Income Tax Instalments of Trusts
A trust must pay income tax instalments (or a single instalment if its principal source of income is farming or fishing) for the taxation year if it meets the following two conditions:
- it estimates that its net income tax payable for the year will exceed $1,800
- its net income tax payable for one of the two previous years exceeded $1,800
The net income tax payable for a given year corresponds to the income tax payable for the year minus the total income tax withheld and the refundable tax credits obtained for the year.
Quarterly instalments must be made by:
- March 15
- June 15
- September 15
- December 15
Each instalment must be equal to a quarter of the estimated income tax payable for the year or of the income tax payable for the previous year.
However, a trust of which the principal source of income is farming or fishing must pay a single annual instalment by December 31. The instalment must be equal to two-thirds of the estimated income tax payable for the year or of the income tax payable for the previous year.
New tax rate for inter vivos trusts
As of the 2013 taxation year, the applicable rate for calculating the income tax payable by an inter vivos trust, including a mutual fund trust and a specified investment flow-through trust (SIFT trust), is 25.75% for income that exceeds $100,000.
To ensure that, as of 2013, the increase in the tax rate is taken into account in the instalment payment amounts of an inter vivos trust, tax legislation has been amended to provide that instalment payment amounts be calculated as though the 25.75% tax rate has applied since the 2011 taxation year.