 Ontario MGCS annual return ........................................ 107
Newfoundland and Labrador resort property Ontario specialty types ................................................... 107
investment tax credit ................................................... 92 Manitoba .............................................................................. 107
Newfoundland and Labrador research and Manitoba additional deduction for credit unions ....... 108
development tax credit ................................................ 92 Manitoba manufacturing investment tax credit .......... 108
Newfoundland and Labrador film and video Manitoba research and development tax credit .......... 108
industry tax credit ........................................................ 92 Manitoba paid work experience tax credit .................. 109
Newfoundland and Labrador interactive digital Manitoba odour-control tax credit ................................ 109
media tax credit ............................................................ 92

82 canada.ca/taxes
 Page Page
Manitoba small business venture capital tax credit .... 110 Yukon.................................................................................... 122
Manitoba cooperative development tax credit ............ 110 Yukon political contribution tax credit......................... 122
Manitoba cultural industries printing tax credit ......... 111 Yukon manufacturing and processing profits tax
Manitoba interactive digital media tax credit .............. 111 credit .............................................................................. 123
Manitoba book publishing tax credit ............................ 111 Yukon research and development tax credit ............... 123
Manitoba green energy equipment tax credit .............. 112 Yukon carbon rebate ....................................................... 123
Manitoba film and video production tax credit ........... 112 Northwest Territories ......................................................... 123
Manitoba rental housing construction tax credit ......... 113 Northwest Territories political contribution tax
Manitoba community enterprise development tax credit .............................................................................. 123
credit .............................................................................. 113 Nunavut ............................................................................... 123
Manitoba child care centre development tax credit .... 113 Nunavut political contribution tax credit .................... 124
Saskatchewan ...................................................................... 113
Other credits ........................................................................ 124
Saskatchewan credit union tax reduction ..................... 114
Line 780 – Investment tax credit refund ........................... 124
Saskatchewan political contribution tax credit ............ 114
Line 784 – Dividend refund ............................................... 124
Saskatchewan manufacturing and processing
Line 788 – Federal capital gains refund ............................ 124
profits tax reduction..................................................... 114
Line 792 – Federal qualifying environmental trust tax
Saskatchewan manufacturing and processing
credit refund..................................................................... 124
investment tax credit ................................................... 114
Line 796 – Canadian film or video production tax
Saskatchewan research and development tax credit .. 114
credit ................................................................................. 124
Saskatchewan qualifying environmental trust tax
Line 797 – Film or video production services tax
credit .............................................................................. 115
credit ................................................................................. 125
British Columbia .................................................................. 115
Line 798 – Canadian journalism labour tax credit .......... 125
British Columbia credit union tax reduction................ 115
Lines 800 and 801 – Tax withheld at source .................... 125
British Columbia logging tax credit .............................. 115
Line 808 – Provincial and territorial capital gains
British Columbia farmers’ food donation tax credit ... 116
refund ................................................................................ 126
British Columbia small business venture capital tax
Line 812 – Provincial and territorial refundable tax
credit .............................................................................. 116
credits ................................................................................ 126
British Columbia scientific research and
Line 840 – Tax instalments paid ........................................ 126
experimental development tax credit ........................ 116
British Columbia SR&ED refundable tax credit 116 Refund or payment ............................................................ 126
British Columbia SR&ED non-refundable Line 894 – Refund code ...................................................... 126
tax credit .............................................................. 116 Line 896................................................................................. 126
Recapture of British Columbia SR&ED tax credit ....... 116
British Columbia qualifying environmental trust Payment of balance owing ............................................... 127
tax credit ........................................................................ 117 Direct deposit request ....................................................... 127
British Columbia film and television tax credit ........... 117 Lines 910 to 918.................................................................... 127
British Columbia production services tax credit ......... 118
British Columbia mining exploration tax credit .......... 119 Mandatory electronic filing for tax preparers ............... 127
British Columbia book publishing tax credit ............... 120 Line 920................................................................................. 127
British Columbia training tax credit .............................. 120 Certification ........................................................................ 127
British Columbia interactive digital media tax Lines 950 to 959.................................................................... 127
credit .............................................................................. 121
British Columbia shipbuilding and ship repair Language of correspondence............................................ 128
industry tax credit ........................................................ 122 Line 990................................................................................. 128

canada.ca/taxes 83
Summary of tax and credits Use Schedule 53, General Rate Income Pool (GRIP)
Calculation, to determine the GRIP and file it with your
In the “Summary of tax and credits” area of your return,
T2 return. You should file this schedule if you paid an
summarize the amounts of federal and provincial or
eligible dividend in the tax year, or if your GRIP balance
territorial tax payable, as well as the credits and refunds
changed, to ensure that the GRIP balance on our records is
claimed to reduce total tax payable.
correct.

Federal tax You can view GRIP balances using the “View return
balances” service through:
Line 700 – Part I tax payable
■ My Business Account at canada.ca/my-cra-business
On line 700, enter the amount of Part I tax payable that you -account, if you are the business owner
determined at amount L of page 8.
■ Represent a Client at canada.ca/taxes-representatives, if
Line 710 – Part III.1 tax payable you are an authorized representative or employee
A corporation that designates dividends as eligible Low rate income pool (LRIP)
dividends that exceed its capacity to pay such dividends is
A corporation resident in Canada that is neither a CCPC
subject to Part III.1 tax. The tax is equal to 20% of the
nor a deposit insurance corporation can pay eligible
excessive eligible dividend designation.
dividends in any amount unless it has an LRIP. The LRIP is
Use Schedule 55, Part III.1 Tax on Excessive Eligible generally made up of taxable income that has benefited
Dividend Designations, to calculate any Part III.1 tax from certain preferential tax rates. The corporation has to
payable and file it with your T2 return. reduce its LRIP to zero by paying out ordinary dividends
before it can pay an eligible dividend, or it will be subject to
Note Part III.1 tax. The LRIP must be calculated at the time a
Every corporation resident in Canada that pays a taxable dividend is paid or received or any other event occurs
dividend in the year, other than a capital gains dividend, affecting the LRIP balance in the year.
must file this schedule.
Use Schedule 54, Low Rate Income Pool (LRIP) Calculation,
In the case where an excessive eligible dividend to determine the LRIP, throughout the year. File the
designation is determined to be part of a tax avoidance completed schedule with your T2 return. All other
scheme, the 20% tax plus an additional 10% tax will apply calculations including the worksheets should be kept with
to the whole dividend designation. your records in case we ask for them at a later date.
Eligible dividend Election not to be a Canadian-controlled private
An eligible dividend is any taxable dividend paid to a corporation
resident of Canada by a Canadian corporation that is A CCPC can elect not to be a CCPC for purposes of the
designated by that corporation to be an eligible dividend. eligible dividend treatment. If it so elects, it is deemed not
The corporation does the designation by notifying, in to be a CCPC for the tax year in which it makes the election
writing, each person or partnership at the time it pays them and all later tax years, until it revokes the election. The
the dividend. For more information about the notification CCPC will lose its entitlement to the small business
guidelines, go to canada.ca/taxes-eligible-dividends and deduction. However, no other benefits of CCPC status will
select “Designation of eligible dividends.” be affected.
A corporation is allowed to designate a portion of a taxable A corporation that revokes an election will become a CCPC
dividend (rather than the whole amount) to be an eligible again for the tax year that follows the tax year in which the
dividend. Late designations are allowed, if they are made revocation is made.
within three years after the day on which the designation
was first required to be made and, in the opinion of the Use Form T2002, Election, or Revocation of an Election, Not
minister, it is just and equitable to do so (including to To Be a Canadian-Controlled Private Corporation, to make
affected shareholders) in the circumstances. The or to revoke an election previously made, and file it by the
designation is deemed to have been made on the day the due date of the T2 return. We will not accept an election or
designation was required to be made. revocation of an election after the filing due date.
A corporation’s capacity to pay eligible dividends depends Note
mostly on its status. A corporation that has previously revoked an election
must get written consent from us to make or revoke
General rate income pool (GRIP) another election.
A CCPC or a deposit insurance corporation may pay
eligible dividends to the extent of its GRIP—a balance Election to treat excessive eligible dividend
generally reflecting taxable income that has not benefited designations as ordinary dividends
from the small business deduction or any other special tax Corporations that make excessive eligible dividend
rate—without incurring Part III.1 tax. The GRIP is designations may be allowed to elect to treat the excessive
calculated at the end of the tax year. However, a amounts paid as ordinary dividends. In order to do so, the
corporation can pay eligible dividends over the course of corporation must have the concurrence of its shareholders
the year as long as, at the end of the year, the eligible who received, or were entitled to receive, the dividend and
dividends paid do not exceed its GRIP. whose addresses are known to the corporation. For more

84 canada.ca/taxes
information, go to canada.ca/taxes-eligible-dividends and corporations are also connected when both of the following
select “Election to treat excessive eligible dividend apply:
designations as ordinary dividends.”
■ the recipient owns more than 10% of the issued share
Corporations cannot elect to treat excessive eligible capital (with full voting rights) of the payer corporation
dividend designations that are subject to the 30% Part III.1
■ the recipient owns shares of the capital stock of the payer
tax as ordinary dividends.
corporation with a fair market value of more than 10% of
References the fair market value of all the issued share capital of the
Sections 185.1 and 185.2 payer corporation
Subsections 89(11) to (14)
You determine control of the corporation by considering
Line 712 – Part IV tax payable the actual ownership of shares, without taking into account
any rights referred to in paragraph 251(5)(b).
Use Parts 1 and 2 of Schedule 3, Dividends Received,
Taxable Dividends Paid, and Part IV Tax Calculation, to For purposes of Part IV tax, a payer corporation is
calculate Part IV tax payable on taxable dividends you controlled by a recipient corporation if more than 50% of
received the payer’s issued share capital (having full voting rights)
belongs to the recipient, to persons with whom the
Dividends subject to Part IV tax recipient does not deal at arm’s length, or to any
The following types of dividends are subject to Part IV tax: combination of these persons.
■ taxable dividends from corporations that are deductible References
Subsections 186(2) and (4)
under section 112 when you calculate taxable income
Exempt corporations
■ taxable dividends from foreign affiliates that are
The following types of corporations are exempt from
deductible under paragraphs 113(1)(a), (a.1) (b), or (d), or
Part IV tax:
subsection 113(2) when you calculate taxable income
A. a corporation that was bankrupt at any time during the
Taxable dividends received are only subject to Part IV tax
year
if the corporation receives them while it is a private or
subject corporation. Taxable dividends received from a B. a corporation that, throughout the year, was one of the
non-connected corporation are subject to Part IV tax. following:
Taxable dividends received from a connected corporation – a prescribed labour-sponsored venture capital
are subject to Part IV tax only when paying the dividends corporation
generates a dividend refund for the payer corporation.
– a prescribed investment contract corporation
The Part IV tax rate is 38 1/3%.
– an insurance corporation
Definitions – a corporation licensed as a trustee
Private corporation
– a bank
A private corporation is a corporation that is:
– a registered securities dealer that was, throughout the
■ resident in Canada
year, a member of a designated stock exchange in
■ not a public corporation Canada
■ not controlled by one or more public corporations Reference
(other than a prescribed venture capital corporation) Section 186.1

■ not controlled by one or more prescribed federal Crown Exempt dividends

corporations A corporation that is a prescribed venture capital
corporation throughout the year does not have to pay
■ not controlled by any combination of prescribed federal Part IV tax on dividends it received from a prescribed
Crown corporations and public corporations qualifying corporation.
Reference References
Subsection 89(1) Section 186.2
Regulation 6704
Subject corporation
A subject corporation is a corporation, other than a private Dividends not taxable
corporation, that is resident in Canada and is controlled by Any dividends that a corporation received from a capital
or for the benefit of either an individual other than a trust, dividend account are not taxable, as long as the payer
or a related group of individuals other than trusts. corporation made an election under section 83. Therefore, if
these non-taxable dividends are included as income, they
Reference
Subsection 186(3) should be deducted as an adjustment on Schedule 1.

Connected corporation Parts 1 and 2 of Schedule 3

A payer corporation is connected to the corporation that In the following section we provide details on Parts 1 and 2
receives the dividends (the recipient) if the recipient of Schedule 3. Parts 3 and 4 are explained on page 73.
controls the payer corporation. The payer and recipient

canada.ca/taxes 85
Part 1 – Dividends received in the tax year dividend is one the corporation receives on a share of
Complete Part 1 to identify dividends, both taxable and another corporation in which the corporation had a
non-taxable, received during the tax year and to calculate substantial interest at the time it received the dividend.
Part IV tax before deductions. Public corporations (other
Part 4 of the schedule also allows the calculation of Part IV
than subject corporations) do not need to calculate Part IV
tax reduction when there is Part IV.1 tax payable on the
tax.
same dividend.
Note
The Part IV tax reduction is equal to:
If more than one corporation paid dividends, you have
to do a separate calculation for each payer corporation. If ■ 10% of the dividend, if the dividend is received from a
your corporation’s tax year-end is different than that of non-connected corporation
the payer corporation, dividends could have been
received from more than one tax year of the payer ■ 30% of the Part IV tax payable, if the dividend is received
corporation. If so, use a separate line to provide the from a connected corporation
information according to each tax year of the payer On line 716, enter the amount of Part IV.1 tax payable that
corporation. you calculated on line 340 of Schedule 43.
On line 320 of the return, enter the amount of taxable References
dividends deductible from taxable income under Sections 187.1 to 187.6
section 112, subsections 113(2) and 138(6), and Subsections 186(1.1) and 191.2(1)
paragraphs 113(1)(a), (a.1), (b), or (d).
Line 720 – Part VI tax payable
Part 2 – Calculation of Part IV tax payable
Part IV tax otherwise payable on a dividend is reduced by You have to complete Schedule 38, Part VI Tax on Capital
any amount of Part IV.1 tax payable on the same dividend. of Financial Institutions, to calculate Part VI tax.
See below for details. Part VI levies a tax on a financial institution’s taxable
You can reduce the amount of dividends subject to Part IV capital employed in Canada. Part VI tax is 1.25% of the
tax by using non-capital losses and farm losses incurred in taxable capital employed in Canada that is more than the
the tax year or carried forward from previous years. $1 billion capital deduction for the year.

Part 2 allows also the calculation of Part IV tax payable for If the corporation is a member of a related group, you have
taxable dividends received from connected corporations to allocate the capital deduction among the members.
and eligible dividends received from non-connected Use Schedule 39, Agreement Among Related Financial
corporations. Institutions – Part VI Tax, to allocate the capital deduction.
On line 712 of the return, enter the amount of Part IV tax File this agreement with your return.
payable on taxable dividends received. Note
References Only one of the associated or related corporations needs
IT-269, Part IV Tax on Taxable Dividends Received by a Private to file Schedule 39 for a calendar year. However, if
Corporation or a Subject Corporation Schedule 39 is not already on file with us when we
Subsection 129(4)
assess any of the returns for a tax year ending in the
calendar year of the agreement, we will ask for one.
Line 716 – Part IV.1 tax payable
Under subsection 190.1(3), you can deduct Part I tax
Complete Schedule 43, Calculation of Parts IV.1 and VI.1 payable for the year from Part VI tax payable. This is called
Taxes, to calculate Part IV.1 tax payable. the Part I tax credit. You can deduct any unused Part I tax
credits from Part VI tax in any of the three previous and
Part 4 of Schedule 43 – Calculation of Part IV.1 tax seven following tax years.
payable
Part 4 gives details on how to calculate Part IV.1 tax. To calculate the balance of unused Part I tax credits and to
carry back this credit, you can use Schedule 42, Calculation
Public corporations and certain other corporations may be of Unused Part I Tax Credit.
subject to the 10% Part IV.1 tax on dividends they receive
on taxable preferred shares. A restricted financial Financial institutions include banks, trust companies, life
institution is also subject to tax on dividends received insurance corporations, certain holding corporations, and
on taxable restricted financial institution shares corporations that accept deposits and carry on the business
(see subsection 248(1) for definitions of these terms). of lending money on the security of real property or
immovables, or investing in indebtedness on the security of
The issuer of taxable preferred shares can elect to pay mortgages on real property or of hypothecs on immovables.
a 40% rather than a 25% tax under Part VI.1 on dividends
on taxable preferred shares when they complete Part 3 of File Schedule 38 with your return if you have Part VI tax
this schedule. This election exempts the holder of these payable, or would have, if not for the deduction of a Part I
shares from the 10% tax under Part IV.1. No other form tax credit.
needs to be filed to elect. For details, see line 724 on On line 720, enter the amount of Part VI tax payable that
page 87. you calculated on line 890 of Schedule 38.
Excepted dividends, which are defined in section 187.1, References
are not subject to Part IV.1 tax. For example, an excepted Sections 190, 190.1, and 190.11 to 190.15

86 canada.ca/taxes
Line 724 – Part VI.1 tax payable over after the taxable income is reduced to zero is part of
Complete the following schedules if required: the non-capital loss for the year. See page 56 for details.

■ Schedule 43, Calculation of Parts IV.1 and VI.1 Taxes On line 724, enter the amount of Part VI.1 tax payable you
calculated on line 270 of Schedule 43.
■ Schedule 45, Agreement Respecting Liability for
References
Part VI.1 Tax Sections 191, and 191.1 to 191.4
See the following headings for more details
Line 727 – Part XIII.1 tax payable
Part 1 of Schedule 43 – Calculation of dividend Every authorized foreign bank is subject to Part XIII.1 tax
allowance equal to 25% of its taxable interest expense for the year.
Calculate the dividend allowance on Part 1 of Schedule 43.
You have to show your calculations on a separate schedule.
Generally, the first $500,000 of dividends paid in the year Identify these calculations as Schedule 92, Part XIII.1 Tax –
on taxable preferred shares is exempt from Part VI.1 tax Additional Tax on Authorized Foreign Banks, since we do
liability. This basic annual exemption is called the dividend not publish this schedule. For more information, see
allowance. Part XIII.1 tax in the Income Tax Act.
However, the $500,000 dividend allowance is reduced if On line 727 of the return, enter the amount of Part XIII.1 tax
you paid more than $1 million of dividends on taxable payable.
preferred shares in the previous year.
Line 728 – Part XIV tax payable
Part 2 of Schedule 43 – Agreement among associated
corporations to allocate the dividend allowance Every corporation that is non-resident in a tax year is
If you are a member of an associated group, you have to subject to Part XIV tax.
allocate the dividend allowance between the members. Part XIV tax is 25%, but a tax treaty can reduce this
Part 2 provides an area for this allocation. percentage. In addition, a tax treaty may restrict the
Part XIV tax to corporations that carry on business in
Part 3 of Schedule 43 – Calculation of Part VI.1 tax Canada through a permanent establishment in Canada.
payable
You have to complete Schedule 20, Part XIV – Additional
Complete Part 3 of Schedule 43 to calculate Part VI.1 tax.
Tax on Non-Resident Corporations, to calculate Part XIV
Part VI.1 tax is levied on dividends (other than certain
tax. On line 728 of the return, enter the amount of Part XIV
excluded dividends) you paid on short-term preferred
tax payable you calculated on Schedule 20.
shares and taxable preferred shares.
Note
You are subject to a 40% tax on dividends you paid on
Corporations that are subject to Part XIV tax should file
short-term preferred shares that are more than the annual
their return with the Sudbury Tax Centre. See
dividend allowance.
“Corporation Internet Filing” on page 10 and “Where do
You are subject to a tax of 25% or 40% on dividends you you file your paper return?” on page 11.
paid on taxable preferred shares (other than short-term References
preferred shares) that are more than any remaining Section 219
dividend allowance. Choosing the 40% rate will exempt the IT-137, Additional Tax on Certain Corporations Carrying on Business in
holder of these shares from the 10% tax under Part IV.1. Canada
This rate would apply to all future dividends paid on that
class or series of shares. Provincial and territorial tax
See subsection 248(1) for definitions of the terms short-term Quebec and Alberta administer their own corporation
preferred shares and taxable preferred shares. income tax systems. Corporations that earn income in these
provinces have to file separate provincial corporation
Schedule 45, Agreement Respecting Liability for income tax returns.
Part VI.1 Tax
All other provinces and territories legislate their
Complete Schedule 45 to certify the transfer of Part VI.1 tax corporation income tax provisions, but the CRA
liability and send it to us with Schedule 43. administers them. These provinces and territories do not
A corporation (the transferor) can transfer all or part of its charge income tax on the taxable income of corporations
Part VI.1 tax liability to another corporation (the transferee), that are exempt from tax under section 149.
if the corporations were related throughout the following If the corporation has a permanent establishment in any
tax years: province or territory other than Quebec or Alberta, you
■ the transferor’s tax year for which it owes Part VI.1 tax have to calculate provincial and/or territorial income taxes
and credits, as well as federal income taxes and credits, on
■ the transferee’s tax year that ends on or before the end of the return.
the above-mentioned transferor’s tax year
You can deduct Part VI.1 tax payable from income. See
page 64 for more information. Any Part VI.1 tax that is left

canada.ca/taxes 87
 Note Note
Unless otherwise specified in the legislation, the credits The Newfoundland and Labrador offshore area and the
are considered government assistance and must be Nova Scotia offshore area are considered provinces.
included in income in the tax year they are received.
By completing line 750, you ensure that the income taxes go
Reference to the correct province or territory. Complete this line even
Paragraph 12(1)(x) if no tax is payable, or if the provincial jurisdiction is
Quebec or Alberta.
Permanent establishment Reference
A permanent establishment in a province or territory is Subsection 124(4)
usually a fixed place of business of the corporation, which
includes an office, branch, oil well, farm, timberland, Line 760 – Net provincial and territorial tax
factory, workshop, warehouse, or mine. Each corporate payable
partner in a partnership has a permanent establishment
where the partnership has a fixed place of business. If the If your provincial or territorial jurisdiction is not Quebec or
corporation does not have a fixed place of business, the Alberta, and you do not need to complete Schedule 5, enter
corporation’s permanent establishment is the principal your provincial or territorial tax payable on line 760.
place in which the corporation’s business is conducted. If you do need to complete Schedule 5, enter the net
Each member of a partnership has a permanent amount of provincial or territorial tax on line 255 of the
establishment in the province or territory where the schedule. If this amount is positive enter it on line 760 of
partnership has a permanent establishment. This applies to the return. If this amount is negative, enter it on line 812 of
both general and limited partners. For example, where a the return.
corporation or its partnership uses substantial machinery or The following section explains when and how to complete
equipment in a particular place at any time in a tax year, it Schedule 5.
is deemed to have a permanent establishment in that place.
Review the locations in which your activities and
transactions occur to ensure all permanent establishments
Schedule 5, Tax Calculation Supplementary –
are properly identified. Corporations
You have to complete Schedule 5 if one of the following
If the corporation carries on business, including partnership
applies:
business, through an employee or an agent established in a
particular place, it is considered to have a permanent ■ there is a permanent establishment of the corporation or
establishment in that place if the employee or agent: its partnerships in more than one province or territory
(complete Part 1), whether or not you are taxable (if
■ has general authority to contract for the corporation, or
taxable, also complete Part 2)
■ has a stock of merchandise owned by the corporation
■ the corporation is claiming provincial or territorial tax
from which the employee or agent regularly fills orders
credits, or rebates (complete Part 2)
received
■ the corporation has to pay taxes other than income tax
A corporation that would not otherwise have any
(see “Part 2 of Schedule 5” on page 89)
permanent establishment in a province or territory and/or
a jurisdiction outside of Canada is deemed to have a Note
permanent establishment at the place designated in its The Newfoundland and Labrador offshore area and the
incorporation documents or bylaws as its head office or Nova Scotia offshore area are considered provinces.
registered office. So, whether or not the corporation carries
For information on the calculation of tax for each province
on a business in a province or territory, it is entitled to the
and territory, see the sections that follow in this chapter.
10% federal abatement, but subject to provincial or
territorial taxation.
Part 1 of Schedule 5 – Allocation of taxable income
See Regulation 400(2) for a complete definition of You must complete Part 1 of Schedule 5 if you or your
permanent establishment. partnerships had a permanent establishment in more than
References one province or territory. Complete columns A to F for each
Regulation 400(2) province or territory in which you had a permanent
IT-177, Permanent Establishment of a Corporation in a Province establishment in the tax year. If there is no taxable income,
you only have to complete columns A, B and D.
Line 750 – Provincial or territorial jurisdiction Note
On line 750, give the name of the province or territory This also applies to corporations with permanent
where you earned your income. Usually, this is where the establishments in Quebec or Alberta.
corporation has its permanent establishment.
We assess provincial or territorial income taxes on the
If you earned income in more than one province or amount of taxable income allocated to each province or
territory, write “multiple” on line 750 and file Schedule 5, territory. For details on how to allocate taxable income, see
Tax Calculation Supplementary – Corporations, with your Regulation 402 and the provincial income allocation
return. See below for instructions on how to complete newsletters.
Schedule 5.

