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

Act current to 2016-11-21 and last amended on 2016-07-01. Previous Versions

Marginal note:Non-resident person’s taxation year and income

 For greater certainty, unless the context requires otherwise

  • (a) a taxation year of a non-resident person shall be determined, except as otherwise permitted by the Minister, in the same manner as the taxation year of a person resident in Canada; and

  • (b) a person for whom income for a taxation year is determined in accordance with this Act includes a non-resident person.

  • NOTE: Application provisions are not included in the consolidated text;
  • see relevant amending Acts. 2001, c. 17, s. 191.
Marginal note:Arm’s length
  •  (1) For the purposes of this Act,

    • (a) related persons shall be deemed not to deal with each other at arm’s length;

    • (b) a taxpayer and a personal trust (other than a trust described in any of paragraphs (a) to (e.1) of the definition trust in subsection 108(1)) are deemed not to deal with each other at arm’s length if the taxpayer, or any person not dealing at arm’s length with the taxpayer, would be beneficially interested in the trust if subsection 248(25) were read without reference to subclauses 248(25)(b)(iii)(A)(II) to (IV); and

    • (c) in any other case, it is a question of fact whether persons not related to each other are, at a particular time, dealing with each other at arm’s length.

  • Definition of related persons

    (2) For the purpose of this Act, related persons, or persons related to each other, are

    • (a) individuals connected by blood relationship, marriage or common-law partnership or adoption;

    • (b) a corporation and

      • (i) a person who controls the corporation, if it is controlled by one person,

      • (ii) a person who is a member of a related group that controls the corporation, or

      • (iii) any person related to a person described in subparagraph 251(2)(b)(i) or 251(2)(b)(ii); and

    • (c) any two corporations

      • (i) if they are controlled by the same person or group of persons,

      • (ii) if each of the corporations is controlled by one person and the person who controls one of the corporations is related to the person who controls the other corporation,

      • (iii) if one of the corporations is controlled by one person and that person is related to any member of a related group that controls the other corporation,

      • (iv) if one of the corporations is controlled by one person and that person is related to each member of an unrelated group that controls the other corporation,

      • (v) if any member of a related group that controls one of the corporations is related to each member of an unrelated group that controls the other corporation, or

      • (vi) if each member of an unrelated group that controls one of the corporations is related to at least one member of an unrelated group that controls the other corporation.

  • Marginal note:Corporations related through a third corporation

    (3) Where two corporations are related to the same corporation within the meaning of subsection 251(2), they shall, for the purposes of subsections 251(1) and 251(2), be deemed to be related to each other.

  • Marginal note:Relation where amalgamation or merger

    (3.1) Where there has been an amalgamation or merger of two or more corporations and the new corporation formed as a result of the amalgamation or merger and any predecessor corporation would have been related immediately before the amalgamation or merger if the new corporation were in existence at that time, and if the persons who were the shareholders of the new corporation immediately after the amalgamation or merger were the shareholders of the new corporation at that time, the new corporation and any such predecessor corporation shall be deemed to have been related persons.

  • Marginal note:Amalgamation of related corporations

    (3.2) Where there has been an amalgamation or merger of 2 or more corporations each of which was related (otherwise than because of a right referred to in paragraph 251(5)(b)) to each other immediately before the amalgamation or merger, the new corporation formed as a result of the amalgamation or merger and each of the predecessor corporations is deemed to have been related to each other.

  • Marginal note:Definitions concerning groups

    (4) In this Act,

    related group

    groupe lié

    related group means a group of persons each member of which is related to every other member of the group; (groupe lié)

    unrelated group

    groupe non lié

    unrelated group means a group of persons that is not a related group. (groupe non lié)

  • Marginal note:Control by related groups, options, etc.

