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

Full Document:  

Act current to 2022-11-16 and last amended on 2022-10-18. Previous Versions

PART IIncome Tax (continued)

DIVISION EComputation of Tax (continued)

SUBDIVISION CRules Applicable to all Taxpayers (continued)

Marginal note:Refundable investment tax credit

  •  (1) Where a taxpayer (other than a person exempt from tax under section 149) files

    • (a) with the taxpayer’s return of income (other than a return of income filed under subsection 70(2) or 104(23), paragraph 128(2)(f) or subsection 150(4)) for a taxation year, or

    • (b) with a prescribed form amending a return referred to in paragraph 127.1(1)(a)

    a prescribed form containing prescribed information, the taxpayer is deemed to have paid on the taxpayer’s balance-due day for the year an amount on account of the taxpayer’s tax payable under this Part for the year equal to the lesser of

    • (c) the taxpayer’s refundable investment tax credit for the year, and

    • (d) the amount designated by the taxpayer in the prescribed form.

  • Marginal note:Definitions

    (2) In this section,

    excluded corporation

    excluded corporation for a taxation year means a corporation that is, at any time in the year,

    • (a) controlled directly or indirectly, in any manner whatever, by

      • (i) one or more persons exempt from tax under this Part by virtue of section 149,

      • (ii) Her Majesty in right of a province, a Canadian municipality or any other public authority, or

      • (iii) any combination of persons each of whom is a person referred to in subparagraph (i) or (ii), or

    • (b) related to any person referred to in paragraph (a); (société exclue)

    qualifying corporation

    qualifying corporation, for a particular taxation year that ends in a calendar year, means a particular corporation that is a Canadian-controlled private corporation in the particular taxation year the taxable income of which for its immediately preceding taxation year  —  together with, if the particular corporation is associated in the particular taxation year with one or more other corporations (in this subsection referred to as “associated corporations”), the taxable income of each associated corporation for its last taxation year that ended in the preceding calendar year (determined before taking into consideration the specified future tax consequences for that last year)  —  does not exceed the qualifying income limit, if any, of the particular corporation for the particular taxation year; (société admissible)

    qualifying income limit

    qualifying income limit of a corporation for a particular taxation year is the amount determined by the formula

    $500,000 × [($40 million – A)/$40 million]

    where

    A
    is
    • (a) nil, if $10 million is greater than or equal to the amount (in paragraph (b) referred to as the “taxable capital amount”) that is the total of the corporation’s taxable capital employed in Canada (within the meaning assigned by section 181.2 or 181.3) for its immediately preceding taxation year and the taxable capital employed in Canada (within the meaning assigned by section 181.2 or 181.3) of each associated corporation for the associated corporation’s last taxation year that ended in the last calendar year that ended before the end of the particular taxation year, or

    • (b) in any other case, the lesser of $40 million and the amount by which the taxable capital amount exceeds $10 million; (plafond de revenu admissible)

    refundable investment tax credit

    refundable investment tax credit of a taxpayer for a taxation year means, in the case of a taxpayer who is

    • (a) a qualifying corporation for the year,

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

    • (c) a trust each beneficiary of which is a person referred to in paragraph (a) or (b),

    an amount equal to 40% of the amount, if any, by which

    • (d) the total of all amounts included in computing the taxpayer’s investment tax credit at the end of the year

      • (i) in respect of property (other than qualified small-business property) acquired, or a qualified expenditure (other than an expenditure in respect of which an amount is included under paragraph (f) in computing the taxpayer’s refundable investment tax credit for the year) incurred, by the taxpayer in the year, or

      • (ii) because of paragraph (b) of the definition investment tax credit in subsection 127(9) in respect of a property (other than qualified small-business property) acquired or a qualified expenditure (other than an expenditure in respect of which an amount is included under paragraph (f) in computing the taxpayer’s refundable investment tax credit for the year) incurred

    exceeds

    • (e) the total of

      • (i) the portion of the total of all amounts deducted under subsection 127(5) for the year or a preceding taxation year (other than an amount deemed by subsection 127.1(3) to be so deducted for the year) that can reasonably be considered to be in respect of the total determined under paragraph (d), and

      • (ii) the portion of the total of all amounts required by subsection 127(6) or 127(7) to be deducted in computing the taxpayer’s investment tax credit at the end of the year that can reasonably be considered to be in respect of the total determined under paragraph (d),

    plus where the taxpayer is a qualifying corporation (other than an excluded corporation) for the year, the amount, if any, by which

    • (f) the total of

      • (i) the portion of the amount required by subsection 127(10.1) to be added in computing the taxpayer’s investment tax credit at the end of the year that is in respect of qualified expenditures incurred by the taxpayer in the year, and

      • (ii) all amounts determined under paragraph (a.1) of the definition investment tax credit in subsection 127(9) in respect of expenditures for which an amount is included in subparagraph (i)

    exceeds

    • (g) the total of

      • (i) the portion of the total of all amounts deducted by the taxpayer under subsection 127(5) for the year or a preceding taxation year (other than an amount deemed by subsection 127.1(3) to be so deducted for the year) that can reasonably be considered to be in respect of the total determined under paragraph (f), and

      • (ii) the portion of the total of all amounts required by subsection 127(6) to be deducted in computing the taxpayer’s investment tax credit at the end of the year that can reasonably be considered to be in respect of the total determined under paragraph (f). (crédit d’impôt à l’investissement remboursable)

  • Marginal note:Addition to refundable investment tax credit

    (2.01) In the case of a taxpayer that is a Canadian-controlled private corporation other than a qualifying corporation or an excluded corporation, the refundable investment tax credit of the taxpayer for a taxation year is the amount, if any, by which

