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

Act current to 2017-11-06 and last amended on 2017-07-01. Previous Versions

Marginal note:Return
  •  (1) Every corporation resident in Canada that pays a taxable dividend (other than a capital gains dividend within the meaning assigned by subsection 130.1(4) or 131(1)) in a taxation year shall file with the Minister, not later than the corporation’s filing-due date for the taxation year, a return for the year under this Part in prescribed form containing an estimate of the taxes payable by it under this Part for the taxation year.

  • Marginal note:Provisions applicable to Part

    (2) Subsections 150(2) and (3), sections 151, 152, 158 and 159, subsections 161(1) and (11), sections 162 to 167 and Division J of Part I are applicable to this Part with such modifications as the circumstances require.

  • Marginal note:Joint and several liability from excessive eligible dividend designations

    (3) Without limiting the liability of any person under any other provision of this Act, if a Canadian-controlled private corporation or a deposit insurance corporation pays an eligible dividend in respect of which it has made an excessive eligible dividend designation to a shareholder with whom it does not deal at arm’s length, the shareholder is jointly and severally, or solidarily, liable with the corporation to pay that proportion of the corporation’s tax payable under this Part because of the designation that the amount of the eligible dividend received by the shareholder is of the total of all amounts each of which is a dividend in respect of which the designation was made.

  • Marginal note:Assessment

    (4) The Minister may, at any time after the last day on which a corporation may make an election under subsection 185.1(2) in respect of an excessive eligible dividend designation, assess a person in respect of any amount payable under subsection (3) in respect of the designation, and the provisions of Division I of Part I (including, for greater certainty, the provisions in respect of interest payable) apply, with any modifications that the circumstances require, to an assessment made under this subsection as though it were made under section 152.

  • Marginal note:Rules applicable

    (5) If under subsection (3) a corporation and a shareholder have become jointly and severally, or solidarily, liable to pay part or all of the corporation’s tax payable under this Part in respect of an excessive eligible dividend designation described in subsection (3),

    • (a) a payment at any time by the shareholder on account of the liability shall, to the extent of the payment, discharge their liability after that time; and

    • (b) a payment at any time by the corporation on account of its liability shall discharge the shareholder’s liability only to the extent of the amount determined by the formula

      (A - B) × C/D

      where

      A
      is the total of
      • (i) the amount of the corporation’s liability, immediately before that time, under this Part in respect of the designation, and

      • (ii) the amount of the payment,

      B
      is the amount of the corporation’s liability, immediately before that time, under this Act,
      C
      is the amount of the eligible dividend received by the shareholder, and
      D
      the total of all amounts each of which is a dividend in respect of which the designation was made.
  • NOTE: Application provisions are not included in the consolidated text;
  • see relevant amending Acts. 2007, c. 2, s. 51.

PART IVTax on Taxable Dividends Received by Private Corporations

Marginal note:Tax on assessable dividends
  •  (1) Every corporation (in this section referred to as the “particular corporation”) that is at any time in a taxation year a private corporation or a subject corporation shall, on or before its balance-due day for the year, pay a tax under this Part for the year equal to the amount, if any, by which the total of

    • (a) 38 1/3% of all assessable dividends received by the particular corporation in the year from corporations other than payer corporations connected with it, and

    • (b) all amounts, each of which is an amount in respect of an assessable dividend received by the particular corporation in the year from a private corporation or a subject corporation that was a payer corporation connected with the particular corporation, equal to that proportion of the payer corporation’s dividend refund (within the meaning assigned by paragraph 129(1)(a)) for its taxation year in which it paid the dividend that

      • (i) the amount of the dividend received by the particular corporation

      is of

      • (ii) the total of all taxable dividends paid by the payer corporation in its taxation year in which it paid the dividend and at a time when it was a private corporation or a subject corporation

    exceeds 38 1/3% of the total of

    • (c) such part of the particular corporation’s non-capital loss and farm loss for the year as it claims, and

    • (d) such part of the particular corporation’s

      • (i) non-capital loss for any of its 20 taxation years immediately preceding or 3 taxation years immediately following the year, and

      • (ii) farm loss for any of its 20 taxation years immediately preceding or 3 taxation years immediately following the year

      as it claims, not exceeding the portion thereof that would have been deductible under section 111 in computing its taxable income for the year if subparagraph 111(3)(a)(ii) were read without reference to the words “the particular taxation year and” and if the corporation had sufficient income for the year.

