What's new for corporations

2011

North American Industry Classification System (NAICS) codes

Since November 2011, all certified tax preparation software for T2 returns use self- identified North American Industry Classification System (NAICS) codes. As a result, corporations no longer need to fill out lines 281, 282 and 283, which were removed from the 2011 T2 return.

Partnerships - Elimination of corporation tax deferral

The deferral of tax by a corporation that has a significant interest in a partnership having a fiscal period different from the corporation's tax year will be eliminated. This rule may also affect other corporations if the fiscal period (of the partnership they are a member of) is changed. For more information, see Partnerships - Elimination of corporation tax deferral.

Joint ventures - Elimination of fiscal period

For tax years ending after March 22, 2011, participant taxpayers who entered into joint venture arrangements will no longer be eligible to compute income as if the joint venture had a separate fiscal period. For more information, see Joint ventures - Elimination of fiscal period.

Stop-loss rule on the redemption of a share

This stop-loss rule is extended for shares disposed of after March 21, 2011.

Capital cost allowance (CCA)

Accelerated CCA for Clean Energy Generation - For eligible assets acquired after March 21, 2011, that have not been used or acquired for use before March 22, 2011, Class 43.2 is amended to include equipment that is used by the taxpayer, or by a lessee of the taxpayer, to generate electrical energy in a process in which all or substantially all of the energy input is from waste heat.

Accelerated CCA for Manufacturing and Processing Sector - Eligible machinery and equipment acquired by the taxpayer in 2012 or 2013, will continue to be included in Class 29 and eligible for a 50% straight line CCA rate.

Oil sands - Canadian exploration expense (CEE) and Canadian development expense (CDE)

Oil sands and shale resource properties - For acquisitions made after March 21, 2011, the cost of acquiring oil sands leases, and other oil sands or shale resource property, is treated as Canadian oil and gas property expense (COGPE), which is deductible at 10% per year on a declining balance basis, instead of being treated as CDE, which is deductible at 30% on a declining basis.

Pre-production development expenses of oil sands or shale mines - The development expenses incurred for the purpose of bringing a new oil sands or shale mine into production in reasonable commercial quantities are to be treated as CDE, which is deductible at 30% per year on a declining balance basis. The change applies for expenses incurred after March 21, 2011, and will be phased-in until 2016. These expenses were previously treated as CEE, which is deductible at 100% in the year incurred. This last treatment will be maintained for expenses incurred before 2015 for new mines on which major construction began before March 22, 2011.

Federal qualifying environmental trust tax credit

The definition of qualifying environmental trust tax credit is extended for 2012 and later tax years.

2011 - Provinces and territories

Manitoba

[Bill 51 tabled 2011-06-07 ]
Manitoba cultural industries printing tax credit - The cultural industries printing tax credit is a new refundable tax credit for Manitoba printers equal to 15% of eligible printing costs incurred and paid after April 12, 2011, and before 2016 to produce eligible books. This deadline differs from the one previously announced in the 2011-04-12 budget.

[2011-04-12 Budget]
Manitoba manufacturing investment tax credit - This credit is extended to December 31, 2014. A corporation can renounce, in whole or in part, the manufacturing investment tax credit.

Manitoba co-op education and apprenticeship tax credit - The components of the credit that were scheduled to expire on December 31, 2011 (the co-op student hiring incentive, the co-op graduate hiring incentive, and the advanced-level apprentice hiring incentive), are extended to December 31, 2014.

Manitoba odour-control tax credit -This credit is extended to December 31, 2014. A corporation can renounce, in whole or in part, the odour-control tax credit.

Manitoba Neighbourhoods Alive! tax credit - Effective April 13, 2011, corporations that make financial donations and provide an eligible service contribution to help charitable organizations set up eligible social enterprises in Manitoba can claim a 30% non-refundable tax credit of up to $15,000 a year, on top of their charitable donation deduction.

Manitoba book publishing tax credit - This credit is extended to December 31, 2014. It is also expanded to include non-refundable monetary advances and labour costs related to publishing an electronic of an eligible literary work, for eligible expenses incurred and paid after April 12, 2011. Also, the bonus applied to Manitoba printing costs when an eligible book is printed on paper with a minimum of 30% recycled content is increased from 10% to 15%, for printing expenses incurred and paid by a publisher after April 12, 2011.

Manitoba green energy equipment tax credit - For installations after April 12, 2011, the tax credit for Manitoba manufacturers of qualifying geothermal heat pumps is increased from 5% to 7.5%. The credit for Manitoba manufacturers is also expanded to include a credit for green energy transmission equipment. The tax credit for purchasers of qualifying made-in-Manitoba geothermal heat pumps installed in Manitoba is also increased from 5% to 7.5%. The tax credit applicable to other eligible installation costs for geothermal heating systems installed in Manitoba is increased from 10% to 15%.

