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

Act current to 2015-07-09 and last amended on 2015-06-30. Previous Versions

Marginal note:Definitions
  •  (1) The definitions in this subsection apply in this section.

    “adjusted cumulative foreign resource expense”

    « frais cumulatifs rajustés relatifs à des ressources à l’étranger »

    “adjusted cumulative foreign resource expense” of a taxpayer, in respect of a country, at the end of a taxation year means the total of

    • (a) the cumulative foreign resource expense of the taxpayer, in respect of that country, at the end of the year; and

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

      • (i) the total determined under paragraph 66.7(13.2)(a) in respect of that country and the taxpayer for the year

      exceeds

      • (ii) the amount that would, but for paragraph (3)(c), be determined under subsection (3) in respect of that country and the taxpayer for the year.

    “cumulative foreign resource expense”

    « frais cumulatifs relatifs à des ressources à l’étranger »

    “cumulative foreign resource expense” of a taxpayer, in respect of a country other than Canada at a particular time, means the amount determined by the formula

    (A + A.1 + B + C + D) – (E + F + G + H + I + J)

    where

    A 
    is the total of all foreign resource expenses, in respect of that country, made or incurred by the taxpayer
    • (a) before the particular time, and

    • (b) at a time (in this definition referred to as a “resident time”)

      • (i) at which the taxpayer was resident in Canada, and

      • (ii) where the taxpayer became resident in Canada before the particular time, that is after the last time (before the particular time) that the taxpayer became resident in Canada;

    A.1 
    is the total of all foreign resource expenses, in respect of that country, that is the cost to the taxpayer of any of the taxpayer’s foreign resource property in respect of that country that is deemed to have been acquired by the taxpayer under paragraph 128.1(1)(c) at the last time (before the particular time) that the taxpayer became resident in Canada;
    B 
    is the total of all amounts included in computing the amount referred to in paragraph 59(3.2)(c.1) in respect of that country, for taxation years that ended before the particular time and at a resident time;
    C 
    is the total of all amounts referred to in the description of F or G that are established by the taxpayer to have become a bad debt before the particular time and at a resident time;
    D 
    is the total of all specified amounts determined under subsection 66.7(13.2), in respect of the taxpayer and that country, for taxation years that ended before the particular time and at a resident time;
    E 
    is the total of all amounts deducted, in computing the taxpayer’s income for a taxation year that ended before the particular time and at a resident time, in respect of the taxpayer’s cumulative foreign resource expense in respect of that country;
    F 
    is the total of all amounts each of which is an amount in respect of a foreign resource property, in respect of that country, (in this description referred to as the “particular property”) disposed of by the taxpayer equal to the amount, if any, by which
    • (a) the amount designated under subparagraph 59(1)(b)(ii) by the taxpayer in respect of the portion of the proceeds of that disposition that became receivable before the particular time and at a resident time

    exceeds

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

      • (i) the total of all amounts that would be determined under paragraph 66.7(2.3)(a), immediately before the time (in this paragraph referred to as the “relevant time”) when such proceeds of disposition became receivable, in respect of the taxpayer, that country and an original owner of the particular property (or of any other property acquired by the taxpayer with the particular property in circumstances to which subsection 66.7(2.3) applied and in respect of which the proceeds of disposition became receivable by the taxpayer at the relevant time) if

        • (A) amounts that became receivable at or after the relevant time were not taken into account,

        • (B) paragraph 66.7(2.3)(a) were read without reference to “30% of”, and

        • (C) no reduction under subsection 80(8) at or after the relevant time were taken into account

      exceeds the total of

      • (ii) all amounts that would be determined under paragraph 66.7(2.3)(a) at the relevant time in respect of the taxpayer, that country and an original owner of the particular property (or of that other property) if

        • (A) amounts that became receivable after the relevant time were not taken into account,

        • (B) paragraph 66.7(2.3)(a) were read without reference to “30% of”, and

        • (C) no reduction under subsection 80(8) at or after the relevant time were taken into account, and

      • (iii) the portion of the amount otherwise determined under this paragraph that was otherwise applied to reduce the amount otherwise determined under this description;

    G 
    is the total of all amounts, in respect of that country, each of which is an amount included in the amount determined under this description by reason of subsection 66(12.41) that became receivable by the taxpayer before the particular time and at a resident time;
    H 
    is the total of all amounts each of which is an amount received before the particular time and at a resident time on account of any amount referred to in the description of C;
    I 
    is the total of all amounts each of which is an amount by which the cumulative foreign resource expense of the taxpayer, in respect of that country, is required, by reason of subsection 80(8), to be reduced at or before the particular time and at a resident time; and
    J 
    is the total of all amounts each of which is an amount that is required to be deducted, before the particular time and at a resident time, under paragraph 66.7(13.1)(a) in computing the taxpayer’s cumulative foreign resource expense.

