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

Full Document:  

Act current to 2022-09-11 and last amended on 2022-09-01. Previous Versions

PART IIncome Tax (continued)

DIVISION EComputation of Tax (continued)

SUBDIVISION CRules Applicable to all Taxpayers (continued)

Marginal note:Part XII.4 tax credit

  •  (1) In this section, the Part XII.4 tax credit of a taxpayer for a particular taxation year means the total of

    • (a) all amounts each of which is an amount determined by the formula

      A × B/C

      where

      A
      is the tax payable under Part XII.4 by a qualifying environmental trust for a taxation year (in this paragraph referred to as the “trust’s year”) that ends in the particular year,
      B
      is the amount, if any, by which the total of all amounts in respect of the trust that were included (otherwise than because of being a member of a partnership) because of the application of subsection 107.3(1) in computing the taxpayer’s income for the particular year exceeds the total of all amounts in respect of the trust that were deducted (otherwise than because of being a member of a partnership) because of the application of subsection 107.3(1) in computing that income, and
      C
      is the trust’s income for the trust’s year, computed without reference to subsections 104(4) to 104(31) and sections 105 to 107, and
    • (b) in respect of each partnership of which the taxpayer was a member, the total of all amounts each of which is the amount that can reasonably be considered to be the taxpayer’s share of the relevant credit in respect of the partnership and, for this purpose, the relevant credit in respect of a partnership is the amount that would, if a partnership were a person and its fiscal period were its taxation year, be the Part XII.4 tax credit of the partnership for its taxation year that ends in the particular year.

  • Marginal note:Reduction of Part I tax

    (2) There may be deducted from a taxpayer’s tax otherwise payable under this Part for a taxation year such amount as the taxpayer claims not exceeding the taxpayer’s Part XII.4 tax credit for the year.

  • Marginal note:Deemed payment of Part I tax

    (3) There is deemed to have been paid on account of the tax payable under this Part by a taxpayer (other than a taxpayer exempt from such tax) for a taxation year on the taxpayer’s balance-due day for the year, such amount as the taxpayer claims not exceeding the amount, if any, by which

    • (a) the taxpayer’s Part XII.4 tax credit for the year

    exceeds

    • (b) the amount deducted under subsection 127.41(2) in computing the taxpayer’s tax payable under this Part for the year.

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • 1995, c. 3, s. 39
  • 1997, c. 25, s. 38
  • 1998, c. 19, ss. 34, 148

Marginal note:Definitions

  •  (1) The following definitions apply in this section.

    designated province

    designated province means a province specified by the Minister of Finance for a calendar year. (province déterminée)

    eligible farming expenses

    eligible farming expenses, of a taxpayer for a designated province for a taxation year, means the amount determined by the formula

    A × B

    where

    A
    is
    • (a) nil, if the total of all amounts deducted in the year by the taxpayer in computing income under this Part from farming activities, excluding any deductions arising from inventory adjustments under section 28 and from transactions with persons that do not deal at arm’s length with the taxpayer, is less than $25,000, and

    • (b) in any other case, the total of all amounts deducted in the year by the taxpayer in computing income under this Part from farming activities, excluding any deductions arising from inventory adjustments under section 28 and from transactions with persons that do not deal at arm’s length with the taxpayer; and

    B
    is the taxpayer’s relevant proportion for the designated province for the taxation year. (dépenses agricoles admissibles)
    farming activities

    farming activities means a farming business, including or excluding activities prescribed by regulation. (activités agricoles)

    payment rate

    payment rate, for a calendar year for a designated province, means the rate specified by the Minister of Finance for the calendar year for the designated province. (taux de paiement)

    relevant proportion

    relevant proportion, of eligible farming expenses of a taxpayer for a designated province for a taxation year, means

