Ontario surtax re Ontario small business deduction

The Ontario surtax re Ontario small business deduction claws back the small business deduction from more profitable Canadian-controlled private corporations (CCPCs).

The surtax re Ontario small business deduction is eliminated effective July 1, 2010.

The surtax of 4.25% applies to CCPCs whose adjusted taxable income and the adjusted taxable income of all associated corporations, if any, exceed the Ontario business limit of $500,000. The surtax fully claws back the deduction when the adjusted taxable income of the corporation or the associated group is equal to or more than $1,500,000.

A corporation's adjusted taxable income is equal to:

• its taxable income or taxable income earned in Canada for the year;

plus

• its adjusted Crown royalties for the year, as calculated on Schedule 504, Ontario Resource Tax Credit and Ontario Additional Tax re Crown Royalties;

minus

• its notional resource allowance for the year, as calculated on Schedule 504.

Reporting the tax

You can use Part 4 of Schedule 500, Ontario Corporation Tax Calculation, to calculate the surtax. Schedule 500 is a worksheet and does not have to be filed with your return.

If the corporation is a member of an associated group, also complete Schedule 501, Ontario Adjusted Taxable Income of Associated Corporations to Determine Surtax re Ontario Small Business Deduction.

On line 272 of Schedule 5, Tax Calculation Supplementary - Corporations, enter the amount of the surtax.

Forms and Publications

• Schedule 5, Tax Calculation Supplementary - Corporations
• Schedule 500, Ontario Corporation Tax Calculation
• Schedule 501, Ontario Adjusted Taxable Income of Associated Corporations to Determine Surtax re Ontario Small Business Deduction
• Schedule 504, Ontario Resource Tax Credit and Ontario Additional Tax re Crown Royalties

Government partners

• Ontario (Ministry of Revenue)