88 canada.ca/taxes
To find the newsletters, go to canada.ca/cra-forms ■ grain elevator operators (Regulation 408)
-publications. Then under “Technical tax information,”
■ bus and truck operators (Regulation 409)
select “Provincial income allocation.”
■ ship operators (Regulation 410)
Special rules for establishing a corporation’s gross revenue
and salaries and wages attributable to a jurisdiction are ■ pipeline operators (Regulation 411)
provided in cases where the corporation is a member of a
partnership and the partnership had permanent ■ divided businesses (Regulation 412)
establishments in more than one jurisdiction. See ■ non-resident corporations (Regulation 413)
Guide T4068, Guide for the Partnership Information
Return (T5013 Forms), and prescribed Form T5013SCH5, In field 100, enter the regulation number that applies to
Allocation of Salaries and Wages, and Gross Revenue for attribute the taxable income.
Multiple Jurisdictions – Schedule 5. Reference
Regulations 400 to 413.1
Whether or not the partnership filed a T5013 and related
schedules, the partner corporations must report their
Part 2 of Schedule 5 – Provincial and territorial tax
permanent establishments and allocable revenue and
payable, tax credits, and rebates
salaries and wages on their own Schedule 5, inclusive of
Complete Part 2 of Schedule 5 if one of the following
their partnership allocations. If a partner has a 50% share of
applies:
partnership income it must include 50% of the gross
revenue from the T5013 Schedule 5 in its T2 Schedule 5 ■ there is provincial or territorial tax (and a permanent
gross revenue. Salaries and wages of the partnership establishment in more than one province or territory)
should also be reported on the T2 Schedule 5 in the same
proportions. ■ there is a claim for provincial or territorial tax credits or
rebates
Generally, to allocate taxable income to each province or
territory, you have to use a formula based on gross ■ there is a claim for provincial or territorial refundable tax
revenue, and salaries and wages. See Part 1 of Schedule 5 credits
for details. Note
You will find the general rules on how to allocate gross Corporations with a permanent establishment in Quebec
revenue in Regulation 402. or Alberta must complete the appropriate provincial
corporation returns and schedules to report provincial
Do not include any of the following amounts in gross tax and claim provincial credits and rebates.
revenue:
Corporations with a permanent establishment in Ontario
■ interest on bonds, debentures, or mortgages must also complete Part 2 of Schedule 5 if one of the
three previous or five following conditions applies. The
■ dividends on shares of capital stock
corporation:
■ rents or royalties from property that are not part of the
■ is claiming the Ontario small business deduction
principal business operations
■ is claiming the Ontario credit union reduction
Allocate gross salaries and wages paid in the year to the
permanent establishment in which those salaries and wages ■ has an addition to Ontario basic income tax (such as a
were paid only to the extent they were paid to employees of transitional tax debit)
the permanent establishment (the permanent establishment
is not necessarily the permanent establishment in which ■ has Ontario corporate minimum tax payable
those salaries and wages were paid). Do not include in ■ has Ontario special additional tax on life insurance
gross salaries and wages any commissions paid to a person corporations payable
who is not an employee, unless that person renders services
that would normally be performed by an employee of the Corporations must also complete Part 2 of Schedule 5 if
corporation. The allocation of salaries paid through a they have Newfoundland and Labrador capital tax on
central paymaster is subject to the deeming rules under financial institutions payable.
Regulation 402.1. On line 255 of Schedule 5, enter the net amount of
See Regulations 403 to 413 for details on special methods provincial and territorial tax payable or the net amount of
for allocating taxable income for the following types of refundable credits. When the result is positive, enter the net
businesses: provincial or territorial tax payable on line 760 of the
return. When the result is negative, enter the refundable
■ insurance corporations (Regulation 403) provincial or territorial tax credit on line 812 of the return.
■ banks (Regulation 404) Attach to your return any forms you completed to claim
provincial or territorial credits or rebates.
■ federal credit unions (Regulation 404.1)
In the following sections, you will find information about
■ trust and loan corporations (Regulation 405) provincial and territorial tax rates, foreign tax credits, and
details on the provincial and territorial credits and rebates.
■ railway corporations (Regulation 406)
■ airline corporations (Regulation 407)

canada.ca/taxes 89
Dual rates of provincial and territorial Taxable income allocated to Newfoundland and Labrador
income tax (from Schedule 5) $60,000
Generally, provinces and territories have two rates of Taxable income allocated to Northwest Territories
income tax: the lower rate and the higher rate. (from Schedule 5) $30,000
The lower rate applies to the income eligible for the federal Total taxable income earned in Canada $90,000
small business deduction. One component of the small
Least of lines 400, 405, 410, and 428 in the
business deduction is the business limit. Some provinces or
federal small business deduction calculation
territories choose to use the federal business limit. Others
(from the T2 return) $78,000
establish their own business limit.
Income eligible for the federal small business
The higher rate applies to all other income. For detailed
deduction attributed to Newfoundland and Labrador:
information on the income eligible for each rate and the
rates that apply to each province and territory, see the $60,000 × $78,000 = $52,000
sections that follow in this chapter or go to canada.ca/en $90,000
/revenue-agency/services/tax/businesses/topics
/corporations/corporation-tax-rates. Taxable income earned in
Newfoundland and Labrador $60,000

Example 1 Subtract: Income eligible for the federal small

Corp X earned all of its income in 2020 from its permanent business deduction attributed to Newfoundland
establishment in Newfoundland and Labrador. Corp X and Labrador $52,000
claimed the small business deduction when it calculated its Amount taxed at higher rate $ 8,000
federal tax payable. The income from active business
carried on in Canada was $78,000. Taxes payable at higher rate:

The Newfoundland and Labrador lower rate of tax is 3%. $8,000 × 15% = $ 1,200
The higher rate of tax is 15%. Taxes payable at lower rate:
Corp X calculates its Newfoundland and Labrador tax $52,000 × 3% = $ 1,560
payable as follows:
Newfoundland and Labrador tax payable $ 2,760
Taxable income $90,000
To calculate its Northwest Territories income tax payable,
Subtract amount taxed at lower rate: Corp Y would repeat the same steps, using the rates that
Least of lines 400, 405, 410, and 428 in the apply.
federal small business deduction calculation
(from the T2 return) $78,000
On the appropriate lines of Part 2 of Schedule 5, enter the
Amount taxed at higher rate $12,000 gross amount of each provincial or territorial tax payable.
Taxes payable at the lower rate:
Provincial or territorial foreign tax credits
$78,000 × 3% = $ 2,340
Every province and territory allows a corporation to claim
Taxes payable at the higher rate: a foreign tax credit for taxes it paid to another country on
$12,000 × 15% = $ 1,800 foreign non-business income. This credit reduces the
provincial tax otherwise payable.
Newfoundland and Labrador tax payable $ 4,140
However, you cannot claim foreign tax credits for the
provinces of Quebec and Alberta on the federal return,
When you allocate taxable income to more than one
because these provinces collect their own income taxes.
province or territory, you also have to allocate
proportionally any income eligible for the federal small The provincial or territorial foreign tax credit is available to
business deduction. a corporation that meets all of the following criteria:
■ it is resident in Canada throughout the tax year
Example 2
Corp Y has permanent establishments in both ■ it has a permanent establishment in the province or
Newfoundland and Labrador and Northwest Territories. territory at any time in the tax year
Its tax year runs from July 1, 2019, to June 30, 2020. ■ it has foreign investment income for the tax year
Corp Y claimed the small business deduction when it For Ontario, an authorized foreign bank is eligible for the
calculated its federal tax payable. foreign tax credit if it performed Canadian banking
The lower rate of tax for Newfoundland and Labrador business.
is 3%, and the higher rate of tax is 15%. You can claim this credit only if the foreign non-business
To calculate its Newfoundland and Labrador income tax, income tax paid exceeds the federal foreign non-business
Corp Y does the following calculations: income tax credit deductible for the year.

90 canada.ca/taxes
For each province or territory for which you are claiming a The tax is equal to 6% of the amount by which the
credit, you have to do a separate calculation. Also, if you corporation’s taxable capital employed in the province for
paid tax to more than one foreign country you have to do a the year, including the offshore area, exceeds its capital
separate calculation for each country. deduction for the year.
If dual rates of corporation tax apply, use the higher rate Corporations that are liable to pay this tax have to file
when you calculate the foreign tax credit. For Ontario, use Schedule 305, Newfoundland and Labrador Capital Tax on
the basic rate of tax. Financial Institutions.
To claim the foreign tax credit, complete Schedule 21, On line 518 of Schedule 5, enter the provincial tax on
Federal and Provincial or Territorial Foreign Income Tax financial institutions payable.
Credits and Federal Logging Tax Credit.
A penalty applies to financial institutions that have to pay
Note this tax and do not file the required return on time. For
If the tax rate has changed during the tax year, you have details, see “Penalties” for large corporations on page 13.
to prorate the calculation in Part 9 of Schedule 21 using
Instalment payment requirements for this tax are the same
the number of days in each period. For British Columbia,
as for Part I tax. For details, see “Instalment due dates” on
prorate the tax rate in each period, round off the
page 12.
prorated rates to the nearest one-thousandth of
one percent (= 0.001%), and add the rounded The provincial capital tax cannot be reduced by any tax
percentages for the periods before multiplying by the credits. However, you can deduct the capital tax payable
foreign non-business income. when calculating federal income for tax purposes.
On the appropriate lines of Part 2 of Schedule 5, enter the
applicable provincial and territorial foreign tax credits. Newfoundland and Labrador political contribution
tax credit
You can claim a tax credit on contributions made to
Newfoundland and Labrador registered political parties, registered district associations,
The lower rate of Newfoundland and Labrador income tax or registered non-affiliated candidates, as defined under the
is 3%. This lower rate applies to taxable income earned in Elections Act, 1991, of Newfoundland and Labrador.
Newfoundland and Labrador that qualifies for the federal
small business deduction. The annual maximum credit is $500 and is calculated as
follows:
The higher rate of income tax is 15%. This higher rate
applies to taxable income earned in Newfoundland and ■ 75% of the first $100 contributed
Labrador that does not qualify for the federal small plus
business deduction.
■ 50% of the next $450 contributed
These rates also apply to taxable income earned in the
Newfoundland and Labrador offshore area. plus

You can use Schedule 307, Newfoundland and Labrador ■ 33 1/3% of the next $600 contributed
Corporation Tax Calculation, to help you calculate the You do not have to file official receipts with your return.
Newfoundland and Labrador tax before the credits are However, keep them in case we ask for them later. We can
applied. You do not have to file it with your return. See the only accept photocopies if the issuer certifies them as true
schedule for more details. copies.
On line 200 and/or 205 of Schedule 5, enter the amount of On line 891 of Schedule 5, enter the total amount of
tax calculated. qualifying contributions, and on line 500, enter the amount
of the credit you are claiming.
Newfoundland and Labrador capital tax on financial
institutions Newfoundland and Labrador venture capital tax credit
A provincial tax is levied on the taxable capital of financial The Newfoundland and Labrador government will issue a
institutions that have a permanent establishment in certificate to corporations investing in qualifying venture
Newfoundland and Labrador. This tax applies to banks, as capital funds. This non-refundable credit is equal to 30% of
well as trust and loan corporations. the amount invested, to a lifetime maximum credit of
A capital deduction of $5 million is available to a $75,000.
corporation that is not a member of a related group and has This credit must be applied against tax otherwise payable.
a capital of $10 million or less. If the corporation is a You can carry unused credits back to the three previous tax
member of a related group, a capital deduction of years or forward to the seven following tax years.
$5 million to be allocated among members of the related
group is available as long as the combined capital of all If you file your T2 return electronically, keep your
members of the related group is $10 million or less. certificate in case we ask for it later. Otherwise, file it with
your paper T2 return.
Use Schedule 306, Newfoundland and Labrador Capital
Tax on Financial Institutions – Agreement Among Related To claim the credit, file a completed Schedule 308,
Corporations, to allocate the capital deduction. File this Newfoundland and Labrador Venture Capital Tax Credit.
agreement with your return. See the schedule for more details.

canada.ca/taxes 91
On line 504 of Schedule 5, enter the amount of the credit. carried out in Newfoundland and Labrador. The credit is
equal to 15% of eligible expenditures.
Newfoundland and Labrador direct equity tax credit
The credit is fully refundable, but must first be applied
You can claim this credit for an investment in eligible against total taxes payable.
shares of a business with which you deal at arm’s length.
To claim the credit, file a completed Schedule 301,
There are two tax credit rates. For qualifying activities Newfoundland and Labrador Research and Development
undertaken in the province outside the Northeast Avalon, Tax Credit, with your return. See the schedule for more
a 35% rate applies. For qualifying activities undertaken details.
within the Northeast Avalon, a 20% rate applies. In cases
where qualifying activities are undertaken in both areas, a On line 520 of Schedule 5, enter the amount of credit earned
reasonable proration applies. in the year.
The maximum credit you can claim is $50,000 per year,
Newfoundland and Labrador film and video industry
including any amounts carried back or carried forward.
tax credit
This credit must be claimed against tax otherwise payable. The minister of Finance for the Province of
You can carry forward unused credits for seven years or Newfoundland and Labrador will issue a tax credit
back three years. certificate to a corporation that produces an eligible film or
video in the province.
The Province of Newfoundland and Labrador will issue
Form NLDETC-1, Newfoundland and Labrador Direct The amount of the credit is equal to whichever is less:
Equity Tax Credit, for eligible investments. File this form
■ 40% of eligible salaries paid in the tax year to residents of
with your T2 return.
the province
To claim the credit, file a completed Schedule 303,
■ 25% of the total production costs for each eligible project
Newfoundland and Labrador Direct Equity Tax Credit. See
the schedule for more details. The tax credit:
On line 505 of Schedule 5, enter the amount of the credit. ■ applies to eligible salaries incurred before January 1, 2022
■ is a maximum of $4 million for each eligible corporation,
Newfoundland and Labrador resort property
together with all corporations associated with that
investment tax credit
corporation, for all eligible films or videos begun in
You can claim this credit if you make an investment in a
a 12-month period
qualifying resort development property in Newfoundland
and Labrador within five years after the unit in the This credit is fully refundable, but must first be applied
qualifying resort development property is first made against total taxes payable.
available for sale. The corporation must not sell or transfer
To claim the credit, file the certificates (or a copy) with your
ownership in the unit for at least five years from the date of
return. Keep a copy for your records.
purchase.
If there is only one certificate, enter the certificate number
The credit is equal to 45% of the amount invested to a
on line 821 of Schedule 5. If there is more than one
lifetime maximum credit of $150,000. The maximum credit
certificate, complete Schedule 302, Additional Certificate
you can claim in the tax year is $50,000, including any
Numbers for the Newfoundland and Labrador Film and
amounts carried back or carried forward.
Video Industry Tax Credit, and file it with your return.
This credit must be applied against tax otherwise payable.
On line 521 of Schedule 5, enter the amount of the credit
You can carry forward unused credits to the
earned in the current year.
seven following tax years or back to the three previous tax
years.
Newfoundland and Labrador interactive digital media
The application for the credit must be made within 90 days tax credit
after the sale of the unit. The Province of Newfoundland You can claim this credit if you paid eligible salaries and
and Labrador will issue Form NLRPITC-1, Newfoundland remuneration for eligible interactive digital media projects
and Labrador Resort Property Investment Tax Credit, for in the province.
qualifying investments. File this form with your T2 return.
This refundable credit is equal to 40% of qualifying
To claim the credit, file a completed Schedule 304, expenditures incurred on or after January 1, 2015.
Newfoundland and Labrador Resort Property Investment Qualifying expenditures are eligible salaries and 65% of
Tax Credit. See the schedule for more details. eligible remuneration. The credit is limited to $40,000 per
On line 507 of Schedule 5, enter the amount of the credit employee and $2 million per corporation or group of
you are claiming. associated corporations per year.
The minister of Finance for the Province of Newfoundland
Newfoundland and Labrador research and development and Labrador will issue a tax credit certificate to a
tax credit corporation that produces an eligible interactive digital
You can claim this credit if you have a permanent media project in the province.
establishment in Newfoundland and Labrador and if you
made eligible expenditures for research and development

92 canada.ca/taxes
To claim the credit, file the certificates (or a copy) with your To claim the credit, file a completed Schedule 321,
return no later than 18 months after the end of the tax year Prince Edward Island Corporate Investment Tax Credit,
for which you are claiming the credit. Keep a copy for your with your return. See the schedule for more details.
records. For most projects, the credit may be claimed for the
On line 530 of Schedule 5, enter the amount of the credit
year in which the expenses were incurred. For projects
you are claiming.
developed primarily for government, the whole credit may
be claimed for the tax year during which the project was
completed. Nova Scotia
The lower rate of Nova Scotia income tax is 3%.
If there is only one certificate, enter the certificate number
on line 840 of Schedule 5. If there is more than one Effective April 1, 2020, the lower rate of Nova Scotia
certificate, complete Schedule 309, Additional Certificate corporation income tax decreases from 3% to 2.5%.
Numbers for the Newfoundland and Labrador Interactive
Digital Media Tax Credit, and file it with your return. See The income eligible for the lower rate is determined using
the schedule for more details. the $500,000 Nova Scotia business limit.

On line 522 of Schedule 5, enter the amount of the credit The higher rate of income tax is 16%. This rate applies to
you are claiming. taxable income earned in Nova Scotia that does not qualify
for the lower rate.
Prince Edward Island Effective April 1, 2020, the higher rate of Nova Scotia
The lower rate of Prince Edward Island income tax is: corporation income tax decreases from 16% to 14%.

Effective January 1, 2021, the Prince Edward Island lower If the rate changes during the tax year, you have to base
rate of corporation income tax decreases from 3% to 2%. your calculation on the number of days in the year that
each rate is in effect.
■ 3% effective January 1, 2020
These rates also apply to taxable income earned in the
■ 3.5% effective January 1, 2019 Nova Scotia offshore area.
■ 4% effective January 1, 2018 You can use Schedule 346, Nova Scotia Corporation Tax
Calculation, to help you calculate the Nova Scotia tax
If the rate changes during the tax year, you have to base
before the application of credits. You do not have to file it
your calculation on the number of days in the year that
with your return. See the schedule for more details.
each rate is in effect.
On line 215 and/or 220 of Schedule 5, enter the amount of
This rate applies to the taxable income earned in
tax calculated.
Prince Edward Island that qualifies for the federal small
business deduction.
Nova Scotia political contribution tax credit
The higher rate of income tax is 16%. This rate applies to You can claim a tax credit on contributions made to
taxable income earned in Prince Edward Island that does candidates and recognized parties, as defined under the
not qualify for the federal small business deduction. Nova Scotia Elections Act.
You can use Schedule 322, Prince Edward Island The annual amount of the credit is the lesser of:
Corporation Tax Calculation, to help you calculate the
Prince Edward Island tax before the credits are applied. ■ 75% of the total contributions
You do not have to file it with your return. See the schedule ■ $750
for more details.
You do not have to file official receipts with your return.
On line 210 of Schedule 5, enter the amount of tax However, keep them in case we ask for them later. We can
calculated. only accept photocopies if the issuer certifies them as true
copies.
Prince Edward Island corporate investment tax credit
Corporations that have acquired qualified property are On line 893 of Schedule 5, enter the total amount of
eligible for this credit. Apply the credit to reduce the qualifying contributions, and on line 550 enter the amount
Prince Edward Island tax payable. of the credit you are claiming.

You can carry back an unused credit to the three previous Nova Scotia food bank tax credit for farmers
tax years from the tax year that you acquired the property. Since January 1, 2016, corporations that carry on a farming
You can also carry forward the unclaimed credit to the business in Nova Scotia may claim a non-refundable tax
seven tax years that follow the tax year in which you credit equal to 25% of the amount of the qualifying
acquired the property. donation that is deducted the same year under section 110.1
The credit can be renounced but must include all current of the federal Income Tax Act for the donation. A
year credits. Partial renouncements are not permitted. The qualifying donation is a donation to an eligible food bank
renouncement must be filed on or before the filing due date of one or more agriculture products produced in
of the income tax return. Nova Scotia.

canada.ca/taxes 93
To claim the credit, file a completed Schedule 2, Charitable Innovation Equity Tax Credit. For more details, see the
Donations and Gifts, with your return. For more details, see schedule.
the schedule.
On line 562 of Schedule 5, enter the amount of the credit
On line 570 of Schedule 5, enter the amount of the credit you are claiming.
earned in the current year.
Nova Scotia venture capital tax credit
Nova Scotia corporate tax reduction for new small This new venture capital tax credit is available for both
businesses individuals and corporations who invest in a qualifying
This tax reduction applies to the first three tax years of an venture capital fund after March 31, 2019, and before
eligible corporation if it is also eligible for a federal small April 1, 2024.
business deduction for the tax year. An eligible corporation
The tax credit is equal to 15% of the eligible investment up
must apply to the Nova Scotia Department of Finance and
to the maximum annual eligible investment.
Treasury Board and receive an eligibility certificate before
claiming the tax reduction. Once the eligibility certificate is The maximum annual eligible investment is $500,000.
received, the corporation can claim this tax reduction to
reduce Nova Scotia income tax otherwise payable. The credit is not refundable. Apply the venture capital tax
credit first to reduce the tax payable for the year to zero. If
An eligible corporation is a CCPC incorporated in unclaimed credits remain, you can carry them back to the
Nova Scotia or a corporation incorporated outside the three previous tax years ending after March 31, 2019. You
province, but inside of Canada, if it pays at least 25% of its can also carry them forward to the seven following tax
wages to employees who are resident in the province and years.
its head office is located in the province. An eligible
corporation must also have at least two employees, one of The minister of Finance and Treasury Board for Nova
whom must be full-time and not related to a specified Scotia will issue a tax credit certificate to corporations that
shareholder of the corporation. make an eligible investment in a qualifying venture capital
fund.
An eligible corporation must apply to the Department of
Finance and Treasury Board of Nova Scotia and receive an To claim the credit, file the original or a copy of the tax
eligibility certificate for each of the three tax years in order credit certificate issued by the province with your return
to claim the tax reduction each tax year. along with a completed Schedule 350, Nova Scotia Venture
Capital Tax Credit. For more details, see the schedule.
Schedule 341, Nova Scotia Corporate Tax Reduction for
New Small Businesses, is a worksheet to calculate the On line 563 of Schedule 5, enter the amount of the credit
credit. You do not have to file it with your return. you are claiming.

To claim the tax reduction, file the original or a copy of the Nova Scotia film industry tax credit
eligibility certificate issued by the province with your Note
return. This credit is ended for film and television productions
On lines 834 and 556 of Schedule 5, enter the certificate that start principal photography after June 30, 2015. On
number and the amount of the reduction you are claiming. July 1, 2015, the Nova Scotia Film & Television
Production Incentive Fund began. This fund is not
Nova Scotia innovation equity tax credit administered by the CRA. Productions that started
principal photography before July 1, 2015, will receive
This credit is made available to corporations resident in
the tax credit based on the previous rules (see below).
Nova Scotia who make eligible capital investments in
All productions will continue to have 30 months from
eligible Nova Scotia small and medium size corporations
the end of the tax year in which the expenditures were
engaged in innovative activities after March 31, 2019, and
made to file their application.
before March 1, 2024. Previously, it was available only to
individuals. Previous rules
The minister of Finance and Treasury Board for Nova
For corporations, the credit is equal to 15% of the eligible
Scotia will issue a tax credit certificate to corporations
investment. The minimum investment amount is $50,000
producing an eligible film in the province when principal
and the maximum annual investment amount is $500,000.
photography started before July 1, 2015.
The credit is not refundable. Apply the credit first to reduce
The credit ranges from 50% to 65% of eligible salaries paid
the tax payable for the year to zero. If unclaimed credits
to employees who are residents of the province. An
remain, you can carry them back to the three previous tax
employee must be a resident of Nova Scotia for tax
years ending after April 1, 2019. You can also carry them
purposes during the production period.
forward to the seven following tax years.
When 50% or more of the days of principal photography of
The minister of Finance and Treasury Board for Nova
the production are in an eligible geographic area the credit
Scotia will issue a tax credit certificate to corporations that
is equal to 60% of all eligible salaries paid to residents of
make an eligible investment in an approved corporation.
the province.
To claim the credit, file the original or a copy of the tax
credit certificate issued by the province with your return
along with a completed Schedule 349, Nova Scotia

94 canada.ca/taxes
When less than 50% of the days of principal photography On line 221 of Schedule 5, enter the amount of recapture
of the production are in an eligible geographic area the calculated.
credit is equal to:
Nova Scotia digital media tax credit
■ 60% of eligible salaries paid to residents of the province
prorated for the number of days of principal The minister of Finance and Treasury Board for
photography that are inside the eligible geographic area Nova Scotia will issue a tax credit certificate to a
over the total number of days of principal photography corporation producing an eligible product in the province.

plus An eligible employee has to be a resident of Nova Scotia for

tax purposes during the production period.
■ 50% of eligible salaries paid to residents of the province
prorated for the number of days of principal The credit is based on the qualifying expenditures incurred
photography that are outside the eligible geographic area before January 1, 2021, and is limited by total expenditures.
over the total number of days of principal photography The Nova Scotia digital media tax credit, which was
Production companies that shoot more than two films in scheduled to end December 31, 2020, is extended five years
the province over a 2-year period are eligible for an to December 31, 2025.
additional 5% of eligible salaries frequent film bonus on the The amount of the credit is the lesser of:
third and subsequent films.
■ 50% of qualifying expenditures
This credit is refundable, but must first be applied against
total taxes payable. ■ 25% of total expenditures

