Ontario Corporate Minimum Tax: Calculation, Credit, and Schedule 510

The Ontario corporate minimum tax is a 2.7 percent tax on a corporation’s adjusted net income that applies only when the corporation, together with any associated corporations, has at least $50 million in total assets and at least $100 million in total revenue.¹ It is governed by sections 54 through 62 of the Taxation Act, 2007 and functions as a floor: a corporation only pays it in a year when the calculated minimum exceeds its regular Ontario corporate income tax. Most large corporations run the calculation, find their regular tax is higher, and owe nothing extra.

Which Corporations Owe It

Both thresholds have to be crossed. A corporation with $80 million in revenue and $60 million in assets is below the revenue line and owes no CMT, even though its assets qualify.

Associated corporations are pooled. If your corporation is associated with one or more others during the year, you add your year-end totals to each associated corporation’s figures from their last taxation year ending within yours.¹ If the combined totals cross both thresholds, every corporation in the group with a permanent establishment in Ontario becomes individually subject to CMT. Association generally follows the federal Income Tax Act rules, which usually turn on the same person or group controlling both corporations through more than 50 percent of voting shares. Shares held by a spouse, parent, or minor child can be attributed to the controlling individual.

Five types of corporation are exempt regardless of size, provided they qualify throughout the entire year: investment corporations, mortgage investment corporations, mutual fund corporations, congregations or business agencies to which section 143 of the federal Income Tax Act applies, and deposit insurance corporations as defined in section 137.1 of that Act.¹ Corporations without a permanent establishment in Ontario are not subject to Ontario corporate income tax at all, so CMT does not reach them either.

How the Tax Is Calculated

The statutory formula is (I − L) × A × R, where I is adjusted net income for the year, L is eligible CMT losses carried forward from prior years, A is the Ontario allocation factor reflecting the share of the corporation’s business carried on in the province, and R is 0.027 for any taxation year ending entirely after June 30, 2010.

That formula does not give you the amount payable. From the CMT figure you deduct the corporation’s regular Ontario corporate income tax for the year (calculated under Division B of Part III without the CMT credit) and, for non-life-insurance corporations, any foreign tax credit.² If the result is zero or negative, no CMT is owed for the year.

This is why the tax bites so rarely. Ontario’s general corporate income tax rate is 11.5 percent. A corporation paying anywhere near the standard rate will have a regular tax bill well above the 2.7 percent floor, and the CMT washes out. The corporations that actually cut a CMT cheque are the ones whose deductions, loss carrybacks, or tax credits have driven their regular Ontario tax below the minimum.

Building Adjusted Net Income

Adjusted net income starts with the corporation’s net income or loss from its financial statements, prepared under Canadian GAAP or IFRS.³ Part 2 of Schedule 510 then walks the corporation through a series of add-backs and deductions that reshape book income into a CMT base reflecting real economic earnings before tax incentives.

A few notable adjustments: accounting gains from corporate reorganizations that are deferred for income tax purposes are deductible from adjusted net income, and gains reported on transfers of property under specific federal rollover provisions (sections 85, 85.1, 97, subsection 13(4), and section 44) are also deductible.³ Certain unrealized mark-to-market gains and losses and foreign currency gains and losses on assets not required to be included in computing income for tax purposes are excluded entirely.

The full list is on Schedule 510 itself. Work through each line against the financial statements rather than relying on a summary; the correct treatment of a particular item can depend on the type of corporation.

CMT Losses Carried Forward

When adjusted net income for a year is negative, the resulting CMT loss can be carried forward for up to 20 years and deducted from adjusted net income in a future year through the L variable in the formula.⁴

Restructuring restricts what transfers. In a section 87 amalgamation, only CMT losses from predecessor corporations that were not controlled by other predecessors in the group move to the new corporation. In a vertical amalgamation, only the parent’s CMT loss can transfer, not the subsidiary’s. When a subsidiary is wound up under subsection 88(1), its CMT loss cannot transfer to the parent.⁴

A corporation not subject to CMT in the current year but holding a CMT loss carryforward or a current-year CMT loss must still file Schedule 510 to preserve the loss.³

Getting the CMT Back Through the Credit

The CMT credit runs the other way. When a corporation pays CMT in one year because its regular Ontario tax fell below the floor, the excess becomes a credit that offsets regular Ontario corporate income tax in future years when the regular tax exceeds the CMT. For many corporations the CMT is closer to a timing measure than a permanent extra tax: you pay now and recover later.

To keep the credit available, file Schedule 510 with the T2 return in any year you have a CMT credit carryforward or are claiming a credit, even if no CMT is owed for the current year.³ A credit that never appears on a filed schedule is a credit you may not be able to claim when you need it.

Filing Schedule 510

Schedule 510 is filed with the T2 Corporation Income Tax Return. The T2 is due within six months of the corporation’s year-end. If the year ends on the last day of a month, the return is due by the last day of the sixth month after. If the year does not end on the last day of a month, the return is due the same calendar day of the sixth month.⁵

File Schedule 510 whenever the corporation owes CMT, is claiming a CMT credit, is carrying forward a CMT credit or loss, or has a current-year CMT loss.³ Skipping the schedule when a carryforward is in play is a common oversight and it can cost real money when you later try to use a credit or loss that was never reported.

Payments, Penalties, and Objections

CMT is paid alongside regular corporate income tax through the same monthly or quarterly instalments, with any remaining balance due on the corporation’s balance-due day. Underpayments accrue interest at the CRA’s prescribed rate, which is 7 percent on overdue corporate taxes for Q1 2026.⁶

Filing the T2 late triggers a penalty of 5 percent of the unpaid tax that was due on the filing deadline, plus 1 percent for each complete month the return remains outstanding, up to 12 months. If the corporation was assessed a late-filing penalty in any of the three preceding tax years and received a demand to file, the penalty doubles to 10 percent plus 2 percent per complete month, up to 20 months.⁷

The CRA issues a notice of assessment on Ontario’s behalf. To dispute the assessed amount, file a notice of objection by the later of 90 days from the date of the notice of assessment or one year after the filing deadline for the return for that tax year.⁸ The second deadline is easy to miss. A corporation with a December 31 year-end that files on time in June has until the following June 30 to object, even if the assessment arrived months earlier.

1
Ontario.ca. Taxation Act, 2007, S.O. 2007, c. 11, Sched. A – Section 55
2
Ontario.ca. Taxation Act, 2007, S.O. 2007, c. 11, Sched. A – Section 56
3
Canada Revenue Agency. Ontario Corporate Minimum Tax
4
Canada Revenue Agency. Ontario Corporate Minimum Tax Loss Carryforward
5
Canada Revenue Agency. When to File Your Corporation Income Tax Return
6
Canada Revenue Agency. Interest Rates for the First Calendar Quarter
7
Canada Revenue Agency. Avoiding Penalties
8
Canada Revenue Agency. Resolving Your Dispute: Objection Rights Under the Income Tax Act