ab-corporate-tax

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# AB Corporate Tax

## Alberta — Corporate Income Tax — Skill v1.0

> **Scope:** Alberta provincial corporate income tax (Alberta Corporate Tax Act, RSA 2000, c A-15) for the 2025 tax year. ALWAYS load this skill alongside the federal T2 skill — Alberta is a non-agreeing province for corporate tax and runs its own AT1 system in parallel with the federal T2.

## 1. Quick reference — Alberta vs federal combined CIT

**Quick reference — Alberta vs federal combined CIT**

| Income type | Federal | Alberta | **Combined** |
| --- | --- | --- | --- |
| **General active business income** | 15% | **8%** | **23%** |
| **SBD income** (first $500,000 active business income, CCPC) | 9% | **2%** | **11%** |
| **Investment income (CCPC, non-active)** | 38.67% (incl. 10.67% refundable) | 8% | 46.67% |
| **M&P income** (no separate AB rate) | 15% | 8% | 23% |

Alberta has the **lowest general provincial corporate income tax rate in Canada** following the Job Creation Tax Cut (Bill 3, 2019), which reduced the general rate from 12% to 8% in four annual 1-point steps culminating July 1, 2020 — accelerated from the original 2022 schedule.

**Comparable provinces (2025 general rate):**
- Alberta: 8%
- BC: 12%
- Saskatchewan: 12%
- Manitoba: 12%
- Ontario: 11.5%
- Quebec: 11.5%

## 2. Required inputs + refusal catalogue

### Required inputs

1. **Permanent establishment (PE)** in Alberta — confirmed via federal Schedule 5 allocation
2. **Alberta taxable income allocation** — % of taxable income earned in Alberta (Schedule 5, federal T2)
3. **Active business income (ABI)** vs aggregate investment income (AAII) split
4. **CCPC status** for the entire tax year
5. **Associated corporation group** — for SBD limit sharing
6. **Federal SR&ED qualified expenditures** — feeds Alberta IEG computation
7. **Fiscal year-end (FYE)** date
8. **Alberta Corporate Account Number (CAN)** — 9 or 10-digit AB TRA identifier

### Refusal catalogue (out of scope — escalate to credentialed Alberta tax practitioner)

- **R-AB-CIT-1** — Multi-provincial PE allocation with disputed Schedule 5 attribution
- **R-AB-CIT-2** — Non-resident corporation carrying on business in Alberta (Part XIV branch tax interaction)
- **R-AB-CIT-3** — Insurance corporations, banks, and financial institutions (special AT1 schedules)
- **R-AB-CIT-4** — Crown corporations, exempt entities under s.35 of the Act
- **R-AB-CIT-5** — Mutual fund corporations, mortgage investment corporations
- **R-AB-CIT-6** — Reorganizations involving Alberta-allocated assets (s.85, s.86, s.87 with cross-border consequences)
- **R-AB-CIT-7** — Voluntary disclosure under the Alberta TRA VDP — credentialed practitioner only
- **R-AB-CIT-8** — AT1 objections, notices of appeal, Alberta Court of King's Bench tax matters

## 3. General rate — 8% (Job Creation Tax Cut)

- **General corporate income tax rate** — 8% (For tax years ending on or after July 1, 2020, remains 8% for the 2025 tax year)  _(s.21 of the Alberta Corporate Tax Act)_

### Rate history (Job Creation Tax Cut, Bill 3, 2019)

**Rate history (Job Creation Tax Cut, Bill 3, 2019)**

| Effective date | General rate |
| --- | --- |
| Before July 1, 2019 | 12% |
| July 1, 2019 | 11% |
| January 1, 2020 | 10% |
| July 1, 2020 | **8%** (accelerated from the originally planned 2022) |
| 2025 | **8%** (current) |

- **Combined federal + Alberta general rate** — 23% (15% federal + 8% AB)

### Straddling tax years

- **Proration for straddling fiscal years** — A corporation with a fiscal year straddling a rate change date must prorate. For 2025, the rate has been stable at 8% since July 1, 2020, so no proration applies to any FYE in 2025.

## 4. Small Business Deduction (SBD) — 2% Alberta rate

- **SBD availability** — Alberta provides a small business deduction under s.22 of the Alberta Corporate Tax Act on the first $500,000 of active business income of a Canadian-controlled private corporation (CCPC).  _(s.22 of the Alberta Corporate Tax Act)_

### Effective rates

- **Alberta SBD rate** — 2% (general rate of 8% minus SBD of 6%)
- **Federal SBD rate** — 9% (general rate of 15% minus federal SBD of 6%)
- **Combined federal + AB SBD rate** — 11% (on first $500,000 ABI)

### Business limit grind

- **Taxable capital employed in Canada (TCEC) grind** — Alberta mirrors the federal grind — the $500,000 business limit is reduced where TCEC of the associated group exceeds $10M, fully phased out at $50M (consistent with the 2024+ federal expansion from the prior $10M-$15M phase-out band).
- **Passive investment income grind** — Alberta mirrors the federal AAII grind under ITA s.125(5.1) — every $1 of AAII over $50,000 reduces the SBD business limit by $5, fully eliminated at $150,000 AAII.  _(ITA s.125(5.1))_
- **Associated corporations sharing** — Associated corporations must share the $500,000 business limit via AB Schedule 3 (mirrors federal T2 Schedule 23 allocation).

### Specified Investment Business (SIB) and Personal Services Business (PSB)

- **SIB income** — SIB income does not qualify for the SBD; taxed at 8% Alberta general rate (plus federal refundable rates on investment income).
- **PSB income** — PSB income is excluded from the SBD by ITA s.125(7); Alberta follows. PSB also faces the federal 5% additional tax under ITA s.123.5 — Alberta does not apply an additional provincial PSB surtax.  _(ITA s.125(7); ITA s.123.5)_

## 5. AT1 return — Alberta's standalone corporate tax return

Alberta is one of three non-agreeing provinces for corporate tax (along with Quebec and — for the period before 2010 — Ontario, which has since integrated). Corporations with a PE in Alberta file:

- **Federal T2** with the Canada Revenue Agency (CRA), AND
- **AT1 — Alberta Corporate Income Tax Return** with **Alberta Tax and Revenue Administration (TRA)**

> Note: Alberta participates in the federal–provincial Tax Collection Agreement (TCA) for **individuals** (CRA administers the AB personal income tax under the same T1), but **not for corporations**. The AT1 system is administered directly by TRA at Alberta Treasury Board and Finance.

### AT1 core schedules (2025)

**AT1 core schedules (2025)**

| Schedule | Purpose |
| --- | --- |
| **AT1 page 1** | Identification, FYE, AB allocation %, tax payable |
| **AT1 Schedule 1** | Alberta small business deduction calculation |
| **AT1 Schedule 2** | Alberta foreign investment income tax credit (limited) |
| **AT1 Schedule 4** | Alberta foreign tax credit on business income |
| **AT1 Schedule 9** | Listed Personal Property and other capital gains |
| **AT1 Schedule 10** | Alberta loss carry-forward continuity (non-capital, net capital, restricted farm) |
| **AT1 Schedule 12** | Income/loss reconciliation to federal Schedule 1 |
| **AT1 Schedule 13** | Alberta Innovation Employment Grant (IEG) |
| **AT1 Schedule 14** | Cumulative eligible capital (CEC) — historical only; replaced by Class 14.1 |
| **AT1 Schedule 18** | Allocation of Alberta income among PEs |

From openaccountants/openaccountants, AGPL-3.0.

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