Income Tax Act

Version of section 94.1 from 2013-06-26 to 2017-11-20:

Marginal note:Offshore investment fund property
  •  (1) If in a taxation year a taxpayer holds or has an interest in property (referred to in this section as an “offshore investment fund property”)

    • (a) that is a share of the capital stock of, an interest in, or a debt of, a non-resident entity (other than a controlled foreign affiliate of the taxpayer or a prescribed non-resident entity) or an interest in or a right or option to acquire such a share, interest or debt, and

    • (b) that may reasonably be considered to derive its value, directly or indirectly, primarily from portfolio investments of that or any other non-resident entity in

      • (i) shares of the capital stock of one or more corporations,

      • (ii) indebtedness or annuities,

      • (iii) interests in one or more corporations, trusts, partnerships, organizations, funds or entities,

      • (iv) commodities,

      • (v) real estate,

      • (vi) Canadian or foreign resource properties,

      • (vii) currency of a country other than Canada,

      • (viii) rights or options to acquire or dispose of any of the foregoing, or

      • (ix) any combination of the foregoing,

    and it may reasonably be concluded, having regard to all the circumstances, including

    • (c) the nature, organization and operation of any non-resident entity and the form of, and the terms and conditions governing, the taxpayer’s interest in, or connection with, any non-resident entity,

    • (d) the extent to which any income, profits and gains that may reasonably be considered to be earned or accrued, whether directly or indirectly, for the benefit of any non-resident entity are subject to an income or profits tax that is significantly less than the income tax that would be applicable to such income, profits and gains if they were earned directly by the taxpayer, and

    • (e) the extent to which the income, profits and gains of any non-resident entity for any fiscal period are distributed in that or the immediately following fiscal period,

    that one of the main reasons for the taxpayer acquiring, holding or having the interest in such property was to derive a benefit from portfolio investments in assets described in any of subparagraphs 94.1(1)(b)(i) to 94.1(1)(b)(ix) in such a manner that the taxes, if any, on the income, profits and gains from such assets for any particular year are significantly less than the tax that would have been applicable under this Part if the income, profits and gains had been earned directly by the taxpayer, there shall be included in computing the taxpayer’s income for the year the amount, if any, by which

    • (f) the total of all amounts each of which is the product obtained when

      • (i) the designated cost to the taxpayer of the offshore investment fund property at the end of a month in the year

      is multiplied by

      • (ii) 1/12 of the total of

        • (A) the prescribed rate of interest for the period that includes that month, and

        • (B) two per cent

    exceeds

    • (g) the taxpayer’s income for the year (other than a capital gain) from the offshore investment fund property determined without reference to this subsection.

  • Marginal note:Definitions

    (2) In this section,

    designated cost

    coût désigné

    designated cost to a taxpayer at any time in a taxation year of an offshore investment fund property that the taxpayer holds or has an interest in means the amount determined by the formula

    A + B + C + D

    where

    A
    is the cost amount to the taxpayer of the property at that time (determined without reference to paragraphs 53(1)(m) and 53(1)(q), subparagraph 53(2)(c)(i.3), paragraphs 53(2)(g) and 53(2)(g.1) and section 143.2),
    B
    is, where an additional amount has been made available by a person to another person after 1984 and before that time, whether by way of gift, loan, payment for a share, transfer of property at less than its fair market value or otherwise, in circumstances such that it may reasonably be concluded that one of the main reasons for so making the additional amount available to the other person was to increase the value of the property, the total of all amounts each of which is the amount, if any, by which such an additional amount exceeds any increase in the cost amount to the taxpayer of the property by virtue of that additional amount,
    C
    is the total of all amounts each of which is an amount included in respect of the offshore investment fund property by virtue of this section in computing the taxpayer’s income for a preceding taxation year, and
    D
    is
    • (a) where the taxpayer has held or has had the interest in the property at all times since the end of 1984, the amount, if any, by which the fair market value of the property at the end of 1984 exceeds the cost amount to the taxpayer of the property at the end of 1984, or

    • (b) in any other case, the total of

      • (i) the amount, if any, by which the fair market value of the property at the particular time the taxpayer acquired the property exceeds the cost amount to the taxpayer of the property at the particular time, and

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

        • (A) the total of all amounts each of which is an amount that would have been included in respect of the property because of this section in computing the taxpayer’s income for a taxation year that began before June 20, 1996 if the cost to the taxpayer of the property were equal to the fair market value of the property at the particular time

        exceeds

        • (B) the total of all amounts each of which is an amount that was included in respect of the property because of this section in computing the taxpayer’s income for a taxation year that began before June 20, 1996,

    except that the designated cost of an offshore investment fund property that is a prescribed offshore investment fund property is nil; (coût désigné)

    non-resident entity

    entité non-résidente

    non-resident entity at any time means

    • (a) a corporation that is at that time non-resident,

    • (b) a partnership, organization, fund or entity that is at that time non-resident or is not at that time situated in Canada, or

    • (c) an exempt foreign trust (other than a trust described in any of paragraphs (a) to (g) of the definition exempt foreign trust in subsection 94(1)). (entité non-résidente)

  • Marginal note:Interpretation

    (3) Where subsection 94.1(1) is applied with respect to an offshore investment fund property that was

    • (a) held by the taxpayer on February 15, 1984,

    • (b) received as a stock dividend in respect of a share of the capital stock of a non-resident entity held by the taxpayer on February 15, 1984,

    • (c) received as a stock dividend in respect of a share of the capital stock of a non-resident entity that the taxpayer had previously received as described in paragraph 94.1(3)(b), or

    • (d) substituted for a property held by the taxpayer on February 15, 1984 pursuant to an arrangement that existed on that date,

    the reference to “1984” in the descriptions of B and in the definition designated cost in subsection 94.1(2) shall be read as a reference to “1985”.

  • NOTE: Application provisions are not included in the consolidated text;
  • see relevant amending Acts. R.S., 1985, c. 1 (5th Supp.), s. 94.1;
  • 1998, c. 19, s. 121;
  • 2013, c. 34, s. 8.
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