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Home » News » International Tax FAQs » What is a Schedule 7 as part of a T2 Corporate Tax Return?
Tax Question:
What is a schedule 7 as part of a T2 corporate tax return?
Facts:
Schedule 7 is generally used by Canadian Controlled Private Corporations (CCPCs) to calculate their aggregate investment income. It also calculates foreign investment income, specified partnership income and active business income.
If a corporation earns investment income during the year, the investment income is included on schedule 7. The investment income is then used in several different calculations on schedule 7 in order to determine various balances used for the calculation of taxes. Many of the investment numbers are calculated and carried forward from other schedules in the tax return. For example, dividend income is calculated and carried forward from schedule 3 and taxable capital gains are calculated and carried forward from schedule 6. One of the calculated balances on schedule 7 is aggregate investment income. Aggregate investment income is calculated for the purpose of determining a refundable portion of taxes. It consists of:
Dividends from Canadian corporations are excluded. Aggregate investment income is subject to the high corporate rate of tax as well as an additional tax on investment income of 6 2/3%. The additional tax can be refunded if a corporation pays a dividend. Furthermore, schedule 7 calculates specified partnership income and active business income. They are both calculated for the purpose of determining the small business deduction.
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Canadian and foreign tax laws are complex and have a tendency to change on a frequent basis. As such, the content published above is believed to be accurate as of the date of this post. Before implementing any tax planning, please seek professional advice from a qualified tax professional. Empire, Chartered Professional Accountants will not accept any liability for any tax ramifications that may result from acting based on the information contained above.
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