Excise Tax Act (R.S.C., 1985, c. E-15)

Marginal note:Qualifying taxpayer

• 217.1 (1) For the purposes of this Division, a person is a qualifying taxpayer throughout a specified year of the person if

  • (a) the person is a financial institution at any time in the specified year; and

  • (b) the person, at any time in the specified year

    • (i) is resident in Canada,

    • (ii) has a qualifying establishment in Canada,

    • (iii) where a majority of the persons having beneficial ownership of the person’s property in Canada are resident in Canada, carries on, engages in or conducts an activity in Canada, or

    • (iv) is a prescribed person or a person of a prescribed class.

• Marginal note:Outlay made, or expense incurred, outside Canada

  (2) For the purposes of this Division, an outlay made, or expense incurred, outside Canada includes any amount representing

  • (a) an outlay made, or expense incurred, by a qualifying taxpayer in respect of

    • (i) property that is, in whole or in part, transferred outside Canada to the qualifying taxpayer,

    • (ii) property, the possession or use of which is, in whole or in part, given or made available outside Canada to the qualifying taxpayer, or

    • (iii) a service that is performed, in whole or in part, outside Canada for the benefit of the qualifying taxpayer or is rendered, in whole or in part, outside Canada to the qualifying taxpayer;

  • (b) an adjustment (within the meaning of subsection 247(2) of the Income Tax Act) to an outlay or expense described in paragraph (a);

  • (c) an expenditure or purchase in respect of a reportable transaction (as defined in section 233.1 of the Income Tax Act) in respect of which a qualifying taxpayer is required under that section to file with the Minister a return in prescribed form containing prescribed information, or would be so required if the qualifying taxpayer carried on a business in Canada and that Act applied to the qualifying taxpayer;

  • (d) in the case of a qualifying taxpayer that is resident in Canada, qualifying compensation of an employee paid in a specified year by the qualifying taxpayer if

    • (i) in the specified year, a duty is performed by the employee outside Canada (in this subsection referred to as a “duty performed outside Canada”) at a qualifying establishment of the qualifying taxpayer or of a person related to the qualifying taxpayer, and

    • (ii) it is not the case that all or substantially all of the duties performed outside Canada by the employee in the specified year are performed elsewhere than at such qualifying establishments; and

  • (e) in the case of a qualifying taxpayer that is not resident in Canada,

    • (i) an allocation by the qualifying taxpayer of an outlay or expense as an amount in respect of a business carried on in Canada by the qualifying taxpayer for the purpose of computing the qualifying taxpayer’s income under the Income Tax Act, or an amount that would be such an allocation if

      • (A) the qualifying taxpayer’s income were computed in accordance with that Act,

      • (B) anything done by the qualifying taxpayer through a qualifying establishment in Canada of the qualifying taxpayer were the carrying on of a business in Canada by the qualifying taxpayer, and

      • (C) that Act applied to the qualifying taxpayer,

    • (ii) an outlay or expense that may reasonably be regarded under the Income Tax Act as an amount that is applicable to a qualifying establishment in Canada of the qualifying taxpayer, or that would reasonably be so regarded if the qualifying establishment were a permanent establishment for purposes of that Act, the qualifying taxpayer carried on a business in Canada and that Act applied to the qualifying taxpayer, and

    • (iii) qualifying compensation of an employee paid in a specified year by the qualifying taxpayer.

• Marginal note:Series of transactions

  (3) For the purposes of this Division, if there is a reference to a series of transactions, the series is deemed to include any related transactions completed in contemplation of the series.

• Marginal note:Internal charge

  (4) For the purposes of this Division, any part of an amount in respect of a transaction or dealing between a particular qualifying establishment of a qualifying taxpayer in Canada and another qualifying establishment of the qualifying taxpayer in a particular country other than Canada is an internal charge for a specified year of the qualifying taxpayer if

  • (a) the amount meets the following criteria:

    • (i) the amount would be allowed as a deduction, an allowance or an allocation for a reserve under the Income Tax Act in computing the income of the particular qualifying establishment for the specified year if

      • (A) that Act applied to the particular qualifying establishment,

      • (B) the income of the particular qualifying establishment were computed in accordance with that Act, and

      • (C) for the purposes of that Act,

        • (I) anything done by the qualifying taxpayer through the particular qualifying establishment were the carrying on of a business in Canada,

        • (II) the particular qualifying establishment were a permanent establishment, and

        • (III) the specified year were the particular qualifying establishment’s taxation year,

