Compensation Tax
A financial institution that is a corporation must pay compensation tax in instalments. Instalment payments of the compensation tax can be calculated using form CO-1027, Calcul des acomptes provisionnels des sociétés (see courtesy translation CO-1027-T).
The rate of the compensation tax applicable to financial institutions has been temporarily increased for a taxation year ending after March 30, 2010, and beginning before April 1, 2014. Consequently, the first instalment of the compensation tax that the corporation has to pay beginning on March 31, 2010, for a taxation year that includes March 31, 2010, must be calculated using a rate that is weighted to reflect the number of days in the taxation year before March 31, 2010, and the number of days in the taxation year after March 30, 2010.
The following table shows how the compensation tax is determined for various types of financial institutions. Form CO-1159.2, Calcul de la taxe compensatoire des institutions financières (see courtesy translation CO-1159.2), is used to calculate the amount of compensation tax payable. Financial institutions concerned must enclose this form with their corporation income tax return.
|
Bank, loan corporation, trust corporation, corporation trading in securities
|
The compensation tax is equal to the sum of the following:
- 0.25% of its capital paid as established for the calculation of the tax on capital, excluding certain deductions, multiplied by the proportion of business carried on in Québec and a fraction whose:
- numerator is the number of days in the taxation year where the corporation was a financial institution
- denominator is the number of days in this taxation year
- 2% or 3.9% of salaries and wages paid by the corporation during the period(s) of the year that it was considered a financial institution
The rate of the compensation tax for a taxation year ending after March 30, 2010, has increased from 2% to 3.9%.
|
|
Insurance corporation
|
The compensation tax is equal to 0.35% or 0.55% of the total of all premiums payable and all taxable premiums on which tax must be paid during the year multiplied by a fraction whose:
- numerator is the number of days in the taxation year that the corporation was a financial institution
- denominator is the number of days in this taxation year
The rate of the compensation tax for a taxation year ending after March 30, 2010, has increased from 0.35% to 0.55%.
|
|
Savings and credit union
|
The compensation tax is equal to 2.5% or 3.8% of salaries and wages paid by the corporation during the period(s) of the year that it was considered a financial institution.
The rate of the compensation tax for a taxation year ending after March 30, 2010, has increased from 2.5% to 3.8%.
|
|
Professional order
|
The compensation tax is equal to 0.35% or 0.55% of premiums, administrative costs, contributions in regard to a group insurance plan or an insurance fund respecting professional liability and of all other costs inherent in the operation of such a plan or fund.
The rate of the compensation tax for a taxation year ending after March 30, 2010, has increased from 0.35% to 0.55%.
|
|
Bank, loan corporation, trust corporation, corporation trading in securities or savings and credit union that is ALSO an insurance corporation
|
The compensation tax is equal to the sum of the following:
- the amount determined based on the type of financial institution
- 0.35% or 0.55% of all taxable premiums paid on which tax must be paid during the year multiplied by a fraction whose:
- numerator is the number of days in the taxation year that the corporation was a financial institution
- denominator is the number of days in this taxation year
The rate of the compensation tax for a taxation year ending after March 30, 2010, has increased from 0.35% to 0.55%.
|
|
Any other corporation that is a financial institution
|
The compensation tax is equal to 1% or 1.5% of salaries and wages paid by the corporation during the period(s) of the year that it was considered a financial institution.
The rate of the compensation tax for a taxation year ending after March 30, 2010, has increased from 1% to 1.5%.
|
For more information, see the Guide de la déclaration de revenus des sociétés (CO-17.G), available in French only.
Financial institutions that are not corporations must remit compensation tax at the same time as their source deductions and employer contributions are remitted using the form Paiement des retenues et des cotisations de l'employeur provided by Revenu Québec.