Income Tax Regulations (C.R.C., c. 945)

Regulations are current to 2017-09-27 and last amended on 2017-07-01. Previous Versions

Resource Income

  •  (1) Where a corporation has resource activities for a taxation year the following rules apply, except as otherwise provided in section 5204:

    adjusted business income

    adjusted business income of the corporation for the year means the amount, if any, by which

    • (a) the amount otherwise determined under section 5202 to be the adjusted business income of the corporation for the year

    exceeds the total of

    • (b) the amount, if any, by which the corporation’s net resource income for the year exceeds the corporation’s net resource adjustment for the year, and

    • (c) all amounts each of which is an amount in respect of refund interest included in computing the taxpayer’s income for the year, to the extent that the amount is included in the amount determined to be the adjusted business income, within the meaning of section 5202, of the corporation for the year; (revenue rajusté d’une entreprise)

    • (d) [Repealed, SOR/2007-19, s. 7]

    cost of capital

    cost of capital of the corporation for the year means the amount, if any, by which

    • (a) the amount otherwise determined under section 5202 to be the cost of capital of the corporation for the year

    exceeds

    • (b) that portion of the gross cost of property or rental cost for the use of property included in computing the cost of capital of the corporation for the year that reflects the extent to which the property was used by the corporation during the year,

      • (i) in activities engaged in for the purpose of earning Canadian resource profits of the corporation, or

      • (ii) in activities referred to in subparagraph 66(15)(b)(i), (ii) or (v), subparagraph 66(15)(e)(i) or (ii), subparagraph 66.1(6)(a)(i), (ii), (iii) or (v) or subparagraph 66.2(5)(a)(i), (ii) or (v) of the Act; (coût en capital)

    cost of labour

    cost of labour of the corporation for the year means the amount, if any, by which

    • (a) the amount otherwise determined under section 5202 to be the cost of labour of the corporation for the year

    exceeds

    • (b) that portion of the salaries and wages and other amounts included in computing the cost of labour of the corporation for the year that,

      • (i) was related to the activities engaged in for the purpose of earning Canadian resource profits of the corporation, or

      • (ii) was included in the Canadian exploration and development expenses, foreign exploration and development expenses, Canadian exploration expense or Canadian development expense, within the meanings assigned by paragraphs 66(15)(b) and (e), 66.1(6)(a) and 66.2(5)(a) of the Act respectively, of the corporation. (coût en main-d’oeuvre)

  • (2) For the purposes of subsection (1), a corporation has “resource activities” for a taxation year if

    • (a) in computing its income for the year, an amount is deductible pursuant to any of sections 65 to 66.2 of the Act;

    • (b) the corporation was at any time during the year engaged in activities for the purpose of earning resource profits of the corporation; or

    • (c) in computing the corporation’s income for the year, an amount was included pursuant to section 59 of the Act.

  • (3) In subsection (1), net resource income of a corporation for a taxation year means the amount, if any, by which the total of

    • (a) the resource profits of the corporation for the year, and

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

      • (i) the total of amounts included in computing the income of the corporation for the year, from an active business carried on in Canada, pursuant to section 59 of the Act (other than amounts that may reasonably be regarded as having been included in computing the resource profits of the corporation for the year),

      exceeds

      • (ii) the total of amounts deducted in computing the income of the corporation for the year under section 64 of the Act, as that section applies with respect to dispositions occurring before November 13, 1981 and to dispositions occurring after November 12, 1981 pursuant to the terms in existence on that date of an offer or agreement in writing made or entered into on or before that date, except those amounts that may reasonably be regarded as having been deducted in computing the resource profits of the corporation for the year,

    exceeds the total of

    • (c) the total of amounts deducted in computing the income of the corporation for the year under section 65 of the Act (other than amounts that may reasonably be regarded as having been deducted in computing the resource profits of the corporation for the year), and

    • (d) the specified percentage for the year of the amount, if any, by which

      • (i) the corporation’s resource profits for the year

      exceeds the total of

      • (ii) the corporation’s Canadian resource profits for the year, and

      • (iii) the earned depletion base (within the meaning assigned by subsection 1205(1)) of the corporation at the beginning of its immediately following taxation year.

