I am preparing the T2 for a federally incorporated corp that operates only in Alberta. What do I enter as jurisdiction so that the federal tax payable calculates as 11%?

If I do not enter any jurisdiction, the company pays 10% more federal tax because the income has not been allocated to a province.  If I enter Alberta as the jurisdiction, the system shows proper federal tax payable of 11% but it also calculates another 3% Alberta tax payable - which is not correct either because the company is not incorporated in Alberta and thus has no provincial tax account number.  Help!!

Answer

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Neither the Jurisdiction of Incorporation nor the existence of a tax account within a given province has a bearing on whether or not taxes are applicable.

If  the company has a permanent establishment in Alberta and operates there then it should have a tax account and the 3% provincial tax is likely applicable (except in rare circumstances of which I have never seen).  Just like if an American moved to Canada and earned a salary in ... say Ontario, then that person is likely "resident" of Ontario and therefore Canada and as such is obligated to pay tax on his/her worldwide income on their Canadian Tax Return, so too a corporation resident in a province is obligated to pay tax in that province.

I suggest that you consult with a tax professional to establish the Provincial residency of the corporation in question if you question my logic.

Probably not what you want to hear, but ... there it is.  Register for an Alberta income tax number and set your jurisdiction to Alberta and pay the 3%.

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