New Brunswick

[2011-03-22 Budget]
New Brunswick income tax rates - Effective July 1, 2011, the higher income tax rate is reduced to 10%. The reduction of this rate formerly planned for July 1, 2012, is cancelled. Effective January 1, 2012, the small business income tax rate is reduced from 5% to 4.5%. This rate is pro-rated for tax years that straddle January 1, 2012.

New Brunswick film tax credit - This credit will be phased out starting April 6, 2011.

Nova Scotia

[2011-04-05 Budget]
Nova Scotia small business income tax rate - The small business income tax rate is reduced from 4.5% to 4% effective January 1, 2012. This rate is pro-rated for tax years that straddle January 1, 2012.

Nova Scotia film industry tax credit - For principal photography starting on or after December 1, 2010, the province removes the total production cost cap. Residency requirements for this credit are also changed beginning on December 1, 2010.

Nova Scotia digital media tax credit - Beginning on December 1, 2010, the residency requirements for this credit are changed.

Ontario

[2011-03-29 Budget]
Ontario book publishing tax credit - Qualifying expenditures incurred after March 29, 2011, include the marketing expenditures incurred 12 months before to 12 months after the literary work is published.

[2011-01-31 Newsletter]
Ontario refundable media tax credits - Effective April 1, 2011, online application for the Ontario Media Development Corporation is mandatory.

Saskatchewan

[2011-03-23 - Budget]
Saskatchewan small business income tax rate - The small business income tax rate is reduced from 4.5% to 2% effective July 1, 2011.

2010

Interest on overpaid taxes

Effective July 1, 2010, the prescribed rate of interest for amounts owing to corporations will be set at the Government of Canada Treasury Bill rate. It was previously the current rate of Treasury Bill plus 2%.

Online notices

Effective on Royal Assent, the ITA, ETA, Excise Act, Air Travellers Security Charge Act, Canada Pension Plan and Employment Insurance Act will be amended to allow for the electronic issuance of notices when authorized by the taxpayer. Taxpayers will be notified by email when a new electronic notice is available on My Business Account. This does not apply to notices that are specifically required to be served personally or by registered or certified mail. The Minister of Revenue will announce the phase-in of this service.

Refunds under Regulation 105 and section 116

For applications for refunds in income tax returns filed after March 4, 2010, a refund is permitted if the income tax return is filed by the non-resident no more than two years after the date of one of the following types of assessments:

• the assessment of a payer, related to the withholding requirements under section 105 of the Income Tax Regulations for an amount paid to the non-resident; or
• the assessment of a purchaser, related to the withholding requirement under section 116 of the ITA for a property purchased from the non-resident.

The amount of the refund is permitted to the extent that it relates to the tax paid by the payer or purchaser for these assessments on behalf of the non-resident.

Section 116 and taxable Canadian property (TCP)

In determining whether a property is a TCP of a taxpayer after March 4, 2010:

• the definition of TCP is amended to exclude certain
  • shares of corporations resident in Canada;
  • interests in a trust resident in Canada; and
  • units of a unit trust resident in Canada.
• for a property that is deemed to be a TCP under various reorganization provisions of the ITA, the property's deemed status is maintained for a period of 60 months; and
• for the purposes of the unwinding provision involving a former Canadian resident individual who emigrated from Canada prior to March 5, 2010, a property is deemed to be TCP for the period that began at emigration time and that ends at the time that the individual returns to Canada, if the property was TCP of the individual on March 4, 2010.
  

Foreign investment entities

New proposed rules build on the current offshore investment fund property regime and entirely dispense with previous proposals. The changes from the current rules include: (i) an increase in the prescribed rate applicable to the computation of income from offshore investment fund property; (ii) the broadening of circumstances in which beneficiaries of certain non-resident trusts, or persons who have contributed to them, are required to report income on a modified foreign accrual property income basis; and (iii) the extension of the reassessment period.

International financial reporting standards (IFRS)

The Canadian Accounting Standards Board (ASB) is adopting IFRS for all publicly accountable enterprises effective January 1, 2011.

To determine if a corporation has to use the IFRS, go to www.cica.ca/IFRS and www.acsbcanada.org/strategic-planning/publicly-accountable/index.aspx.

See International Financial Reporting Standards for more information.

