Corporations operating in Alberta are required to file Alberta corporate tax returns in addition to filing with Canada Revenue Agency (CRA).

Tax and Revenue Administration (TRA), Alberta Finance, administers the Alberta Corporate Tax Act that provides for the calculation of:

• Alberta corporate income tax for corporations with a permanent establishment in Alberta, including Alberta deductions and credits such as the Alberta Royalty Tax Deduction, the Alberta Small Business Deduction, the Alberta Foreign Investment Income Tax Credit and the Alberta Political Contributions Tax Credit;
• Alberta Royalty Tax Credit (ARTC) for corporations that pay eligible Alberta crown royalties;
• Alberta Royalty Credit for Individuals and Trusts (RCIT) that pay eligible Alberta crown royalties; and
• Insurance Corporations tax payable by corporations carrying on the business of insurance in Alberta.

Please note that as announced by the Alberta government on September 21, 2006, (Energy Minister confirms end of Alberta Royalty Tax Credit Program) Alberta will discontinue its ARTC and RCIT programs for corporations, individuals and trusts effective January 1, 2007. See Special Notice Vol. 5 No. 21, Discontinuance of Alberta Royalty Tax Credit (ARTC) and Royalty Credit for Individuals and Trusts (RCIT) Programs.

Background

Corporate income tax has been levied by the province since the 1940s. All incorporated businesses with a permanent establishment (e.g., office, mine, farm, oil well, etc.) in Alberta at any time in a taxation year pay income tax on the portion of their taxable income allocated to Alberta. The Alberta calculation of taxable income parallels the federal calculation, although taxpayers may claim different discretionary deductions such as capital cost allowances for federal and provincial purposes. The allocation of income among provinces is generally standardized across the country.

Small Business Deduction

Canadian-controlled private corporations not in an associated group may claim a small business deduction on active business income (i.e., non-investment income) up to the small business threshold of $400,000.  Canadian-controlled private corporations in an associated group share the maximum small business threshold. For more information about the small business deduction, see information circular CT-17R4, Alberta Small Business Deduction.

On September 20, 2006, the Alberta government announced, among other changes, that an increase in the small business threshold to $500,000 will be phased in by 2009. For more information, please read Government enhances corporate dividend tax credit and small business income threshold.

Alberta Royalty Tax Deduction

Crown royalties are paid by companies to the provincial government for the right to extract natural resources owned by Albertans. Responding to federal resource tax changes that came into effect January 1, 2003, Alberta amended its Corporate Tax Act. See Special Notice Vol. 5, No. 18, "Alberta Response to Federal Resource Tax Changes" for details.

Alberta Royalty Tax Credit (ARTC)

The Alberta Royalty Tax Credit (ARTC) is a royalty program administered through the income tax system. It returns a percentage of a specified amount of Alberta crown royalties paid in a year on conventional oil and gas production. Both the percentage, or credit rate, and the specified amount have varied over time.

Under the program's current parameters, the credit rate reflects fluctuations in quarterly oil and gas prices. Maximum benefits range from $500,000, calculated at 25 per cent of eligible royalties up to $2 million when the reference price exceeds $210, to $1.5 million or 75 per cent of eligible royalties when the price is $100 or less.

This program will be discontinued effective January 1, 2007, as noted above.

Insurance Corporations Tax

The Insurance Corporations Tax is payable by insurance companies for business transacted in Alberta during the year.  The rates are two per cent on premiums for life, accident and sickness insurance, and three per cent on premiums for other types of insurance.