    “foreign resource expense”

    « frais relatifs à des ressources à l’étranger »

    “foreign resource expense” of a taxpayer, in respect of a country other than Canada, means

    • (a) any drilling or exploration expense, including any general geological or geophysical expense, incurred by the taxpayer on or in respect of exploring or drilling for petroleum or natural gas in that country,

    • (b) any expense incurred by the taxpayer for the purpose of determining the existence, location, extent or quality of a mineral resource in that country, including any expense incurred in the course of

      • (i) prospecting,

      • (ii) carrying out geological, geophysical or geochemical surveys,

      • (iii) drilling by rotary, diamond, percussion or other methods, or

      • (iv) trenching, digging test pits and preliminary sampling,

    • (c) the cost to the taxpayer of any of the taxpayer’s foreign resource property in respect of that country,

    • (d) any annual payment made by the taxpayer for the preservation of a foreign resource property in respect of that country, and

    • (e) subject to section 66.8, the taxpayer’s share of an expense, cost or payment referred to in any of paragraphs (a) to (d) that is made or incurred by a partnership in a fiscal period of the partnership that begins after 2000 if, at the end of that period, the taxpayer was a member of the partnership

    but does not include

    • (f) an expenditure that is the cost, or any part of the cost, to the taxpayer of any depreciable property of a prescribed class,

    • (g) an expenditure incurred at any time after the commencement of production from a foreign resource property of the taxpayer in order to evaluate the feasibility of a method of recovery of petroleum, natural gas or related hydrocarbons from the portion of a natural reservoir to which the foreign resource property relates,

    • (h) an expenditure (other than a drilling expense) incurred at any time after the commencement of production from a foreign resource property of the taxpayer in order to assist in the recovery of petroleum, natural gas or related hydrocarbons from the portion of a natural reservoir to which the foreign resource property relates,

    • (i) an expenditure, incurred at any time, that relates to the injection of any substance to assist in the recovery of petroleum, natural gas or related hydrocarbons from a natural reservoir,

    • (j) an expenditure incurred by the taxpayer, unless the expenditure was made

      • (i) for the acquisition of foreign resource property by the taxpayer, or

      • (ii) for the purpose of

        • (A) enhancing the value of foreign resource property that the taxpayer owned at the time the expenditure was incurred or that the taxpayer had a reasonable expectation of owning after that time, or

        • (B) assisting in evaluating whether a foreign resource property is to be acquired by the taxpayer, or

    • (k) the taxpayer’s share of any cost or expenditure referred to in any of paragraphs (f) to (j) that is incurred by a partnership.

    “foreign resource income”

    « revenu provenant de ressources à l’étranger »

    “foreign resource income” of a taxpayer for a taxation year, in respect of a country other than Canada, means the total of

    • (a) that part of the taxpayer’s income for the year, determined without reference to subsections (4) and 66(4), that is reasonably attributable to

      • (i) the production of petroleum or natural gas from natural accumulations of petroleum or natural gas in that country or from oil or gas wells in that country, or

      • (ii) the production of minerals from mines in that country;

    • (b) the taxpayer’s income for the year from royalties in respect of a natural accumulation of petroleum or natural gas in that country, an oil or gas well in that country or a mine in that country, determined without reference to subsections (4) and 66(4); and

    • (c) all amounts each of which is an amount, in respect of a foreign resource property in respect of that country that has been disposed of by the taxpayer, equal to the amount, if any, by which

      • (i) the amount included in computing the taxpayer’s income for the year by reason of subsection 59(1) in respect of that disposition

      exceeds

      • (ii) the total of all amounts each of which is that portion of an amount deducted under subsection 66.7(2) in computing the taxpayer’s income for the year that

        • (A) can reasonably be considered to be in respect of the foreign resource property, and

        • (B) cannot reasonably be considered to have reduced the amount otherwise determined under paragraph (a) or (b) in respect of the taxpayer for the year.

