Ontario capital tax

For tax years starting before July 1, 2010, corporations that have a permanent establishment in Ontario any time in the tax year are liable for Ontario capital tax under section 64 of the Taxation Act, 2007 (Ontario).

These include both financial institutions and corporations other than financial institutions, except:

• a corporation that is liable for the special additional tax under section 74 of the Corporations Tax Act (Ontario);
• a deposit insurance corporation, as defined in subsection 137.1 of the federal Income Tax Act;
• a credit union;
• a corporation exempt from income tax under section 149 of the federal Act;
• a family farm corporation for the year, as defined in subsection 64(3) of the Taxation Act, 2007 (Ontario), other than a corporation for which a determination has been made under subsection 31(2) of the federal Act; and
• a family fishing corporation for the year, as defined in subsection 64(3) of the Taxation Act, 2007 (Ontario).

Note
The Ontario capital tax will be eliminated on July 1, 2010. For businesses mainly engaged in qualifying manufacturing and resource activities in Ontarion, the capital tax was eliminated effective January 1, 2007.

Capital deduction

The taxable capital is reduced by a $15 million capital deduction.

Financial institutions

See Ontario capital tax on financial institutions for information on capital tax rates, foreign banks, and reporting the tax payable.

Other than financial institutions

See Ontario capital tax on other than financial institutions for information on capital tax rates, the capital deduction election, capital tax for manufacturers, and reporting the tax payable.

Reporting the tax

Within six months of the end of the tax year:

• Financial institutions complete Schedule 34, Part I.3 Tax on Financial Institutions, and Schedule 514, Ontario Capital Tax on Financial Institutions, and file them with the T2 return.
• Corporations other than financial institutions complete Schedule 33, Part I.3 Tax on Large Corporations, Schedule 515, Ontario Capital Tax on Other Than Financial Institutions, and, if applicable, Schedule 516, Capital Deduction Election of Associated Group for the Allocation of Net Deduction and file them with the T2 return.

On line 282 of Schedule 5, Tax Calculation Supplementary - Corporations, enter the Ontario capital tax payable.

Forms and Publications

• Schedule 5, Tax Calculation Supplementary - Corporations
• Schedule 33, Part I.3 Tax on Large Corporation
• Schedule 34, Part I.3 Tax on Financial Institutions
• Schedule 514, Ontario Capital Tax on Financial Institutions
• Schedule 515, Ontario Capital Tax on Other Than Financial Institutions
• Schedule 516, Capital Deduction Election of Associated Group for the Allocation of Net Deduction
• Schedule 517, Calculation of Ontario Capital Tax Investment Allowance for Financial Institutions

Government partners

• Ontario (Ministry of Revenue)
• Ontario (e-Laws)