    • (ii) where the qualifying taxpayer has not specified pursuant to paragraph 217.2(2)(c) that subparagraph (iii) is to apply in all cases in determining the internal charges for the specified year and the particular country is a taxing country (as defined in subsection 126(7) of the Income Tax Act) that has a tax treaty (as defined in subsection 248(1) of that Act) with Canada, the amount would be required to be included in computing, under a taxing statute of the particular country that applies to the qualifying taxpayer, or that would apply if the other qualifying establishment were a permanent establishment for the purposes of that statute, the other qualifying establishment’s income or profits for any period (in this paragraph referred to as a “taxing period”) that ends during the specified year if

      • (A) the taxing statute applied to the other qualifying establishment,

      • (B) the other qualifying establishment’s income or profits were computed in accordance with the taxing statute, and

      • (C) for the purposes of the taxing statute,

        • (I) anything done by the qualifying taxpayer through the other qualifying establishment were the carrying on of a business in the particular country, and

        • (II) the other qualifying establishment were a permanent establishment and had the same taxing periods that the qualifying taxpayer would have under the taxing statute, and

    • (iii) where subparagraph (ii) does not apply, the amount would be required to be included in computing under the Income Tax Act the other qualifying establishment’s income for the specified year if

      • (A) the laws of Canada, and not the laws of the particular country, applied, with any modifications that the circumstances require, in the particular country,

      • (B) that Act applied to the other qualifying establishment,

      • (C) the other qualifying establishment’s income were computed in accordance with that Act, and

      • (D) for the purposes of that Act,

        • (I) anything done by the qualifying taxpayer through the other qualifying establishment were the carrying on of a business in the particular country,

        • (II) the other qualifying establishment were a permanent establishment, and

        • (III) the specified year were the other qualifying establishment’s taxation year; and

  • (b) the part of the amount is not

    • (i) an amount determined under the description of A in the formula in the definition external charge in section 217 in calculating an external charge of the qualifying taxpayer for the specified year or a preceding specified year of the qualifying taxpayer,

    • (ii) a permitted deduction of the qualifying taxpayer for the specified year or a preceding specified year of the qualifying taxpayer, other than a permitted deduction of the qualifying taxpayer that is included under paragraph (a) of the description of B in the definition external charge in section 217 in calculating an external charge of the qualifying taxpayer for the specified year or a preceding specified year of the qualifying taxpayer,

    • (iii) an amount that represents a cost to the other qualifying establishment, or a share of a profit of the qualifying taxpayer that is redistributed from the particular qualifying establishment to the other qualifying establishment, that is solely attributable to the issuance, renewal, variance or transfer of ownership by the qualifying taxpayer of a financial instrument that is a derivative, provided that all or substantially all of the amount is

      • (A) an error or profit margin, or employee compensation or benefits, that is reasonably attributable to the issuance, renewal, variance or transfer of ownership, or

      • (B) the estimate of the default risk premium that is directly associated with the derivative, or

    • (iv) a prescribed amount.

• Marginal note:Separate entities

  (5) For the purposes of applying paragraph (4)(a) in respect of a particular qualifying establishment of a qualifying taxpayer in a country other than Canada and another qualifying establishment of the qualifying taxpayer in Canada, the following rules apply:

  • (a) the particular qualifying establishment is deemed to be a distinct and separate enterprise from the qualifying taxpayer, engaged in the same or similar activities under the same or similar conditions as the particular qualifying establishment and dealing wholly independently with the other qualifying establishment and with the part (in this subsection referred to as the “remainder of the qualifying taxpayer”) of the qualifying taxpayer, if any, that is neither the particular qualifying establishment nor the other qualifying establishment;

  • (b) the other qualifying establishment is deemed to be a distinct and separate enterprise from the qualifying taxpayer, engaged in the same or similar activities under the same or similar conditions as the other qualifying establishment and dealing wholly independently with the particular qualifying establishment and with the remainder of the qualifying taxpayer; and

  • (c) any transactions or dealings between any of the particular qualifying establishment, the other qualifying establishment and the remainder of the qualifying taxpayer are deemed to be supplies made on such terms as would have been agreed upon between parties dealing at arm’s length.

• Marginal note:Qualifying rule for credits and rebates

  (6) If an amount (in this subsection referred to as a “qualifying expenditure”) of qualifying consideration, or of an external charge, of a qualifying taxpayer in respect of an outlay made, or expense incurred, outside Canada is greater than zero and, during a reporting period of the qualifying taxpayer during which the qualifying taxpayer is a registrant, tax under section 218.01 or subsection 218.1(1.2) in respect of the qualifying expenditure becomes payable by the qualifying taxpayer or is paid by the qualifying taxpayer without having become payable, the following rules apply for the purpose of determining an input tax credit or an eligible amount, as defined in subsection 261.01(1), of the qualifying taxpayer:

  • (a) the whole or part of property (in this subsection and subsection (8) referred to as “attributable property”) or of a qualifying service (in this subsection and subsection (8) referred to as an “attributable service”) to which the qualifying expenditure is attributable is deemed to have been acquired by the qualifying taxpayer at the time at which the outlay was made or the expense was incurred;

  • (b) the tax is deemed to be tax in respect of a supply of the attributable property or attributable service; and

  • (c) the extent to which the qualifying taxpayer acquired the attributable property or attributable service for consumption, use or supply in the course of commercial activities of the qualifying taxpayer is deemed to be the same extent as that to which the whole or part of the outlay or expense, which corresponds to the qualifying expenditure, was made or incurred to consume, use or supply the attributable property or attributable service in the course of commercial activities of the qualifying taxpayer.