    • (a) if the taxpayer is an individual, the proportion determined by the formula

      A ÷ B

      where

      A
      is the individual’s income for the year from farming activities that is deemed to have been earned in the year in the designated province in accordance with Part XXVI of the Income Tax Regulations, and
      B
      is the whole of the individual’s income from farming activities for the year;
    • (b) if the taxpayer is a corporation, the proportion determined by the formula

      C ÷ D

      where

      C
      is the corporation’s taxable income that is deemed to have been earned in the year in the designated province in accordance with Part IV of the Income Tax Regulations, and
      D
      is the whole of the corporation’s taxable income for the year; and
    • (c) if the taxpayer is a partnership, the proportion determined by the formula

      E ÷ F

      where

      E
      is the partnership’s income for the fiscal period of the partnership from farming activities that would be deemed to have been earned in the year in the designated province, computed in accordance with Part XXVI of the Income Tax Regulations as if the partnership were an individual, and
      F
      is the whole of the partnership’s income from farming activities for the fiscal period of the partnership. (proportion pertinente)
  • Marginal note:Deemed payment on account of tax

    (2) A taxpayer (other than a partnership) that files a prescribed form containing prescribed information with their return of income for a taxation year is deemed, on their balance-due day for the year, to have paid on account of their tax payable under this Part for the year, the total of all amounts each of which is an amount, for each designated province and for each calendar year a portion of which falls within the taxation year, determined by the formula

    (A × B) × (C ÷ D)

    where

    A
    is the payment rate for the calendar year for the designated province;
    B
    is the taxpayer’s eligible farming expenses for the designated province for the taxation year;
    C
    is the number of days within the taxation year that fall within the calendar year; and
    D
    is the number of days in the taxation year.
  • Marginal note:Deemed payment on account of tax — partnership

    (3) If a taxpayer (other than a partnership) is a member of a partnership at the end of a fiscal period of the partnership that ends in a taxation year of the taxpayer — and the partnership files a prescribed form containing prescribed information for that fiscal period and the taxpayer files a prescribed form containing prescribed information with its return of income for the taxation year — the taxpayer is deemed, on the taxpayer’s balance-due day for the taxation year, to have paid on account of their tax payable under this Part for the year, the total of all amounts each of which is an amount, for each designated province and for each calendar year a portion of which falls within the partnership’s fiscal period, determined by the formula

    (A × B) × (C ÷ D) × E

    where

    A
    is the payment rate for the calendar year for the designated province;
    B
    is the partnership’s eligible farming expenses for the designated province for the fiscal period;
    C
    is the number of days within the fiscal period that fall within the calendar year;
    D
    is the number of days in the fiscal period; and
    E
    is the specified proportion of the taxpayer for the fiscal period.
  • Marginal note:Partnerships

    (4) For the purposes of this section,

    • (a) a taxpayer includes a partnership;

    • (b) the fiscal period of a partnership is deemed to be its taxation year; and

    • (c) if a taxpayer is a member of a particular partnership that is a member of another partnership, the taxpayer is deemed

      • (i) to be a member of the other partnership, and

      • (ii) to have a specified proportion in the other partnership for a fiscal period of the other partnership equal to its specified proportion of the particular partnership — for the last fiscal period of the particular partnership that ends in the fiscal period of the other partnership — multiplied by the particular partnership’s specified proportion of the other partnership for the fiscal period of the other partnership.

  • Marginal note:Authority to specify

    (5) For the purposes of this section, the Minister of Finance may specify for a calendar year

    • (a) the designated provinces; and

    • (b) the payment rate for a designated province.

  • Marginal note:Payment rate not specified

    (6) For the purposes of this section, if the Minister of Finance does not specify the payment rate for a designated province under paragraph (5)(b), the payment rate is deemed to be nil.

  • Marginal note:When assistance received

    (7) For the purposes of this Act, and for greater certainty, an amount that a taxpayer is deemed under subsection (2) or (3) to have paid for a taxation year is assistance received by the taxpayer from a government immediately before the end of the year.

  • Marginal note:Relevant proportion — special rule

    (8) For purposes of determining the relevant proportion of eligible farming expenses of a taxpayer for a designated province in a taxation year,

    • (a) if the income of an individual or partnership from farming activities for the year is nil, the income for the year from farming activities that is deemed to have been earned in the year in the designated province shall be computed in accordance with Part XXVI of the Income Tax Regulations as if the individual or partnership earned $1,000,000 of income from farming activities; and

    • (b) if the taxable income of a corporation is nil, the corporation’s taxable income that is deemed to have been earned in the year in the designated province shall be computed in accordance with Part IV of the Income Tax Regulations as if the corporation had taxable income for the year in the amount of $1,000,000.

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • 2022, c. 5, s. 5
COVID-19 – Air Quality Improvement Tax Credit

Marginal note:Definitions

  •  (1) The following definitions apply in this section.

    assistance

    assistance means an amount, other than a prescribed amount or an amount deemed under subsection (2) to have been paid, that would be included under paragraph 12(1)(x) in computing an eligible entity’s income for any taxation year if that paragraph were read without reference to subparagraphs 12(1)(x)(v) to (vii). (montant d’aide)

    eligible entity

    eligible entity, for a taxation year, means

    • (a) a qualifying corporation for the taxation year;

    • (b) an individual other than a trust; or

    • (c) a partnership. (entité déterminée)

    qualifying corporation

    qualifying corporation, for a particular taxation year, means a particular corporation that meets the following conditions:

    • (a) it is a Canadian-controlled private corporation or would be a Canadian-controlled private corporation absent the application of subsection 136(1); and

    • (b) it is the case that

      $15,000,000 > A + B

      where

      A
      is the particular corporation’s taxable capital employed in Canada (in this formula, within the meaning assigned by section 181.2 or 181.3) for its immediately preceding taxation year, and
      B
      is the total of all amounts, each of which is the taxable capital employed in Canada of a corporation that is associated in the particular taxation year with the particular corporation for the associated corporation’s last taxation year that ended before the beginning of the particular taxation year. (société admissible)
    qualifying expenditure

    qualifying expenditure means an outlay or expense prescribed by regulation that is made or incurred by an eligible entity during the qualifying period in the course of the eligible entity’s ordinary commercial activities. (dépense admissible)

    qualifying location

    qualifying location, of an eligible entity, means real or immovable property (other than property that is a self-contained domestic establishment, or part of such a self-contained domestic establishment, the land subjacent to the self-contained domestic establishment and such portion of any immediately contiguous land as can reasonably be regarded as contributing to the use and enjoyment of the self-contained domestic establishment as a residence) in Canada used by the eligible entity primarily in the course of its ordinary commercial activities. (emplacement admissible)

    qualifying period

    qualifying period means the period that begins on September 1, 2021 and ends on December 31, 2022. (période d’admissibilité)

    total per location expense

    total per location expense, for a qualifying location of an eligible entity for a taxation year, means the lesser of

    • (a) the amount determined by the formula

      A − B

      where

      A
      is the total of all amounts, each of which is a qualifying expenditure of the eligible entity made or incurred in the taxation year in respect of the qualifying location (or, for the first taxation year that ends after 2021, the qualifying expenditures made or incurred in respect of the qualifying location from the start of the qualifying period to the end of that first taxation year), and
      B
      is the total of all amounts, each of which is an amount of assistance that
      • (i) the eligible entity has received, is entitled to receive or can reasonably be expected to receive, in respect of amounts described in A, and

      • (ii) has not been repaid before the end of the taxation year pursuant to a legal obligation to do so; and

    • (b) the amount determined by the formula

      $10,000 − C

      where

      C
      is the total of all amounts, each of which is a qualifying expenditure in respect of the qualifying location and
      • (i) is a qualifying expenditure of the eligible entity, in respect of which an amount under subsection (2) or (3) is deemed to have been paid in a prior taxation year, or

      • (ii) is a qualifying expenditure of another eligible entity that is affiliated during the qualifying period with the eligible entity, in respect of which an amount under subsection (2) or (3) is deemed to have been paid in any taxation year. (dépense totale par emplacement)

    total ventilation expense

    total ventilation expense, of an eligible entity for a taxation year, means the lesser of

    • (a) the total of all amounts, each of which is a total per location expense for a qualifying location of the eligible entity for the taxation year; and

    • (b) the amount determined by the formula

      $50,000 × X − Y

      where

      X
      is
      • (i) 100%, unless the eligible entity is affiliated at any time in the qualifying period with one or more other eligible entities that are deemed to have paid an amount under subsection (2) in respect of the qualifying period, or, in the case of a partnership, has a member that is deemed to have paid an amount under subsection (3) in respect of the partnership,

      • (ii) a percentage assigned to the eligible entity under an agreement, if

        • (A) the agreement is entered into by the eligible entity and each eligible entity that

          • (I) is affiliated with the eligible entity in the qualifying period, and

          • (II) is deemed to have paid an amount under subsection (2) in respect of the qualifying period, or, in the case of a partnership, has a member that is deemed to have paid an amount under subsection (3) in respect of the partnership,

        • (B) the agreement is filed in prescribed form and manner with the Minister by the eligible entity and each eligible entity referred to in clause (A),

        • (C) the agreement assigns, for the purposes of this definition, a percentage in respect of each eligible entity referred to in clause (A), and

        • (D) the total of all the percentages assigned under the agreement does not exceed 100%, and

      • (iii) in any other case, nil, and

      Y
      is the total of all amounts, each of which is the total ventilation expense of the eligible entity for a prior taxation year in respect of which an amount is deemed to have been paid under subsection (2) or (3). (dépense totale de ventilation)
  • Marginal note:Refundable tax credit

    (2) An eligible entity (other than a partnership) that files a prescribed form containing prescribed information with its return of income for a taxation year that ends after 2021 is deemed to have, on its balance-due day for the year, paid on account of its tax payable under this Part for the year an amount equal to 25% of its total ventilation expense for the taxation year.

  • Marginal note:Refundable tax credit — partnership

    (3) If an eligible entity (other than a partnership) is a member of a partnership at the end of a fiscal period of the partnership that ends after 2021 and that ends in a taxation year of the eligible entity — and the partnership files an information return in prescribed form containing prescribed information for that fiscal period and the eligible entity files a prescribed form containing prescribed information with its return of income for the taxation year — then the eligible entity is deemed to have paid, on the eligible entity’s balance-due day for the taxation year on account of the eligible entity’s tax payable under this Part for the taxation year, an amount determined by the formula

    0.25 × A × B

    where

    A
    is the total ventilation expense of the partnership for the fiscal period; and
    B
    is the specified proportion of the eligible entity for the fiscal period of the partnership.
  • Marginal note:Partnerships

    (4) For the purposes of this section,

    • (a) the fiscal period of a partnership is deemed to be its taxation year; and

    • (b) if an eligible entity is a member of a particular partnership that is a member of another partnership, the eligible entity is deemed

      • (i) to be a member of the other partnership, and

      • (ii) to have a specified proportion in the other partnership for a fiscal period of the other partnership equal to its specified proportion of the particular partnership — for the last fiscal period of the particular partnership that ends in the fiscal period of the other partnership — multiplied by the particular partnership’s specified proportion of the other partnership for the fiscal period of the other partnership.

  • Marginal note:When assistance received

    (5) For the purposes of this Act other than this section, and for greater certainty, an amount that an eligible entity is deemed under subsection (2) or (3) to have paid is assistance received by it from a government immediately before the end of the taxation year to which it relates.

  • Marginal note:Affiliated entities

    (6) For the purposes of this section, if two eligible entities are affiliated with the same eligible entity, they are deemed to be affiliated with each other.

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • 2022, c. 5, s. 6
 
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