To claim the credit, file the original or a copy of the A bonus of 10% of qualifying expenditures or 5% of total
certificate issued by the province with your return. expenditures is available for developing an eligible product
in a prescribed geographic area. An eligible corporation
If there is only one certificate, enter the certificate number must have no less than 50% of eligible salaries paid to
on line 836 of Schedule 5. If there is more than one employees who normally report to a permanent
certificate, complete Schedule 345, Additional Certificate establishment of the eligible corporation in the prescribed
Numbers for the Nova Scotia Film Industry Tax Credit, and geographic area of the province.
file it with your return.
This credit is refundable, but must be applied first against
On line 565 of Schedule 5, enter the amount of the credit total taxes payable.
earned in the current year.
To claim the credit, file the original or a copy of the
Nova Scotia research and development tax credit certificate issued by the province with your return.
You can claim this credit if you have a permanent If there is only one certificate, enter the certificate number
establishment in Nova Scotia and if you made eligible on line 838 of Schedule 5. If there is more than one
expenditures for research and development carried out in certificate, complete Schedule 347, Additional Certificate
Nova Scotia. The credit is equal to 15% of eligible Numbers for the Nova Scotia Digital Media Tax Credit, and
expenditures. file it with your return.
The credit is fully refundable, but must be applied first On line 567 of Schedule 5, enter the amount of the credit
against total taxes payable. earned in the current year.
You can renounce the research and development tax credit
for eligible expenditures incurred during the year under Nova Scotia digital animation tax credit
subsection 41(7) of the Income Tax Act (Nova Scotia). This credit provides incentive for digital-animation
productions that start key animation before July 1, 2020.
To calculate and claim the credit, file a completed
Schedule 340, Nova Scotia Research and Development Tax The Nova Scotia digital animation tax credit, which was
Credit, with your return. See the schedule for more details. scheduled to end June 30, 2020, is extended five-and-a-half
years to December 31, 2025.
On line 566 of Schedule 5, enter the amount of credit earned
in the year. An eligible employee has to be a resident of Nova Scotia on
the last day of the calendar year just before the year for
Recapture of Nova Scotia research and development which you claim the tax credit. The maximum of an
tax credit employee’s eligible salary is $150,000 per production.
A corporation that disposed of a property used in research Send a Part A application for an eligibility certificate to the
and development, or converted the property to commercial Department of Finance and Treasury Board of Nova Scotia
use, may have to report a recapture of any Nova Scotia before the start of key animation of a digital animation
research and development tax credit previously calculated production. After the production is completed, file a Part B
on that property. Any recapture will create or increase application for a tax certificate.
Nova Scotia tax otherwise payable.
The credit is the sum of:
To calculate the recapture, complete Schedule 340,
Nova Scotia Research and Development Tax Credit. See the ■ 50% of qualifying expenditures deducted by total
schedule for more details. assistance

canada.ca/taxes 95
■ 17.5% of eligible digital animation labour expenditures On line 225 of Schedule 5, enter the amount of tax
calculated.
This credit is refundable, but must be applied first against
total tax payable.
New Brunswick small business investor tax credit
To claim the credit, file the original or a copy of the tax You can claim a tax credit for investments in eligible small
certificate issued by the province with your return. businesses in New Brunswick.
If there is only one certificate, enter the certificate number The non-refundable credit equals 15% of the amount you
on line 839 of Schedule 5. If there is more than one invested to an annual maximum of $75,000 (for investment
certificate, complete Schedule 348, Additional Certificate of up to $500,000).
Numbers for the Nova Scotia Digital Animation Tax Credit,
and file it with your return. You can carry back an unused credit to the three previous
tax years. You can also carry forward the unused credit to
On line 569 of Schedule 5, enter the amount of the credit the seven following tax years.
earned in the current year.
New Brunswick will issue a certificate for qualifying
investments. If you file your return electronically, keep
Nova Scotia capital investment tax credit
your certificate in case we ask for it later. Otherwise, file it
An eligible corporation must submit a Part A application
with your paper T2 return.
for an eligibility certificate to the Department of Finance
and Treasury Board of Nova Scotia in order to find out if To claim the credit, file a completed Schedule 367,
their project is eligible. Part B applications for tax credit New Brunswick Small Business Investor Tax Credit, with
certificates must then be submitted to the Department of your return. For more details, see the schedule.
Finance and Treasury Board after the end of each tax year
On line 578 of Schedule 5, enter the amount of the credit
in which qualified property is acquired.
you are claiming.
An eligible corporation can claim this tax credit on
qualified property acquired before January 1, 2025, for use New Brunswick research and development tax credit
in Nova Scotia as part of an approved project that is more You can claim this credit if you have a permanent
than $15 million in total cost. The refundable credit equals establishment in New Brunswick and you made eligible
15% of the capital cost of qualified property. expenditures for research and development to be carried
The credit is available to corporations mainly in the out in New Brunswick. The amount of the credit is equal
manufacturing and processing, farming, fishing, and to 15% of eligible expenditures.
logging sectors. The credit is fully refundable, but must first be applied
To claim the credit, file the original or a copy of the tax against total taxes payable.
credit certificate issued by the province with your return. To claim the credit, file a completed Schedule 360,
On line 568 of Schedule 5, enter the amount of the credit New Brunswick Research and Development Tax Credit,
you are claiming. with your return. For more details, see the schedule.
On line 597 of Schedule 5, enter the amount of the credit
New Brunswick you are claiming.
The lower rate of New Brunswick corporation income tax
is 2.5% effective April 1, 2018. It was previously 3%. Recapture of New Brunswick research and
development tax credit
To determine the income eligible for the lower rates, use the A corporation that disposed of a property used in research
New Brunswick business limit of $500,000. and development, or converted it to commercial use, may
Note have to report a recapture of any New Brunswick research
The New Brunswick business limit is not subject to the and development tax credit previously calculated on that
federal passive income business limit reduction. As such, property. Any recapture will create or increase
eligible New Brunswick small businesses are eligible for New Brunswick tax otherwise payable.
the New Brunswick lower rate regardless of the amount To calculate the recapture, complete Schedule 360,
of passive income they earned. See page 69. New Brunswick Research and Development Tax Credit.
The higher rate of New Brunswick income tax is 14%. On line 573 of Schedule 5, enter the amount of recapture
The higher rate applies to all income not eligible for the calculated.
lower rates.
Ontario
If the rate changes during the tax year, you have to base
your calculation on the number of days in the year that The basic rate of income tax is 11.5%.
each rate is in effect. You can use Schedule 500, Ontario Corporation Tax
You can use Schedule 366, New Brunswick Corporation Calculation, to calculate your Ontario basic income tax.
Tax Calculation, to help you calculate the New Brunswick Schedule 500 is a worksheet and you do not have to file it
tax before the application of credits. You do not have to file with your return.
it with your return. See the schedule for more details.

96 canada.ca/taxes
On line 270 of Schedule 5, enter the amount of basic income corporate income tax over a five-year period beginning
tax calculated. with its first tax year ending after 2008.
Although the five-year period has ended, it is still possible
Ontario small business deduction
to have a transitional tax debit since, after 2015, the
The deduction reduces the Ontario basic income tax of a corporation can continue to defer the transitional tax debits
corporation that was a CCPC throughout the tax year. It is as long as it does not claim an SR&ED tax deduction and
calculated by multiplying the corporation’s Ontario small the SR&ED expenditure pool is not reduced by government
business income for the tax year by the small business assistance.
deduction rate (8.3%) for the year, resulting in a lower
tax rate of 3.2%. Before January 1, 2020, the deduction rate Conversely, where the corporation’s Ontario tax pools
was 8% and the lower tax rate was 3.5%. exceeded its federal tax pools, the corporation had a
transitional tax credit. A specified corporation was
If the rate changes during the tax year, you have to base generally entitled to a transitional tax credit over a five-year
your calculation on the number of days in the year that period beginning with its first tax year ending after 2008.
each rate is in effect. You can no longer claim this credit.
The Ontario small business deduction is phased out for A specified corporation is defined under subsection 46(5) of
CCPCs (including associated corporations) with taxable the Taxation Act, 2007 (Ontario).
capital employed in Canada of more than $10 million in the
previous tax year. It is completely eliminated when the Complete Schedule 506, Ontario Transitional Tax Debits
taxable capital is $15 million or more in the previous and Credits, to calculate the corporation’s transitional tax
tax year. This is referred to as the taxable capital business debits. Use Schedule 507, Ontario Transitional Tax Debits
limit reduction. and Credits Calculation, to determine the amounts to enter
in Part 3 of Schedule 506.
The Ontario small business limit is not subject to the federal
passive income business limit reduction. As such, eligible File Schedule 506 with the return. Schedule 507 does not
Ontario small businesses can receive the Ontario small have to be filed with the return.
business deduction regardless of the amount of passive
On line 276 of Schedule 5, enter the total transitional tax
income they earned. See page 69.
debits.
Note
Ontario small business income cannot exceed Ontario Ontario corporate minimum tax
taxable income. The Ontario corporate minimum tax payable is equal to the
amount by which the corporate minimum tax exceeds the
When calculating the Ontario small business income, the
Ontario corporate income tax.
corporation’s Ontario domestic factor is the ratio of the
corporation’s Ontario taxable income to the corporation’s A corporation is subject to corporate minimum tax if its
taxable income earned in all provinces and territories. total assets are $50 million or more and its total revenue is
$100 million or more except if the corporation was,
You can use Part 2 of Schedule 500, Ontario Corporation
throughout the tax year, one of the following:
Tax Calculation, to calculate the deduction. Schedule 500 is
a worksheet and you do not have to file it with your return. ■ a corporation exempt from income tax under section 149
of the federal Income Tax Act
On line 402 of Schedule 5, enter the small business
deduction amount. ■ a mortgage investment corporation
■ a deposit insurance corporation under
Ontario transitional tax debits and credits
subsection 137.1(5) of the federal Income Tax Act
The Ontario transitional tax debits and credits provide a
transition from the Corporations Tax Act (Ontario) for ■ a congregation or business agency to which section 143 of
corporations with different income tax attributes for federal the federal Income Tax Act applies
and Ontario purposes.
■ an investment corporation
For tax years ending before 2009, a corporation’s income
■ a mutual fund corporation
and taxable income for Ontario purposes were determined
based on its Ontario tax pools (for example, the The corporate minimum tax rate is 2.7%.
undepreciated capital cost of depreciable property) under
the Corporations Tax Act (Ontario). In determining if the total assets or total revenue exceeds
the limits, a corporation must include its share of the total
For tax years ending after 2008, the corporation’s income assets and total revenue of a partnership in which it has an
and taxable income for Ontario purposes are determined interest, any associated foreign or Canadian corporation,
based on its federal tax pools under the Taxation Act, 2007 and any associated corporation’s share of a partnership.
(Ontario). If a corporation is associated it must complete and file
Schedule 511, Ontario Corporate Minimum Tax – Total
Where the corporation’s federal tax pools exceed its Ontario
Assets and Revenue for Associated Corporations, to report
tax pools, the corporation has a transitional tax debit. A
the total assets and total revenue of all the associated
specified corporation subject to the Ontario transitional tax
corporations.
debit is generally required to pay additional Ontario

canada.ca/taxes 97
File Schedule 510, Ontario Corporate Minimum Tax, with Upon winding up a subsidiary under subsection 88(1), the
your T2 return if one of the following applies: subsidiary’s corporate minimum tax loss may not be
transferred to a parent corporation.
■ the corporation is subject to corporate minimum tax for
the tax year (Part 1 of the schedule) Calculate the carry-forward amount in Part 7 of
Schedule 510, Ontario Corporate Minimum Tax.
■ the corporation is not subject to corporate minimum tax
in the year, but is deducting a corporate minimum tax
Ontario special additional tax on life insurance
credit or has a corporate minimum tax credit
corporations
carryforward (see page 100), corporate minimum tax loss
carryforward, or current year corporate minimum tax A life insurance corporation carrying on business in
loss (Parts 4 to 8 of the schedule) Ontario at any time in the tax year is subject to the Ontario
special additional tax on life insurance corporations.
■ the corporation has special additional tax on life
insurance corporations payable in the year even if it is The special additional tax payable for a tax year is equal to
not subject to corporate minimum tax for the tax year the amount by which:
(Part 4 of Schedule 510, and Schedule 512, Ontario ■ 1.25% of the corporation’s taxable paid-up capital
Special Additional Tax on Life Insurance multiplied by the number of days in the tax year divided
Corporations [SAT]) by 365
Corporate minimum tax is based on the adjusted net exceeds
income of a corporation. The adjusted net income is a
corporation’s net income calculated in accordance with ■ the total of the corporation’s Ontario corporate income
Canadian generally accepted accounting principles or the tax and corporate minimum tax payable for the year
International Financial Reporting Standards, with various Use Schedule 512, Ontario Special Additional Tax on Life
adjustments. The adjustments are reported in Part 2 of Insurance Corporations (SAT), to calculate the tax payable.
Schedule 510.
The special additional tax paid for a tax year is added to the
Accounting gains reported in the year from corporation corporation’s corporate minimum tax credit carryforward.
reorganizations that are deferred for income tax purposes This credit may be deducted to reduce Ontario corporate
are deductible when calculating adjusted net income. income tax payable in future years. For more information,
Accounting gains reported in the year on the transfer of see “Ontario Corporate Minimum Tax Credit” on page 100.
property under section 85, section 85.1, section 97, Enter the special additional tax payable for the tax year in
subsection 13(4), subsection 14(6) and/or section 44 are Part 4 of Schedule 510, Ontario Corporate Minimum Tax.
deductible when calculating adjusted net income. An Life insurance corporations that are subject to the special
election is required in order to claim this deduction. We additional tax and related, at the end of the tax year, to
will consider a corporation to have filed an election (and to another life insurance corporation carrying on business in
not need to file another document) if it reports the Canada must use Schedule 513, Agreement Among Related
deduction and has filed the election(s) required for Life Insurance Corporations (Ontario), to allocate the
corporate income tax purposes. capital allowance among the members of the related group.
In addition, certain unrealized mark-to-market gains/losses File Schedule 512 and, if applicable, Schedule 513, with
and foreign currency gains/losses on assets that are not your return.
required to be included in computing income for income
tax purposes are not included in adjusted net income. For On line 280 of Schedule 5, enter the amount of special
additional information see Ontario Regulation 37/09. additional tax payable.

File a completed Schedule 510 with your return and, if Reference

Section 63, Taxation Act, 2007 (Ontario)
applicable, Schedule 511.
On line 278 of Schedule 5, enter the amount of the corporate Ontario political contributions tax credit
minimum tax. Note
References Effective January 1, 2017, this credit is eliminated for
Division C, Sections 54 – 62 Taxation Act, 2007 (Ontario) corporations. They have up to 20 years to claim their
unused contributions.
Corporate minimum tax loss carryforward
A corporate minimum tax loss may be carried forward You can claim a tax credit on contributions made before
20 years. January 1, 2017, to Ontario registered parties, registered
constituency associations, or registered candidates as
Upon amalgamation under section 87, only corporate
defined under the Ontario Election Finances Act.
minimum tax losses from predecessors who are not
controlled by predecessors in the amalgamated group can Generally, this non-refundable credit is calculated by
be transferred to a new corporation. On a vertical multiplying the basic tax rate (see page 96) by the amount
amalgamation of a parent and subsidiary corporations, of Ontario political contributions, up to an annual
only the loss from the parent may be transferred to the new maximum indexed according to the Election Finances Act.
corporation. The subsidiary’s loss may not be transferred to The credit is effective for tax years ending after
the parent. December 31, 2008. It replaces the previous deduction for
political contributions administered by the province.

98 canada.ca/taxes
You can carry forward unused contributions, including To claim the credit, file a completed Schedule 502, Ontario
those from pre-2009 tax years, for up to 20 years. There are Tax Credit for Manufacturing and Processing, with the
no carry-back provisions. return.
You do not have to file official receipts with your return. On line 406 of Schedule 5, enter the amount of the credit
However, keep them in case we ask for them later. We can you are claiming.
only accept photocopies if the issuer certifies them as true Reference
copies. Section 33, Taxation Act, 2007 (Ontario)
File a completed Schedule 525, Ontario Political
Contributions Tax Credit, with your return. Ontario credit union tax reduction
The Ontario credit union tax reduction allows credit unions
On line 415 of Schedule 5, enter the amount of the credit a special deduction from income tax otherwise payable. It is
you are claiming. designed to reduce their overall income tax rate to the same
Reference net rate paid by small business corporations that claim the
Section 53.2, Taxation Act, 2007 (Ontario) Ontario small business deduction.
To be eligible to claim the Ontario credit union tax
Ontario resource tax credit
reduction, the credit union must meet the following criteria:
Note
As of April 23, 2015, to harmonize with the federal ■ have been a credit union throughout the tax year
government and other provinces, the Ontario resource
■ have had a permanent establishment in Ontario at any
tax credit and the additional tax on Crown royalties are
time in the tax year
eliminated and replaced with a deduction for royalties
and mining taxes paid. You can carry forward unexpired ■ have Ontario taxable income in the year
unused Ontario resource tax credits for the first five tax
years starting after April 23, 2015. The credit and the tax You can use Part 4 of Schedule 500, Ontario Corporation
are calculated on a prorated basis for tax years that Tax Calculation, to calculate the Ontario credit union tax
include April 23, 2015. reduction. Schedule 500 is a worksheet and you do not have
to file it with your return.
The Ontario resource tax credit and the Ontario additional
tax re Crown royalties were based on the corporation’s: To claim the Ontario credit union tax reduction, file
Schedule 17, Credit Union Deductions, with your return.
■ notional resource allowance for the year, as determined
in subsection 7(3) of Ontario Regulation 37/09 to the On line 410 of Schedule 5, enter the amount of the
Taxation Act, 2007 reduction you are claiming.
Reference
■ adjusted Crown royalties for the year, as defined in Section 35, Taxation Act, 2007 (Ontario)
subsection 36(2) of the Taxation Act, 2007 (Ontario)
■ Ontario allocation factor, as defined in subsection 1(1) of Ontario research and development tax credit
the Taxation Act, 2007 (Ontario) You can claim this credit if you have a permanent
establishment in Ontario and you had eligible expenditures
The Ontario resource tax credit is used to offset Ontario for scientific research and experimental development
corporate income tax otherwise payable. Unused amounts carried out in Ontario.
(the resource tax credit balance at the end of the year) can
be carried forward to the following year. An eligible expenditure is all of the following:
To claim an unused credit, complete Schedule 504, Ontario ■ an expenditure attributable to a permanent establishment
Resource Tax Credit and file it with your return. in Ontario of a corporation
On line 404 of Schedule 5, enter the amount of the credit ■ a qualified expenditure for the purposes of section 127 of
you are claiming. the federal Income Tax Act for scientific research and
experimental development carried on in Ontario
Reference
Section 37, Taxation Act, 2007 (Ontario) ■ reduced by government assistance, non-government
assistance or contract payments received, entitled to be
Ontario tax credit for manufacturing and processing received or reasonably expected to be received
You can claim the Ontario tax credit for manufacturing and
processing if the corporation had both: The amount of the non-refundable credit is equal to 3.5% of
eligible expenditures incurred by a corporation in a tax year
■ Ontario taxable income during the tax year that ends on or after June 1, 2016. The rate was
previously 4.5%.
■ eligible Canadian profits from manufacturing and
processing, farming, fishing, logging, mining, the If the credit rate changes during the tax year, you have to
generation of electrical energy for sale, or the production base your calculation on the number of days in the year
of steam for sale that each rate is in effect.
You cannot claim this credit on the corporation’s income The credit may be applied to reduce Ontario corporate
that is subject to the Ontario small business deduction rate. income tax that you would otherwise have to pay. An

canada.ca/taxes 99
unused credit can be carried back 3 years and can be The minimum tax credits attributable to tax years ending
carried forward 20 years. after March 22, 2007, can be carried forward for 20 years.
Only corporations that are not exempt from Ontario For tax years ending after 2008, the carryforward of
corporate income tax and that have no exempt income can minimum tax credits attributable to tax years ending before
claim the credit. March 23, 2007, is extended from 10 to 20 years if the credit
did not otherwise expire before the beginning of the
To claim the credit, file a completed Schedule 508, Ontario
corporation’s first tax year ending after 2008.
Research and Development Tax Credit, with your return.
Also attach completed copies of Form T661, Scientific Complete Parts 4, 5, and 6 of Schedule 510, Ontario
Research and Experimental Development (SR&ED) Corporate Minimum Tax, to calculate the corporate
Expenditures Claim, and Schedule 31, Investment Tax minimum tax credit carryforward and the credit deducted
Credit – Corporations. in the current tax year.
If the corporation is a member of a partnership and is On line 418 of Schedule 5, enter the amount of the credit
allocated a portion of the credit as provided for in deducted in the current tax year.
section 40 of the Taxation Act, 2007 (Ontario), attach a References
schedule showing the partnership’s calculation. Subsections 53(1) to 53(5), Taxation Act, 2007 (Ontario)
On line 416 of Schedule 5, enter the amount of the credit
you are claiming. Ontario community food program donation tax credit
for farmers
References
Sections 38 to 44, Taxation Act, 2007 (Ontario)
A non-refundable tax credit is available for farmers who
donate to community food programs.
Recapture of Ontario research and development A qualifying donation is a donation of one or more
tax credit agricultural products produced in Ontario by an eligible
A corporation that disposed of a property used in scientific person and given after December 31, 2013, by an eligible
research and experimental development, or converted it to person to an eligible community food program in Ontario.
commercial use, may have to report a recapture of any
The credit is equal to 25% of that part of the corporation’s
Ontario research and development tax credit previously
qualifying donations for the year that the corporation
calculated on that property. Any recapture will create or
deducted under subsection 110.1(1) of the federal Income
increase Ontario tax otherwise payable.
Tax Act when computing its taxable income for the year.
To calculate the recapture, complete Schedule 508, Ontario
You must claim the credit in the same year that you claim
Research and Development Tax Credit.
the deduction for charitable gifts under section 110.1 of the
On line 277 of Schedule 5, enter the amount of recapture federal Income Tax Act for the donation. Charitable gifts
calculated. are eligible for a five-year carryforward.
Reference To claim the credit, file a completed Schedule 2, Charitable
Section 45, Taxation Act, 2007 (Ontario) Donations and Gifts, with your return. For more details, see
the schedule.
Ontario corporate minimum tax credit
The Ontario corporate minimum tax credit that may be On line 420 of Schedule 5, enter the amount of the credit
deducted from Ontario corporate income tax payable for you are claiming.
the tax year is equal to the least of: Reference
Section 103.1.2, Taxation Act, 2007 (Ontario)
■ the corporate minimum tax credit available for the tax
year
Ontario qualifying environmental trust tax credit
■ the Ontario corporate income tax payable (before the A corporation that is the beneficiary of a qualifying
corporate minimum tax credit) minus the greater of the environmental trust located in Ontario can claim a
following two amounts: qualifying environmental trust tax credit on income that is
subject to tax under Part XII.4 of the federal Income Tax
– the corporate minimum tax after foreign tax credit
Act.
deduction
The amount of the tax credit is the corporation’s share of
– the gross special additional tax on life insurance
the qualifying environmental trust tax paid by the trust.
corporations for the tax year
The qualifying environmental trust will issue a letter to the
■ the Ontario corporate income tax payable (before the
corporation that is a beneficiary.
corporate minimum tax credit) minus the total
refundable tax credits for the tax year The credit is fully refundable but must first be applied
against taxes payable.
The minimum tax credit carryforward at the beginning of
the tax year is equal to the minimum tax and special You do not have to file the letter with your return.
additional tax paid in previous tax years less any minimum However, keep it in case we ask for it later.
tax credit previously deducted or expired. Only special
additional tax paid in a tax year ending after 2008 is
included.

100 canada.ca/taxes
On line 450 of Schedule 5, enter the amount of the credit Ontario apprenticeship training tax credit
you are claiming. Note
Reference This credit is eliminated for apprenticeship programs in
Section 87, Taxation Act, 2007 (Ontario) which the training agreement or contract of
apprenticeship is registered after November 14, 2017.
Ontario co-operative education tax credit You can claim this refundable credit if you are a
You can claim this credit if you are a corporation that corporation that provided a qualifying apprenticeship at a
provided a qualifying work placement at a permanent permanent establishment in Ontario for a student enrolled
establishment in Ontario for a student enrolled in a in a qualifying skilled trade.
qualifying post-secondary co-operative education program.
To be a qualifying apprenticeship, the apprenticeship must
To be a qualifying work placement, the work placement meet the following conditions:
must meet all of the following conditions:
■ the apprenticeship must be in a qualifying skilled trade
■ the student must perform employment duties for a in the opinion of the Ontario minister of Labour, Training
corporation under a qualifying co-operative education and Skills Development, as well as designated by the
program Ontario minister of Finance
■ the placement must be developed or approved by an
■ the corporation and the apprentice must be participating
eligible educational institution as a suitable learning
in an apprenticeship program in which the training
situation
agreement has been registered under the Ontario College
■ the terms of the placement must require the student to of Trades and Apprenticeship Act, 2009 or a predecessor
engage in productive work of that act
■ the placement must be for a period of at least Note
10 consecutive weeks except, in the case of an internship Only certain skilled trades qualify for the Ontario
program, the placement cannot be less than 8 consecutive apprenticeship training tax credit. For a full list of
months and not more than 16 consecutive months qualifying skilled trades, go to Ontario.ca
■ the corporation must supervise and evaluate the job /apprenticeshiptaxcredit.
performance of the student
The following table summarizes the change in the rates and
■ the institution must monitor the student’s performance maximums of the credit for each qualifying apprenticeship
in the placement for which the training agreement or contract of
■ the institution must certify the placement as a qualifying apprenticeship was registered before November 15, 2017,
work placement depending on the date it started:
■ the student must be paid for the work performed Date General Small Max Max. Max.
rate business yearly number lifetime
The credit is equal to an eligible percentage (25% to 30%) of
rate credit of credit
the eligible expenditures incurred by the corporation for a months
qualifying work placement.
After
25% 30% $5,000 36 $15,000
The maximum credit for each qualifying work placement 2015-04-23
is $3,000. Before
35% 45% $10,000 48 $40,000
Eligible expenditures are equal to the following amounts: 2015-04-24

