Income Tax Act (R.S.C., 1985, c. 1 (5th Supp.))

Act current to 2017-08-27 and last amended on 2017-07-01. Previous Versions

Non-Resident-Owned Investment Corporations

Marginal note:Computation of income
  •  (1) In computing the income of a non-resident-owned investment corporation for a taxation year,

    • (a) no deduction may be made in respect of interest on its bonds, debentures, securities or other indebtedness, and

    • (b) no deduction may be made under subsection 65(1),

    and its income and taxable income shall be computed as if

    • (c) the only taxable capital gains and allowable capital losses referred to in paragraph 3(b) were from dispositions of taxable Canadian property,

    • (d) any taxable capital gain or allowable capital loss of the corporation were an amount equal to twice the amount thereof otherwise determined, and

    • (e) subsection 83(2) were read without reference to paragraph 83(2)(b).

  • Marginal note:Non-resident-owned investment corporations

    (2) In computing the taxable income of a non-resident-owned investment corporation for a taxation year, no deduction may be made from its income for the year, except

    • (a) interest received in the year from other non-resident-owned investment corporations;

    • (b) taxes paid to the government of a country other than Canada in respect of any part of the income of the corporation for the year derived from sources therein; and

    • (c) net capital losses as provided for by section 111.

  • Marginal note:Special tax rate

    (3) The tax payable under this Part by a corporation for a taxation year when it was a non-resident-owned investment corporation is an amount equal to 25% of its taxable income for the year.

  • Marginal note:No deduction for foreign taxes

    (4) No deduction from the tax payable under this Part by a non-resident-owned investment corporation may be made under section 124 or in respect of taxes paid to the government of a country other than Canada.

  • Marginal note:Allowable refund to non-resident-owned investment corporations

    (6) If the return of a non-resident-owned investment corporation’s income for a taxation year has been made within 3 years from the end of the year, the Minister

    • (a) may, on sending the notice of assessment for the year, refund without application its allowable refund for the year; and

    • (b) shall, with all due dispatch, make that allowable refund after sending the notice of assessment if an application for it has been made in writing by the corporation within the period within which the Minister would be allowed under subsection 152(4) to assess tax payable by the corporation for the year if that subsection were read without reference to paragraph 152(4)(a).

  • Marginal note:Application to other liability

    (7) Instead of making a refund that might otherwise be made under subsection 133(6), the Minister may, where the taxpayer is liable or about to become liable to make any payment under this Act, apply the amount that would otherwise be refunded to that other liability and notify the taxpayer of that action.

  • Marginal note:Interest on allowable refund

    (7.01) Where an allowable refund for a taxation year is paid to, or applied to a liability of, a non-resident-owned investment corporation, the Minister shall pay or apply interest on the refund at the prescribed rate for the period beginning on the day that is the later of

    • (a) the day that is 120 days after the end of the year, and

    • (b) the day that is 30 days after the day on which the corporation’s return of income under this Part for the year was filed under section 150, unless the return was filed on or before the day on or before which it was required to be filed,

    and ending on the day the refund is paid or applied.

  • Marginal note:Excess interest on allowable refund

    (7.02) Where at any particular time interest has been paid to, or applied to a liability of, a corporation under subsection 133(7.01) in respect of an allowable refund and it is determined at a subsequent time that the allowable refund was less than that in respect of which interest was so paid or applied,

    • (a) the amount by which the interest that was so paid or applied exceeds the interest, if any, computed in respect of the amount that is determined at the subsequent time to be the allowable refund shall be deemed to be an amount (in this subsection referred to as the “amount payable”) that became payable under this Part by the corporation at the particular time;

    • (b) the corporation shall pay to the Receiver General interest at the prescribed rate on the amount payable, computed from the particular time to the day of payment; and

    • (c) the Minister may at any time assess the corporation in respect of the amount payable and, where the Minister makes such an assessment, the provisions of Divisions I and J apply, with such modifications as the circumstances require, in respect of the assessment as though it had been made under section 152.

