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.
Specified investment flow-through trust
A specified investment flow-through trust (SIFT trust) must calculate and make instalment payments of income tax as if it were a public corporation, for any taxation year that begins after December 21, 2012. Accordingly, the SIFT trust must make instalment payments on a monthly basis, by the last day of each month, if its income tax payable exceeds $3,000 for the year, and $3,000 for the previous year.
As of the 2013 taxation year, the tax rate that applies to testamentary trusts is 25.75% for income that exceeds $100,000. The tax rate that applies to inter vivos trusts is increased to 25.75%, and the tax rate that applies to a specified trust in respect of a specified immovable (This link will open a new window) is increased to 7.05%
To determine whether a trust is required to make instalment payments in 2014, calculate the trust's net income tax payable for 2012 as though the 25.75% tax rate applied that year.