■ salaries and wages (including taxable benefits) paid or For eligible expenditures incurred for a qualifying
payable to a student in a qualifying work placement apprenticeship starting after April 23, 2015, the general rate
■ fees paid or payable to an employment agency for the of this credit is 25%. The rate for small businesses (with
provision of services performed by the student in a salaries or wages of $400,000 or less per year) is 30%. The
qualifying work placement maximum credit for a qualifying apprenticeship is $5,000
per year, to a maximum of $15,000 over the first 36 months
Keep a copy of the letter of certification from the eligible
of the apprenticeship program.
educational institution in Ontario to support your claim.
The letter of certification must contain the name of the Previously, the general rate was 35% and the rate for small
student, the employer, the institution, the term of the work businesses was 45%. The maximum credit for a qualifying
placement, and the name/discipline of the qualifying apprenticeship was $10,000 per year to a maximum of
co-operative education program. $40,000 over the first 48 months of the apprenticeship
program.
To claim the credit, file a completed Schedule 550, Ontario
Co-operative Education Tax Credit, with your return. For Eligible expenditures are equal to the following amounts:
more details, see the schedule.
■ salaries and wages (including taxable benefits) paid to an
On line 452 of Schedule 5, enter the amount of the apprentice in a qualifying apprenticeship
refundable credit you are claiming.
■ fees paid to an employment agency for the provision of
Reference services performed by an apprentice in a qualifying
Section 88, Taxation Act, 2007 (Ontario)
apprenticeship

canada.ca/taxes 101
Keep a copy of the training agreement or contract of Before claiming the credit, you must apply online to
apprenticeship to support your claim. If you have lost or Ontario Creates for a certificate of eligibility. If the
misplaced this document, request a copy from the production is eligible, Ontario Creates will issue a
apprentice or from the Ontario Ministry of Labour, certificate indicating the estimated amount of the tax credit.
Training and Skills Development (MLTSD) if you are an Only one certificate of eligibility is issued for all of the
original party to the contract. eligible productions for the tax year.
If you are employing an apprentice who previously To claim the credit, file the following with your return for
registered a contract with the MLTSD, you must get a copy the year:
of the original contract of apprenticeship or training
■ a certificate of eligibility (or copy) issued by
agreement from the apprentice, or get written consent from
Ontario Creates
the apprentice before contacting the MLTSD.
■ a completed Schedule 554, Ontario Computer Animation
Note
and Special Effects Tax Credit, for each eligible
If you are unable to provide this documentation when
production
we ask for it, your claim may be denied
If you file your return electronically, see information on
To claim the credit, file a completed Schedule 552, Ontario
T2 Attach-a-doc on page 10.
Apprenticeship Training Tax Credit, with your return. For
more details, see the schedule. If you file a paper return, send the return and required
attachments to your tax centre. To find your tax centre, go
On line 454 of Schedule 5, enter the amount of the credit
to canada.ca/cra-tso-contact-information.
you are claiming.
Reference On line 456 of Schedule 5, enter the total amount of the
Section 89, Taxation Act, 2007 (Ontario) credit you are claiming.
Reference
Ontario computer animation and special effects Section 90, Taxation Act, 2007 (Ontario)
tax credit
The Ontario computer animation and special effects tax Ontario film and television tax credit
credit is a refundable tax credit equal to 18% of the As measures due to COVID-19, for productions for which
qualifying labour expenditures for eligible computer eligible expenditures were incurred before March 15, 2020
animation and special effects activities, incurred by a (and not completed), Ontario proposes to temporarily
qualifying corporation in a tax year for an eligible extend by 24 months the following:
production.
■ the deadline for filing an application for certificate of
Qualifying labour expenditures equal the corporation’s completion
Ontario labour expenditures for the tax year less any
assistance reasonably related to these expenditures, other ■ the period for which eligible expenditures can be claimed
than excluded government assistance. The Ontario labour before principal photography begins
expenditures are the sum of the salaries and wages and the ■ the period to have the film or television production
remuneration incurred in a tax year that are directly shown in Ontario after the production is complete and
attributable to computer animation and special effects commercially exploitable, as agreed in writing
activities performed in Ontario and paid to certain persons
or entities, within 60 days of the end of the tax year. The Ontario film and television tax credit is a refundable
tax credit based on the qualifying labour expenditures
To be eligible for the credit, a corporation must meet certain incurred by a qualifying production company for eligible
criteria, including all of the following: Ontario productions. The amount of credit depends on
■ be a Canadian corporation whether the eligible production is:

■ perform eligible computer animation and special effects ■ a first-time production

activities for the eligible production at a permanent ■ a small first-time production
establishment in Ontario for the tax year
■ other than a first-time production
■ not be exempt from tax under Part III of the Taxation
Act, 2007 (Ontario) for the tax year If the eligible Ontario production is a first-time production,
you can claim a credit equal to:
■ not be controlled directly or indirectly, at any time in the
tax year, in any way, by one or more corporations, all or ■ 40% of the labour expenditures, for the first $240,000 for
part of whose taxable income is exempt from tax under the production and 35% on the balance
section 57 of the Corporations Tax Act (Ontario) or ■ an additional 10% of the labour expenditures if the
Part III of the Taxation Act, 2007 (Ontario) production is a regional Ontario production
■ not be a prescribed labour-sponsored venture capital If the eligible Ontario production is a small first-time
corporation at any time in the tax year production, you can claim a credit equal to the lesser of:
■ for productions starting after April 23, 2015, receive the ■ the labour expenditures
Ontario production services tax credit or the Ontario film
and television tax credit

102 canada.ca/taxes
■ $20,000 if the production is a regional Ontario production production is eligible, Ontario Creates will issue a
or $15,000 if it is not a regional Ontario production. These certificate indicating the estimated amount of the tax credit.
amounts are reduced by any Ontario film and television
To claim the credit, file the following with your return for
tax credits previously received for the production
the year for each eligible production:
The total labour expenditure for a small first-time ■ a certificate of eligibility (or copy) issued by
production cannot be more than $50,000 at the time the Ontario Creates
production is completed.
■ a completed Schedule 556, Ontario Film and Television
If the eligible Ontario production is other than a first-time Tax Credit
production, you can claim a credit equal to: If you file your return electronically, see information on
■ 35% of labour expenditures T2 Attach-a-doc on page 10.

■ an additional 10% of labour expenditures if the If you file a paper return, send the return and required
production is a regional Ontario production attachments to your tax centre. To find your tax centre, go
to canada.ca/cra-tso-contact-information.
The qualifying labour expenditures equal the corporation’s
Ontario labour expenditures less assistance reasonably On line 458 of Schedule 5, enter the total amount of the
related to these expenditures. Some exceptions apply: for credit you are claiming.
example, effective March 14, 2017, assistance that is a Reference
payment from the 2015 Ontario Production Services and Section 91, Taxation Act, 2007 (Ontario)
Computer Animation and Special Effects Transition Fund
(“Transitional Grant”) to a qualifying corporation is not Ontario production services tax credit
considered government assistance. See Schedule 556 for The Ontario production services tax credit is a refundable
more exceptions. tax credit based on qualifying production expenditures
incurred for eligible film or television productions by a
The qualifying labour expenditures are determined without
qualifying corporation in a tax year. The corporation can be
reference to any equity investment held by a person
Canadian or foreign owned.
prescribed under section 1106(10) of the federal regulations.
The credit is equal to 21.5% of qualifying production
The Ontario labour expenditures are the sum of the salaries,
expenditures incurred, including qualifying labour
wages, and remuneration paid, and reimbursements made
expenditures as well as the purchase or rental of qualifying
to the parent company of eligible salaries and wages and
tangible properties, such as equipment and studio rentals.
remuneration, incurred in a tax year that are directly
attributable to the eligible Ontario production, performed The qualifying production expenditures include the sum of:
in Ontario and paid to certain persons or entities, within
■ eligible wage expenditures
60 days of the end of the tax year.
■ eligible service contract expenditures
To be eligible for the credit, a corporation must meet certain
criteria, including all of the following: ■ eligible tangible property expenditures
■ be a Canadian-controlled corporation throughout the tax ■ reimbursements to the parent company of eligible wage
year as determined under sections 26 to 28 of the and service contract expenditures
Investment Canada Act
less
■ have a permanent establishment in Ontario throughout
the tax year ■ assistance reasonably related to these expenditures (some
exceptions apply—see next and Schedule 558)
■ be primarily engaged in the carrying on of a Canadian
film or video production business through a permanent Effective March 14, 2017, assistance that is a payment from
establishment in Canada in the tax year the 2015 Ontario Production Services and Computer
Animation and Special Effects Transition Fund
■ not be exempt from tax under Part III of the Taxation (“Transitional Grant”) to a qualifying corporation is not
Act, 2007 (Ontario) or Part I of the federal Income Tax considered government assistance.
Act for the tax year
The eligible expenditures incurred in the tax year must be
■ not be controlled, at any time in the tax year, directly or reasonable and directly attributable to the eligible
indirectly, in any way, by one or more persons, all or part production, performed in Ontario and paid to certain
of whose taxable income was exempt from tax under persons or entities, within 60 days of the end of the tax
Part I of the federal Income Tax Act year.
■ not be a prescribed labour-sponsored venture capital Ontario labour expenditures (including labour under a
corporation at any time in the tax year service contract) must amount to at least 25% of the total
qualifying production expenditures. Otherwise, the
You cannot claim the Ontario film and television tax credit
corporation’s qualifying production expenditure limit for a
if you claim the Ontario production services tax credit for
tax year cannot be more than four times the Ontario labour
that same production for any tax year
expenditures (including labour under a service contract).
Before claiming the credit, you must apply online to
Retroactive to June 4, 2015, eligible service contract
Ontario Creates for a certificate of eligibility. If the
expenditures included in determining a corporation’s

canada.ca/taxes 103
expenditure limit must relate to remuneration paid by the Ontario interactive digital media tax credit
corporation, rather than to salary and wages paid to As a COVID-19 measure, for products that were not
Ontario‑based individuals. completed before March 15, 2020, and for which eligible
labour expenditures were incurred in the 2020 tax year,
Expenditures incurred through non-arm’s length contracts
Ontario has temporarily extended the 37-month period
are limited to expenditures that would have been eligible if
during which eligible labour expenditures must be incurred
incurred directly by the corporation. Only expenditures
by an additional 24 months.
incurred after the final script stage to the end of the
post-production stage are eligible for the credit. The Ontario interactive digital media tax credit is a
refundable tax credit based on qualifying expenditures
As a measure due to COVID-19, for productions for which
incurred for eligible products and eligible digital games by
otherwise eligible expenditures were incurred in Ontario in
a qualifying corporation during a tax year.
tax years ending in 2020 and 2021, Ontario proposes to
temporarily: This credit focuses on entertainment products and
educational products for children under 12. Certain
■ allow certain corporations to claim otherwise eligible
products, such as search engines, real estate databases, or
expenditures incurred in the two tax years before the
news and public affairs products are excluded. These do
year in which principal photography begins
not apply to large digital game corporations (qualifying
■ allow certain corporations an additional 24 months to digital game corporations and specialized digital game
meet minimum spending requirements corporations).
To be eligible for the credit, a corporation must meet certain Film and television websites that are bought or licensed by
criteria, including all of the following: a broadcaster and embedded in the broadcaster’s website
are now eligible for the Ontario interactive digital media
■ be primarily engaged, in the tax year, in the carrying on
tax credit. This applies to websites that host content related
of a film or video production business, or a film or video
to film, television or Internet productions that, as of
production services business, through a permanent
November 1, 2017, had not received a certificate of
establishment in Ontario
eligibility or a letter of ineligibility.
■ not be exempt from tax, for the tax year, under Part III of
the Taxation Act, 2007 (Ontario) or Part I of the Income For products that are certified after April 23, 2015, the
Tax Act following conditions apply:

■ not, at any time in the tax year, be controlled directly or ■ 80% of total labour costs for eligible products have to be
indirectly, in any way, by one or more persons, all or part attributable to qualifying wages and qualifying
of whose taxable income was exempt from tax under remuneration paid to individuals or to corporations that
Part I of the Income Tax Act carry on a personal services business
■ not be a prescribed labour-sponsored venture capital ■ 25% of total labour costs for eligible products have to be
corporation at any time in the tax year attributable to qualifying wages of employees of the
qualifying corporation
You cannot claim the Ontario production services tax credit
if you claim the Ontario film and television tax credit for These apply to products for which a determination of
that same production for any tax year. eligibility has not been made before April 24, 2015,
including those waiting for certification on that date.
Before claiming the credit, you must apply online to
However, only the 80% test applies to products for which
Ontario Creates for a certificate of eligibility. If the
certification was applied for before April 24, 2015.
production is eligible, Ontario Creates will issue a
certificate indicating the estimated amount of the tax credit. The above-noted eligibility requirements do not apply to
large digital game corporations.
To claim the credit, file the following with your return for
the year for each eligible production: The credit applies to the following situations:
■ a certificate of eligibility (or copy) issued by ■ all qualifying corporations that develop and market their
Ontario Creates own eligible products (non-specified products) are
eligible to claim a credit equal to 40% of expenditures
■ a completed Schedule 558, Ontario Production Services
Tax Credit ■ qualifying corporations that develop eligible products
under a fee-for-service arrangement (specified products)
If you file your return electronically, see information on
are eligible to claim a credit equal to 35% of expenditures
T2 Attach-a-doc on page 10.
■ a 35% credit is available to both:
If you file a paper return, send the return and required
attachments to your tax centre. To find your tax centre, go – qualifying digital game corporations that incur a
to canada.ca/cra-tso-contact-information. minimum of $1 million of eligible Ontario labour
expenditures over a 36-month period for
On line 460 of Schedule 5, enter the total amount of the
fee-for-service work done in Ontario for an eligible
credit you are claiming.
digital game
Reference
Section 92, Taxation Act, 2007 (Ontario) – specialized digital game corporations that incur at
least $500,000 ($1 million for tax years starting before

104 canada.ca/taxes
 April 12, 2019) of Ontario labour expenses each year in For more information see Schedule 560, Ontario Interactive
developing eligible digital games. A specialized digital Digital Media Tax Credit.
game corporation generally would have at least 80% of
Before claiming the credit, you must apply online to
Ontario payroll or 90% of annual gross revenues
Ontario Creates for a certificate of eligibility. If the product
directly attributable to developing digital games
or digital game is eligible, Ontario Creates will issue a
For all eligible products, qualifying expenditures include certificate indicating the estimated amount of the tax credit.
Ontario salaries and wages incurred in a tax year that are Only one certificate of eligibility is issued for all of the
directly attributable to the eligible product and paid eligible products or digital games for the tax year.
within 60 days of the end of the tax year.
Note
For eligible products that are not specified products, the You have to apply for this certificate within 18 months of
qualifying expenditures also include marketing and the end of the tax year in which development of the
distribution expenditures (maximum $100,000 per eligible eligible product was completed. Specialized digital game
product for all tax years) incurred in a tax year that are corporations are entitled to file an annual application,
directly attributable to the product and paid to certain rather than having to apply separately for each product
persons and entities within 60 days of the end of the tax they complete.
year.
To claim the credit, file the following with your return for
The amount of eligible remuneration expenditures that a the year:
corporation can claim is 100%. It includes amounts paid to
■ a certificate of eligibility (or copy) issued by
other taxable Canadian corporations for services rendered
Ontario Creates
by its employees. Corporations that develop specified
products are also able to claim these expenditures. ■ a completed Schedule 560, Ontario Interactive Digital
Media Tax Credit, for each eligible product or eligible
Qualifying expenditures are reduced by any government
digital game
assistance reasonably related to these expenditures (some
exceptions apply—see Schedule 560). If you file your return electronically, see information on
T2 Attach-a-doc on page 10.
You cannot claim the Ontario interactive digital media tax
credit if you claim the Ontario computer animation and If you file a paper return, send the return and required
special effects tax credit, the Ontario film and television tax attachments to your tax centre. To find your tax centre, go
credit or the Ontario production services tax credit for the to canada.ca/cra-tso-contact-information.
same expenditure for any tax year.
On line 462 of Schedule 5, enter the total amount of the
To be eligible for the credit, a corporation must meet certain credit you are claiming.
criteria, including all of the following:
Reference
■ be a Canadian corporation Section 93, Taxation Act, 2007 (Ontario)

■ have completed development on or developed an eligible Ontario book publishing tax credit
interactive digital media product at a permanent The Ontario book publishing tax credit is a refundable tax
establishment in Ontario, as described in credit of 30% on the qualifying expenditures incurred
subsection 93(16) of the Taxation Act, 2007 (Ontario) during a tax year for an eligible literary work, by an
■ not be exempt from tax under Part III of the Taxation Ontario book publishing company, up to a maximum credit
Act, 2007 (Ontario) for the tax year of $30,000 per work.

■ not be controlled directly or indirectly, in any way, at any Qualifying expenditures include the following
time in the tax year, by one or more corporations, all or expenditures the corporation incurred in publishing an
part of whose taxable income was exempt from tax under eligible literary work:
section 57 of the Corporations Tax Act (Ontario) or ■ pre-production costs
Part III of the Taxation Act, 2007 (Ontario)
■ marketing expenditures incurred 12 months before to
■ not be a prescribed labour-sponsored venture capital 12 months after the date the literary work is published
corporation at any time in the tax year
■ 50% of the production costs
In addition, a qualifying digital game corporation or a
specialized digital game corporation must also meet the ■ 100% of expenditures incurred that reasonably relate to
following criteria: preparing a literary work for publishing in one or more
digital or electronic formats
■ be a corporation that carries on through a permanent
establishment in Ontario a business that includes ■ 50% of expenditures incurred that reasonably relate to
developing digital games transferring a prepared digital or electronic version of the
literary work into or onto a form suitable for distribution
■ not be a corporation the primary activity of which is to
provide the services of a single individual and all the The credit is available for any number of literary works by
issued and outstanding shares of the capital stock of a Canadian author in an eligible category.
which are owned by that individual
Qualifying expenditures are reduced by any assistance
reasonably related to these expenditures.

canada.ca/taxes 105
To be eligible for the credit, a corporation must meet certain The expenditure limit of $3 million begins to reduce when
criteria, including all of the following: the federal taxable income of the corporation and its
associated corporations for the previous tax year exceeds
■ be a Canadian-controlled corporation throughout the tax
$500,000 and becomes nil at $800,000. The $3 million
year, as determined under sections 26 to 28 of the
expenditure limit also begins to reduce when the specified
Investment Canada Act
capital amount of the corporation and its associated
■ carry on a book publishing business primarily through a corporations for the previous tax year reaches $25 million
permanent establishment in Ontario for the tax year and becomes nil at $50 million.
■ not be exempt from tax under Part III of the Taxation Act, Expenditure limit, qualified expenditure, and eligible
2007 (Ontario) for the tax year repayments are defined in subsections 96(3.1), 96(8)
and 96(12) of the Taxation Act, 2007 (Ontario).
■ not be controlled by the author of the literary work, or by
a person not dealing at arm’s length with the author File a completed Schedule 566, Ontario Innovation Tax
Credit, with your return. See the schedule for more details.
Before claiming the credit, you must apply online to
Ontario Creates for a certificate of eligibility. If the literary On line 468 of Schedule 5, enter the amount of the credit
work is eligible, Ontario Creates will issue the certificate. you are claiming.
To claim the credit, file the following with your return for Reference
Section 96, Taxation Act, 2007 (Ontario)
the year for each literary work:
■ a certificate of eligibility (or copy) issued by Ontario business-research institute tax credit
Ontario Creates You are eligible to claim an Ontario business-research
■ a completed Schedule 564, Ontario Book Publishing Tax institute tax credit if you meet all of the following
Credit conditions:

If you file your return electronically, see information on ■ you carried on business in the tax year through a
T2 Attach-a-doc on page 10. permanent establishment in Ontario

If you file a paper return, send the return and required ■ you incurred qualified expenditures under an eligible
attachments to your tax centre. To find your tax centre, go contract with an eligible research institute
to canada.ca/cra-tso-contact-information. ■ you were not exempt from tax under Part III of the
On line 466 of Schedule 5, enter the total amount of the Taxation Act, 2007 (Ontario)
credit you are claiming. This credit is a 20% refundable tax credit based on qualified
Reference expenditures for the tax year incurred in Ontario under an
Section 95, Taxation Act, 2007 (Ontario) eligible contract with an eligible research institute.
The annual qualified expenditure limit is $20 million. If a
Ontario innovation tax credit
corporation is associated with other corporations at any
You are eligible to claim an Ontario innovation tax credit time in a calendar year, the $20 million limit must be
if you meet all of the following conditions: allocated among the associated corporations. The
■ you had a permanent establishment in Ontario during maximum tax credit that a qualifying corporation or an
the year associated group of corporations can claim in a tax year is
$4 million (20% of $20 million).
■ you have carried on scientific research and experimental
development (SR&ED) in Ontario during the year Complete Schedule 568, Ontario Business-Research
Institute Tax Credit, to claim the credit and complete a
■ you are not exempt from tax under Part III of the Schedule 569, Ontario Business-Research Institute Tax
Taxation Act, 2007 (Ontario) Credit Contract Information, for each eligible contract.
■ you are eligible to claim a federal investment tax credit Note
under section 127 of the federal Income Tax Act for the When completing Schedule 569, to find the applicable
corporation’s qualified expenditures eligible research institute code, go to canada.ca/en
■ you have filed Form T661, Scientific Research and /revenue-agency/services/tax/businesses/topics
Experimental Development (SR&ED) Expenditures /corporations/provincial-territorial-corporation-tax
Claim, and Schedule 31, Investment Tax Credit – /ontario-provincial-corporation-tax/ontario-business
Corporations, in the tax year -research-institute-tax-credit.

The credit is an 8% refundable tax credit based on the sum Keep a copy of each eligible contract to support your claim.
of the corporation’s qualified expenditures incurred in On line 470 of Schedule 5, enter the amount of the credit
Ontario and any eligible repayments. Qualified you are claiming.
expenditures include 100% of current expenditures.
Reference
The credit is available to a maximum annual expenditure Section 97, Taxation Act, 2007 (Ontario)
limit of $3 million. Associated corporations must share in
the $3 million expenditure limit.

106 canada.ca/taxes
Ontario regional opportunities investment tax credit corporations. The corporation resulting from the
A new 10% refundable income tax credit is introduced for amalgamation has to file a Corporations Information Act
capital investments. A Canadian-controlled private Annual Return at the appropriate time.
corporation that invests in capital property that becomes
File the completed Schedule 546 or 548 with the T2 return.
available for use on or after March 25, 2020, in designated
If you have to file more than one tax return in a calendar
regions of Ontario may be eligible for the tax credit.
year, file the annual return only with the first tax return.
Eligible property is capital property generally included in
The CRA will transmit the information on Schedules 546
capital cost allowance class 1 or class 6. Expenditures for
and 548 to the MGCS. The MGCS is responsible for
these classes include costs for constructing, renovating or
maintaining a public database of corporate information. It
acquiring eligible commercial and industrial buildings.
is the corporation’s responsibility to ensure that the
If the property is a building, or an addition or alteration to information on the public record is accurate and up to date.
a building, at least 90% of the floor space of the building is
To report changes to the name of a director/officer, or
used at the end of the tax year for a non-residential use.
changes to both the address and date elected/appointed of
The tax credit is available for expenditures of more than a director/officer, complete two copies of Part 7 of
$50,000 and up to a limit of $500,000 in the tax year. In Schedule 546 as follows:
general, the qualifying region includes the north, the east
■ enter the director/officer information exactly as shown
(except the Ottawa region) and the south-west of Ontario.
(incorrectly) on the public record, with a cease date
A qualifying corporation that is associated with one or
■ photocopy and complete only Part 7 of Schedule 546 with
more other corporations during a particular tax year may
the correct director/officer information
claim this credit if each of the other corporations has agreed
in writing to waive, under subsection 97.1(7) of the Corporations that have to file Schedule 546 have the option
Taxation Act, 2007 (Ontario), its right to claim this credit for of filing electronically with one of the service providers
any tax year of the other corporation that overlaps with the under contract with the Ontario Ministry of Government
particular tax year. This waiver must have been filed with and Consumer Services, instead of filing it together with
the CRA. the T2 return.
To claim the credit, file a completed Schedule 570, Ontario
Ontario specialty types
Regional Opportunities Investment Tax Credit, with your
return. For more details, see the schedule. Any corporation carrying on business in Ontario through a
permanent establishment must file Schedule 524, Ontario
On line 472 of Schedule 5, enter the amount of the credit Specialty Types, to identify its specialty type in one of the
you are claiming. following situations:
Reference ■ the tax year is the first year after incorporation or an
Section 97.1, Taxation Act, 2007 (Ontario)
amalgamation
Ontario Ministry of Government and Consumer ■ there is a change to the specialty type
Services annual return
Ontario corporations and foreign business corporations Manitoba
licensed to carry on business in Ontario must file an The higher rate of Manitoba income tax is 12%.
Ontario Corporations Information Act Annual Return with
the CRA within six months of the end of the tax year as Corporations may be eligible for a small business deduction
follows: to reduce all or part of the tax otherwise payable.
■ Every corporation that is incorporated, continued, or The lower rate of Manitoba income tax for small business
amalgamated in Ontario and subject to the Business is 0%.
Corporations Act or the Corporations Act, except for
The income eligible for the small business deduction rate is
registered charities under the federal Income Tax Act,
determined using the Manitoba business limit of $500,000
must file Schedule 546, Corporations Information Act
effective January 1, 2019. It was previously $450,000.
Annual Return for Ontario Corporations.
When the business limit changes during the tax year, you
■ Every business corporation that is incorporated,
have to base your calculation on the number of days in the
continued, or amalgamated in a jurisdiction outside
year that each limit is in effect.
Canada with a licence under the Extra-Provincial
Corporations Act to carry on business in Ontario must You can use Schedule 383, Manitoba Corporation Tax
file Schedule 548, Corporations Information Act Annual Calculation, to help you calculate your Manitoba tax before
Return for Foreign Business Corporations. the application of credits. You do not have to file it with
your return. See the schedule for more details.
Note
The original amalgamating corporations that have since On line 230 of Schedule 5, enter the amount of tax
amalgamated and continued as one amalgamated calculated.
corporation are NOT required to file a Corporations
Information Act Annual Return. The Ministry of
Government and Consumer Services (MGCS) cannot
accept requests to update the corporate record for these

canada.ca/taxes 107
Manitoba additional deduction for credit unions You have to use the qualified property in Manitoba mainly
Note for manufacturing or processing goods for sale or lease.
The Manitoba additional deduction for credit unions
Qualified property includes new and used buildings,
will be phased out over five years, starting in
machinery, and equipment made available for use in
January 1, 2019, as follows: 80% for 2019, 60% for 2020,
manufacturing or processing goods for sale or lease.
40% for 2021, 20% for 2022, and 0% after 2022. The
amount will be prorated for all tax years during the Note
phase-out period that do not coincide with the calendar The acquired date for purposes of this credit is the date
year. that the property became available for use.
The Manitoba additional deduction for credit unions allows Certain green energy equipment is eligible for both the
credit unions an additional reduction from income tax manufacturing investment tax credit and the green energy
otherwise payable. It is designed to reduce their overall equipment tax credit (see page 112).
income tax rate to the same net rate paid by small business
You can carry back an unused non-refundable credit to the
corporations that claim the Manitoba small business
three previous tax years from the tax year in which you
deduction.
acquired the property. You can also carry it forward to
To be eligible to claim the additional deduction, the credit the 10 tax years that follow the tax year in which you
union must meet all of the following conditions: acquired the property.
■ have been a credit union throughout the tax year To claim the credit, file a completed Schedule 381,
Manitoba Manufacturing Investment Tax Credit no later
■ have had a permanent establishment in Manitoba at any
than 12 months after your income tax return is due for the
time in the tax year
tax year in which the expenditures were incurred. For more
■ have Manitoba taxable income in the year details, see the schedule.
To claim the Manitoba additional deduction for credit On line 605 of Schedule 5, enter the amount of the
unions, file Schedule 17, Credit Union Deductions, with non-refundable credit you are claiming. On line 621 enter
your return. the amount of the refundable credit you are claiming.