  • Marginal note:Election re capital gains dividend

    (7.1) Where at any particular time after 1971 a dividend has become payable by a non-resident-owned investment corporation to shareholders of any class of shares of its capital stock, if the corporation so elects in respect of the full amount of the dividend, in prescribed manner and prescribed form and at or before the particular time or the first day on which any part of the dividend was paid if that day is earlier than the particular time, the following rules apply:

    • (a) the dividend shall be deemed to be a capital gains dividend to the extent that it does not exceed the corporation’s capital gains dividend account immediately before the particular time; and

    • (b) any amount received by another non-resident-owned investment corporation in a taxation year as, on account or in lieu of payment of, or in satisfaction of the capital gains dividend shall not be included in computing its income for the year.

  • Marginal note:Simultaneous dividends

    (7.2) Where a dividend becomes payable at the same time on more than one class of shares of the capital stock of a non-resident-owned investment corporation, for the purposes of subsection 133(7.1), the dividend on any such class of shares shall be deemed to become payable at a different time than the dividend on the other class or classes of shares and to become payable in the order designated

    • (a) by the corporation on or before the day on or before which the election described in subsection 133(7.1) is required to be filed; or

    • (b) in any other case, by the Minister.

  • Marginal note:Application of ss. 131(1.1) to (1.4)

    (7.3) Where at any particular time a non-resident-owned investment corporation paid a dividend to its shareholders and subsection 133(7.1) would have applied to the dividend except that the corporation did not make an election under that subsection on or before the day on or before which it was required by that subsection to be made, subsections 131(1.1) to 131(1.4) apply with such modifications as the circumstances require.

  • Marginal note:Definitions

    (8) In this section,

    allowable refund

    remboursement admissible

    allowable refund of a non-resident-owned investment corporation for a taxation year means the total of amounts each of which is an amount in respect of a taxable dividend paid by the corporation in the year on a share of its capital stock, determined by the formula

    A/B × C

    where

    A
    is the corporation’s allowable refundable tax on hand immediately before the dividend was paid,
    B
    is the greater of the amount of the dividend so paid and the corporation’s cumulative taxable income immediately before the dividend was paid, and
    C
    is the amount of the dividend so paid;

    Canadian property

    biens canadiens

    Canadian property means

    • (a) taxable Canadian property, and

    • (b) any other property not being foreign property within the meaning assigned by section 206; (biens canadiens)

    capital gains dividend account

    compte de dividendes sur les gains en capital

    capital gains dividend account of a non-resident-owned investment corporation at any particular time means the amount determined by the formula

    A - B

    where

    A
    is the total of the following amounts in respect of the period commencing January 1, 1972 and ending immediately after the corporation’s last taxation year ending before the particular time:
    • (a) the corporation’s capital gains for taxation years ending in the period from dispositions in the period of Canadian property or shares of another non-resident-owned investment corporation, and

    • (b) amounts received by the corporation in the period as, on account or in lieu of payment of, or in satisfaction of capital gains dividends from other non-resident-owned investment corporations, and

    B
    is the total of the following amounts in respect of the period referred to in the description of A:
    • (a) the corporation’s capital losses for taxation years ending in the period from dispositions in the period of Canadian property or shares of another non-resident-owned investment corporation,

    • (b) all capital gains dividends that became payable by the corporation before the particular time, and

    • (c) the amount determined by the formula

      0.25 × (M - N)

      where

      M
      is the total of the corporation’s capital gains for taxation years ending in the period from dispositions in the period of taxable Canadian property, and
      N
      is the total of the corporation’s capital losses for the taxation years ending in the period from dispositions in the period of property of the kinds referred to in the description of M;

    increase in capital

    augmentation de capital

    increase in capital in respect of a corporation means a transaction (other than a transaction carried out pursuant to an agreement in writing made before February 28, 2000, referred to in this definition as a “specified transaction”) in the course of which the corporation issues additional shares of its capital stock or incurs indebtedness, if the transaction has the effect of increasing the total of

