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

Act current to 2015-06-09 and last amended on 2015-01-02. Previous Versions

PART IVTAX ON TAXABLE DIVIDENDS RECEIVED BY PRIVATE CORPORATIONS

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

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

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

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

      is of

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

    exceeds 1/3 of the total of

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

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

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

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

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

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

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

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

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

  • Marginal note:When corporation controlled

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

  • Marginal note:Definitions

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

    “assessable dividend”

    « dividende imposable déterminé »

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

    “subject corporation”

    « société assujettie »

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

  • Marginal note:Corporations connected with particular corporation

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

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

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

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

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

  • Marginal note:Deemed private corporation

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

  • Marginal note:Partnerships

    (6) For the purposes of this Part,

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

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

  • Marginal note:Interpretation

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

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