Provincial/Territorial SIFT tax part

For 2009 and later tax years, the provincial/territorial part of a specified investment flow-through (SIFT) trust's tax is based on its provincial/territorial SIFT tax rate. A SIFT trust may elect to apply this rate to its 2007 and 2008 tax years. If the trust does not elect to do this, the tax factor is 13% for the trust’s tax calculation.

SIFT tax rate

The provincial and territorial SIFT tax rates are determined under subsection 414(3) of the Income Tax Regulations.

A SIFT trust's tax rate for a tax year depends on where the trust has a permanent establishment for that year:

• If a SIFT trust has no permanent establishment in a province/territory in the tax year, the rate for the trust is 10%
• If a SIFT trust has a permanent establishment in one province/territory and no permanent establishment outside of that province/territory, the rate is the general corporate income tax rate in the province/territory for the tax year

If based on a SIFT trust's tax year, more than one general corporate income tax rate applies, complete Part A of Chart 8 to determine the trust's general corporate income tax rate for each province/territory in which the trust has a permanent establishment.

If a SIFT trust has a permanent establishment in a province/territory in a tax year and a permanent establishment outside that province/territory (whether inside or outside Canada) in that tax year, the general corporate income tax rate will need to be prorated based on the taxable SIFT distributions attributed to each jurisdiction. Use Part A of Chart 8 (if applicable) to determine the trust's general corporate income tax rate for each province/territory, and complete Part B of Chart 8 to determine the trust's provincial/territorial SIFT tax rate

A SIFT trust's taxable distributions are its non-deductible, distributions amount for the tax year.

General Corporate Income Tax Rates

The definition of the general corporate income tax rate in subsection 414(1) of the Income Tax Act Regulations is relevant for determining a SIFT tax rate in relation to subsection 414(3) of the regulations, in particular, paragraph (b), and variable E of the formula in paragraph 414(3)(c).

Under the definition, for the Province of Quebec, the general corporate income tax rate is set at 0%. This will ensure that a SIFT trust or SIFT partnership that has a permanent establishment (as defined in Part IV of the regulations) in Quebec and that is subject to Quebec's provincial SIFT tax for amounts attributable to that permanent establishment, will not be subject to the provincial part of the federal tax for those amounts.

For the territories and the other provinces, the general corporate income tax rate for a tax year means the highest corporate income tax rate applicable to public corporations in a territory or province for that tax year.

Forms and publications

• Guide T4013, T3 Trust Guide
• Form T3RET, T3 Trust Income Tax and Information Return
• Schedule, T3SCH11, Federal Income Tax

Government Partners

• Department of Finance Canada