    • (a) the corporation’s liabilities, and

    • (b) the fair market value of all the shares of its capital stock

    to an amount that is substantially greater than that total would have been on February 27, 2000 if all specified transactions had been carried out immediately before that day; (augmentation de capital)

    non-resident-owned investment corporation

    société de placement appartenant à des non-résidents

    non-resident-owned investment corporation means a corporation incorporated in Canada that, throughout the whole of the period commencing on the later of June 18, 1971 and the day on which it was incorporated and ending on the last day of the taxation year in respect of which the expression is being applied, complied with the following conditions:

    • (a) all of its issued shares and all of its bonds, debentures and other funded indebtedness were

      • (i) beneficially owned by non-resident persons (other than any foreign affiliate of a taxpayer resident in Canada),

      • (ii) owned by trustees for the benefit of non-resident persons or their unborn issue, or

      • (iii) owned by a non-resident-owned investment corporation, all of the issued shares of which and all of the bonds, debentures and other funded indebtedness of which were beneficially owned by non-resident persons or owned by trustees for the benefit of non-resident persons or their unborn issue, or by two or more such corporations,

    • (b) its income for each taxation year ending in the period was derived from

      • (i) ownership of, or trading or dealing in, bonds, shares, debentures, mortgages, hypothecary claims, bills, notes or other similar property or any interest, or for civil law any right, therein,

      • (ii) lending money with or without security,

      • (iii) rents, hire of chattels, charterparty fees or remunerations, annuities, royalties, interest or dividends,

      • (iv) estates or trusts, or

      • (v) disposition of capital property,

    • (c) not more than 10% of its gross revenue for each taxation year ending in the period was derived from rents, hire of chattels, charterparty fees or charterparty remunerations,

    • (d) its principal business in each taxation year ending in the period was not

      • (i) the making of loans, or

      • (ii) trading or dealing in bonds, shares, debentures, mortgages, hypothecary claims, bills, notes or other similar property or any interest therein,

    • (e) it has, on or before the earlier of February 27, 2000 and the day that is 90 days after the beginning of its first taxation year that begins after 1971, elected in prescribed manner to be taxed under this section, and

    • (f) it has not, before the end of the last taxation year in the period, revoked in prescribed manner its election,

    except that

    • (g) a new corporation (within the meaning assigned by section 87) formed as a result of an amalgamation after June 18, 1971 of two or more predecessor corporations is not a non-resident-owned investment corporation unless each of the predecessor corporations was, immediately before the amalgamation, a non-resident-owned investment corporation,

    • (h) where a corporation is a new corporation described in paragraph (g), and each of the predecessor corporations elected in a timely manner under paragraph (e), paragraph (e) shall be read, in its application to the new corporation, without reference to the words “the earlier of February 27, 2000 and”, and

    • (i) subject to section 134.1, a corporation is not a non-resident-owned investment corporation in any taxation year that ends after the earlier of,

      • (i) the first time, if any, after February 27, 2000 at which the corporation effects an increase in capital, and

      • (ii) the corporation’s last taxation year that begins before 2003; (société de placement appartenant à des non-résidents)

    taxable dividend

    dividende imposable

    taxable dividend does not include a capital gains dividend. (dividende imposable)

  • Marginal note:Definitions

    (9) In the definition allowable refund in subsection 133(8),

    allowable refundable tax on hand

    montant admissible de l’impôt en main remboursable

    allowable refundable tax on hand of a corporation at any particular time means the amount determined by the formula

