Cash Concentration Systems

Bulletin 3003R1
Published: March 2004
Content last reviewed: November 2010
ISBN: 0-7794-2164-7 (PDF)

Publication Archived

Notice to the reader: Capital Tax was fully eliminated on July 1, 2010. It was eliminated effective January 1, 2007 for Ontario corporations primarily engaged in manufacturing or resource activities.

This publication was archived and kept for historical purposes. Use caution when you refer to it, since it reflects the law in force at the time it was released and may no longer apply.


This bulletin updates Interpretation Bulletin 3003R dated March 2004.

The bulletin sets out the policy of the Ontario Ministry of Finance regarding the capital tax treatment of loans and advances created through the operation of cash concentration systems. It is provided as a guide to taxpayers and is not intended as a substitute for the relevant legislation. Any references to legislation are to the provisions of the Corporations Tax Act (Ontario) (CTA) and its Regulations, unless otherwise noted. This bulletin is applicable for taxation years ending on or after December 31, 1997 and before January 1, 2009. For taxation years ending after December 31, 2008, taxable capital is determined in accordance with section 181.2 of the Income Tax Act (Canada) as provided by section 81 of the Taxation Act, 2007.


  1. Generally, a cash concentration system is a system by which a group of related corporations conducts its banking business through one group bank account in order to optimize cash management for all of the corporations together. The system operates through the use of a group concentration bank account, individual current operating accounts and mirror accounts.


  1. The group concentration account, which is usually maintained by and in the name of the parent corporation, is a consolidation of the transactions in the current operating accounts of all of the individual corporations in the related group. Transfers to and from the group concentration account are usually done at the end of each business day in order to eliminate any cash or overdraft balances in each corporation. These transfers are facilitated through the use of mirror accounts.

Inclusion in Paidup Capital

  1. When a transfer is made under a cash concentration system, which results in a liability to a related corporation, the ministry requires that loan or advance payable to be included in paid-up capital.

Eligible Investment Claim

  1. When a corporation makes a transfer under a cash concentration system which results in a receivable from another related corporation, the ministry will allow the corporation to claim that loan or advance receivable as an eligible investment for purposes of the investment allowance, provided that it meets the requirements discussed in Interpretation Bulletin 3015R and all of the following conditions are met:
    • the transfer to and from the group concentration account creates legally effective rights and obligations
    • the banking agreement states that the parent corporation is the owner of the group concentration account and is also responsible for the net overdraft position in that account, and
    • both of the corporations have recorded the transfer in their financial statements and books and records of account.
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