• Marginal note:Qualifying rule for credits and rebates — internal charge

  (7) If tax (in this subsection referred to as “internal tax”) under section 218.01 or subsection 218.1(1.2) in respect of an internal charge becomes payable by a qualifying taxpayer, or is paid by the qualifying taxpayer without having become payable, and the internal charge is determined based in whole or in part on the inclusion of an outlay made, or an expense incurred, outside Canada by the qualifying taxpayer, the following rules apply for the purpose of determining an input tax credit or an eligible amount, as defined in subsection 261.01(1), of the qualifying taxpayer:

  • (a) the whole or part of property (in this subsection and subsection (8) referred to as “internal property”) or of a qualifying service (in this subsection and subsection (8) referred to as an “internal service”) to which the outlay or expense is attributable is deemed to have been supplied to the qualifying taxpayer at the time the outlay was made or the expense was incurred;

  • (b) the amount of the internal tax that can reasonably be attributed to the outlay or expense is deemed to be tax (in this paragraph referred to as “attributed tax”) in respect of the supply of the internal property or the internal service, and the attributed tax is deemed to have become payable at the time the internal tax becomes payable by the qualifying taxpayer or is paid by the qualifying taxpayer without having become payable; and

  • (c) the extent to which the qualifying taxpayer acquired the internal property or internal service for consumption, use or supply in the course of commercial activities of the qualifying taxpayer is deemed to be the same extent as that to which the outlay or expense was made or incurred to consume, use or supply the internal property or internal service in the course of commercial activities of the qualifying taxpayer.

• Marginal note:Input tax credits

  (8) For the purpose of determining an input tax credit of a qualifying taxpayer under section 169

  • (a) in respect of attributable property or an attributable service, the reference in that section to “property or a service” is to be read as a reference to “attributable property or an attributable service, within the meaning of those terms in paragraph 217.1(6)(a)”; and

  • (b) in respect of internal property or an internal service, the reference in that section to “property or a service” is to be read as a reference to “internal property or an internal service, within the meaning of those terms in paragraph 217.1(7)(a)”.

Marginal note:Election

• 217.2 (1) A qualifying taxpayer that is resident in Canada may elect to determine tax under section 218.01 in accordance with paragraph 218.01(a) and tax under subsection 218.1(1.2) in accordance with paragraph 218.1(1.2)(a) for each specified year of the qualifying taxpayer during which the election is in effect.

• Marginal note:Form and contents of election

  (2) An election made under subsection (1) by a qualifying taxpayer shall

  • (a) be made in prescribed form containing prescribed information;

  • (b) set out the first specified year of the qualifying taxpayer during which the election is to be in effect;

  • (c) specify if subparagraph 217.1(4)(a)(iii) is to apply in all cases in determining the internal charges for all specified years of the qualifying taxpayer during which the election is to be in effect; and

  • (d) be filed with the Minister in prescribed manner on or before the day on or before which the qualifying taxpayer’s return under section 219 in respect of tax under section 218.01 or subsection 218.1(1.2) for the first specified year is required to be filed.

• Marginal note:Effective date

  (3) An election made under subsection (1) by a qualifying taxpayer shall become effective on the first day of the specified year set out in the form.

• Marginal note:Cessation

  (4) An election made under subsection (1) by a qualifying taxpayer ceases to have effect on the earlier of

  • (a) the first day of the specified year of the qualifying taxpayer in which the qualifying taxpayer ceases to be resident in Canada; and

  • (b) the day on which a revocation of the election becomes effective.

• Marginal note:Revocation

  (5) A qualifying taxpayer that has made an election under subsection (1) may revoke the election, effective on the first day of a specified year of the qualifying taxpayer that begins at least two years after the election became effective, by filing in prescribed manner with the Minister a notice of revocation in prescribed form containing prescribed information not later than the day on which the revocation is to become effective.

• Marginal note:Restriction

  (6) If a revocation of an election made under subsection (1) becomes effective on a particular date, any subsequent election under that subsection is not a valid election unless the first day of the specified year set out in the subsequent election is at least two years after the day on which the revocation became effective.