Line 720 - Part VI tax payable
Line 720 - Part VI tax payable
You have to complete Schedule 38, Part VI Tax on Capital of Financial Institutions, to calculate Part VI tax.
Part VI levies a tax on a financial institution's taxable capital employed in Canada. Part VI tax is 1.25% of the taxable capital employed in Canada that is more than the $1 billion capital deduction for the year.
If the corporation is a member of a related group, you have to allocate the capital deduction among the members.
Use Schedule 39, Agreement Among Related Financial Institutions - Part VI Tax, to allocate the capital deduction. File this agreement with your return.
Note
Only one of the associated or related corporations needs
to file Schedule 39 for a calendar year. However, if
Schedule 39 is not already on file when the CRA assesses
any of the returns for a tax year ending in the calendar
year of the agreement, it will ask for one.
Under subsection 190.1(3), you can deduct Part I tax payable for the year from Part VI tax payable. This is called the Part I tax credit. You can deduct any unused Part I tax credits from Part VI tax in any of the three previous and seven following tax years.
To calculate the balance of unused Part I tax credits and to carry back this credit, you can use Schedule 42, Calculation of Unused Part I Tax Credit.
Financial institutions include banks, trust companies, life insurance corporations, certain holding corporations, and corporations that accept deposits and carry on the business of lending money on the security of real property or immovables, or investing in indebtedness on the security of mortgages on real property or of hypothecs on immovables.
File Schedule 38 with your return if you have Part VI tax payable, or would have, if not for the deduction of a Part I tax credit.
On line 720, enter the amount of Part VI tax payable that you calculated on line 890 of Schedule 38.
References
Sections 190, 190.1, and 190.11 to 190.15
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