    (A + B + C) - (D + E + F)

    where

    A
    is the total of all amounts each of which is an amount in respect of any taxation year commencing after 1971 and ending before the particular time, equal to the tax under this Part payable by the corporation for the year,
    B
    is an amount equal to 15% of the amount determined for B in the definition cumulative taxable income in this subsection in respect of the corporation,
    C
    where the corporation’s 1972 taxation year commenced before 1972, is an amount equal to 10% of the amount that would be determined for C in the definition cumulative taxable income in this subsection if the reference in the description of C in that definition to “the 1972 taxation year or any taxation year commencing after 1971 and ending before the particular time” were read as a reference to “the 1972 taxation year”,
    D
    is the total of all amounts each of which is an amount, in respect of the 1972 taxation year or any taxation year commencing after 1971 and ending before the particular time, determined by the formula

    0.25 × [L - (M + N)]

    where

    L
    is the total of the corporation’s taxable capital gains for the year from dispositions after 1971 of property described in paragraph 133(1)(c), computed in accordance with the assumption set out in paragraph 133(1)(d),
    M
    is the total of the corporation’s allowable capital losses for the year from dispositions after 1971 of property described in paragraph 133(1)(c), computed in accordance with the same assumption, and
    N
    is the amount deductible from the corporation’s income for the year by virtue of paragraph 133(2)(c),
    E
    is the total of all amounts each of which is an amount equal to 1/3 of any amount paid or credited by the corporation after the commencement of its 1972 taxation year and before the particular time, as, on account or in lieu of payment of, or in satisfaction of interest, and
    F
    is the total of all amounts each of which is an amount in respect of any taxable dividend paid by the corporation on a share of its capital stock before the particular time and after the commencement of its first taxation year commencing after 1971, equal to the amount in respect of the dividend determined under the definition allowable refund in subsection 133(8);

    cumulative taxable income

    revenu imposable cumulatif

    cumulative taxable income of a corporation at any particular time means the amount determined by the formula

    (A + B) - (C + D + E)

    where

    A
    is the total of the corporation’s taxable incomes for taxation years commencing after 1971 and ending before the particular time,
    B
    where the corporation’s 1972 taxation year commenced before 1972, is the amount determined by the formula

    L - (M + N)

    where

    L
    is the corporation’s taxable income for its 1972 taxation year
    M
    is the total of all amounts received by the corporation as described in paragraph 196(4)(b), and
    N
    is the lesser of the amount determined under paragraph 196(4)(e) in respect of the corporation and the amount, if any, by which the total of amounts determined under paragraphs 196(4)(d) to 196(4)(f) in respect of the corporation exceeds the total of amounts determined under paragraphs 196(4)(a) to 196(4)(c) in respect of the corporation,
    C
    is the total of all amounts each of which is an amount, in respect of the 1972 taxation year or any taxation year commencing after 1971 and ending before the particular time, determined by the formula

    P - (Q + R)

    where

    P
    is the total of the corporation’s taxable capital gains for the year from dispositions after 1971 of property described in paragraph 133(1)(c), computed in accordance with the assumption set out in paragraph 133(1)(d),
    Q
    is the total of the corporation’s allowable capital losses for the year from dispositions after 1971 of property described in paragraph 133(1)(c), computed in accordance with the same assumption, and
    R
    is the amount deductible from the corporation’s income for the year by virtue of paragraph 133(2)(c),
    D
    is the total of all amounts each of which is an amount equal to 4/3 of any amount paid or credited by the corporation, after the commencement of its 1972 taxation year and before the particular time, as, on account or in lieu of payment of, or in satisfaction of interest, and
    E
    is the total of all amounts each of which is the amount of any taxable dividend paid by the corporation on a share of its capital stock before the particular time and after the commencement of its firs t taxation year commencing after 1971.
  • NOTE: Application provisions are not included in the consolidated text;
  • see relevant amending Acts. R.S., 1985, c. 1 (5th Supp.), s. 133;
  • 1994, c. 7, Sch. VIII, s. 78;
  • 1998, c. 19, s. 160;
  • 2001, c. 17, ss. 131, 215;
  • 2003, c. 15, s. 114;
  • 2010, c. 25, s. 32;
  • 2013, c. 34, s. 134.
 
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