  • (3.1) In subsection (1), the net resource adjustment of a corporation for a taxation year is the amount determined by the formula

    A - B

    where

    A
    is the amount of Canadian resource profits of the corporation for the year, and
    B
    is the amount that would be the Canadian resource profits of the corporation for the year if
    • (a) subsections 1204(1) and (1.1) provided for the computation of negative amounts where the amounts subtracted in computing gross resource profits (as defined by subsection 1204(1)) and resource profits " exceed the amounts added in computing those amounts, and

    • (b) paragraph 1206(3)(a) applied so that a negative amount of resource profits of a partnership for a fiscal period that ended in the year were, to the extent of the corporation’s share thereof, deducted in computing the corporation’s resource profits for the year.

  • (4) For the purpose of subsection (1), refund interest means an amount that is received, or that becomes receivable, after March 6, 1996 from an authority (including a government or municipality) situated in Canada as a consequence of the overpayment of a tax that was not deductible under the Act in computing any taxpayer’s income and that was imposed by an Act of Canada or a province or a bylaw of a municipality.

  • NOTE: Application provisions are not included in the consolidated text;
  • see relevant amending regulations. SOR/78-377, s. 13;
  • SOR/94-169, s. 7;
  • SOR/94-686, ss. 79(F), 80(F);
  • SOR/96-451, s. 7;
  • SOR/99-179, s. 11;
  • SOR/2007-19, s. 7.

Partnerships

[SOR/94-686, s. 78(F)]

 Where a corporation is a member of a partnership at any time in a taxation year of the corporation, the following rules apply:

cost of capital

cost of capital of the corporation for the year means an amount equal to the aggregate of

  • (a) 10 per cent of the aggregate of all amounts each of which is the gross cost to the corporation of a property referred to in paragraph 1100(1)(e), (f), (g) or (h), paragraph 1102(1)(d) or (g) or Schedule II that

    • (i) was owned by the corporation at the end of the year, and

    • (ii) was used by the corporation at any time during the year,

  • (b) the aggregate of all amounts each of which is the rental cost incurred by the corporation during the year for the use of any property a portion of the gross cost of which would be included by virtue of paragraph (a) if the property were owned by the corporation at the end of the year, and

  • (c) that proportion of the aggregate of the amounts that would be determined under paragraphs (a) and (b) in respect of the partnership for its fiscal period coinciding with or ending in the taxation year of the corporation if the references in those paragraphs to “the corporation” were read as references to “the partnership” and the references in those paragraphs to “the year” were read as references to “the fiscal period of the partnership coinciding with or ending in the year”, that

    • (i) the corporation’s share of the income or loss of the partnership for that fiscal period

    is of

    • (ii) the income or loss of the partnership for that fiscal period, as the case may be,

but for the purposes of this definition, the gross cost of a property or rental cost for the use of any property does not include that portion of those costs that reflects the extent to which the property was used by the corporation during the year or by the partnership during its fiscal period coinciding with or ending in the year

  • (d) in an active business carried on outside Canada,

  • (e) to earn Canadian investment income or foreign investment income as defined in subsection 129(4) of the Act on the assumption that subsection 129(4) of the Act applied to a partnership as well as to a corporation,

  • (f) in activities engaged in for the purpose of earning Canadian resource profits of the corporation or the partnership, as the case may be, or

  • (g) in activities referred to in subparagraph 66(15)(b)(i), (ii) or (v), subparagraph 66(15)(e)(i) or (ii), subparagraph 66.1(6)(a)(i), (ii), (iii) or (v) or subparagraph 66.2(5)(a)(i), (ii) or (v) of the Act; (coût en capital)

cost of labour

cost of labour of the corporation for the year means an amount equal to the aggregate of

  • (a) the salaries and wages paid or payable during the year to all employees of the corporation for services performed during the year,

  • (b) all other amounts each of which is an amount paid or payable during the year for the performance during the year, by any person other than an employee of the corporation, of functions relating to

    • (i) the management or administration of the corporation,

    • (ii) scientific research as defined in section 2900, or

    • (iii) a service or function that would normally be performed by an employee of the corporation, and

  • (c) that proportion of the aggregate of the amounts that would be determined under paragraphs (a) and (b) in respect of the partnership for its fiscal period coinciding with or ending in the taxation year of the corporation if the references in those paragraphs to “the corporation” were read as references to “the partnership” and the references in those paragraphs to “the year” were read as references to the “fiscal period of the partnership coinciding with or ending in the year”, that

    • (i) the corporation’s share of the income or loss of the partnership for that fiscal period

    is of

    • (ii) the income or loss of the partnership for that fiscal period, as the case may be,

but for the purposes of this definition, the salaries and wages referred to in paragraph (a) or other amounts referred to in paragraph (b), of the corporation or the partnership, as the case may be, do not include that portion of those amounts that

  • (d) was included in the gross cost to the corporation or partnership of a property (other than a property that was manufactured by the corporation or partnership and leased during the year by the corporation or the partnership to another person) that was included in computing the cost of capital of the corporation for the year,

  • (e) was related to an active business carried on outside Canada by the corporation or the partnership,

  • (f) was related to the activities engaged in for the purpose of earning Canadian resource profits of the corporation or the partnership, as the case may be, or

  • (g) was included in the Canadian exploration and development expenses, foreign exploration and development expenses, Canadian exploration expense or Canadian development expense, within the meanings assigned by paragraphs 66(15)(b) and (e), 66.1(6)(a) and 66.2(5)(a) of the Act respectively, of the corporation; (coût en main-d’oeuvre)

cost of manufacturing and processing capital

cost of manufacturing and processing capital of the corporation for the year means 100/85 of that portion of the cost of capital of the corporation for that year that reflects the extent to which each property included in the calculation thereof was used directly in qualified activities

  • (a) of the corporation during the year, or

  • (b) of the partnership during its fiscal period coinciding with or ending in the year, as the case may be,

but the amount so calculated shall not exceed the cost of capital of the corporation for the year; (coût en capital de fabrication et de transformation)

cost of manufacturing and processing labour

cost of manufacturing and processing labour of the corporation for the year means 100/75 of that portion of the cost of labour of the corporation for that year that reflects the extent to which

  • (a) the salaries and wages included in the calculation thereof were paid or payable to persons for the portion of their time that they were directly engaged in qualified activities

    • (i) of the corporation during the year, or

    • (ii) of the partnership during its fiscal period coinciding with or ending in the year, and

  • (b) the other amounts included in the calculation thereof were paid or payable to persons for the performance of functions that would be directly related to qualified activities

    • (i) of the corporation during the year, or

    • (ii) of the partnership during its fiscal period coinciding with or ending in the year,

    if those persons were employees of the corporation or the partnership, as the case may be,

but the amount so calculated shall not exceed the cost of labour of the corporation for the year; (coût en main-d’oeuvre de fabrication et de transformation)

gross cost

gross cost of a property at any time means

  • (a) in respect of a property that has become available for use by the partnership for the purposes of subsection 13(26) of the Act, the capital cost to the partnership of the property computed without reference to subsections 13(7.1), (7.4) and (10) and sections 21 and 80 of the Act, and

  • (b) in respect of any other property of the partnership, nil,

and, for the purposes of paragraph (a), if the partnership acquired the property from a person who was a majority-interest partner of the partnership immediately after the property was acquired, the capital cost to the partnership of the property is to be computed as if the property had been acquired at a capital cost equal to the gross cost to the person of the property, except that if the property was partnership property on December 31, 1971, its gross cost is its capital cost to the partnership as determined under subsection 20(3) or (5) of the Income Tax Application Rules. (coût brut)

  • NOTE: Application provisions are not included in the consolidated text;
  • see relevant amending Acts and regulations. SOR/78-377, s. 14;
  • SOR/94-140, s. 13;
  • SOR/94-169, s. 8;
  • SOR/94-686, ss. 48, 78(F) to 81(F);
  • 2013, c. 40, s. 110.
 
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