Manitoba manufacturing investment tax credit Manitoba research and development tax credit
The Manitoba manufacturing investment tax credit, which You can claim this credit if you have a permanent
was scheduled to end December 31, 2020, has been made establishment in Manitoba and you made eligible
permanent. expenditures for research and development carried out in
Manitoba.
You can earn this credit on the cost of qualified property.
The credit will first be applied to reduce the Manitoba The amount of the credit is equal to 15% of eligible
corporation income tax payable. Then you can claim a part expenditures incurred after April 11, 2017. The rate was
of the credit you are entitled to claim in a tax year as a previously 20%. Eligible expenditures include current
refundable credit. expenditures and capital expenditures for depreciable
property (other than a building or a leasehold interest in a
The non-refundable part of the credit is 1% of the cost of building) and first term and second term
qualified property. For property acquired before shared-use-equipment.
April 12, 2017, the rate is 2%.
In addition to the corporation’s eligible expenditures, a
The refundable part of the credit is 7% of the cost of corporation may claim any repayments of government
qualified property. For property acquired before assistance that are related to eligible expenditures.
July 1, 2019, the rate is 8%.
The tax credit for research and development carried on in
Date of Refundable Non- Total credit Manitoba under an eligible contract with a qualifying
acquisition credit rate refundable rate research institute is fully refundable. When eligible
credit rate research and development is not undertaken under an
After eligible contract with an institute, 50% of the tax credit
June 30, 7% 1% 8% amount is refundable, the rest is non-refundable.
2019
Note
Before
Manitoba Finance posted on its website the list of
July 1,
2019, and 8% 1% 9%
Educational Institutions Potentially Eligible for
after April Participation in SR&ED Refundable Manitoba R&D Tax
11, 2017 Credit Program.
Before You can carry back an unused non-refundable credit to the
April 12, 8% 2% 10% three previous tax years from the tax year that you made
2017 the expenditure in. You can also carry it forward to the
20 tax years that follow the tax year in which you made the
Under subsection 7.2(7) of the Manitoba Income Tax Act,
expenditure.
you can renounce, in whole or in part, the manufacturing
investment tax credit earned in the current tax year.

108 canada.ca/taxes
You can renounce the research and development tax credit Co-op student hiring incentive
for an eligible expenditure incurred during the year, in You can claim this credit if you are an employer who
whole or in part, under subsection 7.3(7) of the Income Tax provides a work placement for a student enrolled in a
Act (Manitoba). qualifying post-secondary co-operative education program.
To claim the credit, file a completed Schedule 380, The credit for each qualifying work placement is 15% of the
Manitoba Research and Development Tax Credit, with your salary and wages paid to the student for work performed
return. You must identify the eligible expenditures no later mainly in Manitoba, less government assistance, to a
than 12 months after your income tax return is due for the lifetime maximum of $5,000 per student.
tax year in which the expenditures were incurred. For more
The credit will be nil if the student under the work
details, see the schedule.
placement has had five previous qualifying work
On line 606 of Schedule 5, enter the amount of the placements.
non-refundable credit you are claiming. On line 613 of
Co-op graduate hiring incentive
Schedule 5, enter the amount of the refundable credit.
You can claim this credit if you are an employer that has
hired co-op graduates in full-time employment in
Manitoba paid work experience tax credit
Manitoba. The students must have graduated from a
The Manitoba paid work experience tax credit includes the recognized post-secondary co-operative education program
following: in a field related to the employment.
■ youth work experience hiring incentive (25%, lifetime The credit is equal to 15% of the net salary and wages paid
maximum $5,000) to the graduate, less government assistance, in each of the
■ co-op student hiring incentive (15%, lifetime maximum first two full years of employment, to a maximum of $2,500
$5,000) for each year, where the employment starts within
18 months of graduation.
■ co-op graduate hiring incentive (15%, maximum $2,500)
Apprentice hiring incentive
■ apprentice hiring incentive (15%, 20% for rural or You can claim this credit if you are an employer who hires
northern early level, 25% for high school, maximum high-school and post-secondary apprentices in Manitoba.
$5,000)
The maximum amount of the credit is $5,000 per apprentice
■ journeyperson hiring incentive (15%, maximum $5,000) per year. The rate of salary and wages is:
Employers self-assess salary and wages for qualifying ■ 15%
employees based on the fiscal year, as long as the employee
is progressing through their co-op or apprenticeship ■ 20% for employers of apprentices who normally reside
program. outside of Winnipeg and whose work is performed
outside of Winnipeg
The credit is fully refundable, but it must first be applied
against total taxes payable. ■ 25% for employers of high school apprentices for tax
years ending after 2015
To claim the credit, file a completed Schedule 384,
Manitoba Paid Work Experience Tax Credit, with your This component of the credit also covers employers eligible
return. For more details, see the schedule. for the federal apprenticeship job creation tax credit, who
will receive a top-up that is equal to the difference between
On line 622 of Schedule 5 enter the amount of the this provincial credit and the federal credit.
refundable credit you are claiming.
Journeyperson hiring incentive
A corporation that is exempt under section 149 of the You can claim this credit if you are an employer that has
federal Income Tax Act is also eligible to claim this credit, hired recent graduates of apprenticeship programs in full
except Crown corporations and other provincial time employment in Manitoba. The journeyperson must
government entities for tax years ending after 2016. Along have received their certificate of qualification in Canada in
with Schedule 384, the exempt corporation will also have to a field related to the employment.
complete Schedule 5 and file a T2 return.
The credit is equal to 15% of salary and wages paid to the
Youth work experience hiring incentive journeyperson, less government assistance, in each of the
You can claim this credit if you have been approved by the first two full years of employment, up to a maximum
province to provide paid work experience to an individual of $5,000 for each year, where the employment starts
who has completed an approved high school course or within 18 months of certification.
training program.
Employment periods must be continuous and consecutive,
The credit is equal to 25% of the eligible salary and wages but an employment period may be interrupted by a
paid to a qualifying youth, less government assistance up seasonal layoff of not more than three months.
to a lifetime maximum of $5,000 per youth.
The eligible employment period of the youth must be Manitoba odour-control tax credit
completed by the end of the calendar year following the Note
academic year that the youth completed the approved The Manitoba odour-control tax credit is eliminated for
course. expenditures made after April 11, 2017.

canada.ca/taxes 109
You can earn this credit on eligible expenditures made defined in the regulations. Before March 12, 2018, the
before April 12, 2017, to reduce Manitoba income tax minimum amount was $20,000
payable.
An eligible business corporation and its affiliates can have a
Eligible expenditures consist of the capital costs of maximum of 100 full-time equivalent employees for the
depreciable capital properties that become available for use immediately preceding calendar year or a maximum of
in the year and were acquired for preventing, reducing, or $15 million in annual sales for the most recently completed
eliminating nuisance odours that arise or may arise from fiscal period.
the use or production of organic waste.
Eligible businesses include ventures of commercial crop
You can earn this credit if odour control is a significant, but production in a climate-controlled environment and brew
not necessarily your primary, purpose for acquiring the pubs.
eligible capital property. The properties must be unused
and must not have been acquired for any use by anyone Credit Annual and Yearly Yearly
rate lifetime maximum maximum
before. Eligible expenditures are either prescribed by
investment earned applicable
regulation or approved by the minister. limit
The credit is equal to 10% of the eligible expenditures. Shares issued
after 45% $450,000 $202,500 $67,500
For non-agricultural corporations, it is non-refundable. June 11, 2014
You can carry back an unused credit to the three tax years
before the tax year in which you earned the credit. You can Shares issued
before 30% $450,000 $135,000 $45,000
also carry forward the unclaimed credit to the 10 tax years
June 12, 2014
that follow the tax year in which you earned the credit.
Unused credits may be carried forward on amalgamation
or wind-up. The credit is equal to 45% of the amount invested to a
lifetime maximum investment of $450,000. For eligible
The corporation may be the beneficiary of a trust or a shares issued before June 12, 2014, the rate was 30%.
member of a partnership at the end of the trust’s or
partnership’s tax year. If so, it may include its The annual investment limit is also $450,000 and the
proportionate allocation or share of the trust/partnership’s maximum amount of the tax credit that you can earn in a
eligible expenditures in computing its odour-control tax given year is $202,500. However, the maximum amount of
credit. the tax credit that you can apply against provincial tax in
the year is $67,500, including any amounts carried back or
You cannot claim this credit on eligible expenditures used carried forward. For eligible shares issued before
in calculating any other credit. June 12, 2014, these last two amounts were respectively
You can renounce the odour-control tax credit in whole or $135,000 and $45,000.
in part. This credit must be claimed against Manitoba tax otherwise
Agricultural corporations are eligible for a refundable payable. You can carry forward unused credits to the
odour-control tax credit, in whole or in part. The credit is 10 following tax years or back to the 3 previous tax years.
fully refundable to agricultural corporations effective The Province of Manitoba will issue a tax credit receipt for
June 16, 2011. For the 2013 tax year, this includes any qualifying investments. If you file your T2 return,
amounts not previously claimed or renounced from the electronically, keep your receipt in case we ask for it later.
previous 10 years. Otherwise, file it with your paper T2 return.
To claim the credit, file a completed Schedule 385, To claim the credit, file a completed Schedule 387,
Manitoba Odour-Control Tax Credit, with your return. You Manitoba Small Business Venture Capital Tax Credit. See
can claim this credit no later than 12 months after your the schedule for more details.
income tax return is due for the tax year in which the
expenditures were incurred. For more details, see the On line 608 of Schedule 5, enter the amount of the credit
schedule. you are claiming.

On line 607 of Schedule 5, enter the non-refundable amount Manitoba cooperative development tax credit
of the credit you are claiming. You can no longer earn this credit, as it was eliminated for
If you are an agricultural corporation, enter the refundable contributions made after April 11, 2017. You can only carry
credit you are claiming on line 623 of Schedule 5. forward the non refundable unused unexpired credit
for 10 tax years.
Manitoba small business venture capital tax credit
You can claim this non-refundable tax credit if you meet To claim the carryforward, file a completed Schedule 390,
both of the following conditions: Manitoba Cooperative Development Tax Credit, with your
return.
■ you are a corporation that is not a prescribed venture
capital corporation or labour-sponsored venture capital On line 609 of Schedule 5, enter the amount of the
corporation under Part LXVII of the federal regulations non-refundable unused and unexpired credit carried
forward from previous years and applied to reduce tax
■ you directly invested a minimum of $10,000 before payable in the current year.
January 1, 2023, in a qualifying community enterprise, as

110 canada.ca/taxes
Manitoba cultural industries printing tax credit The credit is refundable. Projects that receive a certificate of
The Manitoba cultural industries printing tax credit, which eligibility and start product development before 2023
was scheduled to end December 31, 2020, is extended one qualify for the credit.
year to December 31, 2021.
The credit is equal to:
This refundable tax credit for Manitoba printers is based on
■ 40% of eligible project costs paid in the tax year to
the eligible printing costs incurred and paid before 2022 in
residents of the province when a corporation pays at
producing eligible books.
least 25% of the salary and wages to employees who are
The annual maximum tax credit is $1.1 million per Manitoba residents for the project period
corporation. If two or more eligible printers are related to
■ 35% of eligible labour costs for the year, when a
or associated with each other, the $1.1 million maximum is
corporation that pays less than 25% of its wages to
shared.
Manitoba employees, incurs labour expenses of at least
The credit is calculated as $1 million more than government assistance related to
those expenses
tax credit = 35% × L × (R1/R2)
Companies may claim up to $100,000 in eligible marketing
where: and distribution expenses directly attributable to a project
L is the total of the amounts paid by the printer in the tax that meets the requirements to claim marketing and
year, and before 2022, as salary or wages to its employees distribution costs.
who were resident in Manitoba on December 31 of that tax Where a government or public authority is the purchaser of
year for their employment in the printer’s book printing an interactive digital media product, the amount paid by
division the purchaser and the amount of the interactive digital
R1 is the printer’s eligible printing revenue for the tax year media tax credit cannot be more than 100% of the project’s
costs.
R2 is the total book printing revenue, other than revenue
from the printing of yearbooks, earned by the printer in the Repaid or repayable government assistance and repayable
tax year and before 2022 or recoupable Canada Media Fund support do not reduce
eligible labour costs.
You can claim this credit if you are engaged in the business
of printing books in Manitoba and have a permanent To claim the credit, file the tax credit certificate with your
establishment in Manitoba. return no later than the filing due date of the tax year
following the tax year in which the project was completed.
All of the following conditions apply:
On line 614 of Schedule 5, enter the amount of the credit
■ the maximum revenue is capped at $200,000 per book you are claiming.
title
■ at least 90% of the book must be new material that has Manitoba book publishing tax credit
not already been published You can claim this credit if you meet all of the following
conditions:
■ if the book contains pictures and is not a children’s book,
at least 65% must be text ■ are engaged mainly in the business of publishing books
or you operate a book publishing business as a university
■ the printer must demonstrate that the book is for sale press
through an established distributor
■ have a permanent establishment in Manitoba
An eligible book is a non-periodical Canadian-authored
publication. It is classified as fiction, non-fiction, poetry, ■ pay at least 25% of the wages and salaries to employees
drama, biography, or children’s. An eligible book must be who are Manitoba residents
printed before 2022.
■ have published at least two eligible books within the
On line 611 of Schedule 5, enter the amount of the credit two-year period ending at the end of the tax year
you are claiming.
An eligible book is a first edition, non-periodical
Canadian-authored publication. It is classified as fiction,
Manitoba interactive digital media tax credit non-fiction, poetry, drama, biography or children’s. An
Manitoba Economic Development and Training will issue a eligible book must be published before 2025.
tax credit certificate to a corporation that develops and
produces an eligible interactive digital media project in The credit is equal to 40% of eligible Manitoba labour costs,
Manitoba. The certificate can be issued upon completion of including non-refundable monetary advances made in the
the project or, if the purchaser is not the government or a tax year to authors of eligible books, to a maximum of
public body, on a yearly basis. However, the corporation $100,000 per year. Eligible labour costs must be incurred
must first receive a certificate of eligibility before the start and paid in Manitoba by the publisher before 2025.
of the project. The credit also includes non-refundable monetary advances
A qualifying corporation must be a taxable Canadian and labour costs related to publishing an electronic version
corporation with a permanent establishment in Manitoba. of an eligible literary work.

canada.ca/taxes 111
An additional bonus of 15% on Manitoba printing costs can The purchaser’s credit also includes gasification equipment
be claimed if the book is printed on paper with a minimum and biomass fuel energy equipment that is installed in
of 30% recycled content. For this bonus, eligible printing Manitoba and used in a business. The tax credit rate is 15%.
costs must be incurred and paid within one year of
This credit is refundable, but must first be applied against
publication of the eligible book.
total taxes payable.
The credit is fully refundable.
On line 619 of Schedule 5, enter the amount of the credit
To claim the credit, file a completed Schedule 389, earned in the year.
Manitoba Book Publishing Tax Credit, no later than
18 months after the end of the tax year for which you are Manitoba film and video production tax credit
claiming the credit. Manitoba Film and Music reviews all tax credit applications
On line 615 of Schedule 5, enter the amount of the credit and will issue a tax credit certificate to a corporation that
you are claiming. produces an eligible film in the province.
The credit is based on labour costs or production costs.
Manitoba green energy equipment tax credit
The credit is equal to 45% (65% with bonuses) of eligible
Manufacturer’s tax credit
salaries paid for work performed on an eligible film.
You can claim this credit if you manufacture and sell
geothermal heat pumps for use in Manitoba The percentage of eligible salaries paid to non-residents for
before July 1, 2023. work performed in Manitoba is 30% of eligible salaries paid
to Manitobans when there are two Manitoba trainees for
Manufacturers can claim a 7.5% tax credit on the adjusted
each eligible non-resident in the film production technical
cost of geothermal heat pump systems that meet the
crew. However, it is 10% of eligible salaries paid to
standards set by the Canadian Standards Association.
Manitobans when there is only one Manitoba trainee for
Adjusted cost means an amount equal to 125% of the each eligible non-resident.
manufacturer’s cost of manufacturing the heat pump.
The following bonuses are available:
For tax years starting before July 1, 2023, manufacturers can
■ a 10% frequent filming bonus on the third eligible film,
also claim an 8% tax credit on the adjusted cost of green
for corporations that produce three eligible films in
energy transmission equipment sold before July 1, 2023.
two years. This also applies to serial productions
The Manitoba manufacturing investment tax credit
■ a 5% rural filming bonus on eligible salaries paid for
(page 108) includes a credit for green energy transmission
work performed in Manitoba on productions where at
equipment.
least 50% of filming days take place at least 35 kilometres
This credit is refundable, but must first be applied against outside of Winnipeg
total taxes payable.
■ a 5% Manitoba producer bonus on eligible salaries
On line 619 of Schedule 5, enter the amount of the credit where a Manitoba resident receives credit as a producer
earned in the year. on an eligible film
Purchaser’s tax credit Instead of claiming the credit based on labour costs only,
You can also claim this credit if you buy qualifying corporations may elect to claim a 30% tax credit based on
property that is used to produce energy in Manitoba from a production costs incurred for labour, goods, and services
renewable resource before July 1, 2023. The rate varies with provided in Manitoba that are directly attributable to the
different classes of property and is prescribed by production of an eligible film.
legislation.
A new Manitoba Production Company Bonus of 8% is
Purchasers can claim a credit on geothermal heat pump added to the 30% cost-of-production credit, increasing the
systems that meet the standards set by the Canadian total cost-of-production credit to 38%. The production
Standards Association. The tax credit equals the total of: company must own, otherwise than by way of security,
voting shares of the corporation and receive credit as a
■ 15% of the capital cost of geothermal energy equipment,
producer, co-producer, or executive producer of the film.
excluding the cost of the heat pump
This applies to productions for which principal
■ 7.5% of the purchase price of a heat pump that qualifies photography begins after May 31, 2020.
for the manufacturer’s geothermal energy equipment tax
The cost-of-production credit also includes eligible
credit
accommodation expenditures of up to $300 (including tax)
Purchasers who install new specified solar heating per night for a residence or a hotel room in Manitoba.
equipment in Manitoba qualify for a refundable 10% credit
This credit is fully refundable, but must first be applied
on the eligible capital costs (including taxes and costs
against total taxes payable.
related to acquiring and making the system operational).
The equipment does not include equipment used to heat To claim the credit, for each eligible film, file the following
water for use in a swimming pool or equipment that with your return for the tax year:
distributes heated air or water in a building.
■ a Certificate of Completion (if the production was
completed in the tax year), or an Advance Certificate of

112 canada.ca/taxes
 Eligibility (if the production was not completed in the tax On line 602 of Schedule 5, enter the amount of the
year), issued by Manitoba Film and Music non-refundable credit you are claiming. On line 326 of
Schedule 5, enter the amount of the refundable credit.
■ a completed copy of Schedule 388, Manitoba Film and
Video Production Tax Credit
Manitoba community enterprise development tax credit
■ all the additional documents listed on the last page of Corporations with a permanent establishment in Manitoba
Schedule 388 that pay at least 25% of their payroll to Manitoba residents
are eligible to acquire tax-creditable shares when they
If you file your return electronically, see information on
invest in specific community enterprises or in community
T2 Attach-a-doc on page 10.
development investment pools in their communities. The
If you file a paper return, send the return and required Manitoba government will issue a receipt called slip
attachments to your tax centre. To find your tax centre, go T2CEDTC (MAN.). The shares must be issued after
to canada.ca/cra-tso-contact-information. June 11, 2014 and before 2021.
Corporations may file Form T2029, Waiver in Respect of the The Manitoba community enterprise development tax
Normal Reassessment Period or Extended Reassessment credit, which was scheduled to end December 31, 2020, has
Period, to extend the application for a Certificate of been extended one year to December 31, 2021.
Completion with the Manitoba certifying authority by
This refundable credit is equal to 45% of a maximum
18 months.
annual investment of $60,000.
On line 620 of Schedule 5, enter the amount of the credit
If you file electronically, keep your receipt in case we ask
earned in the current year.
for it later. Otherwise, file your receipt with your paper
return.
Manitoba rental housing construction tax credit
This tax credit is equal to 8% of the capital cost of an On line 327 of Schedule 5, enter the total amount of the
eligible rental housing project. credit you are claiming.
Projects in which the application is submitted before
Manitoba child care centre development tax credit
March 13, 2018, must be made available for use before 2020.
This refundable income tax credit applies to the creation of
For applications submitted after March 12, 2018 and
licensed child care centres.
before 2019, the project must be made available for use
before 2021. Applications are no longer accepted after 2018. Manitoba will issue a tax credit certificate to taxable private
corporations that create, after March 12, 2018, and
Eligible projects means the construction or conversion from
before 2021, new child care centres. The credit can
a non-residential use, of a building, group of buildings, or
reach $10,000 over five years per infant or preschool space
portion of a building, with at least five or more new
created. The corporation must not be primarily engaged in
residential rental units, and with at least 10% of the units
child care services.
qualifying as affordable rental housing units. The
maximum credit is set at $12,000 per eligible rental unit. On line 889 of Schedule 5, enter the certificate number and
on line 328, the amount of the credit you are claiming.
Manitoba Housing and Community Development reviews
all tax credit applications and will issue a tax credit
certificate to a corporation that builds an eligible rental Saskatchewan
housing project. The lower rate of Saskatchewan income tax is 2%.
The minister responsible for this credit is the minister Effective October 1, 2020, the Saskatchewan lower rate of
appointed to administer the Manitoba Housing and corporation income tax temporarily decreases from 2%
Renewal Corporation Act. It was previously the minister of to 0%. It will be restored to 1% effective July 1, 2022, and
Housing and Community Development. to 2% effective July 1, 2023. If the rate changes during the
tax year, you have to base your calculation on the number
Eligible landlords can operate as a for-profit or
of days in the year that each rate is in effect.
not-for-profit corporation, but must be residents of
Manitoba or have a permanent establishment in Manitoba. Income eligible for this lower rate is determined using the
Eligible not-for-profit projects will receive a fully Saskatchewan business limit of $600,000.
refundable tax credit in the year in which the tax credit is
earned, as the project becomes available for use. The tax The higher rate of income tax is 12%. This rate applies to all
credit on for-profit projects will be claimable over a income not eligible for the lower rate.
maximum of five years, and is non-refundable. You can use Schedule 411, Saskatchewan Corporation Tax
To claim the credit, file a completed Schedule 394, Calculation, to help you calculate your Saskatchewan tax
Manitoba Rental Housing Construction Tax Credit, with before the application of credits. You do not have to file it
your return. You do not have to file the certificate with your with your return. See the schedule for more details.
return. However, keep it in case we ask for it later. On line 235 of Schedule 5, enter the amount of tax
Tax-exempt corporations also have to file a return in order calculated.
to claim this credit.

canada.ca/taxes 113
Saskatchewan credit union tax reduction You can calculate the reduction on Schedule 404,
Note Saskatchewan Manufacturing and Processing Profits Tax
The Saskatchewan credit union tax reduction is being Reduction. Schedule 404 is a worksheet to calculate the
phased out over four years as follows: 75% for 2017, 50% reduction. You do not have to file it with your return. For
for 2018, 25% for 2019, and 0% after 2019. The amount is more details, see the schedule.
prorated for all tax years during the phase-out period
On line 626 of Schedule 5, enter the amount of reduction
that do not coincide with the calendar year.
you are claiming.
The Saskatchewan credit union tax reduction allows credit
unions a special reduction from income tax otherwise Saskatchewan manufacturing and processing
payable. It is designed to reduce their overall income tax investment tax credit
rate to the same net rate paid by small business You can earn this credit on qualified property that is used
corporations that claim the Saskatchewan small business in Saskatchewan mainly for manufacturing or processing
deduction. goods for lease or sale.
To be eligible to claim the tax reduction, the credit union The credit is fully refundable and is equal to 6% of the
must meet all of the following conditions: capital cost of a qualified property.
■ have been a credit union throughout the tax year Corporations that are exempt under section 149 of the
federal Income Tax Act are not eligible for the credit.
■ have had a permanent establishment in Saskatchewan at
any time in the tax year To claim the credit, file a completed Schedule 402,
Saskatchewan Manufacturing and Processing Investment
■ have Saskatchewan taxable income in the year
Tax Credit, with your return. For more details, see the
To claim the Saskatchewan credit union tax reduction, file schedule.
Schedule 17, Credit Union Deductions, with your return.
On line 644 of Schedule 5, enter the amount of the credit
you are claiming.
Saskatchewan political contribution tax credit
You can claim a tax credit on contributions made to
Saskatchewan research and development tax credit
qualifying political parties or election candidates.
You can claim this credit if you have a permanent
The annual maximum credit is $650 and is calculated as establishment in Saskatchewan, and you made eligible
follows: expenditures for scientific research and experimental
development carried out in Saskatchewan.
■ 75% of the first $400 contributed
The credit is equal to 10% of eligible expenditures incurred
plus
after March 31, 2015. This rate was previously 15%.
■ 50% of the next $350 contributed
The credit is based on the sum of the corporation’s eligible
plus expenditures and on any repayments of government
assistance that are related to eligible expenditures.
■ 33 1/3% of the next $525 contributed
Refundability varies with the period the expenditure is
You do not have to file official receipts with your return. incurred. Any unused non-refundable credit can be carried
However, keep them in case we ask for them later. We can back 3 tax years and carried forward 10 tax years from the
only accept photocopies if the issuer certifies them as true tax year in which you earned the credit.
copies.
You can renounce the non-refundable research and
On line 890 of Schedule 5, enter the total amount of development tax credit for an eligible expenditure incurred
qualifying contributions, and on line 624, enter the amount during the year, in whole or in part.
of the credit you are claiming.
Effective April 1, 2017, Canadian-controlled private
Saskatchewan manufacturing and processing profits corporations (CCPCs) are eligible for a refundable tax credit
tax reduction on the first $1 million of qualifying expenditures.
You can claim this reduction if at any time in the tax year Qualifying expenditures that are more than the annual
you had a permanent establishment in Saskatchewan, limit, and those incurred by non-CCPCs, remain eligible for
earned taxable income and had Canadian manufacturing a non-refundable credit. A yearly maximum of $10 million
and processing profits, in Saskatchewan. for total qualifying expenditures is set for refundable and
non-refundable tax credits.
The profits from producing or processing electrical energy
or steam for sale can be included with Canadian
manufacturing and processing profits for this tax reduction.
You must claim this reduction within three years of the
filing due date of the return for the applicable tax year.
You can reduce the Saskatchewan income tax rate on
Canadian manufacturing and processing profits by up
to 2%.

