Due to the economic downturn, Ottawa is allowing small businesses to defer payment of monthly federal corporate tax installments for the months of January, February and March 2002 for six months, without accruing interest. Monthly installments after that period must be paid in the month they are due.

To qualify for the installment deferral, small business corporations must be resident in Canada and have less than $15 million of taxable capital employed in earning income during the previous taxation year. The definition of taxable capital is extensive under the federal and provincial tax legislation, but it basically includes capital stock, retained earnings and debt.

This could apply to clients with incorporated companies, as well as small brokerage firms or advisors who have incorporated their businesses.

A corporation associated with other corporations will be eligible only if the taxable capital employed in Canada of all of the associated corporations does not exceed $15 million in the previous year. Both federal income and capital tax installments will be deferred.

To ensure that all small business benefit from the six-month deferral, those companies whose balance due-date falls within the six months, will have their balance-due date extended.