  • Marginal note:Reduction where Part IV.1 tax payable

    (1.1) Notwithstanding subsection 186(1), where an assessable dividend was received by a corporation in a taxation year and was included in an amount in respect of which tax under Part IV.1 was payable by the corporation for the year, the tax otherwise payable under this Part by the corporation for the year shall be reduced

    • (a) where the assessable dividend is described in paragraph 186(1)(a), by 10% of the assessable dividend, and

    • (b) where the assessable dividend is described in paragraph 186(1)(b), by 30% of the amount determined under that paragraph in respect of the assessable dividend.

  • Marginal note:When corporation controlled

    (2) For the purposes of this Part, other than for the purpose of determining whether a corporation is a subject corporation, one corporation is controlled by another corporation if more than 50% of its issued share capital (having full voting rights under all circumstances) belongs to the other corporation, to persons with whom the other corporation does not deal at arm’s length, or to the other corporation and persons with whom the other corporation does not deal at arm’s length.

  • Marginal note:Definitions

    (3) The definitions in this subsection apply in this Part.

    assessable dividend

    assessable dividend means an amount received by a corporation at a time when it is a private corporation or a subject corporation as, on account of, in lieu of payment of or in satisfaction of, a taxable dividend from a corporation, to the extent of the amount in respect of the dividend that is deductible under section 112, paragraph 113(1)(a), (a.1), (b) or (d) or subsection 113(2) in computing the recipient corporation’s taxable income for the year. (dividende imposable déterminé)

    subject corporation

    subject corporation means a corporation (other than a private corporation) resident in Canada and controlled, whether because of a beneficial interest in one or more trusts or otherwise, by or for the benefit of an individual (other than a trust) or a related group of individuals (other than trusts). (société assujettie)

  • Marginal note:Corporations connected with particular corporation

    (4) For the purposes of this Part, a payer corporation is connected with a particular corporation at any time in a taxation year (in this subsection referred to as the “particular year”) of the particular corporation if

    • (a) the payer corporation is controlled (otherwise than by virtue of a right referred to in paragraph 251(5)(b)) by the particular corporation at that time; or

    • (b) the particular corporation owned, at that time,

      • (i) more than 10% of the issued share capital (having full voting rights under all circumstances) of the payer corporation, and

      • (ii) shares of the capital stock of the payer corporation having a fair market value of more than 10% of the fair market value of all of the issued shares of the capital stock of the payer corporation.

  • Marginal note:Deemed private corporation

    (5) A corporation that is at any time in a taxation year a subject corporation shall, for the purposes of paragraph 87(2)(aa) and section 129, be deemed to be a private corporation at that time, except that its refundable dividend tax on hand (within the meaning assigned by subsection 129(3)) at the end of the year shall be determined without reference to paragraph 129(3)(a).

  • Marginal note:Partnerships

    (6) For the purposes of this Part,

    • (a) all amounts received in a fiscal period by a partnership as, on account or in lieu of payment of, or in satisfaction of, taxable dividends shall be deemed to have been received by each member of the partnership in the member’s fiscal period or taxation year in which the partnership’s fiscal period ends, to the extent of that member’s share thereof; and

    • (b) each member of a partnership shall be deemed to own at any time that proportion of the number of the shares of each class of the capital stock of a corporation that are property of the partnership at that time that the member’s share of all dividends received on those shares by the partnership in its fiscal period that includes that time is of the total of all those dividends.

  • Marginal note:Interpretation

    (7) For greater certainty, where a provision of this Act or the regulations indicates that the term connected has the meaning assigned by subsection 186(4), that meaning shall be determined by taking into account the application of subsection 186(2) unless the provision expressly provides otherwise.

  • NOTE: Application provisions are not included in the consolidated text;
  • see relevant amending Acts. R.S., 1985, c. 1 (5th Supp.), s. 186;
  • 1994, c. 7, Sch. VIII, s. 110;
  • 1996, c. 21, s. 48;
  • 2001, c. 17, s. 164;
  • 2003, c. 15, s. 120;
  • 2005, c. 19, s. 41;
  • 2006, c. 4, s. 83;
  • 2013, c. 34, s. 75;
  • 2016, c. 11, s. 8.
 
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