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
AT1 Schedule 21	Calculation of Alberta tax payable
AT1 Schedule 29	Innovation Employment Grant — detailed eligible expenditures

Filing channel

• Net File AT1 via TRA's online portal (mandatory for most corporations)
• Tax preparer software: CCH iFirm Taxprep, Wolters Kluwer Cantax, Intuit ProFile, TaxCycle — all support AT1 e-filing
• Paper filing permitted only for corporations exempt from e-filing (very rare exceptions)

Account number

• Corporations must register for an Alberta Corporate Account Number (CAN) with TRA before first filing
• Registration: TRA Client Self-Service (TRACS) portal

6. Filing deadlines

Filing deadlines

Item	Deadline
AT1 return filing	6 months after FYE (same as federal T2)
AT1 tax payment	2 months after FYE (CCPCs claiming SBD: 3 months after FYE — mirrors federal)
Instalments	Monthly instalments for corporations with prior-year AB tax over $2,000; quarterly available for eligible CCPCs (mirrors federal eligibility)
Notice of objection	90 days from Notice of (Re)assessment
Record retention	6 years from end of last tax year to which the records relate

Late filing penalties (Alberta TRA)

• Late filing penalty structure — - 5% of unpaid tax at filing deadline, plus - 1% per complete month of continuing failure, up to 12 months - Doubled for repeat offenders (prior late-filing penalty in any of the 3 preceding tax years and TRA demand to file): 10% + 2%/month up to 20 months - Interest on unpaid tax accrues from balance-due date at the TRA-prescribed rate (set quarterly; aligned roughly with federal CRA prescribed rate plus a margin)

7. Alberta Investor Tax Credit (AITC) — historical

• AITC description and status — The AITC was a non-refundable 30% tax credit for investments in eligible Alberta small businesses (capped at $60,000/investor/year and $5M per business lifetime), available 2017–2019. - Status: Eliminated effective March 30, 2020 by the UCP government (Bill 20, 2019) - Grandfathered claims: Credits earned 2017–2019 retain a 4-year carry-forward (last carry-forward window expired with 2023 tax year for the final 2019 vintage) - 2025 action: Check for any unused AITC carry-forward on prior AT1 — for FYEs in 2025, the 2019-vintage carry-forward has expired; only confirm there is nothing inadvertently still being claimed. (Bill 20, 2019)

8. Capital Investment Tax Credit (CITC) — wound down

• CITC description and status — The CITC was a 10% non-refundable tax credit for capital investment in manufacturing, processing, and tourism infrastructure (eligible expenditure $1M minimum, credit cap $5M per project). - Status: Program wound down in 2020; no new applications accepted. - Grandfathered claims: Credits earned for approved projects retain a 10-year carry-forward. - 2025 action: Check the prior AT1 for any CITC carry-forward balance and confirm continued claim eligibility against TRA approval letter.

9. Innovation Employment Grant (IEG) — refundable R&D credit

The IEG is Alberta's refundable R&D tax credit, introduced effective January 1, 2021 to partially replace the wound-down Alberta SR&ED tax credit (which was eliminated effective January 1, 2020).

Rate structure (s.26.6 Alberta Corporate Tax Act)

Rate structure (s.26.6 Alberta Corporate Tax Act) (s.26.6 Alberta Corporate Tax Act)

Tier	Rate	Base
Base credit	8%	First $4M of eligible R&D expenditures (in Alberta)
Incremental credit	20%	Expenditures above the prior 2-year average R&D spend, up to the $4M cap

Eligibility

• IEG eligibility criteria — - Corporation with PE in Alberta at any time in the tax year - Eligible expenditures = federal SR&ED qualified expenditures (per ITA s.37 and Regulation 2900) incurred in Alberta - Refundable: Excess credit over Alberta tax payable refunded to the corporation (no carry-forward needed) (ITA s.37; Regulation 2900)

Expenditure cap

• IEG expenditure cap rules — - The $4M expenditure cap is shared among associated corporations - The cap is prorated for short tax years

