Is provincial capital tax, and interest thereon, deductible in computing income? After observing that “[p]rovincial income tax is not deductible … since … [it] is not an expense incurred for the purpose of gaining or producing income but rather is an expense incurred because income was earned,” CRA stated:
Capital tax is not a tax that is calculated on the income of a business but rather a tax calculated on the paid-up capital of the corporation. Generally, this tax is considered an expense incurred for the purpose of earning income. The 1991Budget of the Department of Finance is consistent with this approach. …
Interest on capital tax will be deductible if the capital tax is deductible by virtue of section 9.