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

Act current to 2014-06-12 and last amended on 2014-01-01. Previous Versions

Marginal note:Disposition of approved share
  •  (1) If an approved share of the capital stock of a registered labour-sponsored venture capital corporation or a revoked corporation is, before the first discontinuation of its venture capital business, redeemed, acquired or cancelled by the corporation less than eight years after the day on which the share was issued (other than in circumstances described in subclause 204.81(1)(c)(v)(A)(I) or (III) or clause 204.81(1)(c)(v)(B) or (D) or other than if the share is a Class A share of the capital stock of the corporation that is exchanged for another Class A share of the capital stock of the corporation as part of a qualifying exchange) or any other share that was issued by any other labour-sponsored venture capital corporation is disposed of, the person who was the shareholder immediately before the redemption, acquisition, cancellation or disposition shall pay a tax under this Part equal to the lesser of

    • (a) the amount determined by the formula

      A × B

      where

      A 
      is
      • (i) where the share was issued by a registered labour-sponsored venture capital corporation or a revoked corporation, the labour-sponsored funds tax credit in respect of the share, and

      • (ii) where the share was issued by any other labour-sponsored venture capital corporation and was at any time an approved share, the amount, if any, required to be remitted to the government of a province as a consequence of the redemption, acquisition, cancellation or disposition (otherwise than as a consequence of an increase in the corporation’s liability for a penalty under a law of the province), and

      B 
      is
      • (i) nil, where the share was issued by a registered labour-sponsored venture capital corporation or a revoked corporation, the original acquisition of the share was before March 6, 1996 and the redemption, acquisition, cancellation or disposition is

        • (A) more than 2 years after the day on which it was issued, where the redemption, acquisition, cancellation or disposition is permitted under the articles of the corporation because an individual attains 65 years of age, retires from the workforce or ceases to be resident in Canada,

        • (B) more than five years after its issuance, or

        • (C) if the day that is five years after its issuance is in February or March of a calendar year, in February or on March 1st of that calendar year but not more than 31 days before that day,

      • (i.1) nil, where the share was issued by a registered labour-sponsored venture capital corporation or a revoked corporation, the original acquisition of the share was after March 5, 1996 and the redemption, acquisition or cancellation is in February or on March 1st of a calendar year but is not more than 31 days before the day that is eight years after the day on which the share was issued,

      • (ii) one, in any other case where the share was issued by a registered labour-sponsored venture capital corporation or a revoked corporation, and

      • (iii) in any other case, the quotient obtained when the labour-sponsored fund tax credit in respect of the share is divided by the tax credit provided under a law of a province in respect of any previous acquisition of the share, and

    • (b) the amount that would, but for subsection 211.8(2), be payable to the shareholder because of the redemption, acquisition, cancellation or disposition (determined after taking into account the amount determined under subparagraph (ii) of the description of A in paragraph 211.8(1)(a)).

  • Marginal note:Rules of application

    (1.1) Subsections 204.8(2) and (3) and 204.85(3) apply for the purpose of subsection (1).

  • Marginal note:Withholding and remittance of tax

    (2) Where a person or partnership (in this section referred to as the “transferee”) redeems, acquires or cancels a share and, as a consequence, tax is payable under this Part by the person who was the shareholder immediately before the redemption, acquisition or cancellation, the transferee shall

    • (a) withhold from the amount otherwise payable on the redemption, acquisition or cancellation to the shareholder the amount of the tax;

    • (b) within 30 days after the redemption, acquisition or cancellation, remit the amount of the tax to the Receiver General on behalf of the shareholder; and

    • (c) submit with the remitted amount a statement in prescribed form.

  • Marginal note:Liability for tax

    (3) Where a transferee has failed to withhold any amount as required by subsection 211.8(2) from an amount paid or credited to a shareholder, the transferee is liable to pay as tax under this Part on behalf of the shareholder the amount the transferee failed to withhold, and is entitled to recover that amount from the shareholder.

  • NOTE: Application provisions are not included in the consolidated text;
  • see relevant amending Acts. 1997, c. 25, s. 62;
  • 2000, c. 19, s. 62;
  • 2013, c. 34, s. 344.