Nova Scotia tax on large corporations

A provincial tax is levied on the taxable capital of large corporations that have a permanent establishment in Nova Scotia, except for:

• corporations mentioned in subsection 181.1(3) of the federal Income Tax Act; and
• banks, credit unions, trust and loan companies.

Note
The Nova Scotia tax on large corporations will be completely eliminated by July 1, 2012.

A penalty applies to large corporations that have to pay this tax and do not file the required return on time. For more details, see Large corporations.

The provincial capital tax cannot be reduced by any tax credits, except the Nova Scotia energy tax credit. However, you can deduct the capital tax payable when calculating federal income for tax purposes.

Instalment payment requirements are the same as for Part I tax. For more details, see Pay by Instalments.

The taxable capital employed in Canada is used to determine the eligibility for the capital deduction and the tax rate.

Capital deduction

A capital deduction of $5 million is available to a corporation that is not a member of a related group and has taxable capital employed in Canada of less than $10 million.

If the corporation is a member of a related group, a capital deduction of $5 million to be allocated among members of the related group is available as long as the combined taxable capital of all members of the related group is less than $10 million.

Allocating the deduction

File Schedule 343, Nova Scotia Tax on Large Corporations - Agreement Among Related Corporations, with the return. Only one of the associated / related corporations needs to file this schedule for a calendar year. If the schedule is not already on file with us when we assess any of the returns for a tax year ending in the calendar year of the agreement, we will ask for one.

Enter the amount of the capital deduction you are claiming on line 120 of Schedule 342, Nova Scotia Tax on Large Corporations.

Capital tax rates

If the taxable capital employed in Canada of all related corporations is less than $10 million, the tax rates applicable to the Nova Scotia taxable capital are as follows:

• 0.4% effective July 1, 2008;
• 0.3% effective July 1, 2009;
• 0.2% effective July 1, 2010;
• 0.1% effective July 1, 2011; and
• 0% effective July 1, 2012.

If the taxable capital employed in Canada of all related corporations is $10 million or more, the tax rates applicable to the Nova Scotia taxable capital are as follows:

• 0.200% effective July 1, 2008;
• 0.15% effective July 1, 2009;
• 0.1% effective July 1, 2010;
• 0.05% effective July 1, 2011; and
• 0% effective July 1, 2012.

These rates apply to the taxable capital allocated to the province of Nova Scotia, including the Nova Scotia offshore area.

The tax is prorated based on the number of days in the year when the tax year straddles these dates.

Reporting the tax

File a completed Schedule 342, Nova Scotia Tax on Large Corporations. (Use this schedule to also calculate and claim the Nova Scotia energy tax credit).

On line 765 of the T2 Corporation Income Tax Return, enter the provincial tax on large corporations payable.

Forms and publications

• Schedule 342, Nova Scotia Tax on Large Corporations
• Schedule 343, Nova Scotia Tax on Large Corporations - Agreement Among Related Corporations
• T2 Corporation Income Tax Return
• T2 Corporation - Income Tax Guide (T4012)

Government partners

• Nova Scotia (provincial site)