    “foreign resource loss”

    « perte résultant de ressources à l’étranger »

    “foreign resource loss” of a taxpayer for a taxation year in respect of a country other than Canada means the taxpayer’s loss for the year in respect of the country determined in accordance with the definition “foreign resource income” with such modifications as the circumstances require.

    “global foreign resource limit”

    « limite globale des frais relatifs à des ressources à l’étranger »

    “global foreign resource limit” of a taxpayer for a taxation year means the amount that is the lesser of

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

      • (i) the amount determined under subparagraph 66(4)(b)(ii) in respect of the taxpayer for the year

      exceeds the total of

      • (ii) the total of all amounts each of which is the maximum amount that the taxpayer would be permitted to deduct, in respect of a country, under subsection (4) in computing the taxpayer’s income for the year if, in its application to the year, subsection (4) were read without reference to paragraph (4)(b), and

      • (iii) the amount deducted for the year under subsection 66(4) in computing the taxpayer’s income for the year; and

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

      • (i) 30% of the total of all amounts each of which is, at the end of the year, the taxpayer’s adjusted cumulative foreign resource expense in respect of a country

      exceeds

      • (ii) the total described in subparagraph (a)(ii).

  • Marginal note:Application of subsection 66(15)

    (2) The definitions in subsection 66(15) apply in this section.

  • Marginal note:Amount to be included in income

    (3) For the purpose of paragraph 59(3.2)(c.1), the amount referred to in this subsection in respect of a taxpayer for a taxation year is the amount, if any, by which

    • (a) the total of all amounts referred to in the descriptions of E to J in the definition “cumulative foreign resource expense” in subsection (1) that are deducted in computing the taxpayer’s cumulative foreign resource expense at the end of the year in respect of a country

    exceeds the total of

    • (b) the total of all amounts referred to in the descriptions of A to D in the definition “cumulative foreign resource expense” in subsection (1) that are included in computing the taxpayer’s cumulative foreign resource expense at the end of the year in respect of the country, and

    • (c) the total determined under paragraph 66.7(13.2)(a) for the year in respect of the taxpayer and the country.

  • Marginal note:Deduction for cumulative foreign resource expense

    (4) In computing a taxpayer’s income for a taxation year throughout which the taxpayer is resident in Canada, the taxpayer may deduct the amount claimed by the taxpayer, in respect of a country other than Canada, not exceeding the total of

    • (a) the greater of

      • (i) 10% of a particular amount equal to the taxpayer’s adjusted cumulative foreign resource expense in respect of the country at the end of the year, and

      • (ii) the least of

        • (A) if the taxpayer ceased to be resident in Canada immediately after the end of the year, the particular amount,

        • (B) if clause (A) does not apply, 30% of the particular amount,

        • (C) the amount, if any, by which the taxpayer’s foreign resource income for the year in respect of the country exceeds the portion of the amount, deducted under subsection 66(4) in computing the taxpayer’s income for the year, that applies to a source in the country, and

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

          • (I) the total of all amounts each of which is the taxpayer’s foreign resource income for the year in respect of a country

          exceeds the total of

          • (II) all amounts each of which is the taxpayer’s foreign resource loss for the year in respect of a country, and

          • (III) the amount deducted under subsection 66(4) in computing the taxpayer’s income for the year, and

    • (b) the lesser of

      • (i) the amount, if any, by which the particular amount exceeds the amount determined for the year under paragraph (a) in respect of the taxpayer, and

      • (ii) that portion of the taxpayer’s global foreign resource limit for the year that is designated for the year by the taxpayer, in respect of that country and no other country, in prescribed form filed with the Minister with the taxpayer’s return of income for the year.

  • Marginal note:Individual changing residence

    (5) Where at any time in a taxation year an individual becomes or ceases to be resident in Canada,

    • (a) subsection (4) applies to the individual as if the year were the period or periods in the year throughout which the individual was resident in Canada; and

    • (b) for the purpose of applying this section, subsection 66(13.1) does not apply to the individual for the year.

  • NOTE: Application provisions are not included in the consolidated text;
  • see relevant amending Acts. 2001, c. 17, s. 47;
  • 2013, c. 34, s. 202.