Capital cost allowance

Television set-top boxes

Satellite and cable set-top boxes acquired after March 4, 2010, and which have not been used before March 5, 2010, will be included in class 30 to take advantage of the new 40% declining balance CCA rate. Previously, satellite boxes were included in Class 8 and were eligible for a 20% declining balance and cable boxes were included in Class 10 and eligible for a 30% declining balance.

Accelerated CCA for clean energy generation

For heat recovery equipments (Class 43.2), restrictions that require the recovered heat to be reused in a process of the same type that generated it, has been removed. This change is effective March 4, 2010.

Specified distribution equipment that is part of a district energy system used by the taxpayer to provide district heating or cooling through the use of thermal energy (class 43.1 and 43.2), will be eligible for the current 30% or 50% respective declining balance rate. This change is effective March 4, 2010.

For tax years ending after 2004, the definition of "principal-business corporation" will be amended to include corporations the principal business of which is producing fuel or generating or distributing energy using class 43.1 or class 43.2 property.

2010 - Provinces and territories

British Columbia

• [Bill 19 (Royal Assent June 3, 2010)]
  British Columbia training tax credit - The enhanced tax credit rate for the Red Seal apprenticeship program is reduced to 5.5% from 15% effective June 3, 2010.
• [2010-03-02 Budget]
  British Columbia film and television tax credit - The qualified BC labour expenditures cap is increased to 60% from 48% of production costs. The digital animation or visual effects tax credit is increased to 17.5% from 15%. These changes will be effective for productions with principal photography that begins after February 28, 2010.
• British Columbia production services tax credit - The credit for foreign productions is increased to 33% from 25% of accredited qualified BC labour expenditures. The digital animation or visual effects production services tax credit is increased to 17.5% from 15%. These changes will be effective for productions with principal photography that begins after February 28, 2010.
• British Columbia interactive digital media tax credit - A new interactive digital media tax credit equal to 17.5% of qualified BC labour expenditures is introduced. The credit will be effective for qualifying video game development projects that begin after August 31, 2010.

Manitoba

• [2010-03-23 Budget]
  Manitoba research and development tax credit - The refundable credit will not be limited to R&D carried on under contract with a research institute in Manitoba. For in-house R&D expenditures incurred after 2010, 25% of the tax credit amount will be refundable; for expenditures incurred after 2011, 50% of the tax credit amount will be refundable.
• Manitoba co-op education and apprenticeship tax credit - Beginning in 2011, the tax credit will be expanded to include employers who hire high-school and post-secondary level 1 and 2 apprentices who are not eligible for the federal apprenticeship job creation tax credit. This includes tax-exempt employers as well as employers of non-Red Seal apprentices. The new credit will equal 10% of net wages and salaries to an apprentice, up to a maximum of $2,000.
• Manitoba community enterprise investment tax credit - This credit is extended to December 31, 2013, and renamed the "small business venture capital tax credit".
• Manitoba interactive digital media tax credit - This credit is extended to December 31, 2013. Effective for certificates of eligibility and tax credit certificates issued after March 23, 2010, tax credit certificates can be issued on a tax-year basis instead of at the end of a project, and repaid or repayable government assistance will no longer reduce eligible labour costs.
• Manitoba film and video production tax credit - This tax credit is extended to March 1, 2014. For productions that start principal photography after March 2010, corporations will be able to elect to claim either the maximum 65% tax credit based on eligible labour costs, or a new 30% tax credit based on production costs incurred for labour, goods and services provided in Manitoba that are directly attributable to the production of an eligible film. Effective March 24, 2010, federal limitation periods will be adopted for filing a Manitoba film tax credit certificate with the CRA. Also, corporations may file a waiver to extend the tax credit application deadline by 18 months.
• Manitoba cooperative development tax credit - A new tax credit is introduced for cooperatives that make financial contributions after September 2010 and before 2021 toward cooperative development in Manitoba.

New Brunswick

• [2009-12-01 Budget]
  New Brunswick film tax credit - This credit is extended to eligible salaries incurred before January 1, 2020. Effective January 1, 2010, an additional 10% regional bonus is available for eligible productions that take place more than 50 km from the the city hall in Moncton, the city hall in Fredericton, and the city hall in Saint John.

Newfoundland and Labrador

• [2010-03-29 Budget]
  Newfoundland and Labrador small business income tax rate - Effective for tax years beginning on or after April 1, 2010, the small business income tax rate is reduced from 5% to 4%.

Nova Scotia

• [2010-04-06 Budget]
  Nova Scotia small business income tax rate - Effective January 1, 2011, the small business income tax rate will be reduced from 5% to 4.5%. This rate change will be pro-rated for tax years that straddle January 1, 2011.