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

Act current to 2016-08-15 and last amended on 2016-07-01. Previous Versions

Marginal note:Taxable capital employed in Canada of non-resident

 The taxable capital employed in Canada for a taxation year of a corporation (other than a financial institution) that was throughout the year not resident in Canada is the amount, if any, by which

  • (a) the total of all amounts each of which is the carrying value at the end of the year of an asset of the corporation used by it in the year in, or held by it in the year in the course of, carrying on any business carried on by it during the year through a permanent establishment in Canada

exceeds the total of

  • (b) the amount of the corporation’s indebtedness at the end of the year (other than indebtedness described in any of paragraphs 181.2(3)(c) to 181.2(3)(f)) that may reasonably be regarded as relating to a business carried on by it during the year through a permanent establishment in Canada,

  • (c) the total of all amounts each of which is the carrying value at the end of the year of an asset described in subsection 181.2(4) of the corporation that was used by it in the year in, or held by it in the year in the course of, carrying on any business carried on by it during the year through a permanent establishment in Canada, and

  • (d) the total of all amounts each of which is the carrying value at the end of the year of an asset of the corporation that

    • (i) is a ship or aircraft operated by the corporation in international traffic or is personal or movable property used in its business of transporting passengers or goods by ship or aircraft in international traffic, and

    • (ii) was used by the corporation in the year in, or held by it in the year in the course of, carrying on any business during the year through a permanent establishment in Canada,

    if the country in which the corporation is resident imposed neither a capital tax for the year on similar assets nor a tax for the year on the income from the operation of a ship or aircraft in international traffic, of any corporation resident in Canada during the year.

  • NOTE: Application provisions are not included in the consolidated text;
  • see relevant amending Acts. R.S., 1985, c. 1 (5th Supp.), s. 181.4;
  • 1994, c. 7, Sch. II, s. 149;
  • 1998, c. 19, s. 197;
  • 2013, c. 34, s. 149.
Marginal note:Capital deduction
  •  (1) Subject to subsection (1.1), the capital deduction of a corporation for a taxation year is $50 million unless the corporation is related to another corporation at any time in the taxation year, in which case, subject to subsection (4), its capital deduction for the year is nil.

  • Marginal note:Exceptions

    (1.1) For the purposes of applying subsection 125(5.1), the definitions unused surtax credit in subsections 181.1(6) and 190.1(5), and subsection 225.1(8), the amount of tax in respect of a corporation under subsection 181.1(1) for a taxation year is to be determined as if the reference to “$50 million” in subsection (1) were a reference to “$10 million”.

  • Marginal note:Related corporations

    (2) Subject to subsection (4.1), a corporation that is related to any other corporation at any time in a taxation year of the corporation that ends in a calendar year may file with the Minister in prescribed form an agreement on behalf of the related group of which the corporation is a member under which an amount that does not exceed $50 million is allocated among all corporations that are members of the related group for each taxation year of each such corporation ending in the calendar year and at a time when it was a member of the related group.

  • Marginal note:Allocation by Minister

    (3) Subject to subsection (4.1), the Minister may request a corporation that is related to any other corporation at the end of a taxation year to file with the Minister an agreement referred to in subsection (2) and, if the corporation does not file such an agreement within 30 days after receiving the request, the Minister may allocate an amount among the members of the related group of which the corporation is a member for the taxation year not exceeding $50 million.

  • Marginal note:Idem

    (4) The least amount allocated for a taxation year to a member of a related group under an agreement described in subsection 181.5(2) or by the Minister pursuant to subsection 181.5(3) is the capital deduction of that member for that taxation year.

  • Marginal note:Exceptions

    (4.1) For the purposes of applying subsection 125(5.1), the definitions unused surtax credit in subsections 181.1(6) and 190.1(5), and subsection 225.1(8), subsections (2) to (4) are to be read as if the amount determined under subsection (2) or (3), as the case may be, in respect of the corporation for the taxation year were that proportion of $10 million that the amount otherwise determined in respect of the corporation for the taxation year under that subsection is of $50 million.

  • Marginal note:Idem

    (5) Where a corporation (in this subsection referred to as the “first corporation”) has more than one taxation year ending in the same calendar year and is related in 2 or more of those taxation years to another corporation that has a taxation year ending in that calendar year, the capital deduction of the first corporation for each such taxation year at the end of which it is related to the other corporation is an amount equal to its capital deduction for the first such taxation year.

  • Marginal note:Idem

    (6) Two corporations that would, but for this subsection, be related to each other by reason only of

    • (a) the control of any corporation by Her Majesty in right of Canada or a province, or

    • (b) a right referred to in paragraph 251(5)(b),

    are, for the purposes of this section and subsection 181.3(4), deemed not to be related to each other except that, where at any time a taxpayer has a right referred to in paragraph 251(5)(b) with respect to shares and it can reasonably be considered that one of the main purposes for the acquisition of the right was to avoid any limitation on the amount of a corporation’s capital deduction for a taxation year, for the purpose of determining whether a corporation is related to any other corporation, the corporations are, for the purposes of this section, deemed to be in the same position in relation to each other as if the right were immediate and absolute and as if the taxpayer had exercised the right at that time.

  • Marginal note:Related corporations that are not associated

    (7) For the purposes of subsection 181.3(4) and this section, a Canadian-controlled private corporation and another corporation to which it would, but for this subsection, be related at any time shall be deemed not to be related to each other at that time where the corporations are not associated with each other at that time.