Claim mechanics

• IEG claim filing mechanics — - File AT1 Schedule 29 (detailed eligible expenditures, allocation among associated group) - File AT1 Schedule 13 (summary, integration with AT1 tax payable) - Reconciles to federal T661 (SR&ED claim) line entries restricted to Alberta-located expenditures

Interaction with federal SR&ED

• IEG and federal SR&ED interaction — - The IEG is separate from federal SR&ED ITC — both can be claimed on the same eligible expenditure pool (where Alberta-located) - The IEG itself is taxable income for federal purposes in the year received (ITA s.12(1)(x); included on federal T2 Schedule 1) - Alberta does not require an offsetting addback (avoids double-taxing the grant in AB) (ITA s.12(1)(x))

10. Foreign investment income — no additional AAII refundable tax in Alberta

• No AB AAII refundable tax — Some provinces (e.g., Saskatchewan with its 2% additional refundable tax on AAII) apply a provincial refundable tax on aggregate investment income (AAII) of CCPCs mirroring the federal 10.67% Part I refundable tax under ITA s.123.3. Alberta does NOT have an additional provincial refundable tax on AAII. Investment income of an Alberta CCPC is taxed at: - Federal: 38.67% (28% Part I + 10.67% additional refundable Part I) - Alberta: 8% only (general rate; no surtax, no AAII supplement) - Combined: 46.67% Federal RDTOH (refundable dividend tax on hand) mechanics apply at the federal level only; Alberta has no provincial RDTOH equivalent. Refundable mechanics operate solely through CRA on the federal Part I refundable component. (ITA s.123.3)

11. Worked example — Calgary tech CCPC

Facts

• Corporation: Cascade Code Inc., a CCPC incorporated in Alberta, FYE December 31, 2025
• Single PE: Calgary, Alberta (100% Alberta allocation per federal Schedule 5)
• Gross revenue: $2,000,000 (Canadian-source SaaS development services)
• Net income for tax purposes (line 300, federal T2): $400,000
• Active business income (ABI): $300,000 (after federal Schedule 7 calculation)
• Investment income: $20,000 (interest on cash reserves)
• Taxable capital employed in Canada (TCEC): $3,200,000 (below $10M — no TCEC grind)
• Associated corporations: none
• SR&ED qualified expenditures (Alberta): $250,000 (current-year)
• Prior 2-year average Alberta R&D spend: $180,000

Step 1 — Federal T2 (for context)

• ABI eligible for SBD: $300,000 (all under $500,000 limit, no grind)
• Federal SBD-rate tax: $300,000 × 9% = $27,000
• Federal general-rate tax on remaining $100,000 ($400,000 − $300,000 ABI): $100,000 × 15% = $15,000
• Federal Part I refundable on investment income: not separately computed here; subsumed in T2 mechanics
• Federal tax (Part I, simplified): ~$42,000 before credits

Step 2 — Alberta AT1 — Schedule 21 tax payable

• Alberta taxable income: $400,000 (100% Alberta allocation)
• SBD-rate portion (matches federal SBD claim): $300,000 × 2% = $6,000
• General-rate portion: $100,000 × 8% = $8,000
• Alberta tax before credits: $14,000

Step 3 — Innovation Employment Grant (AT1 Schedule 13 + 29)

• Eligible AB SR&ED expenditures: $250,000
• Prior 2-year average: $180,000
• Base credit (8% on first $4M of $250,000): $250,000 × 8% = $20,000
• Incremental credit (20% on amount above prior 2-yr avg, up to $4M cap):
  • Incremental: $250,000 − $180,000 = $70,000
  • 20% × $70,000 = $14,000
• Total IEG: $20,000 + $14,000 = $34,000 (refundable)

Step 4 — Net AT1 result

• Alberta tax before credits: $14,000
• Less: IEG (refundable): ($34,000)
• Alberta net refund: $20,000
• (The IEG creates a refundable position because credits exceed tax payable; TRA issues the refund.)