114 canada.ca/taxes
The following table summarizes the eligibility criteria for ■ film and television tax credit
refund:
■ interactive digital media tax credit
Expenditures Annual Non-
CCPCs ■ mining exploration tax credit
incurred expenditures CCPCs
$1 million or non- ■ production services tax credit
refundable
less refundable
After March 31, ■ scientific research end experimental development tax
2017 more than $1 credit
non- non-
million, up to
refundable refundable ■ training tax credit for employers
$10 million
After The lower rate of British Columbia income tax is 2%.
March 31, 2015, non- non-
no limit Income eligible for the lower rate is determined using the
and before refundable refundable
April 1, 2017 British Columbia business limit of $500,000.
After $3 million or non- The higher rate of British Columbia income tax is 12%. This
refundable
March 31, 2012, less refundable rate applies to all income not eligible for the lower rate.
and before more than $3 non- non-
April 1, 2015 million refundable refundable You can use Schedule 427, British Columbia Corporation
Tax Calculation, to help you calculate your
For eligible expenditures incurred after March 31, 2015, British Columbia tax before the application of credits. You
and before April 1, 2017, the whole credit is do not have to file it with your return. See the schedule for
non-refundable. more details.
Effective for qualifying expenditures incurred after On line 240 of Schedule 5, enter the amount of tax
March 31, 2012, and before April 1, 2015: calculated.
■ the tax credit is refundable only for CCPCs, up to a References
Sections 14, 14.1, and 16, British Columbia Income Tax Act
maximum annual limit of $3 million in qualifying
expenditures
British Columbia credit union tax reduction
■ qualifying expenditures that are more than the annual The British Columbia credit union tax reduction allows
limit, and all qualifying expenditures incurred by credit unions a special reduction from income tax otherwise
non-CCPCs, are eligible for a non-refundable tax credit payable. It is designed to reduce their overall income tax
To claim the credit, file a completed Schedule 403, rate to the same net rate paid by small business
Saskatchewan Research and Development Tax Credit. See corporations that claim the British Columbia small business
the schedule for more details. deduction.

On line 631 of Schedule 5, enter the amount of the To be eligible to claim the tax reduction, the credit union
non-refundable credit you are claiming. On line 645 of must meet all of the following conditions:
Schedule 5, enter the amount of the refundable credit. ■ have been a credit union throughout the tax year

Saskatchewan qualifying environmental trust tax credit ■ have had a permanent establishment in British Columbia
at any time in the tax year
A corporation that is a beneficiary of a qualifying
environmental trust located in Saskatchewan can claim ■ have British Columbia taxable income in the year
a 12% tax credit on income that is subject to tax under
Part XII.4 of the federal Income Tax Act. Note
Exceptionally, in 2016, only 80% of the additional
The qualifying environmental trust will issue a letter to the deduction was available.
corporation that is a beneficiary.
To claim the British Columbia credit union tax reduction,
This credit is fully refundable, but must first be applied file Schedule 17, Credit Union Deductions, with your
against taxes payable. return.
You do not have to file the letter with your return.
However, keep it in case we ask for it later. British Columbia logging tax credit
Corporations that have paid logging tax to
On line 641 of Schedule 5, enter the amount of the credit British Columbia on income they earned from logging
earned. operations for the year can claim a British Columbia
logging tax credit. This non-refundable credit is equal to
British Columbia one-third of the logging tax payable and paid as indicated
As part of British Columbia’s COVID-19 supports, the on provincial forms FIN 542S, Logging Tax Return of
deadline to claim the following tax credits for claims Income, or FIN 542P, Logging Tax Return of Income for
required to be made March 13,2020, or later is extended to Processors.
six months from the original due date or to
December 31, 2020, whichever is earlier:
■ book publishing tax credit

canada.ca/taxes 115
On line 651 of Schedule 5, enter the amount of the credit British Columbia scientific research and experimental
you are claiming. development tax credit
Reference A qualifying corporation with a permanent establishment
Section 19.1, British Columbia Income Tax Act in British Columbia can claim this credit on expenditures
incurred in the tax year before September 1, 2022, for
British Columbia farmers’ food donation tax credit scientific research and experimental development (SR&ED)
Corporations in the business of farming can claim this carried on in British Columbia.
credit if they donate qualifying agricultural products they An active member of a partnership can also claim its share
produce in British Columbia to a registered charity that of the partnership’s non-refundable tax credit for SR&ED
provides food to those in need or helps to operate a school carried on in British Columbia. Only partners that are
meal program. qualifying corporations can claim the credit.
The non-refundable tax credit is equal to 25% of the eligible To claim the credit, file a completed Form T666,
amount of the qualifying agricultural product for gifts British Columbia (BC) Scientific Research and Experimental
made on or after February 17, 2016. Development Tax Credit, with your return. You must file
The British Columbia farmers’ food donation tax credit, this form no later than 18 months after the end of the tax
which was scheduled to end December 31, 2020, has been year in which the qualified expenditures are incurred (even
extended three years to December 31, 2023. if you do not claim the credit for that year). For more
details, see Form T666.
You must claim the credit in the same year that you claim
References
the deduction for charitable gifts under section 110.1 of the Part 6, British Columbia Income Tax Act
federal Income Tax Act for the donation. The carry-forward
period is five years. British Columbia SR&ED refundable tax credit
A qualifying corporation that is a CCPC may claim the
To claim the credit, file a completed Schedule 2, Charitable refundable tax credit.
Donations and Gifts, with your return. For more details, see
the schedule. The amount of the credit is equal to 10% of whichever of
the following amounts is less:
On line 683 of Schedule 5, enter the amount of the credit
you are claiming. ■ the SR&ED qualified BC expenditure for the tax year
■ the expenditure limit for the tax year
British Columbia small business venture capital
tax credit On line 674 of Schedule 5, enter the amount of the
Corporations investing in shares of a registered venture refundable credit you are claiming.
capital corporation or eligible business corporation can Reference
claim a British Columbia venture capital tax credit. The Section 98, British Columbia Income Tax Act
British Columbia government issues a certificate called
British Columbia SR&ED non-refundable tax credit
Form SBVC 10 to these corporations.
Qualifying CCPCs with SR&ED qualified expenditures that
For tax years that end after February 21, 2017, eligible are more than their expenditure limit and qualifying
business corporations participating in the small business corporations that are not CCPCs, may claim a
venture capital program are allowed to claim the British non-refundable tax credit.
Columbia interactive digital media tax credit (page 121).
The annual non-refundable tax credit is 10% of the SR&ED
As of March 2, 2019, a convertible right investment in an qualified BC expenditure for that year less the total of:
eligible business corporation is eligible for a tax credit.
■ the amount of refundable credit for that year
A tax credit certificate is issued when the investment is
made, not when the convertible right converts to shares. ■ any amount renounced for that year
Apply the venture capital tax credit first to reduce the The credit may be deducted against the income tax payable
British Columbia provincial tax payable for the year to zero. for that year. You must claim the maximum tax credit
If unclaimed credits remain, you can carry them forward available in the year it is earned. You can carry back an
for four tax years to reduce the British Columbia tax unused credit to the 3 previous tax years from the year the
payable. expenditures were incurred. You can also carry forward the
unclaimed credit to the 10 tax years that follow the tax year
You do not have to file the certificate with your return.
in which the expenditures were incurred.
However, keep it in case we ask for it later.
On line 659 of Schedule 5, enter the amount of the
On Schedule 5, line 880, enter the unclaimed tax credit, if
non-refundable credit you are claiming.
any, at the end of the previous tax year. On line 881, enter
the tax credit amount available in the current year as Reference
reported on Form SBVC 10. On line 882, enter the 9-digit Section 99, British Columbia Income Tax Act
certificate number from Form SBVC 10. On line 883, enter
the amount of the credit transferred on an amalgamation. Recapture of British Columbia SR&ED tax credit
On line 656, enter the tax credit amount you are claiming. A corporation that disposed of a property used in SR&ED,
or converted it to commercial use within 10 years of
Reference
Section 21, British Columbia Income Tax Act acquiring the property, may be required to report a

116 canada.ca/taxes
recapture of any British Columbia SR&ED tax credit Note
previously calculated on that property. Any recapture will If you are not eligible for, and do not claim the basic tax
create or increase British Columbia tax otherwise payable. credit, you cannot claim the scriptwriting, regional,
distant location, film training, or the DAVE tax credits.
To calculate the recapture, complete Form T666 and attach
it to your return. For more details, see Form T666. To claim these credits, file the following with your return
for the year:
On line 241 of Schedule 5, enter the amount of recapture
calculated. ■ the eligibility certificate (or a copy) received from
Reference
Creative BC
Sections 102.1 to 102.6, British Columbia Income Tax Act if it applies, the completion certificate (or a copy) and a
■
copy of the audited statement of production costs and
British Columbia qualifying environmental trust notes provided to Creative BC
tax credit
A corporation that is a beneficiary of a qualifying ■ a completed copy of Form T1196, British Columbia Film
environmental trust located in British Columbia can claim a and Television Tax Credit, for each eligible production
tax credit on income that is subject to tax under Part XII.4 of If you file your return electronically, see information on
the federal Income Tax Act. T2 Attach-a-doc on page 10.
The credit will reduce the provincial tax otherwise payable If you file a paper return, send the return and required
for the tax year that includes the trust’s tax year. attachments to your tax centre. To find your tax centre, go
This credit is fully refundable, but must first be applied to canada.ca/cra-tso-contact-information.
against total taxes payable. You must claim these credits no later than 36 months after
On line 670 of Schedule 5, enter the amount of the credit the end of the tax year.
earned. For tax years starting on or after February 19, 2020, the
Reference filing deadline to claim these credits is now 18 months after
Section 25, British Columbia Income Tax Act the end of the tax year, reduced from 36 months.
On line 671 of Schedule 5, enter the amount you are
British Columbia film and television tax credit
claiming.
The film and television tax credits are for domestic
productions with qualifying levels of Canadian content. Basic tax credit
To claim these credits, an eligible production corporation The basic tax credit is equal to 35% of the qualified BC
must be a Canadian-controlled taxable corporation that has labour expenditure for the tax year for the production.
a permanent establishment in British Columbia and its
Scriptwriting tax credit
activities must primarily be carrying on a film or video
The scriptwriting tax credit is equal to 35% of eligible
production business through a permanent establishment in
scriptwriting expenditures directly attributable to
Canada.
developing script material for a production. This includes
The film and television tax credit cannot be claimed if salary, wages, and other remuneration and reimbursements
the production services tax credit is claimed for that paid to scriptwriters who are BC-based individuals. The
production. cost of buying a published or finished literary work,
screenplay, script or script material is not eligible.
These credits are fully refundable but must first be applied
against total taxes payable. The expenses have to be incurred:
These credits apply to BC labour expenditures. For ■ after February 20, 2018
determining BC labour expenditures, a BC-based
■ no earlier than two years before the date principal
individual is a person who is resident in the province on
photography starts
December 31 of the year preceding the end of the tax year
for which the tax credit is claimed. ■ before the end of the final script stage
An eligible production corporation can claim these different These amounts have to be paid no later than 60 days after
credits: the end of the tax year in which principal photography
started.
■ the basic tax credit (35%)
Regional tax credit
■ the scriptwriting tax credit [for scriptwriting
The regional tax credit is equal to one of the following
expenditures incurred after February 20, 2018 (35%)]
amounts:
■ the regional tax credit (12.5%)
■ 12.5% of the qualified BC labour expenditure for the
■ the distant location regional tax credit (6%) production for the tax year, where a minimum of
five days and more than 50% of the total principal
■ the film training tax credit (30%—see other option below)
photography days in British Columbia are outside of the
■ the digital animation, visual effects and post-production designated Vancouver area
(DAVE) tax credit (16%—17.5% before October 1, 2016)
■ for a production that is intended for television broadcast
as a series and that comprises a cycle of at least

canada.ca/taxes 117
 three episodes, where principal photography of at least ■ 30% of the payments (net of assistance) made to the
three episodes is done in British Columbia outside of the trainees in the tax year while they are participating in the
designated Vancouver area, the credit is 12.5% of the approved training program on the production
qualified BC labour expenditure for the tax year for the
■ 3% of the qualified BC labour expenditure for the
qualified episodes done in British Columbia, where a
production for the tax year
minimum of five days and more than 50% of the total
principal photography days in British Columbia are Digital animation, visual effects and post-production
outside of the designated Vancouver area (DAVE) tax credit
The digital animation, visual effects and post-production
The credit is prorated for the number of days of principal
tax credit is equal to 16% of BC labour expenditure directly
photography done in British Columbia outside the
attributable to prescribed digital animation or visual effects
designated Vancouver area over the total number of days of
activities, including prescribed digital post-production
principal photography done in British Columbia.
activities for productions that start principal photography
For animated productions that start key animation after after February 28, 2015. For productions that started
June 26, 2015, the regional tax credit is 12.5% of the principal photography before October 1, 2016, the rate
qualified BC labour expenditure prorated by the BC labour is 17.5%.
expenditure incurred in BC outside of the designated Reference
Vancouver area over the total BC labour expenditure for Part 5, British Columbia Income Tax Act
the animated production incurred in the tax year. There is
no minimum number or percentage of principal British Columbia production services tax credit
photography days required, and there is no proration based The production services tax credits are available to both
on principal photography days. domestic and foreign producers and there is no Canadian
Distant location regional tax credit content requirement. To claim these credits, the corporation
The distant location regional tax credit is available when must have a permanent establishment in British Columbia
principal photography is done in British Columbia in a during the tax year, and throughout the tax year, must have
distant location. The distant location is that part of British primarily carried on a film or video production business or
Columbia that is not included within the area that extends a film or video production services business.
from the designated Vancouver area north, up to and The production services tax credit cannot be claimed if the
including Whistler, and east to include Hope. film and television tax credit is claimed for that production.
The distant location regional tax credit is equal to one of the These credits are fully refundable, but must first be applied
following amounts: against total income tax payable.
■ 6% of the qualified BC labour expenditure for the These credits apply to BC labour expenditures. A BC-based
production for the tax year, where a minimum of one individual is a person who is resident in the province on
day of principal photography is in a distant location December 31 of the year preceding the end of the tax year
■ for a production that is intended for television broadcast for which the tax credit is claimed.
as a series and that comprises a cycle of at least An accredited production corporation can claim these
three episodes, where principal photography of at least different credits:
three episodes is done in a distant location, the credit is
6% of the qualified BC labour expenditure for the tax ■ the basic production services tax credit (28%—33%
year for the qualified episodes determined for the before October 1, 2016)
regional tax credit, where a minimum of one day of
■ the regional production services tax credit (6%)
principal photography is in a distant location
■ the distant location production services tax credit (6%)
The credit is prorated for the number of days of principal
photography done in a distant location, over the total ■ the digital animation, visual effects and post-production
number of days of principal photography done in British (DAVE) services tax credit (16%—17.5% before
Columbia. October 1, 2016)
For animated productions that start key animation after Note
June 26, 2015, the distant location regional tax credit is 6% If you are not eligible for, and do not claim the basic
of the qualified BC labour expenditure prorated by the BC production services tax credit, you cannot claim the
labour expenditure incurred in a distant location over the regional, distant location, or DAVE production services
total BC labour expenditure for the animated production tax credits.
incurred in the tax year. There is no minimum number or
To claim these credits, file the following with your return
percentage of principal photography days required, and
for the year:
there is no proration based on principal photography days.
■ the accreditation certificate (or a copy) received from
The distant location regional tax credit can only be claimed
Creative BC
if the corporation is eligible for, and claiming, the regional
tax credit. Effective July 1, 2020, corporations intending to claim
these credits must notify Creative BC of their intent
Film training tax credit
within 60 days of first incurring an accredited BC labour
The film training tax credit is equal to whichever is less:
expenditure for the production. Creative BC must

118 canada.ca/taxes
 receive this notice before issuing an accreditation The credit is prorated for the number of days of principal
certificate. photography done in a distant location, over the total
number of days of principal photography done in British
■ a completed Form T1197, British Columbia Production
Columbia.
Services Tax Credit, for each accredited production
For animated productions that start key animation after
If you file your return electronically, see information on
June 26, 2015, the distant location production services tax
T2 Attach-a-Doc on page 10.
credit is 6% of the accredited qualified BC labour
If you file a paper return, send the return and required expenditure prorated by the accredited BC labour
attachments to your tax centre. To find your tax centre, go expenditure incurred in a distant location over the total
to canada.ca/cra-tso-contact-information. accredited BC labour expenditure incurred for the
animated production in the tax year. There is no minimum
You must claim these credits no later than 36 months after number or percentage of principal photography days
the end of the tax year. required, and there is no proration based on principal
For tax years starting on or after February 19, 2020, the photography days.
filing deadline to claim these credits is now 18 months after The distant location production services tax credit can only
the end of the tax year, reduced from 36 months. be claimed if the corporation is eligible for, and is claiming
On line 672 of Schedule 5, enter the amount of credit you the regional production services tax credit.
are claiming. Digital animation, visual effects and post-production
Basic production services tax credit (DAVE) services tax credit
The basic production services tax credit is equal to 28% of The digital animation, visual effects and post-production
the corporation’s accredited qualified BC labour services tax credit is equal to 16% of accredited qualified BC
expenditure for the tax year. labour expenditure that is directly attributable to
prescribed digital animation or visual effects activities,
For productions that started principal photography before including prescribed digital post-production activities for
October 1, 2016, the rate is 33%. If the first episode in a cycle productions that start principal photography after
of a television series started principal photography before February 28, 2015.
October 1, 2016, the 33% rate applies to all episodes in that
cycle. For productions that started principal photography before
October 1, 2016, the rate is 17.5%. If the first episode in a
Regional production services tax credit cycle of a television series started principal photography
The regional production services tax credit is equal to 6% of before October 1, 2016, the 17.5% rate applies to all episodes
the accredited qualified BC labour expenditure for the in that cycle.
production for the tax year, where a minimum of five days
and more than 50% of the total principal photography days Reference
Part 5, British Columbia Income Tax Act
in British Columbia are done outside of the designated
Vancouver area.
British Columbia mining exploration tax credit
The credit is prorated for the number of days of principal A corporation that has incurred qualified mining
photography done in British Columbia outside the exploration expenses in British Columbia may qualify for
designated Vancouver area over the total number of days of the British Columbia mining exploration tax credit. The
principal photography done in British Columbia. corporation must have maintained a permanent
establishment in the province at any time in the tax year.
For animated productions that start key animation after
June 26, 2015, the regional production services tax credit The expenditures have to be incurred in the tax year for
is 6% of the accredited qualified BC labour expenditure, determining the existence, location, extent, or quality of a
prorated by the accredited BC labour expenditure incurred mineral resource in British Columbia.
in BC outside the designated Vancouver area over the total
accredited BC labour expenditure for the animated Qualified mining exploration expenses may include
production incurred in the tax year. There is no minimum expenses incurred in the course of:
number or percentage of principal photography days ■ prospecting
required, and there is no proration based on principal
photography days. ■ carrying out geological surveys

Distant location production services tax credit ■ drilling

The distant location production services tax credit is ■ trenching
available when principal photography is done in British
Columbia in a distant location. The distant location is that ■ digging test pits
part of British Columbia that is not included within the area ■ preliminary sampling
that extends from the designated Vancouver area north, up
to and including Whistler and east to include Hope. Exploration expenses may also include expenses incurred
for environmental studies and community consultation to
The distant location production services tax credit is equal get a right, licence or privilege for determining the
to 6% of the accredited qualified BC labour expenditure for existence, location, extent or quality of a mineral resource
the production for the tax year, where a minimum of one in BC.
day of principal photography is done in a distant location.

canada.ca/taxes 119
Any flow-through mining expenditure renounced under and on line 665, enter the amount of the credit you are
subsection 66(12.6) of the federal Income Tax Act does not claiming. You must claim this credit no later than
qualify for the credit. 18 months after the end of the tax year.
This credit also applies to partnerships. Taxpayers who are References
active members of a partnership, other than specified Part 8, British Columbia Income Tax Act
members (such as limited partners), can each claim their
proportionate share of the partnership’s tax credit. To claim British Columbia training tax credit
your proportionate share of the partnership’s tax credit, file You can claim a refundable tax credit if you are a taxable
a completed Schedule T1249, British Columbia Mining corporation with a permanent establishment in the
Exploration Tax Credit Partnership Schedule, with your province and you paid salary or wages before
return. For more details, see the schedule. January 1, 2023, to an employee who was registered in a
prescribed program administered through the BC Industry
The credit is equal to 20% of the amount by which: Training Authority.
■ the total qualified mining exploration expenses incurred The British Columbia training tax credit, which was
in the tax year scheduled to end December 31, 2019, has been extended
is more than three years to December 31, 2022.

■ the total assistance for amounts included in the total The province offers a credit to employers based on the
qualified mining exploration expenses for the tax year wages paid to an apprentice:

Prospecting, drilling, trenching, digging test pits and ■ the basic tax credit for apprentices in the first 24 months
preliminary sampling expenses incurred after May 17, 2018 of a non-Red Seal program (20%, maximum $4,000)
are qualified mining exploration expenses only to the extent ■ the completion tax credit when an apprentice completes
the expenses exceed any revenues resulting from those level three or four of either a Red Seal program or a
expenses before the mine comes into production in non-Red Seal program (15%, maximum $2,500/$3,000)
reasonable commercial quantities.
■ the enhanced tax credit for apprentices who are
A corporation can claim an additional 10% of the total registered as Indians under the Indian Act or who
qualified mining exploration expenses incurred in qualify for the disability amount on their income tax and
prescribed mountain pine beetle affected areas. These benefit return (all levels of both Red Seal and
expenses must be reduced by the total assistance non-Red Seal programs) (5.5% maximum $1,000, 30%
attributable to them. maximum $6,000, or 22.5% maximum $3,750/$4,500)
The credit is fully refundable, but must first be applied Note
against total taxes payable. For level three or four of a Red Seal or non-Red Seal
To claim the credit, file a completed Schedule 421, program, level has the same meaning as tax credit level.
British Columbia Mining Exploration Tax Credit, with your To complete a tax credit level, see the requirements in
return. You must claim this credit no later than 18 months the table issued by the province, Training Tax Credits:
after the end of the tax year, for a tax year that ends on or Table of Eligible Programs and Completion
after January 1, 2017. It was previously 36 months. Requirements for Employers.

