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

Act current to 2014-12-08 and last amended on 2014-11-01. Previous Versions

Subdivision cRules Applicable to all Taxpayers

Marginal note:Foreign tax deduction
  •  (1) A taxpayer who was resident in Canada at any time in a taxation year may deduct from the tax for the year otherwise payable under this Part by the taxpayer an amount equal to

    • (a) such part of any non-business-income tax paid by the taxpayer for the year to the government of a country other than Canada (except, where the taxpayer is a corporation, any such tax or part thereof that may reasonably be regarded as having been paid by the taxpayer in respect of income from a share of the capital stock of a foreign affiliate of the taxpayer) as the taxpayer may claim,

    not exceeding, however,

    • (b) that proportion of the tax for the year otherwise payable under this Part by the taxpayer that

      • (i) the amount, if any, by which the total of the taxpayer’s qualifying incomes exceeds the total of the taxpayer’s qualifying losses

        • (A) for the year, if the taxpayer is resident in Canada throughout the year, and

        • (B) for the part of the year throughout which the taxpayer is resident in Canada, if the taxpayer is non-resident at any time in the year,

        from sources in that country, on the assumption that

        • (C) no businesses were carried on by the taxpayer in that country,

        • (D) where the taxpayer is a corporation, it had no income from shares of the capital stock of a foreign affiliate of the taxpayer, and

        • (E) where the taxpayer is an individual,

          • (I) no amount was deducted under subsection 91(5) in computing the taxpayer’s income for the year, and

          • (II) if the taxpayer deducted an amount under subsection 122.3(1) from the taxpayer’s tax otherwise payable under this Part for the year, the taxpayer’s income from employment in that country was not from a source in that country to the extent of the lesser of the amounts determined in respect thereof under paragraphs 122.3(1)(c) and 122.3(1)(d) for the year,

      is of

      • (ii) the total of

        • (A) the amount, if any, by which,

          • (I) if the taxpayer was resident in Canada throughout the year, the taxpayer’s income for the year computed without reference to paragraph 20(1)(ww), and

          • (II) if the taxpayer was non-resident at any time in the year, the amount determined under paragraph 114(a) in respect of the taxpayer for the year

          exceeds

          • (III) the total of all amounts each of which is an amount deducted under section 110.6 or paragraph 111(1)(b), or deductible under any of paragraphs 110(1)(d) to (d.3), (f), (g) and (j) and sections 112 and 113, in computing the taxpayer’s taxable income for the year, and

        • (B) the amount, if any, added under section 110.5 in computing the taxpayer’s taxable income for the year.

  • Marginal note:Authorized foreign bank

    (1.1) In applying subsections 20(12) and (12.1) and this section in respect of an authorized foreign bank,

    • (a) the bank is deemed, for the purposes of subsections (1), (4) to (5), (6) and (7), to be resident in Canada in respect of its Canadian banking business;

    • (b) the references in subsection 20(12) and paragraph (1)(a) to “country other than Canada” shall be read as a reference to “country that is neither Canada nor a country in which the taxpayer is resident at any time in the taxation year”;

    • (c) the reference in subparagraph (1)(b)(i) to “from sources in that country” shall be read as a reference to “in respect of its Canadian banking business from sources in that country”;

    • (d) subparagraph (1)(b)(ii) shall be read as follows:

      • “(ii) the lesser of

        • (A) the taxpayer’s taxable income earned in Canada for the year, and

        • (B) the total of the taxpayer’s income for the year from its Canadian banking business and the amount determined in respect of the taxpayer under subparagraph 115(1)(a)(vii) for the year.”;

    • (e) in computing the non-business income tax paid by the bank for a taxation year to the government of a country other than Canada, there shall be included only taxes that relate to amounts that are included in computing the bank’s taxable income earned in Canada from its Canadian banking business; and

    • (f) the definition “tax-exempt income” in subsection (7) shall be read as follows:

      “tax-exempt income”

      “tax-exempt income” means income of a taxpayer from a source in a particular country in respect of which

      • (a) the taxpayer is, because of a comprehensive agreement or convention for the elimination of double taxation on income, which has the force of law in the particular country and to which a country in which the taxpayer is resident is a party, entitled to an exemption from all income or profits taxes, imposed in the particular country, to which the agreement or convention applies, and

      • (b) no income or profits tax to which the agreement or convention does not apply is imposed in the particular country;”.

