Derived from the federal Income Tax Act and the Income Tax Regulations, the Ontario Special Additional Tax on life insurance corporations (SAT) is a benefit for incorporated life insurance companies with fixed addresses who wish to levy their taxable income. The SAT is a deductible capital tax incurred during the earning of a life insurance corporations’ fiscal year.
According to the Government of Canada, the SAT for a tax year of an entity is equal to:
- 1.25% of the corporation's capital which is multiplied by the number of tax days in the tax year which is then divided by 365
equals more than:
- the total amount of the Ontario corporation’s income tax and minimum corporate tax payable in the same tax year.
You must file Schedule 512 for the SAT to calculate the tax payable. Every tax year that the SAT is filed for, the SAT is carried forward as the Ontario corporate minimum tax credit. You may choose to use this tax credit for future years to lower your corporate income tax payable.
Related life insurance corporations
If your life insurance corporation is related to one or more life insurance corporations in Ontario that are actively operational within Canada, you must file Schedule 513 with your T2 tax return. This is because you must claim and allocate each related group’s capital allowance among its respective members for each tax year and each entity.
How to report special additional tax on life insurance corporations
The SAT can be disclosed on a life insurance corporation’s tax T2 report by filing Schedule 512 and if necessary, Schedule 513. You must also enter the SAT payable within the tax year in part 4 of Schedule 510. Schedule 510 is intended for life insurance corporations who qualify for the Ontario corporate minimum tax.
In addition, there is the Tax Calculation Supplementary form, Schedule 5, where line 280 is required to claim the SAT. The Tax Calculation Supplementary form is intended for life insurance corporations who have more than 1 permanent residence across jurisdictions, with the entity residing in Ontario, and/or the entity is additionally claiming provincial tax credits for the same tax year.
The Ontario Special Additional Tax on Life Insurance Corporations is an advantageous deductible for all Ontarian life insurance companies which helps determine the carrying value of the entity, including assets and taxable capital for each fiscal year.
T2inc ensures your corporation benefits from all eligible tax credits
A number of tax credits are available to corporations in Ontario. Working with a tax and business accounting firm is the best way to ensure your corporation benefits from these tax credits as much as possible.
For more information on tax-deductible business expenses or other ways to reduce your corporate taxes, please don’t hesitate to contact T2inc. With the help of our corporate tax specialists, you can maximize your deductions.
Frédéric Roy-Gobeil
CPA, M. TAX
As President of T2inc.ca and an entrepreneur at heart, I have founded many start-ups such as delve Labs and T2inc.ca. A former tax specialist at Ernst & Young, I am also a member of the Ordre des comptables professionnels agréés CPA and have a master's degree in taxation from the Université de Sherbrooke. With a passion for the world of entrepreneurship and the growth mindset, I have authored numerous articles and videos on the industry and the business world, as well as on accounting, taxation, financial statements and financial independence.
