Excise Tax Act

Marginal note:Forfeiture, extinguished debt, etc.

• 182 (1) For the purposes of this Part, where at any time, as a consequence of the breach, modification or termination after 1990 of an agreement for the making of a taxable supply (other than a zero-rated supply) of property or a service in Canada by a registrant to a person, an amount is paid or forfeited to the registrant otherwise than as consideration for the supply, or a debt or other obligation of the registrant is reduced or extinguished without payment on account of the debt or obligation,

  • (a) the person is deemed to have paid, at that time, an amount of consideration for the supply equal to the amount determined by the formula

    (A/B) × C

    where

    A

    is 100%,

    B

    is

    • (i) if tax under subsection 165(2) was payable in respect of the supply, the total of 100%, the rate set out in subsection 165(1) and the tax rate for the participating province in which the supply was made, and

    • (ii) in any other case, the total of 100% and the rate set out in subsection 165(1), and

    C

    is the amount paid, forfeited or extinguished, or by which the debt or obligation was reduced, as the case may be; and

  • (b) the registrant is deemed to have collected, and the person is deemed to have paid, at that time, all tax in respect of the supply that is calculated on that consideration, which is deemed to be equal to

    • (i) where tax under subsection 165(2) was payable in respect of the supply, the total of the tax under that subsection and under subsection 165(1) calculated on that consideration, and

    • (ii) in any other case, tax under subsection 165(1) calculated on that consideration.

• Marginal note:Transitional

  (2) Paragraph (1)(b) does not apply in respect of amounts paid or forfeited, and debts or other obligations reduced or extinguished, as a consequence of a breach, modification or termination of an agreement where

  • (a) the agreement was entered into in writing before 1991;

  • (b) the amount is paid or forfeited, or the debt or other obligation is reduced or extinguished, as the case may be, after 1992; and

  • (c) tax in respect of the amount paid, forfeited or extinguished, or by which the debt or obligation was reduced, as the case may be, was not contemplated in the agreement.

• Marginal note:Application of Division IX

  (2.1) Division IX does not apply for the purposes of subsection (1).

• Marginal note:Exception

  (3) Subsection (1) does not apply to that part of any amount paid or forfeited in respect of the breach, modification or termination of an agreement for the making of a supply where that part is

  • (a) an additional amount that is charged to a person because the consideration for the supply is not paid within a reasonable period and is such an amount referred to in section 161;

  • (b) an amount paid by one railway corporation to another railway corporation as or on account of a penalty for failure to return rolling stock within a stipulated time; or

  • (c) an amount paid as or on account of demurrage.