  • Marginal note:Idem

    (2) Where a taxpayer who was resident in Canada at any time in a taxation year carried on business in the year in a country other than Canada, the taxpayer may deduct from the tax for the year otherwise payable under this Part by the taxpayer an amount not exceeding the least of

    • (a) such part of the total of the business-income tax paid by the taxpayer for the year in respect of businesses carried on by the taxpayer in that country and the taxpayer’s unused foreign tax credits in respect of that country for the 10 taxation years immediately preceding and the 3 taxation years immediately following the year as the taxpayer may claim,

    • (b) the amount determined under subsection 126(2.1) for the year in respect of businesses carried on by the taxpayer in that country, and

    • (c) the amount by which

      • (i) the tax for the year otherwise payable under this Part by the taxpayer

      exceeds

      • (ii) the amount or the total of amounts, as the case may be, deducted under subsection 126(1) by the taxpayer from the tax for the year otherwise payable under this Part.

  • Marginal note:Amount determined for purposes of para. (2)(b)

    (2.1) For the purposes of paragraph 126(2)(b), the amount determined under this subsection for a year in respect of businesses carried on by a taxpayer in a country other than Canada is the total of

    • (a) that proportion of the tax for the year otherwise payable under this Part by the taxpayer that

      • (i) the amount, if any, by which the total of the taxpayer’s qualifying incomes exceeds the total of the taxpayer’s qualifying losses

        • (A) for the year, if the taxpayer is resident in Canada throughout the year, and

        • (B) for the part of the year throughout which the taxpayer is resident in Canada, if the taxpayer is non-resident at any time in the year,

        from businesses carried on by the taxpayer in that country

      is of

      • (ii) the total of

        • (A) the amount, if any, by which

          • (I) if the taxpayer is resident in Canada throughout the year, the taxpayer’s income for the year computed without reference to paragraph 20(1)(ww), and

          • (II) if the taxpayer is non-resident at any time in the year, the amount determined under paragraph 114(a) in respect of the taxpayer for the year

          exceeds

          • (III) the total of all amounts each of which is an amount deducted under section 110.6 or paragraph 111(1)(b), or deductible under any of paragraphs 110(1)(d) to (d.3), (f), (g) and (j) and sections 112 and 113, in computing the taxpayer’s taxable income for the year, and

        • (B) the amount, if any, added under section 110.5 in computing the taxpayer’s taxable income for the year, and

    • (b) that proportion of the amount, if any, added under subsection 120(1) to the tax for the year otherwise payable under this Part by the taxpayer that

      • (i) the amount determined under subparagraph (a)(i) in respect of the country

      is of

      • (ii) the amount, if any, by which,

        • (A) where section 114 does not apply to the taxpayer in respect of the year, the taxpayer’s income for the year, and

        • (B) where section 114 applies to the taxpayer in respect of the year, the total of the taxpayer’s income for the period or periods referred to in paragraph 114(a) and the amount that would be determined under paragraph 114(b) in respect of the taxpayer for the year if subsection 115(1) were read without reference to paragraphs 115(1)(d) to 115(1)(f)

        exceeds

        • (C) the taxpayer’s income earned in the year in a province (within the meaning assigned by subsection 120(4)).

  • Marginal note:Non-resident’s foreign tax deduction

    (2.2) If at any time in a taxation year a taxpayer who is not at that time resident in Canada disposes of a property that was deemed by subsection 48(2), as it read in its application before 1993, or by paragraph 128.1(4)(e), as it read in its application before October 2, 1996, to be taxable Canadian property of the taxpayer, the taxpayer may deduct from the tax for the year otherwise payable under this Part by the taxpayer an amount equal to the lesser of

    • (a) the amount of any non-business-income tax paid by the taxpayer for the year to the government of a country other than Canada that can reasonably be regarded as having been paid by the taxpayer in respect of any gain or profit from the disposition of the property, and

    • (b) that proportion of the tax for the year otherwise payable under this Part by the taxpayer that

      • (i) the taxable capital gain from the disposition of that property

      is of

      • (ii) if the taxpayer is non-resident throughout the year, the taxpayer’s taxable income earned in Canada for the year determined without reference to paragraphs 115(1)(d) to (f), and

      • (iii) if the taxpayer is resident in Canada at any time in the year, the amount that would have been the taxpayer’s taxable income earned in Canada for the year if the part of the year throughout which the taxpayer was non-resident were the whole taxation year.

