13 September 2012 External T.I. 2012-0448801E5 - Corporate Instalments and Ontario CMT Credit

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.

Principal Issues: Would an Ontario corporation minimum tax (CMT) credit that was claimed in the prior year reduce the current year Ontario instalment payments that are based on the “first instalment base”?

Position: Yes.

Reasons: The CMT credit is deducted in computing the amount of its Ontario tax payable for a taxation year and would therefore affect the “first instalment base” computation.

XXXXXXXXXX
2012-044880
M. Gauthier
(613) 948-1143
Attention: XXXXXXXXXX

September 13, 2012

Dear XXXXXXXXXX,

Re: Corporate Instalments and Ontario CMT Credit

We are writing in reply to your email of May 15, 2012 in which you asked whether an Ontario corporation minimum tax (“CMT”) credit that was claimed in the prior year would affect current year instalment payments based on the first instalment base method. You also indicated that in the current year, the corporation would not be eligible for the CMT credit as it does not have a balance in its CMT account.

Section 116 of the Taxation Act, 2007 for Ontario (the “Ontario Act”) sets out the requirement for Ontario corporate income tax instalments and any balance of Ontario corporate taxes payable.

Subsection 116(2) of the Ontario Act states that subsection 157(4) of the Income Tax Act (the “Act”) applies so that the terms “first instalment base” and “second instalment base” have the meanings prescribed by section 5301 of the Income Tax Regulations. In general, those terms mean the tax payable by the corporation for the preceding taxation year or second preceding taxation year, as the case may be. Tax payable is defined in subsection 248(2) of the Act as the tax payable as fixed by assessment or reassessment. Subsection 1(7) of the Ontario Act states that where the Ontario Act applies a Federal provision, the Federal provision is applied with whatever modifications are necessary in the circumstances. Therefore, for the purposes of computing Ontario corporate tax instalments, the “first instalment base” and “second instalment base” amounts would be based on the Ontario taxes payable in the preceding taxation year or second preceding taxation year, as the case may be.

Section 53 of the Ontario Act permits a corporation to deduct a CMT credit in computing the amount of its Ontario tax payable for a taxation year. Therefore, a CMT credit deducted in computing Ontario taxes payable in the preceding taxation year would reduce the current year’s Ontario instalment payments that are based on the first instalment base. This is regardless of whether the corporation has a balance in its Ontario corporate minimum tax account for the current taxation year.

Whether or not the corporation has a balance in its CMT account for the current year is only relevant in determining Ontario corporate tax instalments that are based on an estimate of Ontario taxes payable pursuant to subparagraph 116(1)1(i) of the Ontario Act.

We hope this information is of assistance to you.

Yours truly,

Terry Young, CA
Manager, Administrative Law Section
International Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch