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

Full Document:  

Act current to 2022-09-22 and last amended on 2022-09-01. Previous Versions

PART IVTax on Taxable Dividends Received by Private Corporations (continued)

Marginal note:Exempt corporations

 No tax is payable under this Part for a taxation year by a corporation

  • (a) that was, at any time in the year, a bankrupt; or

  • (b) that was, throughout the year,

    • (i) a bank,

    • (ii) a corporation licensed or otherwise authorized under the laws of Canada or a province to carry on in Canada the business of offering to the public its services as a trustee,

    • (iii) an insurance corporation,

    • (iv) a prescribed labour-sponsored venture capital corporation,

    • (v) a prescribed investment contract corporation,

    • (vi) a non-resident-owned investment corporation, or

    • (vii) a registered securities dealer that was throughout the year a member, or a participating organization, of a designated stock exchange in Canada.

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • R.S., 1985, c. 1 (5th Supp.), s. 186.1
  • 1998, c. 19, s. 200
  • 2007, c. 35, s. 55
  • 2017, c. 33, s. 64

Marginal note:Exempt dividends

 For the purposes of subsection 186(1), dividends received in a taxation year by a corporation that was, throughout the year, a prescribed venture capital corporation from a corporation that was a prescribed qualifying corporation with respect to those dividends shall be deemed not to be taxable dividends.

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • 1987, c. 46, s. 59

Marginal note:Information return

  •  (1) Every corporation that is liable to pay tax under this Part for a taxation year in respect of a dividend received by it in the year shall, on or before the day on or before which it is required to file its return of income under Part I for the year, file a return for the year under this Part in prescribed form.

  • Marginal note:Interest

    (2) Where a corporation is liable to pay tax under this Part and has failed to pay all or any part thereof on or before the day on or before which the tax was required to be paid, it shall pay to the Receiver General interest at the prescribed rate on the amount that it failed to pay computed from the day on or before which the tax was required to be paid to the day of payment.

  • Marginal note:Provisions applicable to Part

    (3) Sections 151, 152, 158 and 159, subsections 161(7) and 161(11), sections 162 to 167 and Division J of Part I are applicable to this Part with such modifications as the circumstances require.

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • 1970-71-72, c. 63, s. 1 “187”
  • 1985, c. 45, ss. 101, 126(F)
  • 1986, c. 6, s. 98

PART IV.1Taxes on Dividends on Certain Preferred Shares Received by Corporations

Definition of excepted dividend

 In this Part, excepted dividend means a dividend

  • (a) received by a corporation on a share of the capital stock of a foreign affiliate of the corporation, other than a dividend received by a specified financial institution on a share acquired in the ordinary course of the business carried on by the institution;

  • (b) received by a corporation from another corporation (other than a corporation described in any of paragraphs (a) to (f) of the definition financial intermediary corporation in subsection 191(1)) in which it has or would have, if the other corporation were a taxable Canadian corporation, a substantial interest (as determined under section 191) at the time the dividend was paid;

  • (c) received by a corporation that was, at the time the dividend was received, a private corporation or a financial intermediary corporation (within the meaning assigned by subsection 191(1));

  • (d) received by a corporation on a short-term preferred share of the capital stock of a taxable Canadian corporation other than a dividend described in paragraph (b) or (c) of the definition excluded dividend in subsection 191(1); or

  • (e) received by a corporation on a share (other than a taxable RFI share or a share that would be a taxable preferred share if the definition taxable preferred share in subsection 248(1) were read without reference to paragraph (a) of that definition) of the capital stock of a mutual fund corporation.

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • R.S., 1985, c. 1 (5th Supp.), s. 187.1
  • 1994, c. 7, Sch. II, s. 154

Marginal note:Tax on dividends on taxable preferred shares

 Every corporation shall, on or before its balance-due day for a taxation year, pay a tax under this Part for the year equal to 10% of the total of all amounts each of which is a dividend, other than an excepted dividend, received by the corporation in the year on a taxable preferred share (other than a share of a class in respect of which an election under subsection 191.2(1) has been made) to the extent that an amount in respect of the dividend was deductible under section 112 or 113 or subsection 138(6) in computing its taxable income for the year or under subsection 115(1) in computing its taxable income earned in Canada for the year.

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • R.S., 1985, c. 1 (5th Supp.), s. 187.2
  • 2003, c. 15, s. 121

Marginal note:Tax on dividends on taxable RFI shares

  •  (1) Every restricted financial institution shall, on or before its balance-due day for a taxation year, pay a tax under this Part for the year equal to 10% of the total of all amounts each of which is a dividend, other than an excepted dividend, received by the institution at any time in the year on a share acquired by any person before that time and after 8:00 p.m. Eastern Daylight Saving Time, June 18, 1987 that was, at the time the dividend was paid, a taxable RFI share to the extent that an amount in respect of the dividend was deductible under section 112 or 113 or subsection 138(6) in computing its taxable income for the year or under subsection 115(1) in computing its taxable income earned in Canada for the year.

  • Marginal note:Time of acquisition of share

    (2) For the purposes of subsection 187.3(1),

    • (a) a share of the capital stock of a corporation acquired by a person after 8:00 p.m. Eastern Daylight Saving Time, June 18, 1987 pursuant to an agreement in writing entered into before that time shall be deemed to have been acquired by that person before that time;

    • (b) a share of the capital stock of a corporation acquired by a person after 8:00 p.m. Eastern Daylight Saving Time, June 18, 1987 and before 1988 as part of a distribution to the public made in accordance with the terms of a prospectus, preliminary prospectus, registration statement, offering memorandum or notice filed before 8:00 p.m. Eastern Daylight Saving Time, June 18, 1987 with a public authority pursuant to and in accordance with the securities legislation of the jurisdiction in which the shares are distributed shall be deemed to have been acquired by that person before that time;

    • (c) a share (in this paragraph referred to as the “new share”) of the capital stock of a corporation that is acquired by a person after 8:00 p.m. Eastern Daylight Saving Time, June 18, 1987 in exchange for

      • (i) a share of a corporation that was issued before 8:00 p.m. Eastern Daylight Saving Time, June 18, 1987 or is a grandfathered share, or

      • (ii) a debt obligation of a corporation that was issued before 8:00 p.m. Eastern Daylight Saving Time, June 18, 1987, or issued after that time pursuant to an agreement in writing entered into before that time,

      where the right to the exchange for the new share and all or substantially all the terms and conditions of the new share were established in writing before that time shall be deemed to have been acquired by that person before that time;

    • (d) a share of a class of the capital stock of a Canadian corporation listed on a designated stock exchange in Canada that is acquired by a person after 8:00 p.m. Eastern Daylight Saving Time, June 18, 1987 on the exercise of a right

      • (i) that was issued before that time and listed on a prescribed stock exchange in Canada, and

      • (ii) the terms of which at that time included the right to acquire the share,

      where all or substantially all the terms and conditions of the share were established in writing before that time shall be deemed to have been acquired by that person before that time;

    • (e) where a share that was owned by a particular restricted financial institution at 8:00 p.m. Eastern Daylight Saving Time, June 18, 1987 has, by one or more transactions between related restricted financial institutions, been transferred to another restricted financial institution, the share shall be deemed to have been acquired by the other restricted financial institution before that time unless at any particular time after 8:00 p.m. Eastern Daylight Saving Time, June 18, 1987 and before the share was transferred to the other restricted financial institution the share was owned by a shareholder who, at that particular time, was a person other than a restricted financial institution related to the other restricted financial institution; and

    • (f) where, at any particular time, there has been an amalgamation within the meaning assigned by section 87, and

      • (i) each of the predecessor corporations was a restricted financial institution throughout the period from 8:00 p.m. Eastern Daylight Saving Time, June 18, 1987 to the particular time and the predecessor corporations were related to each other throughout that period, or

      • (ii) each of the predecessor corporations and the new corporation is a corporation described in any of paragraphs (a) to (d) of the definition restricted financial institution in subsection 248(1),

      a taxable RFI share acquired by the new corporation from a predecessor corporation on the amalgamation shall be deemed to have been acquired by the new corporation at the time it was acquired by the predecessor corporation.

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • R.S., 1985, c. 1 (5th Supp.), s. 187.3
  • 2003, c. 15, s. 122
  • 2007, c. 35, s. 68

Marginal note:Partnerships

 For the purposes of this Part,

  • (a) all amounts received in a fiscal period by a partnership as, on account or in lieu of payment of, or in satisfaction of, dividends shall be deemed to have been received by each member of the partnership in the member’s fiscal period or taxation year in which the partnership’s fiscal period ends, to the extent of that member’s share thereof;

  • (b) each member of a partnership shall be deemed to own at any time that proportion of the number of the shares of each class of the capital stock of a corporation that are property of the partnership at that time that the member’s share of all dividends received on those shares by the partnership in its fiscal period that includes that time is of the total of all those dividends; and

  • (c) a reference to a person includes a partnership.

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • 1988, c. 55, s. 152

Marginal note:Information return

 Every corporation liable to pay tax under this Part for a taxation year shall file with the Minister, not later than the day on or before which it is required by section 150 to file its return of income for the year under Part I, a return for the year under this Part in prescribed form containing an estimate of the taxes payable by it under sections 187.2 and 187.3 for the year.

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • 1988, c. 55, s. 152

Marginal note:Provisions applicable to Part

 Sections 152, 158 and 159, subsections 161(1), 161(2) and 161(11), sections 162 to 167 and Division J of Part I are applicable to this Part with such modifications as the circumstances require.

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • 1988, c. 55, s. 152

Marginal note:Provisions applicable — Crown corporations

 Section 27 applies to this Part with any modifications that the circumstances require.

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • 1998, c. 19, s. 201

PART VTax and Penalties in Respect of Qualified Donees

Marginal note:Application of s. 149.1(1)

 The definitions in subsection 149.1(1) apply to this Part.

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • 1984, c. 45, s. 57

Marginal note:Deemed year-end on notice of revocation

  •  (1) If on a particular day the Minister issues a notice of intention to revoke the registration of a taxpayer as a registered charity under any of subsections 149.1(2) to (4.1) and 168(1), it becomes a listed terrorist entity or it is determined, under subsection 7(1) of the Charities Registration (Security Information) Act, that a certificate served in respect of the charity under subsection 5(1) of that Act is reasonable on the basis of information and evidence available,

    • (a) the taxation year of the charity that would otherwise have included that day is deemed to end at the end of that day;

    • (b) a new taxation year of the charity is deemed to begin immediately after that day; and

    • (c) for the purpose of determining the charity’s fiscal period after that day, the charity is deemed not to have established a fiscal period before that day.

  • Marginal note:Revocation tax

    (1.1) A charity referred to in subsection (1) is liable to a tax, for its taxation year that is deemed to have ended, equal to the amount determined by the formula

    A - B

    where

    A
    is the total of all amounts, each of which is
    • (a) the fair market value of a property of the charity at the end of that taxation year,

    • (b) the amount of an appropriation (within the meaning assigned by subsection (2)) in respect of a property transferred to another person in the 120-day period that ended at the end of that taxation year, or

    • (c) the income of the charity for its winding-up period, including gifts received by the charity in that period from any source and any income that would be computed under section 3 as if that period were a taxation year; and

    B
    is the total of all amounts (other than the amount of an expenditure in respect of which a deduction has been made in computing income for the winding-up period under paragraph (c) of the description of A), each of which is
    • (a) a debt of the charity that is outstanding at the end of that taxation year,

    • (b) an expenditure made by the charity during the winding-up period on charitable activities carried on by it, or

    • (c) an amount in respect of a property transferred by the charity during the winding-up period and not later than the latter of one year from the end of the taxation year and the day, if any, referred to in paragraph (1.2)(c), to a person that was at the time of the transfer an eligible donee in respect of the charity, equal to the amount, if any, by which the fair market value of the property, when transferred, exceeds the consideration given by the person for the transfer.

  • Marginal note:Winding-up period

    (1.2) In this Part, the winding-up period of a charity is the period

    • (a) that begins immediately after the earliest of the days on which

      • (i) the Minister issues a notice of intention to revoke the registration of the charity under any of subsections 149.1(2) to (4.1) and 168(1),

      • (ii) the charity becomes a listed terrorist entity, and

      • (iii) it is determined, under subsection 7(1) of the Charities Registration (Security Information) Act, that a certificate served in respect of the charity under subsection 5(1) of that Act is reasonable on the basis of information and evidence available, and

    • (b) that ends on the day that is the latest of

      • (i) the day, if any, on which the charity files a return under subsection 189(6.1) for the taxation year deemed by subsection (1) to have ended, but not later than the day on which the charity is required to file that return,

      • (ii) the day on which the Minister last issues a notice of assessment of tax payable under subsection (1.1) for that taxation year by the charity, and

      • (iii) if the charity has filed a notice of objection or appeal in respect of that assessment, the day on which the Minister may take a collection action under section 225.1 in respect of that tax payable.

  • Marginal note:Eligible donee

    (1.3) In this Part, an eligible donee in respect of a particular charity is

    • (a) a registered charity

      • (i) of which more than 50% of the members of the board of directors or trustees of the registered charity deal at arm’s length with each member of the board of directors or trustees of the particular charity,

      • (ii) that is not the subject of a suspension under subsection 188.2(1),

      • (iii) that has no unpaid liabilities under this Act or under the Excise Tax Act,

      • (iv) that has filed all information returns required by subsection 149.1(14), and

      • (v) that is not the subject of a certificate under subsection 5(1) of the Charities Registration (Security Information) Act or, if it is the subject of such a certificate, the certificate has been determined under subsection 7(1) of that Act not to be reasonable; or

    • (b) a municipality in Canada that is approved by the Minister in respect of a transfer of property from the particular charity.

  • Marginal note:Eligible donee

    (1.4) In this Part, an eligible donee in respect of a particular Canadian amateur athletic association is a registered Canadian amateur athletic association

    • (a) of which more than 50% of the members of the board of directors or trustees of the registered Canadian amateur athletic association deal at arm’s length with each member of the board of directors or trustees of the particular Canadian amateur athletic association;

    • (b) that is not the subject of a suspension under subsection 188.2(1);

    • (c) that has no unpaid liabilities under this Act or under the Excise Tax Act; and

    • (d) that has filed all information returns required by subsection 149.1(14).

  • Marginal note:Shared liability — revocation tax

    (2) A person who, after the time that is 120 days before the end of the taxation year of a charity that is deemed by subsection (1) to have ended, receives property from the charity, is jointly and severally, or solidarily, liable with the charity for the tax payable under subsection (1.1) by the charity for that taxation year for an amount not exceeding the total of all appropriations, each of which is the amount by which the fair market value of such a property at the time it was so received by the person exceeds the consideration given by the person in respect of the property.

  • Marginal note:Non-application of revocation tax

    (2.1) Subsections (1) and (1.1) do not apply to a charity in respect of a notice of intention to revoke given under any of subsections 149.1(2) to (4.1) and 168(1) if the Minister abandons the intention and so notifies the charity or if

    • (a) within the one-year period that begins immediately after the taxation year of the charity otherwise deemed by subsection (1) to have ended, the Minister has registered the charity as a charitable organization, private foundation or public foundation; and

    • (b) the charity has, before the time that the Minister has so registered the charity,

      • (i) paid all amounts, each of which is an amount for which the charity is liable under this Act (other than subsection (1.1)) or the Excise Tax Act in respect of taxes, penalties and interest, and

      • (ii) filed all information returns required by or under this Act to be filed on or before that time.

  • Marginal note:Transfer of property tax

    (3) Where, as a result of a transaction or series of transactions, property owned by a registered charity that is a charitable foundation and having a net value greater than 50% of the net asset amount of the charitable foundation immediately before the transaction or series of transactions, as the case may be, is transferred before the end of a taxation year, directly or indirectly, to one or more charitable organizations and it may reasonably be considered that the main purpose of the transfer is to effect a reduction in the disbursement quota of the foundation, the foundation shall pay a tax under this Part for the year equal to the amount by which 25% of the net value of that property determined as of the day of its transfer exceeds the total of all amounts each of which is its tax payable under this subsection for a preceding taxation year in respect of the transaction or series of transactions.

  • Marginal note:Non-application of subsection (3)

    (3.1) Subsection (3) does not apply to a transfer that is a gift to which subsection 188.1(11) or (12) applies.

  • Marginal note:Joint and several, or solidary, liability — tax transfer

    (4) If property has been transferred to a charitable organization in circumstances described in subsection (3) and it may reasonably be considered that the organization acted in concert with a charitable foundation for the purpose of reducing the disbursement quota of the foundation, the organization is jointly and severally, or solidarily, liable with the foundation for the tax imposed on the foundation by that subsection in an amount not exceeding the net value of the property.

  • Marginal note:Definitions

    (5) In this section,

    net asset amount

    net asset amount of a charitable foundation at any time means the amount determined by the formula

    A - B

    where

    A
    is the fair market value at that time of all the property owned by the foundation at that time, and
    B
    is the total of all amounts each of which is the amount of a debt owing by or any other obligation of the foundation at that time; (montant de l’actif net)
    net value

    net value of property owned by a charitable foundation, as of the day of its transfer, means the amount determined by the formula

    A - B

    where

    A
    is the fair market value of the property on that day, and
    B
    is the amount of any consideration given to the foundation for the transfer. (valeur nette)
  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • R.S., 1985, c. 1 (5th Supp.), s. 188
  • 1994, c. 7, Sch. II, s. 155, c. 21, s. 84
  • 2001, c. 41, s. 116
  • 2005, c. 19, s. 43
  • 2010, c. 25, s. 50
  • 2011, c. 24, s. 58
  • 2013, c. 34, s. 151(E)
  • 2018, c. 12, s. 30
  • 2021, c. 23, s. 47
  • 2022, c. 10, s. 22
 
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