  • Marginal note:Former resident — deduction

    (2.21) If at any particular time in a particular taxation year a non-resident individual disposes of a property that the individual last acquired because of the application, at any time (in this subsection referred to as the “acquisition time”) after October 1, 1996, of paragraph 128.1(4)(c), there may be deducted from the individual’s tax otherwise payable under this Part for the year (in this subsection referred to as the “emigration year”) that includes the time immediately before the acquisition time an amount not exceeding the lesser of

    • (a) the total of all amounts each of which is the amount of any business-income tax or non-business-income tax paid by the individual for the particular year

      • (i) where the property is real or immovable property situated in a country other than Canada,

        • (A) to the government of that country, or

        • (B) to the government of a country with which Canada has a tax treaty at the particular time and in which the individual is resident at the particular time, or

      • (ii) where the property is not real or immovable property, to the government of a country with which Canada has a tax treaty at the particular time and in which the individual is resident at the particular time,

      that can reasonably be regarded as having been paid in respect of that portion of any gain or profit from the disposition of the property that accrued while the individual was resident in Canada and before the time the individual last ceased to be resident in Canada, and

    • (b) the amount, if any, by which

      • (i) the amount of tax under this Part that was, after taking into account the application of this subsection in respect of dispositions that occurred before the particular time, otherwise payable by the individual for the emigration year

      exceeds

      • (ii) the amount of such tax that would have been payable if the property had not been deemed by subsection 128.1(4) to have been disposed of in the emigration year.

  • Marginal note:Former resident — trust beneficiary

    (2.22) If at any particular time in a particular taxation year a non-resident individual disposes of a property that the individual last acquired at any time (in this subsection referred to as the “acquisition time”) on a distribution after October 1, 1996 to which paragraphs 107(2)(a) to (c) do not apply only because of subsection 107(5), the trust may deduct from its tax otherwise payable under this Part for the year (in this subsection referred to as the “distribution year”) that includes the acquisition time an amount not exceeding the lesser of

    • (a) the total of all amounts each of which is the amount of any business-income tax or non-business-income tax paid by the individual for the particular year

      • (i) where the property is real or immovable property situated in a country other than Canada,

        • (A) to the government of that country, or

        • (B) to the government of a country with which Canada has a tax treaty at the particular time and in which the individual is resident at the particular time, or

      • (ii) where the property is not real or immovable property, to the government of a country with which Canada has a tax treaty at the particular time and in which the individual is resident at the particular time,

      that can reasonably be regarded as having been paid in respect of that portion of any gain or profit from the disposition of the property that accrued before the distribution and after the latest of the times, before the distribution, at which

      • (iii) the trust became resident in Canada,

      • (iv) the individual became a beneficiary under the trust, or

      • (v) the trust acquired the property, and

    • (b) the amount, if any, by which

      • (i) the amount of tax under this Part that was, after taking into account the application of this subsection in respect of dispositions that occurred before the particular time, otherwise payable by the trust for the distribution year

      exceeds

      • (ii) the amount of such tax that would have been payable by the trust for the distribution year if the property had not been distributed to the individual.

  • Marginal note:Where foreign credit available

    (2.23) For the purposes of subsections (2.21) and (2.22), in computing, in respect of the disposition of a property by an individual in a taxation year, the total amount of taxes paid by the individual for the year to one or more governments of countries other than Canada, there shall be deducted any tax credit (or other reduction in the amount of a tax) to which the individual was entitled for the year, under the law of any of those countries or under a tax treaty between Canada and any of those countries, because of taxes paid or payable by the individual under this Act in respect of the disposition or a previous disposition of the property.

  • Marginal note:Rules relating to unused foreign tax credit

    (2.3) For the purposes of this section,

    • (a) the amount claimed under paragraph 126(2)(a) by a taxpayer for a taxation year in respect of a country shall be deemed to be in respect of the business-income tax paid by the taxpayer for the year in respect of businesses carried on by the taxpayer in that country to the extent of the amount of that tax, and the remainder, if any, of the amount so claimed shall be deemed to be in respect of the taxpayer’s unused foreign tax credits

    • Marginal note:in respect of that country that may be claimed for the taxation year;

      (b) no amount may be claimed under paragraph (2)(a) in computing a taxpayer’s tax payable under this Part for a particular taxation year in respect of the taxpayer’s unused foreign tax credit in respect of a country for a taxation year until the taxpayer’s unused foreign tax credits in respect of that country for taxation years preceding the taxation year that may be claimed for the particular taxation year have been claimed; and

    • (c) an amount in respect of a taxpayer’s unused foreign tax credit in respect of a country for a taxation year may be claimed under paragraph (2)(a) in computing the taxpayer’s tax payable under this Part for a particular taxation year only to the extent that it exceeds the aggregate of all amounts each of which is the amount that may reasonably be considered to have been claimed in respect of that unused foreign tax credit in computing the taxpayer’s tax payable under this Part for a taxation year preceding the particular taxation year.

  • Marginal note:Employees of international organizations

    (3) Where an individual is resident in Canada at any time in a taxation year, there may be deducted from the individual’s tax for the year otherwise payable under this Part an amount equal to that proportion of the tax for the year otherwise payable under this Part by the individual that

    • (a) the individual’s income

      • (i) for the year, if the individual is resident in Canada throughout the year, and

      • (ii) for the part of the year throughout which the individual was resident in Canada, if the individual is non-resident at any time in the year,

      from employment with an international organization (other than a prescribed international organization), as defined for the purposes of section 2 of the Foreign Missions and International Organizations Act

    is of

    • (b) the amount, if any, by which

      • (i) if the taxpayer is resident in Canada throughout the year, the taxpayer’s income for the year computed without reference to paragraph 20(1)(ww), and

      • (ii) if the taxpayer is non-resident at any time in the year, the amount determined under paragraph 114(a) in respect of the taxpayer for the year

      exceeds

      • (iii) the total of all amounts each of which is an amount deducted under section 110.6 or paragraph 111(1)(b), or deductible under any of paragraphs 110(1)(d) to (d.3), (f), (g) and (j), in computing the taxpayer’s taxable income for the year,

      except that the amount deductible under this subsection in computing the individual’s tax payable under this Part for the year may not exceed that proportion of the total of all amounts each of which is an amount paid by the individual to the organization as a levy (the proceeds of which are used to defray expenses of the organization), computed by reference to the remuneration received by the individual in the year from the organization in a manner similar to the manner in which income tax is computed, that

    • (c) the individual’s income for the year from employment with the organization

    is of

    • (d) the amount that would be the individual’s income for the year from employment with the organization if this Act were read without reference to paragraph 81(1)(a).

  • Marginal note:Portion of foreign tax not included

    (4) For the purposes of this Act, an income or profits tax paid by a person resident in Canada to the government of a country other than Canada does not include a tax, or that portion of a tax, imposed by that government that would not be imposed if the person were not entitled under section 113 or this section to a deduction in respect of the tax or that portion of the tax.

  • Marginal note:No economic profit

    (4.1) If a taxpayer acquires a property, other than a capital property, at any time after February 23, 1998 and it is reasonable to expect at that time that the taxpayer will not realize an economic profit in respect of the property for the period that begins at that time and ends when the taxpayer next disposes of the property, the total amount of all income or profits taxes (referred to as the “foreign tax” for the purpose of subsection 20(12.1)) in respect of the property for the period, and in respect of related transactions, paid by the taxpayer for any year to the government of any country other than Canada, is not included in computing the taxpayer’s business-income tax or non-business-income tax for any taxation year.

  • Marginal note:Denial of foreign tax credit

    (4.11) If a taxpayer is a member of a partnership, any income or profits tax paid to the government of a particular country other than Canada — in respect of the income of the partnership for a period during which the taxpayer’s direct or indirect share of the income of the partnership under the income tax laws (referred to in subsection (4.12) as the “relevant foreign tax law”) of any country other than Canada under the laws of which any income of the partnership is subject to income taxation, is less than the taxpayer’s direct or indirect share of the income for the purposes of this Act — is not included in computing the taxpayer’s business-income tax or non-business-income tax for any taxation year.

  • Marginal note:Exceptions

    (4.12) For the purposes of subsection (4.11), a taxpayer is not to be considered to have a lesser direct or indirect share of the income of a partnership under the relevant foreign tax law than for the purposes of this Act solely because of one or more of the following:

    • (a) a difference between the relevant foreign tax law and this Act in the manner of

      • (i) computing the income of the partnership, or

      • (ii) allocating the income of the partnership because of the admission to, or withdrawal from, the partnership of any of its members;

    • (b) the treatment of the partnership as a corporation under the relevant foreign tax law; or

    • (c) the fact that the taxpayer is not treated as a corporation under the relevant foreign tax law.

  • Marginal note:Tiered partnerships

    (4.13) For the purposes of subsections (4.11) and (4.12), if a taxpayer is (or is deemed by this subsection to be) a member of a particular partnership that is a member of another partnership, the taxpayer is deemed to be a member of the other partnership.

  • Marginal note:Short-term securities acquisitions

    (4.2) If at any particular time a taxpayer disposes of a property that is a share or debt obligation and the period that began at the time the taxpayer last acquired the property and ended at the particular time is one year or less, the amount included in business-income tax or non-business-income tax paid by the taxpayer for a particular taxation year on account of all taxes (referred to in this subsection and subsections (4.3) and 161(6.1) as the “foreign tax”) that are

    • (a) paid by the taxpayer in respect of dividends or interest in respect of the period that are included in computing the taxpayer’s income from the property for any taxation year,

    • (b) otherwise included in business-income tax or non-business-income tax for any taxation year, and

    • (c) similar to the tax levied under Part XIII

    shall, subject to subsection (4.3), not exceed the amount determined by the formula

    A × (B - C) × D/E

    where

    A 
    is
    • (a) if the foreign tax would otherwise be included in business-income tax, the total of

      • (i) that proportion of 26.5% that the number of days in the taxation year that are in 2011 is of the number of days in the taxation year, and

      • (ii) that proportion of 25% that the number of days in the taxation year that are after 2011 is of the number of days in the taxation year, and

    • (b) if the foreign tax would otherwise be included in non-business-income tax, the total of

      • (i) if the taxpayer is a corporation that is a Canadian-controlled private corporation throughout the taxation year, that proportion of 28% that the number of days in the taxation year that are after 2010 is of the number of days in the taxation year, and

      • (ii) if the taxpayer is not a Canadian-controlled private corporation throughout the taxation year, the total of

        • (A) that proportion of 16.5% that the number of days in the taxation year that are in 2011 is of the number of days in the taxation year, and

        • (B) that proportion of 15% that the number of days in the taxation year that are after 2011 is of the number of days in the taxation year,

    B 
    is the total of the taxpayer’s proceeds from the disposition of the property at the particular time and the amount of all dividends or interest from the property in respect of the period included in computing the taxpayer’s income for any taxation year,
    C 
    is the total of the cost at which the taxpayer last acquired the property and any outlays or expenses made or incurred by the taxpayer for the purpose of disposing of the property at the particular time,
    D 
    is the amount of foreign tax that would otherwise be included in computing the taxpayer’s business-income tax or non-business-income tax for the particular year, and
    E 
    is the total amount of foreign tax that would otherwise be included in computing the taxpayer’s business-income tax or non-business-income tax for all taxation years.
  • Marginal note:Exceptions

    (4.3) Subsection (4.2) does not apply to a property of a taxpayer

    • (a) that is a capital property;

    • (b) that is a debt obligation issued to the taxpayer that has a term of one year or less and that is held by no one other than the taxpayer at any time;

    • (c) that was last acquired by the taxpayer before February 24, 1998; or

    • (d) in respect of which any foreign tax is, because of subsection (4.1), not included in computing the taxpayer’s business-income tax or non-business-income tax.

  • Marginal note:Dispositions ignored

    (4.4) For the purposes of subsections (4.1) and (4.2) and the definition “economic profit” in subsection (7),

    • (a) a disposition or acquisition of property deemed to be made by subsection 10(12) or (13), 14(14) or (15) or 45(1), section 70, 128.1 or 132.2, subsections 138(11.3) or 142.5(2), paragraph 142.6(1)(b) or subsections 142.6(1.1) or (1.2) or 149(10) is not a disposition or acquisition, as the case may be; and

    • (b) a disposition

      • (i) to which section 51.1 applies, of a convertible obligation in exchange for a new obligation,

      • (ii) to which subsection 86(1) applies, of old shares in exchange for new shares, or

      • (iii) to which subsections 87(4) and (8) apply, of old shares in exchange for new shares,

    is not a disposition, and the convertible obligation and the new obligation, or the old shares and the new shares, as the case may be, are deemed to be the same property.

  • Marginal note:Synthetic disposition  — holding period

    (4.5) If a synthetic disposition arrangement is entered into in respect of a property owned by a taxpayer and the synthetic disposition period of the arrangement is 30 days or more,

    • (a) for the purpose of determining whether the period referred to in subsection (4.2) is one year or less, the period is deemed to begin at the earlier of

      • (i) the time that is immediately before the particular time referred to in subsection (4.2), and

      • (ii) the end, if any, of the synthetic disposition period; and

    • (b) for the purposes of subsection (4.6), the taxpayer is deemed not to own the property during the synthetic disposition period.

  • Marginal note:Exception

    (4.6) Subsection (4.5) does not apply in respect of a property owned by a taxpayer in respect of a synthetic disposition arrangement if the taxpayer owned the property throughout the one-year period (determined without reference to this subsection) that ended immediately before the synthetic disposition period of the arrangement.

  • Marginal note:Foreign oil and gas levies

    (5) A taxpayer who is resident in Canada throughout a taxation year and carries on a foreign oil and gas business in a taxing country in the year is deemed for the purposes of this section to have paid in the year as an income or profits tax to the government of the taxing country an amount equal to the lesser of

    • (a) the amount, if any, by which

      • (i) the amount obtained by multiplying the taxpayer’s income from the business in the taxing country for the year by the total of

        • (A) that proportion of 26.5% that the number of days in the taxation year that are in 2011 is of the number of days in the taxation year, and

        • (B) that proportion of 25% that the number of days in the taxation year that are after 2011 is of the number of days in the taxation year

      exceeds

      • (ii) the total of all amounts that would, but for this subsection, be income or profits taxes paid in the year in respect of the business to the government of the taxing country, and

    • (b) the taxpayer’s production tax amount for the business in the taxing country for the year.

  • Marginal note:Deductions for specified capital gains

    (5.1) Where in a taxation year an individual has claimed a deduction under section 110.6 in computing the individual’s taxable income for the year, for the purposes of this section the individual shall be deemed to have claimed the deduction under section 110.6 in respect of such taxable capital gains or portion thereof as the individual may specify in the individual’s return of income required to be filed pursuant to section 150 for the year or, where the individual has failed to so specify, in respect of such taxable capital gains as the Minister may specify in respect of the taxpayer for the year.

  • Marginal note:Rules of construction

    (6) For the purposes of this section,

    • (a) the government of a country other than Canada includes the government of a state, province or other political subdivision of that country;

    • (b) where a taxpayer’s income for a taxation year is in whole or in part from sources in more than one country other than Canada, subsections (1) and (2) shall be read as providing for separate deductions in respect of each of the countries other than Canada;

    • (c) if any income from a source in a particular country would be tax-exempt income but for the fact that a portion of the income is subject to an income or profits tax imposed by the government of a country other than Canada, the portion is deemed to be income from a separate source in the particular country; and

    • (d) if, in computing a taxpayer’s income for a taxation year from a business carried on by the taxpayer in Canada, an amount is included in respect of interest paid or payable to the taxpayer by a person resident in a country other than Canada, and the taxpayer has paid to the government of that other country a non-business income tax for the year with respect to the amount, the amount is, in applying the definition “qualifying incomes” in subsection (7) for the purpose of subsection (1), deemed to be income from a source in that other country.

  • Marginal note:Definitions

    (7) In this section,

    “business-income tax”

    « impôt sur le revenu tiré d’une entreprise »

    “business-income tax” paid by a taxpayer for a taxation year in respect of businesses carried on by the taxpayer in a country other than Canada (referred to in this definition as the “business country”) means, subject to subsections (4.1) to (4.2), the portion of any income or profits tax paid by the taxpayer for the year to the government of a country other than Canada that can reasonably be regarded as tax in respect of the income of the taxpayer from a business carried on by the taxpayer in the business country, but does not include a tax, or the portion of a tax, that can reasonably be regarded as relating to an amount that

    • (a) any other person or partnership has received or is entitled to receive from that government, or

    • (b) was deductible under subparagraph 110(1)(f)(i) in computing the taxpayer’s taxable income for the year;

    “commercial obligation”

    « obligation commerciale »

    “commercial obligation” in respect of a taxpayer’s foreign oil and gas business in a country means an obligation of the taxpayer to a particular person, undertaken in the course of carrying on the business or in contemplation of the business, if the law of the country would have allowed the taxpayer to undertake an obligation, on substantially the same terms, to a person other than the particular person;

    “economic profit”

    « profit économique »

    “economic profit” of a taxpayer in respect of a property for a period means the part of the taxpayer’s profit, from the business in which the property is used, that is attributable to the property in respect of the period or to related transactions, determined as if the only amounts deducted in computing that part of the profit were

    • (a) interest and financing expenses incurred by the taxpayer and attributable to the acquisition or holding of the property in respect of the period or to a related transaction,

    • (b) income or profits taxes payable by the taxpayer for any year to the government of a country other than Canada, in respect of the property for the period or in respect of a related transaction, or

    • (c) other outlays and expenses that are directly attributable to the acquisition, holding or disposition of the property in respect of the period or to a related transaction;

    “foreign oil and gas business”

    « entreprise pétrolière et gazière à l’étranger »

    “foreign oil and gas business” of a taxpayer means a business, carried on by the taxpayer in a taxing country, the principal activity of which is the extraction from natural accumulations, or from oil or gas wells, of petroleum, natural gas or related hydrocarbons;

    “non-business-income tax”

    « impôt sur le revenu ne provenant pas d’une entreprise »

    “non-business-income tax” paid by a taxpayer for a taxation year to the government of a country other than Canada means, subject to subsections (4.1) to (4.2), the portion of any income or profits tax paid by the taxpayer for the year to the government of that country that

    • (a) was not included in computing the taxpayer’s business-income tax for the year in respect of any business carried on by the taxpayer in any country other than Canada,

    • (b) was not deductible by virtue of subsection 20(11) in computing the taxpayer’s income for the year, and

    • (c) was not deducted by virtue of subsection 20(12) in computing the taxpayer’s income for the year,

    but does not include a tax, or the portion of a tax,

    • (c.1) that is in respect of an amount deducted because of subsection 104(22.3) in computing the taxpayer’s business-income tax,

    • (d) that would not have been payable had the taxpayer not been a citizen of that country and that cannot reasonably be regarded as attributable to income from a source outside Canada,

    • (e) that may reasonably be regarded as relating to an amount that any other person or partnership has received or is entitled to receive from that government,

    • (f) that, where the taxpayer deducted an amount under subsection 122.3(1) from the taxpayer’s tax otherwise payable under this Part for the year, may reasonably be regarded as attributable to the taxpayer’s income from employment to the extent of the lesser of the amounts determined in respect thereof under paragraphs 122.3(1)(c) and 122.3(1)(d) for the year,

    • (g) that can reasonably be attributed to a taxable capital gain or a portion thereof in respect of which the taxpayer or a spouse or common-law partner of the taxpayer has claimed a deduction under section 110.6, or

    • (h[Repealed, 2013, c. 33, s. 13]

    • (i) that can reasonably be regarded as relating to an amount that was deductible under subparagraph 110(1)(f)(i) in computing the taxpayer’s taxable income for the year;

    “production tax amount”

    « impôt sur la production »

    “production tax amount” of a taxpayer for a foreign oil and gas business carried on by the taxpayer in a taxing country for a taxation year means the total of all amounts each of which

    • (a) became receivable in the year by the government of the country because of an obligation (other than a commercial obligation) of the taxpayer, in respect of the business, to the government or an agent or instrumentality of the government,

    • (b) is computed by reference to the amount by which

      • (i) the amount or value of petroleum, natural gas or related hydrocarbons produced or extracted by the taxpayer in the course of carrying on the business in the year

      exceeds

      • (ii) an allowance or other deduction that

        • (A) is deductible, under the agreement or law that creates the obligation described in paragraph (a), in computing the amount receivable by the government of the country, and

        • (B) is intended to take into account the taxpayer’s operating and capital costs of that production or extraction, and can reasonably be considered to have that effect,

    • (c) would not, if this Act were read without reference to subsection (5), be an income or profits tax, and

    • (d) is not identified as a royalty under the agreement that creates the obligation or under any law of the country;

    “qualifying incomes”

    « revenus admissibles »

    “qualifying incomes” of a taxpayer from sources in a country means incomes from sources in the country, determined in accordance with subsection (9);

    “qualifying losses”

    « pertes admissibles »

    “qualifying losses” of a taxpayer from sources in a country means losses from sources in the country, determined in accordance with subsection (9);

    “related transactions”

    « opérations connexes »

    “related transactions”, in respect of a taxpayer’s ownership of a property for a period, means transactions entered into by the taxpayer as part of the arrangement under which the property was owned;

    “tax-exempt income”

    « revenu exonéré d’impôt »

    “tax-exempt income” means income of a taxpayer from a source in a country in respect of which

    • (a) the taxpayer is, because of a tax treaty with that country, entitled to an exemption from all income or profits taxes, imposed in that country, to which the treaty applies, and

    • (b) no income or profits tax to which the treaty does not apply is imposed in any country other than Canada;

    “tax for the year otherwise payable under this Part”

    « impôt payable par ailleurs pour l’année en vertu de la présente partie »

    “tax for the year otherwise payable under this Part” by a taxpayer means

    • (a) in paragraph (1)(b) and subsection (3), the amount determined by the formula

      A - B

      where

      A 
      is the amount that would be the tax payable under this Part for the year by the taxpayer if that tax were determined without reference to section 120.3 and before making any deduction under any of sections 121, 122.3, 125 to 127.41 and, if the taxpayer is a Canadian-controlled private corporation throughout the year, section 123.4, and
      B 
      is the amounts deemed by subsections 120(2) and (2.2) to have been paid on account of tax payable under this Part by the taxpayer,
    • (b) in subparagraph (2)(c)(i) and paragraph (2.2)(b), the amount that would be the tax payable under this Part for the year by the taxpayer if that tax were determined without reference to sections 120.3 and 123.3 and before making any deduction under any of sections 121 and 122.3, subsection 123.4(3), and sections 124 to 127.41, and

    • (c) in subsection (2.1), the amount that would be the tax payable under this Part for the year by the taxpayer if that tax were determined without reference to subsection 120(1) and sections 120.3 and 123.3 and before making any deduction under any of sections 121 and 122.3, subsection 123.4(3) and sections 124 to 127.41;

    “taxing country”

    « pays taxateur »

    “taxing country” means a country (other than Canada) the government of which regularly imposes, in respect of income from businesses carried on in the country, a levy or charge of general application that would, if this Act were read without reference to subsection (5), be an income or profits tax;

    “unused foreign tax credit”

    « fraction inutilisée du crédit pour impôt étranger »

    “unused foreign tax credit” of a taxpayer in respect of a country for a taxation year means the amount, if any, by which

    • (a) the business-income tax paid by the taxpayer for the year in respect of businesses carried on by the taxpayer in that country

    exceeds

    • (b) the amount, if any, deductible under subsection (2) in respect of that country in computing the taxpayer’s tax payable under this Part for the year.

  • Marginal note:Deemed dividend — partnership

    (8) If an amount is deemed by subsection 96(1.11) to be a taxable dividend received by a person in a taxation year of the person in respect of a partnership, and it is reasonable to consider that all or part of the amount (in this subsection referred to as the “foreign-source portion”) is attributable to income of the partnership from a source in a country other than Canada, the person is deemed for the purposes of this section to have an amount of income from that source for that taxation year equal to the amount determined by the formula

    A × B/C

    where

    A 
    is the total amount included under subsection 82(1) in computing the income of the person in respect of the taxable dividend for that taxation year;
    B 
    is the foreign-source portion; and
    C 
    is the amount of the taxable dividend deemed to be received by the person.
  • Marginal note:Computation of qualifying incomes and losses

    (9) The qualifying incomes and qualifying losses for a taxation year of a taxpayer from sources in a country shall be determined

    • (a) without reference to

      • (i) any portion of income that was deductible under subparagraph 110(1)(f)(i) in computing the taxpayer’s taxable income,

      • (ii) for the purpose of subparagraph (1)(b)(i), any portion of income in respect of which an amount was deducted under section 110.6 in computing the taxpayer’s income, or

      • (iii) any income or loss from a source in the country if any income of the taxpayer from the source would be tax-exempt income; and

    • (b) as if the total of all amounts each of which is that portion of an amount deducted under subsection 66(4), 66.21(4), 66.7(2) or 66.7(2.3) in computing those qualifying incomes and qualifying losses for the year that applies to those sources were the greater of

      • (i) the total of all amounts each of which is that portion of an amount deducted under subsection 66(4), 66.21(4), 66.7(2) or 66.7(2.3) in computing the taxpayer’s income for the year that applies to those sources, and

      • (ii) the total of

        • (A) the portion of the maximum amount that would be deductible under subsection 66(4) in computing the taxpayer’s income for the year that applies to those sources if the amount determined under subparagraph 66(4)(b)(ii) for the taxpayer in respect of the year were equal to the amount, if any, by which the total of

          • (I) the taxpayer’s foreign resource income (within the meaning assigned by subsection 66.21(1)) for the year in respect of the country, determined as if the taxpayer had claimed the maximum amounts deductible for the year under subsections 66.7(2) and (2.3), and

          • (II) all amounts each of which would have been an amount included in computing the taxpayer’s income for the year under subsection 59(1) in respect of a disposition of a foreign resource property in respect of the country, determined as if each amount determined under subparagraph 59(1)(b)(ii) were nil,

          exceeds

          • (III) the total of all amounts each of which is a portion of an amount (other than a portion that results in a reduction of the amount otherwise determined under subclause (I)) that applies to those sources and that would be deducted under subsection 66.7(2) in computing the taxpayer’s income for the year if the maximum amounts deductible for the year under that subsection were deducted,

        • (B) the maximum amount that would be deductible under subsection 66.21(4) in respect of those sources in computing the taxpayer’s income for the year if

          • (I) the amount deducted under subsection 66(4) in respect of those sources in computing the taxpayer’s income for the year were the amount determined under clause (A),

          • (II) the amounts deducted under subsections 66.7(2) and (2.3) in respect of those sources in computing the taxpayer’s income for the year were the maximum amounts deductible under those subsections,

          • (III) for the purposes of the definition “cumulative foreign resource expense” in subsection 66.21(1), the total of the amounts designated under subparagraph 59(1)(b)(ii) for the year in respect of dispositions by the taxpayer of foreign resource properties in respect of the country in the year were the maximum total that could be so designated without any reduction in the maximum amount that would be determined under clause (A) in respect of the taxpayer for the year in respect of the country if no assumption had been made under subclause (A)(II) in respect of designations made under subparagraph 59(1)(b)(ii), and

          • (IV) the amount determined under paragraph 66.21(4)(b) were nil, and

        • (C) the total of all amounts each of which is the maximum amount, applicable to one of those sources, that is deductible under subsection 66.7(2) or (2.3) in computing the taxpayer’s income 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. 126;
  • 1994, c. 7, Sch. II, s. 103, Sch. VIII, s. 67, c. 21, s. 60;
  • 1995, c. 3, s. 36;
  • 1996, c. 21, s. 29;
  • 1999, c. 22, s. 47;
  • 2000, c. 12, s. 142, c. 19, s. 35;
  • 2001, c. 17, s. 117;
  • 2002, c. 9, s. 39;
  • 2005, c. 19, s. 27;
  • 2007, c. 29, s. 15;
  • 2013, c. 33, s. 13, c. 34, ss. 127, 267, c. 40, s. 56.