For more details, see the schedule. Members of a You cannot claim the British Columbia training tax credit if
partnership must also file a completed Schedule T1249. you claim the British Columbia shipbuilding and ship
repair industry tax credit in the tax year.
On line 673 of Schedule 5, enter the amount of credit you
are claiming. You can claim one or more of the following three credits in
the year for each qualified employee:
References
Section 25.1, British Columbia Income Tax Act ■ The basic tax credit is 20% of the salary and wages (net
of designated assistance) that were paid to an employee
British Columbia book publishing tax credit who was in the first 24 months of a non-Red Seal
You can claim this credit if you receive a base amount of apprenticeship program in the tax year. The maximum
Publishing Support contributions under the federal Canada basic tax credit you can claim is $4,000, per employee, per
Book Fund (CBF) before April 1, 2021. year. This credit is not available to Red Seal programs
and cannot be claimed if you are claiming the federal
The recipient must be a Canadian-controlled corporation apprenticeship job creation tax credit for the same
carrying on business mainly through a permanent employee (see page 79)
establishment in British Columbia with book publishing as
its principal business. ■ The completion tax credit is 15% of the salary and wages
(net of designated assistance) that were paid to an
You are eligible for a credit of 90% of the base amount of employee within the 12 month period ending on any day
Publishing Support contributions received in the tax year. in the month that the employee completed level three or
The credit is fully refundable, but must first be applied four. The maximum completion tax credit you can claim
against total taxes payable. is $2,500 per employee who has completed level three,
On line 886 of Schedule 5, enter the base amount of and $3,000 per employee who has completed level four.
Publishing Support contributions received in the tax year

120 canada.ca/taxes
 This credit applies to both Red Seal and non-Red Seal working for you when they completed a specific level of the
programs apprenticeship program.
■ The enhanced tax credit applies to employees who are These credits extend to partnerships. Corporations who are
registered as Indians under the Indian Act or qualify for members of a partnership, other than specified members
the disability amount on their income tax return. Do not (such as limited partners), can each claim their share of the
claim the basic tax credit or the completion tax credit if partnership’s tax credit.
you are claiming the enhanced tax credit as these credits
Special rules apply for employers not dealing at arm’s
are included in the calculation of the enhanced tax
length who want to claim the training tax credit for the
credits. An employer claiming the enhanced tax credit for
same employee. For more details, see section 125 of the
a qualifying employee should only complete Part 3 when
British Columbia Income Tax Act.
filing Schedule 428, British Columbia Training Tax
Credit. The enhanced tax credits are as follows: To claim these credits, file a completed Schedule 428,
British Columbia Training Tax Credit, with your return.
– for the first 24 months of a Red Seal program, 5.5% of
You must claim the basic tax credit and the enhanced basic
the salary and wages (net of designated assistance) that
tax credit no later than 36 months after the end of the tax
were paid to an employee who was in the first
year in which the eligible salaries and wages are paid. You
24 months of a Red Seal apprenticeship program in the
must claim the completion tax credit and the enhanced
tax year. The maximum tax credit you can claim is
completion tax credit no later than 36 months after the end
$1,000 per employee. You can claim this credit in
of the tax year in which the employee completed the
addition to the federal apprenticeship job creation tax
requirements for a tax credit level.
credit for the same employee
On line 679 of Schedule 5, enter the total amount of the
– for the first 24 months of a non-Red Seal program,
credits you are claiming.
30% of the salary and wages (net of designated
assistance) that were paid to an employee who was in References
the first 24 months of a non-Red Seal apprenticeship Part 9, British Columbia Income Tax Act
Training Tax Credits: Table of Eligible Programs and Completion
program in the tax year. The maximum tax credit you Requirements for Employers
can claim is $6,000 per employee. This credit is not
available to Red Seal programs and cannot be claimed
British Columbia interactive digital media tax credit
if you are claiming the federal apprenticeship job
The interactive digital media tax credit is a refundable
creation tax credit for the same employee
credit equal to 17.5% of BC eligible salary and wages (net of
– for level three or four of a Red Seal or non-Red Seal designated assistance) incurred before September 1, 2023.
program, 22.5% of the salary and wages (net of
You cannot claim this credit if you claim the BC SR&ED tax
designated assistance) that were paid to an employee
credit for the year. Also, the corporation must meet all of
within the 12-month period ending on any day in the
the following conditions:
month that the employee completed level three or four.
The maximum tax credit you can claim is $3,750, per ■ be registered with the BC Ministry of Finance for each tax
employee who has completed level three and $4,500, year for which the tax credit is claimed
per employee who has completed level four. This part
of the credit is also called the enhanced completion tax ■ have a permanent establishment in British Columbia at
credit any time during the tax year

For the completion and enhanced tax credits, the salary and ■ be a taxable Canadian corporation throughout the tax
wages can be dually applied to overlapping periods when year
more than one level is completed during the tax year. ■ have an amount of eligible salary and wages for the tax
year greater than $100,000. This amount is prorated for
Example short tax years
The employer’s tax year runs from January 1 to ■ be a corporation that meets at least one of the
December 31, 2020. three following conditions:
An employee completes level three on January 31, 2020, – principal business in the tax year is developing
and level four on June 30, 2020. interactive digital media products
In the tax year, the employer can claim the wages paid from – all or substantially all of the business in the tax year is
February 1, 2019, to January 31, 2020, for the level three tax one or both of the following:
credit. In the same tax year, the employer can also claim the
wages paid from July 1, 2019, to June 30, 2020, for the ■ developing interactive digital media products
level four tax credit. The wages paid from July 1, 2019, to ■ providing eligible activities to a corporation who has
January 31, 2020, are used for both credits. a permanent establishment in British Columbia and
whose principal business is the development of
You can also claim these credits for former qualified interactive digital media products
employees for the time they were employed by you during
– principal business in the tax year is not developing
an eligible period, even though they were no longer
interactive digital media products, but eligible salary

canada.ca/taxes 121
 and wages are equal to or greater than $2 million for (such as limited partners), can each claim their share of the
tax years that end after February 21, 2017 partnership’s tax credit.
Note Special rules apply for employers not dealing at arm’s
For tax years that end after February 21, 2017, interactive length who wish to claim the tax credit for the same
digital media corporations registered as eligible business employee. For more details, see section 126.5 of the British
corporations in the small business venture capital Columbia Income Tax Act.
program (page 116) are eligible to claim the credit.
To claim these credits, file a completed Schedule 430,
To claim the credit, file a completed Schedule 429, British Columbia Shipbuilding and Ship Repair Industry
British Columbia Interactive Digital Media Tax Credit, with Tax Credit, with your return. You must claim these credits
your return. no later than 36 months after the end of the tax year in
which you paid the eligible salaries and wages.
You must claim this credit no later than 18 months after the
end of the tax year. On line 681 of Schedule 5, enter the total amount of the
credits you are claiming.
On line 680 of Schedule 5, enter the amount of the credit
you are claiming. References
Part 9, British Columbia Income Tax Act
Reference
Part 10, British Columbia Income Tax Act
Yukon
British Columbia shipbuilding and ship repair industry The lower rate of Yukon income tax is 2%.
tax credit
Effective January 1, 2021, the lower rate of Yukon
You can claim a refundable tax credit if you are an eligible corporation income tax decreases from 2% to 0%. If the rate
employer in the British Columbia shipbuilding and ship changes during the tax year, you have to base your
repair industry and, before January 1, 2023, you paid salary calculation on the number of days in the year that each rate
or wages to an employee who was registered in a is in effect.
prescribed program administered through the BC Industry
Training Authority. Income eligible for the lower rate is determined using the
Yukon business limit of $500,000.
The credit applies to Red Seal and non-Red Seal programs.
The higher rate of tax is 12%. The higher rate applies to
You can claim one or more of the following three credits in taxable income earned in the Yukon that does not qualify
the year for each qualified employee: for the small business deduction.
■ the basic tax credit for employees within 24 months after You can use Schedule 443, Yukon Corporation Tax
the employee entered into an industry training Calculation, to help you calculate the Yukon tax before the
agreement (20%, maximum $5,250) application of credits. You do not have to file it with your
■ the completion tax credit when an employee completes return. See the schedule for more details.
level three or four of an eligible program (20%, On line 245 of Schedule 5, enter the amount of tax
maximum $5,250) calculated.
■ the enhanced tax credit for employees who are registered
as Indians under the Indian Act or who qualify for the Yukon political contribution tax credit
disability amount on their income tax return (all levels of You can claim a tax credit on contributions made to a
an eligible program) (30%, maximum $7,875) registered political party or to a candidate for an election to
the Yukon Legislative Assembly.
For each of the basic and completion tax credits, the credit
is equal to 20% of the salary and wages (net of designated The Yukon political contribution tax credit for corporations
assistance) that were paid to an employee, up to a matches the federal political contribution tax credit for
maximum of $5,250 per employee per tax year. individuals on an ongoing basis.
These numbers are increased by half when they apply to Currently, the annual maximum credit is $650 and is
the enhanced tax credit. This credit is equal to 30% of the calculated as follows:
salary and wages (net of designated assistance) that were
■ 75% of the first $400 contributed
paid to an employee, up to a maximum of $7,875 per
employee per tax year. plus
For the completion and enhanced tax credits, the salary and ■ 50% of the next $350 contributed
wages can be dually applied to overlapping periods when
more than one level is completed during the tax year. plus

You cannot claim the British Columbia shipbuilding and ■ 33 1/3% of the next $525 contributed
ship repair industry tax credit if you claim the British You do not have to file official receipts with your return.
Columbia training tax credit in the tax year. However, keep them in case we ask for them later. We can
These credits extend to partnerships. Corporations that are only accept photocopies if the issuer certifies them as true
members of a partnership, other than specified members copies.

122 canada.ca/taxes
On line 897 of Schedule 5, enter the total amount of Assets in capital cost allowance class 54 and class 55 have
qualifying contributions. On line 675, enter the amount of been added to the list of eligible assets under the program
the credit you are claiming. for non-mining businesses. This applies to tax years ending
after March 18, 2020.
Yukon manufacturing and processing profits tax credit
To claim the rebate, file Schedule 444, Yukon Business
Corporations that have earned taxable income and Carbon Price Rebate, with your return.
manufacturing and processing profits in the Yukon are
eligible for this credit. On line 699 of Schedule 5, enter the amount of the rebate
you are claiming.
The Yukon manufacturing and processing profits tax credit
rate is 9.5%. The small business increment is 0.5%.
Northwest Territories
Effective January 1, 2021, the small business increment The lower rate of Northwest Territories income tax is 4%.
decreases from 0.5% to 0%. If the rate changes during the This lower rate applies to taxable income earned in the
tax year, you have to base your calculation on the number Northwest Territories that qualifies for the federal small
of days in the year that each rate is in effect. business deduction.
Schedule 440, Yukon Manufacturing and Processing Profits Effective January 1, 2021, the lower rate of Northwest
Tax Credit, is a worksheet to calculate the credit. You do Territories corporation income tax decreases from 4%
not have to file it with your return. For more details, see the to 2%. If the rate changes during the tax year, you have to
schedule. base your calculation on the number of days in the year
On line 677 of Schedule 5, enter the amount of the credit that each rate is in effect.
you are claiming. The higher rate of the Northwest Territories income tax
is 11.5%. This rate applies to taxable income earned in the
Yukon research and development tax credit Northwest Territories that does not qualify for the federal
You can claim this credit if you have a permanent small business deduction.
establishment in the Yukon at any time in the year and you
incurred qualified expenditures in the year for scientific You can use Schedule 461, Northwest Territories
research and experimental development carried on in the Corporation Tax Calculation, to help you calculate the
Yukon. Northwest Territories tax before the credits are applied.
You do not have to file it with your return. See the schedule
The credit is equal to the total of the following amounts: for more details.
■ 15% of eligible expenditures incurred in the year On line 250 of Schedule 5, enter the amount of tax
■ 5% of eligible expenditures included above paid or calculated.
payable to Yukon College or Yukon University (Yukon
College was continued as Yukon University effective Northwest Territories political contribution tax credit
February 6, 2020) You can claim a tax credit on contributions made to a
candidate for an election to the Northwest Territories
The credit is based on the sum of the corporation’s qualified Legislative Assembly.
expenditures and any eligible repayments.
The annual maximum credit is $500 and is calculated as
The credit is fully refundable, but must first be applied follows:
against total taxes payable.
■ 100% of the first $100 contributed
To claim the credit, file Schedule 442, Yukon Research and
Development Tax Credit, with your return no later than plus
18 months after the end of the tax year for which you are ■ 50% of the next $800 contributed
claiming the credit. For more details, see the schedule.
You do not have to file official receipts with your return.
On line 698 of Schedule 5, enter the amount of the credit However, keep them in case we ask for them later. We can
earned. only accept photocopies if the issuer certifies them as true
copies.
Yukon carbon rebate
Since July 1, 2019, the federal carbon levy has been applied Note
to fuels bought in Yukon. Yukon Carbon Rebate Program Contributions to a political party do not qualify for this
will return all carbon levy revenues back to individuals, credit.
businesses, First Nations governments, and municipal On line 898 of Schedule 5, enter the total amount of
governments. qualifying contributions, and on line 700, enter the amount
The Canada Revenue Agency administers parts of this of the credit you are claiming.
program in the form of rebates.
Nunavut
On or before November 1 in each financial year, the Yukon
minister of Finance will determine the business rebate The lower rate of Nunavut income tax is 3% effective
factor for the next financial year in accordance with the July 1, 2019. It was previously 4%. This lower rate applies to
Yukon Government Carbon Price Rebate Act. taxable income earned in Nunavut that qualifies for the
federal small business deduction.

canada.ca/taxes 123
If the rate changes during the tax year, you have to base The federal capital gains refund for the year is whichever is
your calculation on the number of days in the year that less:
each rate is in effect.
■ 14% of the total of:
The higher rate of Nunavut income tax is 12%. This rate
– the capital gains dividends paid in the period starting
applies to taxable income earned in Nunavut that does not
60 days after the beginning of the year and ending
qualify for the small business deduction.
60 days after the end of the year and
You can use Schedule 481, Nunavut Corporation Tax
– the capital gains redemption for the year, or
Calculation, to help you calculate the Nunavut tax before
the credits are applied. You do not have to file it with your ■ the refundable capital gains tax on hand at the end of the
return. See the schedule for more details. year
On line 260 of Schedule 5, enter the amount of tax Complete the appropriate lines on Schedule 18, and enter
calculated. on line 788 of the return the federal capital gains refund.
See the next page for details on the provincial or territorial
Nunavut political contribution tax credit capital gains refund.
You can claim a tax credit on contributions made to a
Note
candidate for an election to the Nunavut Legislative
If a corporation is established and maintained mainly to
Assembly.
benefit non-residents, it does not qualify as a mutual
The annual maximum credit is $500 and is calculated as fund corporation, and it cannot claim the capital gains
follows: refund.
■ 100% of the first $100 contributed References
Sections 130 and 131
plus
■ 50% of the next $800 contributed Line 792 – Federal qualifying environmental
trust tax credit refund
You do not have to file official receipts with your return.
However, keep them in case we ask for them later. We can On line 792, enter the amount of federal qualifying
only accept photocopies if the issuer certifies them as true environmental trust tax credit refund that was not used in
copies. the Part I tax calculation. See page 77 for more information.

Note Line 796 – Canadian film or video production

Contributions to a political party do not qualify for this
credit.
tax credit
A fully refundable tax credit is available to qualified
On line 899 of Schedule 5, enter the total amount of corporations that produce an eligible production certified
qualifying contributions. On line 725, enter the amount of by the minister of Canadian Heritage to be a Canadian film
the credit you are claiming. or video production.
The credit is equal to 25% of qualified labour expenditures
Other credits for the year for the production. The qualified labour
Line 780 – Investment tax credit refund expenditure cannot be more than 60% of the total cost of a
production. The tax credit is therefore limited to 15% of the
On line 780, enter the amount of the investment tax credit
total cost of a production, less any assistance. Labour
refund. See page 77 for details.
expenditures in respect of non-residents of Canada (other
than Canadian citizens) will not be eligible for the credit.
Line 784 – Dividend refund
For more information, see Guide RC4164, Canadian Film or
On line 784, enter the amount of the dividend refund,
Video Production Tax Credit, or go to canada.ca/taxes-film.
which you calculated in the “Dividend refund” area on
page 7 of your return. See page 72 for details. To claim the credit, file the following items with your
return for the year:
Line 788 – Federal capital gains refund ■ the Canadian Film or Video Production Certificate
Investment corporations and mutual fund corporations (Part A) issued by the Canadian Audio-Visual
have to file Schedule 18, Federal and Provincial or Certification Office (CAVCO), or a copy
Territorial Capital Gains Refund, with their returns.
Schedule 18 has to contain the following information: ■ if it applies, a Certificate of Completion (Part B) issued by
CAVCO, or a copy, and a copy of the audited statement
■ details about the refundable capital gains tax on hand of production costs and notes provided to CAVCO
■ details of the capital gains redemption for the year ■ a completed Form T1131, Canadian Film or Video
Production Tax Credit, for each Canadian film or video
■ a calculation of the federal capital gains refund for the
production
year
If you file your return electronically, see information on
Use 28% as the percentage to determine the refundable
T2 Attach-a-doc on page 10.
capital gains tax on hand.

124 canada.ca/taxes
If you file a paper return, send the return and required Line 798 – Canadian journalism labour tax
attachments to your tax centre. To find your tax centre, go credit
to canada.ca/cra-tso-contact-information.
The Canadian journalism labour tax credit is a refundable
On line 796, enter the amount of the credit from tax credit that was introduced as of January 1, 2019. The
Form T1131. If you are filing more than one of these forms, credit is set at 25% of qualifying labour expenditures for a
enter the cumulative total. tax year, for an eligible newsroom employee of a qualifying
journalism organization (QJO).
You cannot claim the Canadian film or video production
tax credit if you claim the film or video production services The maximum credit available is $13,750 for each eligible
tax credit for that same production for any tax year. newsroom employee per year. The credit amount will be
References
reduced by the amount received from the Aid to Publishers
Section 125.4 component of the Canada Periodical Fund.
Regulation 1106
RC4164, Canadian Film or Video Production Tax Credit To be eligible for the credit, the corporation must be a QJO,
as defined in subsection 125.6(1). Under this definition,
a QJO must be a qualified Canadian journalism
Line 797 – Film or video production services organization (QCJO), as defined in subsection 248(1), and
tax credit must also meet additional specific criteria:
A fully refundable tax credit is available to eligible
■ it does not hold a licence, as defined in subsection 2(1) of
production corporations for a film or video production
the Broadcasting Act
certified by the minister of Canadian Heritage to be an
accredited production. ■ if it is a corporation having share capital, it meets the
conditions in subparagraph (e)(iii) of the definition of
Eligible production corporations do not include those that,
Canadian newspaper in subsection 19(5)
at any time in the year, are tax-exempt, are controlled by
one or more tax-exempt entities, or are prescribed Several legislative amendments relating to the Canadian
labour-sponsored venture capital corporations. journalism labour tax credit have been proposed. When
passed, the legislative amendments will be effective as of
The credit is equal to 16% of qualified Canadian labour
January 1, 2019. The proposed amendments include
expenditures for the year.
changes to:
Note
■ the definitions of QJO, QCJO, eligible newsroom
Qualified Canadian labour expenditure is net of any
employee, assistance, and qualifying labour expenditure
assistance.
■ the proration of the credit if the organization has not
For more information, see Guide RC4385, Film or Video
been a QJO throughout the tax year
Production Services Tax Credit, or go to canada.ca/taxes
-film. ■ the ability of a partnership that is a QJO to allocate credit
amounts to its active members
To claim the credit, file the following items with your
return for the year: ■ the rules related to the designation and revocation of the
an Accredited Film or Video Production Certificate, or a designation of an organization as a QCJO
■
copy issued by CAVCO For information on the current legislation relating to the tax
credit and the proposed changes, go to canada.ca
■ a completed Form T1177, Film or Video Production
/journalism-labour-tax-credit and canada.ca/en/revenue
Services Tax Credit, for each accredited production
-agency/services/tax/businesses/topics/corporations/whats
If you file your return electronically, see information on -new-corporations.html#jrnlsm.
T2 Attach-a-doc on page 10.
For information on how to apply for designation as
If you file a paper return, send the return and required a QCJO, go to canada.ca/support-canadian-journalism and
attachments to your tax centre. To find your tax centre, go select Qualified Canadian journalism organization.
to canada.ca/cra-tso-contact-information.
To claim the credit, file a completed Schedule 58, Canadian
On line 797, enter the amount of the credit from Journalism Labour Tax Credit, with your return for the
Form T1177. If you are filing more than one of these forms, year.
enter the cumulative total.
On line 798 of the return, enter the amount of the credit you
You cannot claim the film or video production services tax are claiming.
credit if you claim the Canadian film or video production References
tax credit for that same production for any tax year. Section 125.6
Subsection 248(1)
References
Section 125.5
Regulation 9300 Lines 800 and 801 – Tax withheld at source
RC4385, Film or Video Production Services Tax Credit
This is the amount shown as “income tax deducted” on any
information slips, such as NR4, T4A, or T4A-NR, you may
have received. You do not have to file these information
slips with your return, unless you are a non-resident

canada.ca/taxes 125
corporation. However, keep them in case we ask for them Refund or payment
later.
Your refund or balance owing is the difference you get after
On line 800, enter the total amount of income tax deducted subtracting all the credits on lines 780 to 840 from the total
from all your information slips. On line 801, enter the total tax payable on line 770.
payments on which tax has been withheld. If your total tax payable (line 770) is less than your total
References credits (line 890), enter the difference on the refund line.
IC77-16, Non-Resident Income Tax
IC75-6, Required Withholding From Amounts Paid to Non-Residents If your total payable (line 770) is more than your total
Providing Services in Canada credits (line 890), enter the difference on the balance owing
line.
Line 808 – Provincial and territorial capital Note
gains refund After we process your return and apply any interest
Investment public corporations and mutual fund and/or penalty charges, if the total amount owing at
corporations have to file Schedule 18, Federal and that time is $2 or less, you will not have to pay that
Provincial or Territorial Capital Gains Refund, with their amount. If an amount of $2 or less is owed to you, the
return, complete with information mentioned on page 124. amount will not be refunded; however, we will apply it
to any existing liability you may have.
These corporations have to calculate the provincial and
territorial capital gains refund according to provincial and
Line 894 – Refund code
territorial income tax acts.
If entitled to a refund, enter one of the following codes on
Complete the appropriate lines of Schedule 18, and enter line 894:
the provincial and territorial capital gains refund on
line 808. ■ enter “1” or leave this line blank if you want us to send
you the refund
References
Sections 130 and 131 ■ enter “2” if you want us to transfer the refund to next
year’s instalment account
Line 812 – Provincial and territorial ■ enter “3” if you want us to apply the refund to another
refundable tax credits liability (such as an expected debit from a reassessment)
On line 812, enter the amount of provincial and territorial or to a different account. Attach a letter to your return
refundable tax credits calculated on line 255 of Schedule 5 giving instructions and we will review your request
(negative amount).
We will apply the refund to any outstanding liabilities the
corporation owes on the same or related business number
Line 840 – Tax instalments paid account. Then, we will refund or transfer the excess
On line 840, report all instalment payments you made for overpayment according to the code you enter. We will do
the tax year. this only if all the required returns have been filed on the
account and all related accounts.
You can view your interim balance; and if needed, you can
transfer payments within a program account and between Note
program accounts of the same nine-digit business number Under subsection 220(6) of the Income Tax Act a
and immediately view updated balances, by using the corporation may assign any amount payable under this
“View and pay account balance” service through: Act. However, according to subsection 220(7) the
minister of National Revenue “is not required to pay to
■ My Business Account at canada.ca/my-cra-business the assignee, the assigned amount.” As an alternative,
-account, if you are the business owner we will review a request to send the refund to a “care of”
■ Represent a Client at canada.ca/taxes-representatives, if address. However, a refund issued in this manner will
you are an authorized representative or employee still be issued in the name of the corporation (see the
third bullet above).
If there is a discrepancy between the amount you report on
the return and the interim balance in your business The payment of refunds and rebates will be withheld until
account, we will use the amount in your business account all required returns, of which the minister of National
for the tax year being assessed when we process the return. Revenue has knowledge, have been filed.
For information on how to make payments, go Reference
Subsection 164(2.01)
to canada.ca/payments or see Guide T7B–Corp,
Corporation Instalment Guide. For more information on
calculating instalments, go to My Business Account Line 896 – If the corporation is a
at canada.ca/my-cra-business-account and use the Canadian-controlled private corporation
“Calculate instalment payments” service or see throughout the tax year, does it qualify for the
Guide T7B–Corp, Corporation Instalment Guide. one-month extension of the date the balance
Note of tax is due?
Even if you elected to report in a functional currency, Tick the yes or no box. See “Balance-due day” on page 12.
you still have to complete line 840 in Canadian currency.

126 canada.ca/taxes
Payment of balance owing Another way to start direct deposit for your corporation’s
account, or to change banking information you already
You can pay your corporation’s balance owing electronically
gave us, is to complete the “Direct deposit request” at the
by using your financial institution’s Internet or telephone
bottom of page 9 of the return. You do not have to complete
banking services, or through a third-party service provider.
this area if you have already signed up for direct deposit
Most financial institutions allow a corporation to schedule a
and the information you gave before has not changed.
future-dated payment. If you don’t have a bank account at a
financial institution in Canada, you can pay by wire transfer You cannot use the Corporation Internet Filing service to
or at a Canada Post retail outlet using a remittance voucher start direct deposit or to change your direct deposit
containing a Quick Response (QR) code. information.
For more information about payments, go to canada.ca For more information, go to canada.ca/cra-direct-deposit.
/payments or contact your financial institution.
Your direct deposit request will stay in effect until you
Make your payment online using the Canada Revenue change the information or cancel the service. However, if
Agency’s My Payment option. For more information, or to your financial institution advises us that you have a new
use My Payment, go to canada.ca/cra-my-payment. account, we may deposit your payments into the new
account. If, for any reason, we cannot deposit a payment
Pre-authorized debit (PAD) is an online, self-service option.
into a designated account, we will mail a cheque to you at
Businesses can authorize the CRA to withdraw a payment or
the address we have on file at the time of the original
payments to be made from a Canadian bank account to the
payment.
CRA on a pre-set date to pay an amount owing or make
instalment payments. By setting up a PAD through the Note
CRA’s My Business Account, businesses can reduce the risk The CRA must generate all large-value refunds
of misallocated payments and avoid missing deadlines and ($25 million or more) through the Large Value Transfer
the resulting penalties and interest charges. System (LVTS). To avoid potential delays, you have to
be registered for direct deposit and be registered on the
If you have an amount owing, you can view a revised
LVTS. If you are expecting a large-value refund, arrange
balance that includes interest calculated to a date you select
for direct deposit and contact your tax centre to make
by using the “View and pay account balance” service and
the necessary arrangements.
selecting the “Calculate future balance” option through:
■ My Business Account at canada.ca/my-cra-business Mandatory electronic filing for tax
-account, if you are the business owner
preparers
■ Represent a Client at canada.ca/taxes-representatives, if
you are an authorized representative or employee Line 920
Enter the tax preparer’s EFILE number if applicable.
You can ask that we stop issuing remittance vouchers and
the envelope that we send with notices and statements by Tax preparers have to file electronically all income tax
using the “Enquiries service” and selecting the “Change returns they prepare for a fee, with two exceptions: they
mailing instructions” option through My Business Account can file 10 corporation returns and 10 individual returns by
at canada.ca/my-cra-business-account or through means other than electronically. We may charge a penalty
Represent a Client at canada.ca/taxes-representatives. to tax preparers who fail to do so.
For more information, go to canada.ca/taxes-mandatory
Direct deposit request -electronic-filing.
Lines 910 to 918 Reference
Section 150.1
You can start, update, or stop direct deposit online, and
also view direct deposit transactions through:
Certification
■ My Business Account at canada.ca/my-cra-business
-account, if you are a business owner Lines 950 to 959
■ Represent a Client at canada.ca/taxes-representatives, if Lines 950 to 956 – Complete these lines with the required
you are a representative with level three (delegated information. Be sure that the person who signs and dates
authority) authorization the return is an authorized officer of the corporation.

Representatives authorized at level one or two with online Line 957 – Tick the yes or no box.
access can see direct deposit transactions Lines 958 and 959 – If you answer no to line 957, provide
at canada.ca/taxes-representatives. the first and last names and telephone number of a contact
You can now sign up for direct deposit or change your person. This contact person is responsible for all matters
account information through the websites of many financial related to the processing of this year’s return, and must be
institutions. Once you provide consent for direct deposit, an authorized representative.
your CRA direct deposit information will be updated the Note
next day. Visit your financial institution’s website for If you wish to authorize representatives (including
information on how to sign up. employees) to discuss your corporation income tax
return for any year with the CRA, use

canada.ca/taxes 127
 My Business Account. Please verify if your list of Language of correspondence
authorized representatives is up to date and, if
applicable, modify or cancel authorized representatives. Line 990
My Business Account allows you to authorize new Indicate in which official language you would like to
representatives, and to view, update, and cancel receive your correspondence by entering the appropriate
authorizations of existing representatives. For more code:
information, go to canada.ca/my-cra-business-account.
■ 1 for English
For information on how to authorize a representative for
■ 2 for French
a non-resident account, go to canada.ca/cra
-representatives-non-resident-accounts.

128 canada.ca/taxes
Related forms and publications
List of federal and provincial or territorial corporation schedules and forms
We provide the following schedules and forms on our website at canada.ca/cra-forms-publications.