    (5) For the purposes of subsection 251(2) and the definition Canadian-controlled private corporation in subsection 125(7),

    • (a) where a related group is in a position to control a corporation, it shall be deemed to be a related group that controls the corporation whether or not it is part of a larger group by which the corporation is in fact controlled;

    • (b) where at any time a person has a right under a contract, in equity or otherwise, either immediately or in the future and either absolutely or contingently,

      • (i) to, or to acquire, shares of the capital stock of a corporation or to control the voting rights of such shares, the person shall, except where the right is not exercisable at that time because the exercise thereof is contingent on the death, bankruptcy or permanent disability of an individual, be deemed to have the same position in relation to the control of the corporation as if the person owned the shares at that time,

      • (ii) to cause a corporation to redeem, acquire or cancel any shares of its capital stock owned by other shareholders of the corporation, the person shall, except where the right is not exercisable at that time because the exercise thereof is contingent on the death, bankruptcy or permanent disability of an individual, be deemed to have the same position in relation to the control of the corporation as if the shares were so redeemed, acquired or cancelled by the corporation at that time;

      • (iii) to, or to acquire or control, voting rights in respect of shares of the capital stock of a corporation, the person is, except where the right is not exercisable at that time because its exercise is contingent on the death, bankruptcy or permanent disability of an individual, deemed to have the same position in relation to the control of the corporation as if the person could exercise the voting rights at that time, or

      • (iv) to cause the reduction of voting rights in respect of shares, owned by other shareholders, of the capital stock of a corporation, the person is, except where the right is not exercisable at that time because its exercise is contingent on the death, bankruptcy or permanent disability of an individual, deemed to have the same position in relation to the control of the corporation as if the voting rights were so reduced at that time; and

    • (c) where a person owns shares in two or more corporations, the person shall as shareholder of one of the corporations be deemed to be related to himself, herself or itself as shareholder of each of the other corporations.

  • Marginal note:Blood relationship, etc.

    (6) For the purposes of this Act, persons are connected by

    • (a) blood relationship if one is the child or other descendant of the other or one is the brother or sister of the other;

    • (b) marriage if one is married to the other or to a person who is so connected by blood relationship to the other;

    • (b.1) common-law partnership if one is in a common-law partnership with the other or with a person who is connected by blood relationship to the other; and

    • (c) adoption if one has been adopted, either legally or in fact, as the child of the other or as the child of a person who is so connected by blood relationship (otherwise than as a brother or sister) to the other.

  • NOTE: Application provisions are not included in the consolidated text;
  • see relevant amending Acts. R.S., 1985, c. 1 (5th Supp.), s. 251;
  • 1994, c. 7, Sch. II, s. 195;
  • 1998, c. 19, s. 242;
  • 2000, c. 12, ss. 140, 142;
  • 2001, c. 17, s. 192;
  • 2013, c. 34, s. 361.

Definition of affiliated persons

  •  (1) For the purposes of this Act, affiliated persons, or persons affiliated with each other, are

    • (a) an individual and a spouse or common-law partner of the individual;

    • (b) a corporation and

      • (i) a person by whom the corporation is controlled,

      • (ii) each member of an affiliated group of persons by which the corporation is controlled, and

      • (iii) a spouse or common-law partner of a person described in subparagraph (i) or (ii);

    • (c) two corporations, if

      • (i) each corporation is controlled by a person, and the person by whom one corporation is controlled is affiliated with the person by whom the other corporation is controlled,

      • (ii) one corporation is controlled by a person, the other corporation is controlled by a group of persons, and each member of that group is affiliated with that person, or

      • (iii) each corporation is controlled by a group of persons, and each member of each group is affiliated with at least one member of the other group;

    • (d) a corporation and a partnership, if the corporation is controlled by a particular group of persons each member of which is affiliated with at least one member of a majority-interest group of partners of the partnership, and each member of that majority-interest group is affiliated with at least one member of the particular group;

    • (e) a partnership and a majority-interest partner of the partnership;

    • (f) two partnerships, if

      • (i) the same person is a majority-interest partner of both partnerships,

      • (ii) a majority-interest partner of one partnership is affiliated with each member of a majority-interest group of partners of the other partnership, or

      • (iii) each member of a majority-interest group of partners of each partnership is affiliated with at least one member of a majority-interest group of partners of the other partnership;

    • (g) a person and a trust, if the person

      • (i) is a majority-interest beneficiary of the trust, or

      • (ii) would, if this subsection were read without reference to this paragraph, be affiliated with a majority-interest beneficiary of the trust; and

    • (h) two trusts, if a contributor to one of the trusts is affiliated with a contributor to the other trust and

      • (i) a majority-interest beneficiary of one of the trusts is affiliated with a majority-interest beneficiary of the other trust,

      • (ii) a majority-interest beneficiary of one of the trusts is affiliated with each member of a majority-interest group of beneficiaries of the other trust, or

      • (iii) each member of a majority-interest group of beneficiaries of each of the trusts is affiliated with at least one member of a majority-interest group of beneficiaries of the other trust.

