|
Tax
and Revenue Administration
Alberta Corporate
Tax Act
Information
Circular CT-21R1 |
| Last Reviewed: |
October 1999 |
| Produced by: |
Alberta Finance and Enterprise, Tax and
Revenue Administration |
| For more information: |
tra.revenue@gov.ab.ca |
CT-21R1 / October 1999
ALBERTA CORPORATE
TAX ACT INFORMATION CIRCULAR:
INSURANCE CORPORATIONS TAX
This Information Circular discusses the Alberta tax assessed on insurance premiums
under the Alberta Corporate Tax Act (the "Act"). The topics discussed include:
- Part 9 of the Act imposes a tax on corporations carrying on the business of insurance in
Alberta within the meaning of the Insurance Act of Alberta. An exception is
made for fraternal societies that are incorporated for the purposes of making life,
accident or sickness insurance contracts with members only and are not for profit. For
simplicity, the term "insurer" will be used in this circular to refer to
corporations subject to Part 9 tax.
- The tax is based on the amount of premiums receivable in the taxation year in respect
of:
a) in the case of property insurance, contracts covering property that is situated in
Alberta at the time the premiums become payable; and
b) in the case of insurance other than property insurance, contracts with, or in
respect of, persons that are resident in Alberta at the time the premiums become payable.
Prior to October 31, 1995, "taxation year" was defined as the calendar year.
Effective for taxation years ending on or after October 31, 1995, "taxation
year" means the fiscal year of the corporation.
- The tax is not payable in respect of:
a) consideration received by a life insurer for an annuity contract;
b) premiums for marine insurance;
c) reinsurance premiums received by a
reinsurer; and
d) premiums or portion of a premium not retained by an insurer under a risk
distribution plan.
- The amount of premiums receivable in the taxation year on which the tax is based is
gross premiums receivable (except in respect of amounts described in paragraph 3) during
the year less the sum of:
a) premiums returned during the year; and
b) the cash value of dividends paid or credited to policyholders during the year.
- The tax rate for premiums is:
a) 2 percent on accident, life and sickness insurance policies; and
b) 3 percent on all other insurance policies.
- Insurers that are required to pay the tax for a taxation year must file a return in
prescribed form (form AT2095) with Alberta Finance and Enterprise, Tax and Revenue Administration
("TRA") on or before the 75th day following the taxation year end. The return is
to be accompanied by a copy of the "Provincial and Territorial Summary of Premiums
Written, Dividends and Claims Exhibit" (as filed with the Superintendent of
Insurance).
- The tax for a taxation year is due on or before the 75th day following the taxation year
end. If a debit balance exists for any time after that date, interest, compounded on a
daily basis, will be charged on that balance for the time it remains outstanding.
The
interest rates used are the same as those used for corporate income tax. Current interest rates can be obtained on our Internet site or by contacting
TRA.
- If an overpayment of tax occurs, the amount overpaid may be refunded or may be applied
against another liability under the Act, including any outstanding balance in the
insurer's income tax account.
- Interest on an overpayment will be calculated from the later of:
a) the day the overpayment arose;
b) the 75th day following the taxation year end; and
c) the day on which a complete return for the year was filed;
to the day the amount is refunded, repaid, or applied.
- If a return is not filed on time, a late-filing penalty is assessed in the amount of:
a) 5 percent of the tax that was unpaid at the required filing date; plus
b) 1 percent of the tax that was unpaid at the required filing date for each complete
month that the return is late, to a maximum of twelve months.
- Although an insurer's return is considered to be filed on the day on which it is
received by TRA, a late-filing penalty will not be assessed if a mailed return is received
within five working days after the required filing date. A return sent via a courier
service will not attract a late-filing penalty if it is received within one day of the
required filing date. If hand-delivered returns are received anytime after the required
filing date, they are considered late-filed.
- If the return is not filed in prescribed form or does not contain the prescribed
information, the insurer will be asked to remedy the situation. Any refund interest to
which an insurer may be entitled will not begin until the required information has been
submitted. If the situation is not remedied as required, the insurer may be subject to
prosecution.
- An insurer may be liable to pay an administrative penalty if TRA finds that the filed
return contains false statements or omissions under conditions that constitute gross
negligence.
- Insurers who wilfully attempt to evade payment of tax are subject, upon conviction by a
court, to fines. Individuals that are a party to corporate acts of evasion are also
subject to fines and imprisonment, if convicted.
- An insurer who fails to file a return as and when required is guilty of an offence and
is liable on conviction to a per diem fine, determined by the court, for each day of
default. Similarly, the directors of the corporation may be charged for failure to file a
corporation's return and would be liable upon conviction to a per diem fine.
- In assessing the insurance premiums tax, the
Minister of Finance is not bound by a
return or by the fact that no return has been filed. If circumstances warrant, TRA may
issue an assessment that is at variance with a filed return (e.g. in the case of
misrepresentation or fraud) or that reflects an estimate of tax payable determined without
reference to a filed return (e.g. where previous requests to file have been ignored). Such
an assessment is valid and binding and payment will be enforced.
- The normal period in which a return may be reassessed is:
a) for a Canadian-controlled private corporation, within three years from the date of
mailing of the notice of assessment; or
b) for all other corporations, within four years from the date of mailing of the notice
of assessment.
Reassessments issued beyond the normal reassessment period are limited to cases where
the insurer has filed a waiver to waive the normal reassessment period, has made a
misrepresentation that is attributable to neglect, carelessness or wilful default or has
committed any fraud in the filing of the return or supplying information.
- An insurer that has questions or disagrees with an assessment or reassessment should
first contact TRA to discuss the issue. If the situation cannot be resolved through
contact with TRA, and the insurer still disagrees with the (re)assessment, it may file a
notice of objection within 90 days of the mailing of the notice of (re)assessment. The
notice of objection must be sent by certified or registered mail to:
- The disposition of a notice of objection may be appealed to the Alberta Court of Queen's
Bench. If the Provincial Treasurer consents, the insurer may waive its right to
reconsideration by way of objection in favour of direct appeal to the Court. Please refer
to Information Circular CT-8, "Objections and Appeals"
for detailed information about the objection and appeal processes.
- The Act requires an insurer to keep its records and books of account in Alberta or at a
location approved in writing by the Minister of Finance. For additional information on
the requirements concerning records and books, please refer to Information
Circular CT-13, "Records and Books".
- Requests for further information or forms should be
directed to Tax Services.
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