Ontario transitional tax debits and credits
The Ontario transitional tax debits and credits provide a transition from the Corporations Tax Act (Ontario) for corporations with different income tax attributes for federal and Ontario purposes.
For tax years ending before 2009, a corporation's income and taxable income for Ontario purposes were determined based on its Ontario tax pools (for example, the undepreciated capital cost of depreciable property) under the Corporations Tax Act (Ontario).
For tax years ending after 2008, the corporation's income and taxable income for Ontario purposes are determined based on its federal tax pools under theTaxation Act, 2007 (Ontario).
Where the corporation's federal tax pools exceed its Ontario tax pools, the corporation has a transitional tax debit. A specified corporation subject to the Ontario transitional tax debit is generally required to pay additional Ontario corporate income tax over a five-year period beginning with its first tax year ending after 2008.
Although the five-year period has ended, it is still possible to have a transitional tax debit since, after 2015, the corporation can continue to defer the transitional tax debits as long as it does not claim an SR&ED tax deduction and the SR&ED expenditure pool is not reduced by government assistance.
Conversely, where the corporation's Ontario tax pools exceeded its federal tax pools, the corporation had a transitional tax credit. A specified corporation was generally entitled to a transitional tax credit over a five-year period beginning with its first tax year ending after 2008. You can no longer claim this credit.
A specified corporation is defined under subsection 46(5) of the Taxation Act, 2007 (Ontario).
Calculating the debits
Complete Schedule 506, Ontario Transitional Tax Debits and Credits, to calculate the corporation's transitional tax debits and file it with your return.
Use Schedule 507, Ontario Transitional Tax Debits and Credits Calculation, to determine the amounts you enter in Part 3 of Schedule 506. You do not need to file Schedule 507 with your return.
On line 276 of Schedule 5, Tax Calculation Supplementary – Corporations, enter the total transitional tax debits.
Forms and publications
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