Corporate minimum tax is a tax levied by the government of Ontario. Every corporation that is required to pay corporate income tax in Ontario (i.e. has a permanent establishment in Ontario at any point during the fiscal year) and exceeds certain asset and revenue thresholds must pay this tax.
In this article, discover the thresholds beyond which corporate minimum tax must be paid, and find out how to calculate and report the tax for your business.
Who is subject to corporate minimum tax in Ontario?
Corporations that have at least $50 million in assets and earn at least $100 million in revenue are subject to corporate minimum tax in Ontario, with the following exemptions:
- Corporations that are exempt from paying income tax under section 149 of the Income Tax Act
- Mortgage investment corporations
- Those considered to be deposit insurance corporations under section 137 of the Income Tax Act
- Congregations or business agencies that are considered to be communal organizations under section 143 of the Income Tax Act
- Investment corporations
- Mutual fund corporations
When determining total assets and total revenue, corporations must include any share of a partnership, any associated corporation, and any associated corporation’s share of a partnership. Any corporation that is considered to be associated will need to fill out and file a Schedule 511 form to report its associated assets and revenue.
How to calculate corporate minimum tax in Ontario
Corporate minimum tax is based on a corporation’s adjusted net income and is calculated using a tax rate of 2.7%. Corporations are only required to pay corporate minimum tax to the extent that it exceeds their income tax payable for the tax year in question.
The corporate minimum tax payable is calculated by taking a corporation’s adjusted financial statement income, subtracting any corporate minimum tax losses from previous years, and multiplying the result by the corporate minimum tax rate (2.7%).
How to report corporate minimum tax in Ontario
If your corporation is subject to the corporate minimum tax rate, you’ll need to file a Schedule 510 with your T2 corporate tax returns. You can file your business tax returns yourself online or by mail (note that most corporations with yearly revenues that exceed $1 million are required to file online). If you’d like more guidance and support, you can use taxation software or get help from a corporate tax specialist.
Get help with your corporate taxes in Ontario
T2inc provides corporate tax and accounting services for businesses in Ontario and Quebec. In addition to offering first-rate tax software, we have expert tax accountants available online to support our clients and answer any questions they have. If you’d like expert guidance to help you optimize your corporate finances, contact us today!