Step 5 — Combined effective Alberta rate (this example)

• Pre-credit combined federal + AB on $400,000:
  • SBD portion: $300,000 × 11% = $33,000
  • General portion: $100,000 × 23% = $23,000
  • Combined pre-IEG: $56,000 (14% effective)
• Post-IEG (Alberta refunds $20,000, federal SR&ED ITC computed separately):
  • Effective combined rate drops materially once both IEG and federal SR&ED ITC are factored in.

Step 6 — Deliverables for the client

1. AT1 return + Schedules 1, 13, 21, 29
2. Federal T2 with consistent Schedule 1, 7, 23, 31, 49 entries
3. T661 federal SR&ED claim (Alberta-located expenditures flagged for IEG cross-reference)
4. IEG refund expected: ~$20,000 (subject to TRA processing — typical 6–9 months from filing)
5. Instalment recalculation for 2026 based on 2025 AT1 tax

12. Conservative defaults

• Conservative default rules — When information is missing, the skill applies these conservative defaults (always flag for reviewer confirmation): 1. Allocation %: If federal Schedule 5 not yet finalized, assume 100% Alberta only when the corporation has confirmed sole-PE Alberta status; otherwise refuse and request allocation. 2. CCPC status: Confirm CCPC status throughout the year — do not assume; non-CCPC status disqualifies SBD entirely. 3. Associated group sharing: Default the SBD allocation to $0 for the subject corporation until associated group T2-Sch 23 allocation is confirmed in writing. 4. TCEC grind: If TCEC near $10M, apply full grind treatment (assume worst case) until prior-year T2 Schedule 33 is reviewed. 5. IEG prior-2-year average: If unavailable, compute base 8% only (no incremental); flag for reviewer to add incremental after historic data confirmation. 6. IEG eligibility: Apply only to expenditures with documented Alberta location (work performed at AB PE, AB-resident employees); refuse to extend to ambiguous remote-work expenditures without payroll address evidence. 7. AITC / CITC carry-forwards: Assume none unless prior AT1 Schedule 10 / TRA approval letter confirms balance. 8. Instalment base: Default to prior-year method unless current-year estimate is substantially lower and documented. 9. Filing penalty exposure: Flag any late filing — even by 1 day — for immediate reviewer escalation.

13. Sources

Primary law

• Primary law sources — - Alberta Corporate Tax Act, RSA 2000, c A-15 — the operative statute - s.21: General corporate income tax rate - s.22: Small business deduction - s.26.6: Innovation Employment Grant - s.35: Exempt corporations - Alberta Corporate Tax Regulation, Alta Reg 119/2008 - Bill 3, Job Creation Tax Cut Act, 2019 (general rate reduction to 8%) - Bill 20, Fiscal Measures and Taxation Act, 2019 (AITC elimination) (Alberta Corporate Tax Act, RSA 2000, c A-15)

Federal coordination

• Federal coordination sources — - Income Tax Act (Canada), RSC 1985, c 1 (5th Supp) — s.123–125 (federal CIT and SBD), s.37 + Reg 2900 (SR&ED expenditures used for IEG base) (Income Tax Act (Canada), RSC 1985, c 1 (5th Supp))

Administrative guidance

• Administrative guidance sources — - TRA Information Circular CT-1 — Filing the AT1 - TRA Information Circular CT-17 — Innovation Employment Grant guide - TRA Information Circular CT-2 — Alberta Small Business Deduction - TRA Information Circular IC-PEN-1 — Penalties and interest - TRA Client Self-Service (TRACS) — corporate account registration and filing portal - Alberta Treasury Board and Finance — Corporate Income Tax program page

Federal forms (cross-referenced)

• Federal forms cross-referenced — - T2 Corporation Income Tax Return + Schedules 1, 5, 7, 23, 31, 33, 49 - T661 SR&ED Expenditures Claim (Alberta-located expenditures feed IEG)

Rate confirmation

• 2025 rate confirmation — Alberta Budget 2025 (tabled February 27, 2025) — reaffirmed 8% general / 2% SBD rates for the 2025 tax year; no rate changes announced. (Alberta Budget 2025 (tabled February 27, 2025))

End of Skill v1.0 — Alberta Corporate Income Tax

End of Skill v1.0 — Alberta Corporate Income Tax

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