  • NOTE: Application provisions are not included in the consolidated text;
  • see relevant amending Acts. R.S., 1985, c. 1 (5th Supp.), s. 181.5;
  • 1994, c. 7, Sch. II, s. 150;
  • 1998, c. 19, s. 198;
  • 2003, c. 15, s. 86.
Marginal note:Return

 Every corporation that is or would, but for subsection 181.1(4), be liable to pay tax under this Part for a taxation year shall file with the Minister, not later than the day on or before which the corporation is required by section 150 to file its return of income for the year under Part I, a return of capital for the year in prescribed form containing an estimate of the tax payable under this Part by it for the year.

  • NOTE: Application provisions are not included in the consolidated text;
  • see relevant amending Acts. R.S., 1985, c. 1 (5th Supp.), s. 181.6;
  • 1994, c. 7, Sch. VIII, s. 108.
Marginal note:Provisions applicable to Part

 Sections 152, 158 and 159, subsection 161(11), sections 162 to 167 and Division J of Part I apply to this Part with such modifications as the circumstances require and, for the purpose of this section, paragraph 152(6)(a) shall be read as follows:

  • “(a) a deduction under section 181.1(4) in respect of any unused surtax credit (within the meaning assigned by subsection 181.1(6)) for a subsequent taxation year.”

  • NOTE: Application provisions are not included in the consolidated text;
  • see relevant amending Acts. R.S., 1985, c. 1 (5th Supp.), s. 181.7;
  • 1994, c. 7, Sch. II, s. 151, Sch. VIII, s. 109.
Marginal note:Provisions applicable — Crown corporations

 Section 27 applies to this Part with any modifications that the circumstances require.

  • NOTE: Application provisions are not included in the consolidated text;
  • see relevant amending Acts. 1998, c. 19, s. 199.

 [Repealed, 1994, c. 7, Sch. VIII, s. 109(1)]

  • NOTE: Application provisions are not included in the consolidated text;
  • see relevant amending Acts. R.S., 1985, c. 1 (5th Supp.), s. 181.8;
  • 1994, c. 7, Sch. VIII, s. 109.

 [Repealed, 1994, c. 7, Sch. VIII, s. 109(1)]

  • NOTE: Application provisions are not included in the consolidated text;
  • see relevant amending Acts. R.S., 1985, c. 1 (5th Supp.), s. 181.9;
  • 1994, c. 7, Sch. VIII, s. 109.

PART IITobacco Manufacturers’ Surtax

Marginal note:Surtax
  •  (1) Every corporation shall pay a tax under this Part for each taxation year equal to 50% of the corporation’s Part I tax on tobacco manufacturing profits for the year.

  • Marginal note:Definitions

    (2) In this Part,

    exempt activity

    activité exclue

    exempt activity, of a particular corporation, means

    • (a) farming; or

    • (b) processing leaf tobacco, if

      • (i) that processing is done by, and is the principal business of, the particular corporation,

      • (ii) the particular corporation does not manufacture any tobacco product, and

      • (iii) the particular corporation is not related to any other corporation that carries on tobacco manufacturing (determined, in respect of the other corporation, as if the particular corporation did not exist and the definition tobacco manufacturing were read without reference to the words “in Canada”); (activité exclue)

    Part I tax on tobacco manufacturing profits

    impôt de la partie I sur les bénéfices de fabrication du tabac

    Part I tax on tobacco manufacturing profits of a corporation for a taxation year means 21% of the amount determined by the formula

    (A × B/C) - D

    where

    A 
    is the amount that would be the corporation’s Canadian manufacturing and processing profits for the year, within the meaning assigned by subsection 125.1(3), if the total of all amounts, each of which is the corporation’s loss for the year from an active business, other than tobacco manufacturing, carried on by it in Canada, were equal to the lesser of
    • (a) that total otherwise determined, and

    • (b) the total of all amounts, each of which is the amount of the corporation’s income for the year from an active business, other than tobacco manufacturing, carried on by it in Canada,

    B 
    is the corporation’s tobacco manufacturing capital and labour cost for the year,
    C 
    is the total of the corporation’s cost of manufacturing and processing capital for the year and its cost of manufacturing and processing labour for the year, within the meanings assigned by regulations made for the purposes of section 125.1, and
    D 
    is
    • (a) where the corporation is a Canadian-controlled private corporation throughout the year, the corporation’s business limit for the year as determined for the purpose of section 125, and

    • (b) in any other case, nil; (impôt de la partie I sur les bénéfices de fabrication du tabac)

    tobacco manufacturing

    fabrication du tabac

    tobacco manufacturing means any activity, other than an exempt activity, relating to the manufacture or processing in Canada of tobacco or tobacco products in or into any form that is, or would after any further activity become, suitable for smoking; (fabrication du tabac)

    tobacco manufacturing capital and labour cost

    coût en capital et en main-d’oeuvre lié à la fabrication du tabac

    tobacco manufacturing capital and labour cost of a corporation for a taxation year means the total of the amounts that would be the corporation’s cost of manufacturing and processing capital for the year and its cost of manufacturing and processing labour for the year, within the meanings assigned by regulations made for the purpose of section 125.1, if the manufacturing or processing referred to in the definition qualified activities in those regulations were tobacco manufacturing. (coût en capital et en main-d’oeuvre lié à la fabrication du tabac)

  • NOTE: Application provisions are not included in the consolidated text;
  • see relevant amending Acts. 1994, c. 29, s. 16;
  • 1997, c. 26, s. 77;
  • 2000, c. 30, s. 173;
  • 2001, c. 16, s. 43;
  • 2007, c. 35, s. 54.
 
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