Starting July 1, 2017, your clients that own or owned businesses in the Yukon might be able to claim the Yukon Manufacturing and Processing Profits Tax Credit. To get this tax benefit, your client’s company had to be established in the Yukon sometime during the year, and must have made taxable income and earned money from manufacturing or processing. The rules for what counts as a permanently established business are found under section 400 of the Government of Canada’s Income Tax Regulations.
The actual amount of money your clients can claim has changed over the past few years. Prior to July 2017, your clients could get a credit of 12.5% of their manufacturing and processing revenue if they were a large corporation or 1.5% if they were a small corporation. Going forward, your clients can get 9.5% if they’re large and 0.5% if they’re small. The amount your client gets is reduced if they were a Canadian-controlled private corporation.
You can figure out how much of the credit your client gets by completing T2 Schedule 440. This schedule calls for amounts from your client’s Schedule 443 (Yukon Corporation Tax Calculation) and taxable income from their T2 return. Once you figure out the credit amount, report it on line 677 of Schedule 5 (Tax Calculation Supplementary – Corporations).
Your client shouldn’t file the T2 Schedule 440 worksheet with their corporate income tax filing. Still, it’s worthwhile to use the form, especially for 2017. The credit your client gets for 2017 is split between the old rate and the new rate. You’ll want to work with your Yukon manufacturing and processing clients to calculate the tax credit to reduce their corporate tax bill.