Canada Extends Investment Tax Credit Carry-Forwards
Canadian Minister of Finance, Jim Flaherty, has proposed to extend the carry-forward
period for unused investment tax credits earned by Canadian businesses in the
1998 to 2005 taxation years to 20 taxation years, from the current 10 taxation years.
Under the changes, corporations operating in Ontario will benefit from one
tax return, one set of tax rules and one point of contact as a result of moving
to a single corporate tax administration starting in the 2009 taxation year.
However, the requirement for one set of tax rules coupled with the current 10-taxation-year
carry-forward period may result in some companies not being able to claim their
unused federal investment tax credits, such as those for scientific research
and experimental development, as previously planned. Extending the carry-forward period to 20 taxation years will provide some
additional opportunity to claim these credits, thereby addressing the fact that
Ontario corporations can currently choose different levels of investment tax
credits and deductions for federal and Ontario purposes, but will no longer
be able to so after 2008. "This change will facilitate a smooth transition to the new single corporate
tax administration system in Ontario," explained Flaherty. "Moreover,
to ensure fairness and simplicity, this change will apply to all federal investment
tax credits earned in the 1998 to 2005 taxation years, by individuals as well
as corporations, in all the provinces and territories." The government intends to introduce legislation to provide this tax relief
at an early opportunity. .
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