19 May 2010 External T.I. 2009-0307091E5 - Ontario Apprentice Training Tax 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: How is an Ontario Apprenticeship Training Tax Credit (ATTC) earned in a corporation's 2008 taxation year and received in its 2009 taxation year adjusted for in determining the corporation's 2009 Ontario tax liability in order to avoid double taxation of the ATTC?

Position: Currently, neither the Corporations Tax Act nor the Taxation Act, 2007 has any adjustments to account for the ATTC being included twice in Ontario taxable income. The Ontario Ministry of Finance is working to resolve the issue.

Reasons: The issue relates to Ontario tax policy which is the responsibility of the Ontario Ministry of Finance.

XXXXXXXXXX
									2009-030709
									A. Mahendran
May 19, 2010

Dear XXXXXXXXXX :

This is in response to your correspondence received on January 18, 2009, and is further to a telephone conversation between you and Ms. Mahendran, regarding the taxation of an Ontario apprenticeship training tax credit (ATTC) claimed by a corporation in its 2008 taxation year and reported in its Ontario taxable income in 2008. The corporation received a full refund in its 2009 taxation year and reported it in income for federal tax purposes in that year, which is the first year of harmonization of federal and Ontario corporate taxes. Specifically, you have asked how an ATTC earned in a corporation's 2008 taxation year and considered received in its 2009 taxation year is adjusted for under the harmonization rules in order to avoid double taxation of the ATTC.

Written confirmation of the tax implications inherent in particular transactions is given by this Directorate only where the transactions are proposed and are the subject matter of an advance income tax ruling request submitted in the manner set out in Information Circular 70-6R5, Advance Income Tax Rulings, dated May 17, 2002. Where the particular transactions are completed, the inquiry should be addressed to the relevant tax services office. We are, however, prepared to offer the following general comments, which may be of assistance.

In the fact situation described in your correspondence, the 2008 ATTC will be subject to Ontario income tax twice, once in 2008 as it is required to be included in Ontario income under the Ontario Corporations Tax Act (CTA) and a second time in 2009 due to the fact that under the Ontario Taxation Act, 2007 (TA), Ontario taxable income is based on federal taxable income. Pursuant to the TA, where a taxation year ends after December 31, 2008, a corporation's Ontario taxable income is equal to its federal taxable income multiplied by the Ontario allocation percentage. Currently, neither the CTA nor the TA allow any adjustments to Ontario taxable income for the double counting of the income inclusion.

The Ontario Ministry of Finance (OMOF) has been informed of the Ontario double taxation issue that arises when an Ontario refundable tax credit that is earned and included in Ontario taxable income in a corporation's 2008 taxation year and is also taxed again under the TA in the corporation's 2009 taxation year. It is our understanding that the OMOF is working towards a resolution of this issue.

The role of this Directorate is to interpret the CTA and TA as passed by the Ontario Legislature. Should you wish to pursue this issue further, you may contact the Corporate and Commodity Taxation Branch of the Ontario Ministry of Finance by writing to Frost Bldg N, 2nd Floor, 95 Grosvenor St, Toronto ON, M7A 1Z1.

We trust that the information provided is helpful.

Yours truly,

Lita Krantz, C.A.
Assistant Director
Ontario Corporate Tax Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch