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

Act current to 2017-09-14 and last amended on 2017-07-01. Previous Versions

Marginal note:Tax on taxable dividends
  •  (1) Every taxable Canadian corporation shall pay a tax under this Part for each taxation year equal to the amount, if any, by which

    • (a) the total of

      • (i) the amount determined by multiplying the amount by which the total of all taxable dividends (other than excluded dividends) paid by the corporation in the year and after 1987 on short-term preferred shares exceeds the corporation’s dividend allowance for the year, by

        • (A) 50% for dividends paid in a taxation year that ends before 2010,

        • (B) 45% for dividends paid in a taxation year that ends after 2009 and before 2012,

        • (C) 40% for dividends paid in a taxation year that ends after 2011,

      • (ii) 40% of the amount, if any, by which the total of all taxable dividends (other than excluded dividends) paid by the corporation in the year and after 1987 on taxable preferred shares (other than short-term preferred shares) of all classes in respect of which an election under subsection 191.2(1) has been made exceeds the amount, if any, by which the corporation’s dividend allowance for the year exceeds the total of the dividends referred to in subparagraph 191.1(1)(a)(i),

      • (iii) 25% of the amount, if any, by which the total of all taxable dividends (other than excluded dividends) paid by the corporation in the year and after 1987 on taxable preferred shares (other than short-term preferred shares) of all classes in respect of which an election under subsection 191.2(1) has not been made exceeds the amount, if any, by which the corporation’s dividend allowance for the year exceeds the total of the dividends referred to in subparagraphs 191.1(1)(a)(i) and 191.1(1)(a)(ii), and

      • (iv) the total of all amounts each of which is an amount determined for the year in respect of the corporation under paragraph 191.3(1)(d)

    exceeds

    • (b) the total of all amounts each of which is an amount determined for the year in respect of the corporation under paragraph 191.3(1)(c).

  • Marginal note:Dividend allowance

    (2) For the purposes of this section, a taxable Canadian corporation’s dividend allowance for a taxation year is the amount, if any, by which

    exceeds

    • (b) the amount, if any, by which the total of taxable dividends (other than excluded dividends) paid by it on taxable preferred shares, or shares that would be taxable preferred shares if they were issued after June 18, 1987 and were not grandfathered shares, in the calendar year immediately preceding the calendar year in which the taxation year ended exceeds $1,000,000,

    unless the corporation is associated in the taxation year with one or more other taxable Canadian corporations, in which case, except as otherwise provided in this section, its dividend allowance for the year is nil.

  • Marginal note:Associated corporations

    (3) If all of the taxable Canadian corporations that are associated with each other in a taxation year and that have paid taxable dividends (other than excluded dividends) on taxable preferred shares in the year have filed with the Minister in prescribed form an agreement whereby, for the purposes of this section, they allocate an amount to one or more of them for the taxation year, and the amount so allocated or the total of the amounts so allocated, as the case may be, is equal to the total dividend allowance for the year of those corporations and all other taxable Canadian corporations with which each such corporation is associated in the year, the dividend allowance for the year for each of the corporations is the amount so allocated to it.

  • Marginal note:Total dividend allowance

    (4) For the purposes of this section, the total dividend allowance of a group of taxable Canadian corporations that are associated with each other in a taxation year is the amount, if any, by which

    exceeds

    • (b) the amount, if any, by which the total of taxable dividends (other than excluded dividends) paid by those corporations on taxable preferred shares, or shares that would be taxable preferred shares if they were issued after June 18, 1987 and were not grandfathered shares, in the calendar year immediately preceding the calendar year in which the taxation year ended exceeds $1,000,000.

  • Marginal note:Failure to file agreement

    (5) If any of the taxable Canadian corporations that are associated with each other in a taxation year and that have paid taxable dividends (other than excluded dividends) on taxable preferred shares in the year has failed to file with the Minister an agreement as contemplated by subsection 191.1(3) within 30 days after notice in writing by the Minister has been forwarded to any of them that such an agreement is required for the purpose of any assessment of tax under this Part, the Minister shall, for the purpose of this section, allocate an amount to one or more of them for the taxation year, which amount or the total of which amounts, as the case may be, shall equal the total dividend allowance for the year for those corporations and all other taxable Canadian corporations with which each such corporation is associated in the year, and the dividend allowance for the year of each of the corporations is the amount so allocated to it.

  • Marginal note:Dividend allowance in short years

    (6) Notwithstanding any other provision of this section,

    • (a) where a corporation has a taxation year that is less than 51 weeks, its dividend allowance for the year is that proportion of its dividend allowance for the year determined without reference to this paragraph that the number of days in the year is of 365; and

    • (b) where a taxable Canadian corporation (in this paragraph referred to as the “first corporation”) has more than one taxation year ending in a calendar year and is associated in two or more of those taxation years with another taxable Canadian corporation that has a taxation year ending in that calendar year, the dividend allowance of the first corporation for each taxation year in which it is associated with the other corporation ending in that calendar year is, subject to the application of paragraph 191.1(6)(a), an amount equal to the amount that would be its dividend allowance for the first such taxation year if the allowance were determined without reference to paragraph 191.1(6)(a).

  • NOTE: Application provisions are not included in the consolidated text;
  • see relevant amending Acts. R.S., 1985, c. 1 (5th Supp.), s. 191.1;
  • 2013, c. 34, s. 333.
Marginal note:Election
  •  (1) For the purposes of determining the tax payable by reason of subparagraphs 191.1(1)(a)(ii) and 191.1(1)(a)(iii), a taxable Canadian corporation (other than a financial intermediary corporation or a private holding corporation) may make an election with respect to a class of its taxable preferred shares the terms and conditions of which require an election to be made under this subsection by filing a prescribed form with the Minister

    • (a) not later than the day on or before which its return of income under Part I is required by section 150 to be filed for the taxation year in which shares of that class are first issued or first become taxable preferred shares; or

    • (b) within the 6 month period commencing on any of the following days, namely,

      • (i) the day of sending of any notice of assessment of tax payable under this Part or Part I by the corporation for that year,

      • (ii) where the corporation has served a notice of objection to an assessment described in subparagraph (i), the day of sending of a notice that the Minister has confirmed or varied the assessment,

      • (iii) where the corporation has instituted an appeal in respect of an assessment described in subparagraph 191.2(1)(b)(i) to the Tax Court of Canada, the day of mailing of a copy of the decision of the Court to the taxpayer, and

      • (iv) where the corporation has instituted an appeal in respect of an assessment described in subparagraph 191.2(1)(b)(i) to the Federal Court of Appeal or the Supreme Court of Canada, the day on which the judgment of the Court is pronounced or delivered or the day on which the corporation discontinues the appeal.

  • Marginal note:Time of election

    (2) An election with respect to a class of taxable preferred shares filed in accordance with subsection 191.2(1) shall be deemed to have been filed before any dividend on a share of that class is paid.

  • Marginal note:Assessment

    (3) Where an election has been filed under subsection 191.2(1), the Minister shall, notwithstanding subsections 152(4) and 152(5), assess or reassess the tax, interest or penalties payable under this Act by any corporation for any relevant taxation year in order to take into account the election.

  • NOTE: Application provisions are not included in the consolidated text;
  • see relevant amending Acts. R.S., 1985, c. 1 (5th Supp.), s. 191.2;
  • 2002, c. 8, s. 184;
  • 2010, c. 25, s. 53.
Marginal note:Agreement respecting liability for tax
  •  (1) Where a corporation (in this section referred to as the “transferor corporation”) and a taxable Canadian corporation (in this section referred to as the “transferee corporation”) that was related (otherwise than because of a right referred to in paragraph 251(5)(b) or because of the control of any corporation by Her Majesty in right of Canada or a province) to the transferor corporation

    • (a) throughout a particular taxation year of the transferor corporation (or, where the transferee corporation came into existence in that year, throughout the part of that year in which the transferee corporation was in existence), and

    • (b) throughout the last taxation year of the transferee corporation ending at or before the end of the particular taxation year (or, where the transferor corporation came into existence in that last taxation year of the transferee corporation, throughout that part of that last year in which the transferor corporation was in existence)

    file as provided in subsection 191.3(2) an agreement or amended agreement with the Minister under which the transferee corporation agrees to pay all or any portion, as is specified in the agreement, of the tax for that taxation year of the transferor corporation that would, but for the agreement, be payable under this Part by the transferor corporation (other than any tax payable by the transferor corporation by reason of another agreement made under this section), the following rules apply, namely,

    • (c) the amount of tax specified in the agreement is an amount determined for that taxation year of the transferor corporation in respect of the transferor corporation for the purpose of paragraph 191.1(1)(b),

    • (d) the amount of tax specified in the agreement is an amount determined in respect of the transferee corporation for its last taxation year ending at or before the end of that taxation year of the transferor corporation for the purpose of subparagraph 191.1(1)(a)(iv), and

    • (e) the transferor corporation and the transferee corporation are jointly and severally, or solidarily, liable to pay the amount of tax specified in the agreement and any interest or penalty in respect thereof.

  • Marginal note:Consideration for agreement

    (1.1) For the purposes of Part I of this Act, where property is acquired at any time by a transferee corporation as consideration for entering into an agreement with a transferor corporation that is filed under this section,

    • (a) where the property was owned by the transferor corporation immediately before that time,

      • (i) the transferor corporation shall be deemed to have disposed of the property at that time for proceeds equal to the fair market value of the property at that time, and

      • (ii) the transferor corporation shall not be entitled to deduct any amount in computing its income as a consequence of the transfer of the property, except any amount arising as a consequence of subparagraph 191.3(1.1)(a)(i);

    • (b) the cost at which the property was acquired by the transferee corporation at that time shall be deemed to be equal to the fair market value of the property at that time;

    • (c) the transferee corporation shall not be required to add an amount in computing its income solely because of the acquisition at that time of the property; and

    • (d) no benefit shall be deemed to have been conferred on the transferor corporation as a consequence of the transferor corporation entering into an agreement filed under this section.

  • Marginal note:Manner of filing agreement

    (2) An agreement or amended agreement referred to in subsection 191.3(1) between a transferor corporation and a transferee corporation shall be deemed not to have been filed with the Minister unless

    • (a) it is in prescribed form;

    • (b) it is filed on or before the day on or before which the transferor corporation’s return for the year in respect of which the agreement is filed is required to be filed under this Part or within the 90-day period beginning on the day of sending of a notice of assessment of tax payable under this Part or Part I by the transferor corporation for the year or by the transferee corporation for its taxation year ending in the calendar year in which the taxation year of the transferor corporation ends or the sending of a notification that no tax is payable under this Part or Part I for that taxation year;

    • (c) it is accompanied by,

      • (i) where the directors of the transferor corporation are legally entitled to administer its affairs, a certified copy of their resolution authorizing the agreement to be made,

      • (ii) where the directors of the transferor corporation are not legally entitled to administer its affairs, a certified copy of the document by which the person legally entitled to administer the corporation’s affairs authorized the agreement to be made,

      • (iii) where the directors of the transferee corporation are legally entitled to administer its affairs, a certified copy of their resolution authorizing the agreement to be made, and

      • (iv) where the directors of the transferee corporation are not legally entitled to administer its affairs, a certified copy of the document by which the person legally entitled to administer the corporation’s affairs authorized the agreement to be made; and

    • (d) where the agreement is not an agreement to which subsection 191.3(4) applies, an agreement amending the agreement has not been filed in accordance with this section.

    • (e) [Repealed, 1994, c. 7, Sch. II, s. 163(1)]

  • Marginal note:Assessment

    (3) Where an agreement or amended agreement between a transferor corporation and a transferee corporation has been filed under this section with the Minister, the Minister shall, notwithstanding subsections 152(4) and 152(5), assess or reassess the tax, interest and penalties payable under this Act by the transferor corporation and the transferee corporation for any relevant taxation year in order to take into account the agreement or amended agreement.

  • Marginal note:Related corporations

    (4) Where, at any time, a corporation has become related to another corporation and it may reasonably be considered, having regard to all the circumstances, that the main purpose of the corporation becoming related to the other corporation was to transfer, by filing an agreement or an amended agreement under this section, the benefit of a deduction under paragraph 110(1)(k) to a transferee corporation, the amount of the tax specified in the agreement shall, for the purposes of paragraph 191.3(1)(c), be deemed to be nil.

  • Marginal note:Assessment of transferor corporation

    (5) The Minister may at any time assess a transferor corporation in respect of any amount for which it is jointly and severally, or solidarily, liable by reason of paragraph (1)(e) and the provisions of Division I of Part I are applicable in respect of the assessment as though it had been made under section 152.

  • Marginal note:Payment by transferor corporation

    (6) If a transferor corporation and a transferee corporation are by reason of paragraph (1)(e) jointly and severally, or solidarily, liable in respect of tax payable by the transferee corporation under subparagraph 191.1(1)(a)(iv) and any interest or penalty in respect thereof, the following rules apply:

    • (a) a payment by the transferor corporation on account of the liability shall, to the extent thereof, discharge their liability; and

    • (b) a payment by the transferee corporation on account of its liability discharges the transferor corporation’s liability only to the extent that the payment operates to reduce the transferee corporation’s liability under this Act to an amount less than the amount in respect of which the transferor corporation was, by paragraph (1)(e), made jointly and severally, or solidarily, liable.

  • NOTE: Application provisions are not included in the consolidated text;
  • see relevant amending Acts. R.S., 1985, c. 1 (5th Supp.), s. 191.3;
  • 1994, c. 7, Sch. II, s. 163;
  • 1995, c. 21, s. 41;
  • 1998, c. 19, s. 207;
  • 2010, c. 25, s. 54;
  • 2013, c. 34, s. 153.
 
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