Schedule Page
Title
or form numbers
RC193 Service Feedback 134
RC312 Reportable Transaction Information Return 15
RC431 Request for Re-appropriation of T2 Statute-barred Credits 11
RC4288 Request for Taxpayer Relief – Cancel or Waive Penalties or Interest 14
RC4649 Country-by-Country Report 15
T2 T2 Corporation Income Tax Return 10
T2 Short T2 Short Return 10
T2 SCH 1 Net Income (Loss) for Income Tax Purposes 35
T2 SCH 2 Charitable Donations and Gifts 60-62
T2 SCH 3 Dividends Received, Taxable Dividends Paid, and Part IV Tax Calculation 73, 84
T2 SCH 4 Corporation Loss Continuity and Application 57
T2 SCH 5 Tax Calculation Supplementary – Corporations 88
T2 SCH 6 Summary of Dispositions of Capital Property 36
T2 SCH 7 Aggregate Investment Income and Income Eligible for the Small Business Deduction 66, 71
T2 SCH 8 Capital Cost Allowance (CCA) 40
T2 SCH 9 Related and Associated Corporations 27
T2 SCH 11 Transactions with Shareholders, Officers, or Employees 29
T2 SCH 12 Resource-Related Deductions 54
T2 SCH 13 Continuity of Reserves 54
T2 SCH 14 Miscellaneous Payments to Residents 30
T2 SCH 15 Deferred Income Plans 30
T2 SCH 16 Patronage Dividend Deduction 55
T2 SCH 17 Credit Union Deductions 55
T2 SCH 18 Federal and Provincial or Territorial Capital Gains Refund 124, 126
T2 SCH 19 Non-Resident Shareholder Information 29
T2 SCH 20 Part XIV – Additional Tax on Non-Resident Corporations 87
T2 SCH 21 Federal and Provincial or Territorial Foreign Income Tax Credits and Federal Logging Tax Credit 76, 90
T2 SCH 22 Non-Resident Discretionary Trust 30
Agreement Among Associated Canadian-Controlled Private Corporations to Allocate the Business
T2 SCH 23 28, 68
Limit (see Schedule 49 for allocation of the expenditure limit)
T2 SCH 24 First-Time Filer After Incorporation, Amalgamation, or Winding-up of a Subsidiary into a Parent 22
T2 SCH 25 Investment in Foreign Affiliates 30
T2 SCH 27 Calculation of Canadian Manufacturing and Processing Profits Deduction 75
T2 SCH 28 Election Not to Be Associated Through a Third Corporation 29
T2 SCH 29 Payments to Non-Residents 31
T2 SCH 31 Investment Tax Credit – Corporations 77
T2 SCH 33 Taxable Capital Employed in Canada – Large Corporations 13
T2 SCH 34 Taxable Capital Employed in Canada – Financial Institutions 13
T2 SCH 35 Taxable Capital Employed in Canada – Large Insurance Corporations 13

canada.ca/taxes 129
 Schedule Page
Title
or form numbers
T2 SCH 38 Part VI Tax on Capital of Financial Institutions 13, 86
T2 SCH 39 Agreement Among Related Financial Institutions – Part VI Tax 86
T2 SCH 42 Calculation of Unused Part I Tax Credit 17, 86
T2 SCH 43 Calculation of Parts IV.1 and VI.1 Taxes 86, 87
T2 SCH 44 Non-Arm’s Length Transactions 30
T2 SCH 45 Agreement Respecting Liability for Part VI.1 Tax 87
Agreement Among Associated Canadian-Controlled Private Corporations to Allocate the
T2 SCH 49 29
Expenditure Limit (see Schedule 23 for allocation of the business limit)
T2 SCH 50 Shareholder Information 32
T2 SCH 53 General Rate Income Pool (GRIP) Calculation 84
T2 SCH 54 Low Rate Income Pool (LRIP) Calculation 84
T2 SCH 55 Part III.1 Tax on Excessive Eligible Dividend Designations 84
T2 SCH 58 Canadian Journalism Labour Tax Credit 125
T2 SCH 71 Income Inclusion for Corporations that Are Members of Single-Tier Partnerships 12
T2 SCH 72 Income Inclusion for Corporations that Are Members of Multi-Tier Partnerships 12
T2 SCH 73 Income Inclusion Summary for Corporations that Are Members of Partnerships 12
T2 SCH 88 Internet Business Activities 32
T2 SCH 89 Request for Capital Dividend Account Balance Verification
T2 SCH 91 Information Concerning Claims for Treaty-Based Exemptions 8, 24
T2 SCH 97 Additional Information on Non-resident Corporations in Canada 24
T2 SCH 100 Balance Sheet Information 26
T2 SCH 101 Opening Balance Sheet Information 26
T2 SCH 125 Income Statement Information 26
T2 SCH 141 Notes Checklist 26
T2 SCH 301 Newfoundland and Labrador Research and Development Tax Credit 92
Additional Certificate Numbers for the Newfoundland and Labrador Film and Video Industry Tax
T2 SCH 302 92
Credit
T2 SCH 303 Newfoundland and Labrador Direct Equity Tax Credit 92
T2 SCH 304 Newfoundland and Labrador Resort Property Investment Tax Credit 92
T2 SCH 305 Newfoundland and Labrador Capital Tax on Financial Institutions 91
Newfoundland and Labrador Capital Tax on Financial Institutions – Agreement Among Related
T2 SCH 306 91
Corporations
T2 SCH 307 Newfoundland and Labrador Corporation Tax Calculation 91
T2 SCH 308 Newfoundland and Labrador Venture Capital Tax Credit 91
Additional Certificate Numbers for the Newfoundland and Labrador Interactive Digital Media Tax
T2 SCH 309 92
Credit
T2 SCH 321 Prince Edward Island Corporate Investment Tax Credit 93
T2 SCH 322 Prince Edward Island Corporation Tax Calculation 93
T2 SCH 340 Nova Scotia Research and Development Tax Credit 95
T2 SCH 341 Nova Scotia Corporate Tax Reduction for New Small Businesses 94
T2 SCH 345 Additional Certificate Numbers for the Nova Scotia Film Industry Tax Credit 94
T2 SCH 346 Nova Scotia Corporation Tax Calculation 93
T2 SCH 347 Additional Certificate Numbers for the Nova Scotia Digital Media Tax Credit 95
T2 SCH 348 Additional Certificate Numbers for the Nova Scotia Digital Animation Tax Credit 95
T2 SCH 349 Nova Scotia Innovation Equity Tax Credit 94
T2 SCH 350 Nova Scotia Venture Capital Tax Credit 94
T2 SCH 360 New Brunswick Research and Development Tax Credit 96

130 canada.ca/taxes
Schedule Page
Title
or form numbers
T2 SCH 366 New Brunswick Corporation Tax Calculation 96
T2 SCH 367 New Brunswick Small Business Investor Tax Credit 96
T2 SCH 500 Ontario Corporation Tax Calculation 96, 99
T2 SCH 502 Ontario Tax Credit for Manufacturing and Processing 99
T2 SCH 504 Ontario Resource Tax Credit 99
T2 SCH 506 Ontario Transitional Tax Debits and Credits 97
T2 SCH 507 Ontario Transitional Tax Debits and Credits Calculation 97
T2 SCH 508 Ontario Research and Development Tax Credit 99
T2 SCH 510 Ontario Corporate Minimum Tax 97, 98, 100
T2 SCH 511 Ontario Corporate Minimum Tax – Total Assets and Revenue for Associated Corporations 97
T2 SCH 512 Ontario Special Additional Tax on Life Insurance Corporations (SAT) 98
T2 SCH 513 Agreement Among Related Life Insurance Corporations (Ontario) 98
T2 SCH 524 Ontario Specialty Types 107
T2 SCH 525 Ontario Political Contributions Tax Credit 98
T2 SCH 546 Corporations Information Act Annual Return for Ontario Corporations 107
T2 SCH 548 Corporations Information Act Annual Return for Foreign Business Corporations 107
T2 SCH 550 Ontario Co-operative Education Tax Credit 101
T2 SCH 552 Ontario Apprenticeship Training Tax Credit 101
T2 SCH 554 Ontario Computer Animation and Special Effects Tax Credit 102
T2 SCH 556 Ontario Film and Television Tax Credit 102
T2 SCH 558 Ontario Production Services Tax Credit 103
T2 SCH 560 Ontario Interactive Digital Media Tax Credit 104
T2 SCH 564 Ontario Book Publishing Tax Credit 105
T2 SCH 566 Ontario Innovation Tax Credit 106
T2 SCH 568 Ontario Business-Research Institute Tax Credit 106
T2 SCH 569 Ontario Business-Research Institute Tax Credit Contract Information 106
T2 SCH 570 Ontario Regional Opportunities Investment Tax Credit 107
T2 SCH 380 Manitoba Research and Development Tax Credit 108
T2 SCH 381 Manitoba Manufacturing Investment Tax Credit 108
T2 SCH 383 Manitoba Corporation Tax Calculation 107
T2 SCH 384 Manitoba Paid Work Experience Tax Credit 109
T2 SCH 385 Manitoba Odour-Control Tax Credit 109
T2 SCH 387 Manitoba Small Business Venture Capital Tax Credit 110
T2 SCH 388 Manitoba Film and Video Production Tax Credit 112
T2 SCH 389 Manitoba Book Publishing Tax Credit 111
T2 SCH 390 Manitoba Cooperative Development Tax Credit 110
T2 SCH 394 Manitoba Rental Housing Construction Tax Credit 113
T2 SCH 402 Saskatchewan Manufacturing and Processing Investment Tax Credit 114
T2 SCH 403 Saskatchewan Research and Development Tax Credit 114
T2 SCH 404 Saskatchewan Manufacturing and Processing Profits Tax Reduction 114
T2 SCH 411 Saskatchewan Corporation Tax Calculation 113
T2 SCH 421 British Columbia Mining Exploration Tax Credit 119
T2 SCH 427 British Columbia Corporation Tax Calculation 115
T2 SCH 428 British Columbia Training Tax Credit 120
T2 SCH 429 British Columbia Interactive Digital Media Tax Credit 121
T2 SCH 430 British Columbia Shipbuilding and Ship Repair Industry Tax Credit 122

canada.ca/taxes 131
 Schedule Page
Title
or form numbers
T2 SCH 440 Yukon Manufacturing and Processing Profits Tax Credit 123
T2 SCH 442 Yukon Research and Development Tax Credit 123
T2 SCH 443 Yukon Corporation Tax Calculation 122
T2 SCH 444 Yukon Business Carbon Price Rebate 123
T2 SCH 461 Northwest Territories Corporation Tax Calculation 123
T2 SCH 481 Nunavut Corporation Tax Calculation 123
T106 Information Return of Non-Arm’s Length Transactions with Non-Residents 31
T183CORP Information Return for Corporations Filing Electronically 9
T400A Notice of Objection – Income Tax Act 18
T652 Notice of Revocation of Waiver 17
T661 Scientific Research and Experimental Development (SR&ED) Expenditures Claim 56, 78
T666 British Columbia (BC) Scientific Research and Experimental Development Tax Credit 116
Subsection 13(29) Election in Respect of Certain Depreciable Properties, Acquired for Use in a
T1031 40
Long Term Project
T1044 Non-Profit Organization (NPO) Information Return 24
T1131 Canadian Film or Video Production Tax Credit 124
T1134 Information Return Relating to Controlled and Not-Controlled Foreign Affiliates 31
T1135 Foreign Income Verification Statement 31
T1141 Information Return in Respect of Contributions to Non-Resident Trusts, Arrangements or Entities 32
T1142 Information Return in Respect of Distributions from and Indebtedness to a Non-Resident Trust 32
Agreement to Transfer Qualified Expenditures Incurred in Respect of SR&ED Contracts Between
T1146 78
Persons Not Dealing at Arm’s Length
T1177 Film or Video Production Services Tax Credit 125
T1196 British Columbia Film and Television Tax Credit 117
T1197 British Columbia Production Services Tax Credit 118
T1249 British Columbia Mining Exploration Tax Credit Partnership Schedule 119
Application by a Non-Resident of Canada (Corporation) for a Reduction in the Amount of
T1288 Non-Resident Tax Required to be Withheld on Income Earned From Acting in a Film or Video 8
Production
T1296 Election, or Revocation of an Election, to Report in a Functional Currency 23
T2002 Election, or Revocation of an Election, Not To Be a Canadian-Controlled Private Corporation 84
T2029 Waiver in Respect of the Normal Reassessment Period or Extended Reassessment Period 16
T2057 Election on Disposition of Property by a Taxpayer to a Taxable Canadian Corporation 29
T2058 Election on Disposition of Property by a Partnership to a Taxable Canadian Corporation 29
T5003 (slip) Statement of Tax Shelter Information 30
T5004 Claim for Tax Shelter Loss or Deduction 30
T5013 (slip) Statement of Partnership Income 30
T5013 FIN Partnership Financial Return 14, 30
T5013 SUM Information Slips Summary 14, 30
T5013SCH5 Allocation of Salaries and Wages, and Gross Revenue for Multiple Jurisdictions – Schedule 5 88

132 canada.ca/taxes
Digital services
Handling business taxes online Receiving your CRA mail online
Use the CRA’s digital services for businesses throughout Sign up for email notifications to get most of your CRA
the year to: mail, like your notice of assessment, online.

■ make payments to the CRA online with My Payment For more information, go to canada.ca/cra-business
or a pre-authorized debit agreement, or create a -email-notifications.
QR code to pay in person at Canada Post
Authorizing the withdrawal of a
■ file a return, view the status of filed returns, and view
return balances
pre-determined amount from your Canadian
chequing account
■ submit documents to the CRA
Pre-authorized debit (PAD) is a secure, online self-service
■ authorize a representative for online access to your payment option for individuals and businesses. This
business accounts option lets you set the payment amount you authorize
the CRA to withdraw from your Canadian chequing
■ register to receive email notifications and to view mail account to pay your tax on a specific date or dates you
from the CRA in My Business Account choose. You can set up a PAD agreement using the
■ manage addresses CRA’s secure My Business Account service at canada.ca
/my-cra-business-account, or the CRA BizApp at
■ manage direct deposit information canada.ca/cra-mobile-apps. PADs are flexible and
■ view and pay account balance managed by you. You can use My Business Account
to view historical records, modify, cancel, or skip a
■ calculate a future balance payment. For more information, go to canada.ca
■ transfer payments and immediately view updated /pay-authorized-debit.
balances
■ view closing balances (for example, non-capital loss
Electronic payments
balances) Make your payment using:
■ make an online request regarding your account and ■ your financial institution’s online or telephone banking
view answers to common enquiries services
■ submit an audit enquiry ■ the CRA’s My Payment service at canada.ca/cra-my
-payment
To log in to or register for the CRA’s digital services,
go to: ■ your credit card through one of the CRA’s third party
service providers
■ My Business Account at canada.ca/my-cra-business
-account, if you are a business owner ■ PayPal or Interac e-transfer through one of the CRA’s
third-party service providers
■ Represent a Client at canada.ca/taxes-representatives,
if you are an authorized representative or employee ■ the “Proceed to pay” button in the “View and pay
account balance” service in My Business Account.
For more information, go to canada.ca/taxes-business Currently only available for business owners
-online.
■ pre-authorized debit at canada.ca/my-cra-business
CRA BizApp -account
CRA BizApp is a mobile web app for small business For more information, go to canada.ca/payments.
owners and sole proprietors. The app offers secure access
to view accounting transactions, pay outstanding
balances, make interim payments, and more.
You can access CRA BizApp on any mobile device with
an Internet browser—no app stores needed! To access the
app, go to canada.ca/cra-mobile-apps.

canada.ca/taxes 133
For more information
What if you need help? If you are not satisfied with the service you received, try to
resolve the matter with the CRA employee you have been
If you need more information after reading this guide, go dealing with or call the telephone number provided in the
to canada.ca/taxes or call 1-800-959-5525. CRA’s correspondence. If you do not have contact
For detailed information on topics in this guide, see the information, go to canada.ca/cra-contact.
provincial, territorial, and federal Income Tax Act and the If you still disagree with the way your concerns were
Income Tax Regulations. addressed, you can ask to discuss the matter with the
employee’s supervisor.
Direct deposit If you are still not satisfied, you can file a service complaint
Direct deposit is a fast, convenient, and secure way to get by filling out Form RC193, Service Feedback. For more
your Canada Revenue Agency (CRA) payments directly information and how to file a complaint, go
into your account at a financial institution in Canada. For to canada.ca/cra-service-feedback.
more information and ways to enrol, go to canada.ca/cra
If the CRA has not resolved your service complaint, you
-direct-deposit.
can submit a complaint with the Office of the Taxpayers’
Ombudsperson.
Forms and publications
The CRA encourages electronic filing of your return. If you Formal disputes (objections and
require a paper version of our forms and publications, go
to canada.ca/cra-forms-publications or call one of the
appeals)
following numbers: You can file a formal dispute or objection if you think
the CRA misinterpreted the facts of your tax situation or
■ 1-800-959-5525, from Canada and the United States applied the tax law incorrectly.
■ 613-940-8497, from outside Canada and the For more information about objections or formal disputes,
United States. We only accept collect calls initiated by go to canada.ca/cra-complaints-disputes.
telephone operators. After your call is accepted by an
automated response, you may hear a beep and
experience a normal connection delay Reprisal complaints
If you have previously submitted a service-related
Electronic mailing lists complaint or requested a formal review of a CRA decision
and feel that, as a result, you were not treated impartially
The CRA can notify you by email when new information on by a CRA employee, you can submit a reprisal complaint
a subject of interest to you is available on the website. To by filling out Form RC459, Reprisal Complaint.
subscribe to the electronic mailing lists, go to canada.ca
/cra-email-lists. For more information about complaints and disputes, go
to canada.ca/cra-complaints-disputes.
Teletypewriter (TTY) users
If you have a hearing or speech impairment and use a TTY,
Due dates
call 1-800-665-0354. When the due date falls on a Saturday, a Sunday, or a
public holiday recognized by the CRA, we consider your
If you use an operator-assisted relay service, call our payment to be on time if we receive it on the next business
regular telephone numbers instead of the TTY number. day. Your return is considered on time if we receive it or if
it is postmarked on or before the next business day.
Service complaints For more information, go to canada.ca/important-dates
You can expect to be treated fairly under clear and -corporations.
established rules, and get a high level of service each time
you deal with the CRA; see the Taxpayer Bill of Rights.

134 canada.ca/taxes
Non-resident corporation enquiries We only accept collect calls initiated by telephone
operators. After your call is accepted by an automated
If you have a question about a non-resident corporation
response, you may hear a beep and experience a normal
account, go to canada.ca/taxes-international-business or
connection delay.
call:
Mailing address
Within Canada and continental United States
You may write to:
1-800-959-5525
Monday to Friday (except holidays) Sudbury Tax Centre
9 a.m. to 6 p.m. (local time) PO Box 20000, STN A
Sudbury ON P3A 5C1
From outside Canada and continental United States
CANADA
613-940-8497
Monday to Friday (except holidays) Fax
9 a.m. to 6 p.m. (Eastern time) 705-671-0490

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Index
Page Page

Active business income – Schedule 7 .......................... 67 Final return (dissolution) .............................................. 23

Amalgamated corporations Foreign
Final tax year before amalgamation ......................... 23 Affiliates (investment in) – Form T1134,
First tax year – Schedule 24 ....................................... 23 Schedule 25 .................................................................. 31
Appeals ............................................................................ 18 Business income tax credit – Schedule 21 ............... 76
Associated corporations – Schedules 23 and 49 ......... 28, 29 Non-business income tax credit – Schedule 21....... 76
Authorizing representatives and employees .............. 127 Property ....................................................................... 31
Available-for-use rule .................................................... 40, 79 Tax deductions, addition to taxable income ........... 64
Functional currency ....................................................... 23
Balance-due day ............................................................. 12
Base amount of Part I tax ............................................... 74 General Index of Financial Information (GIFI) ......... 26
Books and records .......................................................... 18 Gifts, Ecological – Schedule 2 ....................................... 62
Business limit – Schedule 23.......................................... 68 Gifts of cultural property – Schedule 2 ....................... 61
Business number ............................................................ 19 Gifts of medicine – Schedule 2 ..................................... 62
Canadian film or video production tax credit – Inactive corporations ..................................................... 35
Form T1131 .................................................................. 124 Instalment due dates...................................................... 12
Capital cost allowance (CCA) – Schedule 8 ................ 42 Instalment payments ..................................................... 126
Capital gains refund (federal and provincial or Internet business activities – Schedule 88 ................... 32
territorial) – Schedule 18 ............................................ 124,126 International Financial Reporting Standards (IFRS) . 35
CCA rates and classes .................................................... 48 Investment
Charitable donations – Schedule 2 ............................... 60 Corporation deduction .............................................. 76
Control Income – Schedule 7 ................................................... 66, 71
Acquisition of .............................................................. 22 Tax credit – Schedule 31 ............................................ 80
Definition ..................................................................... 27 Tax credit recapture ................................................... 74
Losses and changes in control ................................... 57 Tax credit refund ........................................................ 81, 124
Country-by-country reporting ...................................... 15
Credit unions –
Journalism labour tax credit ......................................... 125
Allocation in proportion to borrowing – Logging tax credit – Schedule 21 ................................. 77
Schedule 17 .................................................................. 55 Losses
Allowable business investment ................................ 39
Deferred income plans – Schedule 15 ......................... 30
And changes in control .............................................. 57
Digital services ................................................................ 133
Carry-back – Schedule 4 ............................................ 57
Direct deposit .................................................................. 127
Continuity and application – Schedule 4 ................ 57
Dispositions of capital property – Schedule 6............. 36
Farm ............................................................................. 58, 64
Dividends – Schedule 3
Limited partnership ................................................... 59, 64
Paid ............................................................................... 73
Listed personal property ........................................... 59
Received ....................................................................... 62
Net capital ................................................................. 36, 58, 64
Refund .......................................................................... 73, 124
Non-capital .................................................................. 57, 64
Subject to Part IV tax .................................................. 85
Restricted farm............................................................ 58, 64
Earned depletion base – Schedule 12........................... 54
Election not to be associated – Schedule 28 ................. 29
Mandatory Internet filing ............................................ 9
Mandatory electronic filing for tax preparers ............ 127
Eligible dividend ............................................................ 84
Manufacturing and processing profits deduction –
General Rate Income Pool (GRIP)............................. 84
Schedule 27 .................................................................. 75
Low Rate Income Pool (LRIP) ................................... 84
Election to not be a CCPC .......................................... 84 NAICS codes .................................................................. 10
Excessive dividend designations .............................. 84, 84 Net income (or loss) for income tax purposes –
Exemption from tax under section 149 ........................ 24 Schedule 1 .................................................................... 35, 60
New corporations – Schedule 24 .................................. 22
Federal qualifying environmental trust tax credit ..... 77
Non-profit organizations
Federal qualifying environmental trust tax credit
Exempt from tax ......................................................... 24
refund ........................................................................... 124
Information return – Form T1044 ............................. 24
Federal tax abatement .................................................... 75
Non-resident
Filing requirements
Corporations ............................................................... 8
Acceptable formats ..................................................... 9
Discretionary trust – Schedule 22 ............................. 30
Filing deadlines ........................................................... 11
Non-arm’s length transactions
Where to file ................................................................ 11
with non-resident persons – Form T106 .................. 31
Who has to file ............................................................. 8
Ownership – Schedule 19 .......................................... 29
Film or video production services tax credit .............. 125

136 canada.ca/taxes
 Page Page

Payments to – Schedule 29......................................... 31 Reassessments ................................................................ 17

Reduced business limit .................................................. 69
Part I tax .......................................................................... 74, 81 Refundable dividend tax on hand ............................... 71
Part III.1 Tax – Schedule 55 ........................................... 84
Refundable portion of Part I tax ................................... 71
Part IV tax – Schedule 3 ................................................. 85
Related corporations – Schedule 9 ............................... 27
Part IV.1 tax – Schedule 43 ............................................ 86
Reserves
Part VI tax – Schedules 38, 39, 42 .................................. 86
Capital gains ............................................................... 39
Part VI.1 tax – Schedules 43, 45 ..................................... 87
Continuity – Schedule 13 ........................................... 55
Part XIII.1 tax – Schedule 92 .......................................... 87
Part VI.1 tax deduction .................................................. 64 Scientific research and experimental
Part XIV tax – Schedule 20............................................. 87 development expenditures – Form T661 ................. 56
Partnerships Shareholder information – Schedule 50 ...................... 32
Information slip T5013 ............................................... 30 Short return (T2) ............................................................. 10
Limiting deferral of corporation tax ......................... 12 Small business deduction .............................................. 66
Patronage dividend deduction – Schedule 16 ............ 55 Specified investment business ...................................... 67
Payments to non-residents – Schedule 29 ................... 31 Specified partnership income or loss ........................... 68
Payments to residents – Schedule 14 ........................... 30
Penalties ........................................................................... 13
Tax rate (basic) ............................................................... 74
Tax reduction
Permanent establishment .............................................. 88
General ......................................................................... 70, 77
Personal services business ............................................. 67, 74
Tax shelter loss or deduction – Form T5004 ............... 30
Provincial and territorial tax and credits
Tax withheld at source .................................................. 125
British Columbia ......................................................... 115
Taxable income
Manitoba ...................................................................... 107
Addition for foreign tax deductions ........................ 64
New Brunswick ........................................................... 96
Calculation .................................................................. 60, 65
Newfoundland and Labrador ................................... 91
Used to calculate small business deduction ........... 68
Northwest Territories ................................................. 123
Transactions
Nova Scotia .................................................................. 93
Non-arm’s length – Schedule 44 ............................... 30
Nunavut ....................................................................... 123
With shareholders, officers, or employees –
Ontario ......................................................................... 96
Schedule 11 .................................................................. 29
Prince Edward Island ................................................. 93
Saskatchewan .............................................................. 113 Wind-up of a subsidiary – Schedule 24 ...................... 23
Yukon ........................................................................... 122
Provincial or territorial
Dual income tax rates ................................................. 90
Foreign tax credits ...................................................... 90
Jurisdiction ................................................................... 88
Tax credits and rebates ............................................... 87
Tax payable – Schedule 5 ........................................... 88

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