  • Marginal note:Affiliation where amalgamation or merger

    (2) Where at any time 2 or more corporations (in this subsection referred to as the “predecessors”) amalgamate or merge to form a new corporation, the new corporation and any predecessor are deemed to have been affiliated with each other where they would have been affiliated with each other immediately before that time if

    • (a) the new corporation had existed immediately before that time; and

    • (b) the persons who were the shareholders of the new corporation immediately after that time had been the shareholders of the new corporation immediately before that time.

  • Marginal note:Definitions

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

    affiliated group of persons

    groupe de personnes affiliées

    affiliated group of persons means a group of persons each member of which is affiliated with every other member. (groupe de personnes affiliées)

    beneficiary

    bénéficiaire

    beneficiary, under a trust, includes a person beneficially interested in the trust. (bénéficiaire)

    contributor

    cotisant

    contributor, to a trust, means a person who has at any time made a loan or transfer of property, either directly or indirectly, in any manner whatever, to or for the benefit of the trust other than, if the person deals at arm’s length with the trust at that time and is not immediately after that time a majority-interest beneficiary of the trust,

    • (a) a loan made at a reasonable rate of interest; or

    • (b) a transfer made for fair market value consideration. (cotisant)

    controlled

    contrôlé

    controlled means controlled, directly or indirectly in any manner whatever. (contrôlé)

    majority-interest beneficiary

    bénéficiaire détenant une participation majoritaire

    majority-interest beneficiary, of a trust at any time, means a person whose interest as a beneficiary, if any, at that time

    • (a) in the income of the trust has, together with the interests as a beneficiary in the income of the trust of all persons with whom the person is affiliated, a fair market value that is greater than 50% of the fair market value of all the interests as a beneficiary in the income of the trust; or

    • (b) in the capital of the trust has, together with the interests as a beneficiary in the capital of the trust of all persons with whom the person is affiliated, a fair market value that is greater than 50% of the fair market value of all the interests as a beneficiary in the capital of the trust. (bénéficiaire détenant une participation majoritaire)

    majority-interest group of beneficiaries

    groupe de bénéficiaires détenant une participation majoritaire

    majority-interest group of beneficiaries, of a trust at any time, means a group of persons each of whom is a beneficiary under the trust at that time such that

    • (a) if one person held the interests as a beneficiary of all of the members of the group, that person would be a majority-interest beneficiary of the trust; and

    • (b) if any member of the group were not a member, the test described in paragraph (a) would not be met. (groupe de bénéficiaires détenant une participation majoritaire)

    majority-interest group of partners

    groupe d’associés détenant une participation majoritaire

    majority-interest group of partners of a partnership means a group of persons each of whom has an interest in the partnership such that

    • (a) if one person held the interests of all members of the group, that person would be a majority-interest partner of the partnership; and

    • (b) if any member of the group were not a member, the test described in paragraph (a) would not be met. (groupe d’associés détenant une participation majoritaire)

  • Marginal note:Interpretation

    (4) For the purposes of this section,

    • (a) persons are affiliated with themselves;

    • (b) a person includes a partnership;

    • (c) notwithstanding subsection 104(1), a reference to a trust does not include a reference to the trustee or other persons who own or control the trust property; and

    • (d) in determining whether a person is affiliated with a trust,

      • (i) if the amount of income or capital of the trust that a person may receive as a beneficiary under the trust depends on the exercise by any person of, or the failure by any person to exercise, a discretionary power, that person is deemed to have fully exercised, or to have failed to exercise, the power, as the case may be,

      • (ii) the interest of a person in a trust as a beneficiary is disregarded in determining whether the person deals at arm’s length with the trust if the person would, in the absence of the interest as a beneficiary, be considered to deal at arm’s length with the trust,

      • (iii) a trust is not a majority interest beneficiary of another trust unless the trust has an interest as a beneficiary in the income or capital, as the case may be, of the other trust, and

      • (iv) in determining whether a contributor to one trust is affiliated with a contributor to another trust, individuals connected by blood relationship, marriage, common-law partnership or adoption are deemed to be affiliated with one another.

  • NOTE: Application provisions are not included in the consolidated text;
  • see relevant amending Acts. 1998, c. 19, s. 243;
  • 2000, c. 12, s. 142;
  • 2005, c. 19, s. 54;
  • 2013, c. 40, s. 91(E).
 
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