    • (a) the total of

      • (i) the portion of the amount required by subsection 127(10.1) to be added in computing the taxpayer’s investment tax credit at the end of the year that is in respect of qualified expenditures incurred by the taxpayer in the year, and

      • (ii) all amounts determined under paragraph (a.1) of the definition investment tax credit in subsection 127(9) in respect of expenditures for which an amount is included in subparagraph (i)

    exceeds

    • (b) the total of

      • (i) the portion of the total of all amounts deducted by the taxpayer under subsection 127(5) for the year or a preceding taxation year (other than an amount deemed by subsection (3) to have been so deducted for the year) that can reasonably be considered to be in respect of the total determined under paragraph (a), and

      • (ii) the portion of the total of all amounts required by subsection 127(6) to be deducted in computing the taxpayer’s investment tax credit at the end of the year that can reasonably be considered to be in respect of the total determined under paragraph (a).

  • Marginal note:Application of s. 127(9)

    (2.1) The definitions in subsection 127(9) apply to this section.

  • Marginal note:Refundable investment tax credit — associated CCPCs

    (2.2) If a particular Canadian-controlled private corporation is associated with another corporation in circumstances where those corporations would not be associated if the Act were read without reference to paragraph 256(1.2)(a), the particular corporation has issued shares to one or more persons who have been issued shares by the other corporation and there is at least one shareholder of the particular corporation who is not a shareholder of the other corporation or one shareholder of the other corporation who is not a shareholder of the particular corporation, the particular corporation is not associated with the other corporation for the purpose of calculating that portion of the particular corporation’s refundable investment tax credit that is in respect of qualified expenditures.

  • Marginal note:Application of subsection (2.2)

    (2.3) Subsection (2.2) applies to the particular corporation and the other corporation referred to in that subsection only if the Minister is satisfied that

    • (a) the particular corporation and the other corporation are not otherwise associated under this Act; and

    • (b) the existence of one or more shareholders of the particular corporation who is not a shareholder of the other corporation, or the existence of one or more shareholders of the other corporation who is not a shareholder of the particular corporation, is not for the purpose of satisfying the requirements of subsection (2.2) or 127(10.22).

  • Marginal note:Deemed deduction

    (3) For the purposes of this Act, the amount deemed under subsection 127.1(1) to have been paid by a taxpayer for a taxation year shall be deemed to have been deducted by the taxpayer under subsection 127(5) for the year.

  • Marginal note:Qualifying income limit determined in certain cases

    (4) For the purpose of the definition of qualifying corporation in subsection (2), where a Canadian-controlled private corporation has a taxation year that is less than 51 weeks, the taxable income of the corporation for the year shall be determined by multiplying that amount by the ratio that 365 is of the number of days in that 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. 127.1
  • 1994, c. 8, s. 16
  • 1995, c. 3, s. 38
  • 1996, c. 21, s. 31
  • 1997, c. 25, s. 36
  • 1998, c. 19, s. 147
  • 2005, c. 19, s. 29
  • 2009, c. 2, s. 41
  • 2012, c. 31, s. 28
  • 2013, c. 40, s. 58

Marginal note:Share-purchase tax credit

  •  (1) There may be deducted from the tax otherwise payable under this Part by a taxpayer for a taxation year an amount not exceeding the total of

    • (a) the taxpayer’s share-purchase tax credit for the year, and

    • (b) the taxpayer’s unused share-purchase tax credit for the taxation year immediately following the year.

  • Marginal note:Persons exempt from tax

    (2) Where a taxpayer who was throughout a taxation year a person described in any of paragraphs 149(1)(e) to (y) files with the taxpayer’s return of income under this Part for the year a prescribed form containing prescribed information, the taxpayer shall be deemed to have paid, on the day on which the return is filed, an amount, on account of the taxpayer’s tax under this Part for the year, equal to the taxpayer’s share-purchase tax credit for the year.

  • Marginal note:Trust

    (3) Where, in a particular taxation year of a taxpayer who is a beneficiary under a trust, an amount is included in computing the share-purchase tax credit of the trust for its taxation year ending in that particular taxation year, the trust may, in its return of income for its taxation year ending in that particular taxation year, designate as attributable to the taxpayer such portion of that amount

    • (a) as may, having regard to all the circumstances (including the terms and conditions of the trust arrangement), reasonably be considered to be attributable to the taxpayer, and

    • (b) as was not designated by the trust in respect of any other beneficiary of that trust,

    and, where the trust so designates such a portion, an amount equal to that portion shall be

    • (c) added in computing the share-purchase tax credit of the taxpayer for the particular taxation year, and

    • (d) deducted in computing the share-purchase tax credit of the trust for its taxation year ending in the particular taxation year.

  • Marginal note:Exclusion of certain trusts

    (3.1) For the purposes of subsection 127.2(3), a trust does not include a trust that is

    • (a) governed by an employee benefit plan or a revoked deferred profit sharing plan; or

    • (b) exempt from tax under section 149.

  • Marginal note:Partnership

    (4) Where, in a taxation year of a taxpayer who is a member of a partnership, an amount is included in computing the share-purchase tax credit of the partnership for its fiscal period ending in that year, such portion of that amount as may reasonably be considered to be the taxpayer’s share thereof shall be

    • (a) added in computing the share-purchase tax credit of the taxpayer for that year; and

    • (b) deducted in computing the share-purchase tax credit of the partnership for that fiscal period.

  • Marginal note:Cooperative corporation

    (5) Where at any particular time in a taxation year a taxpayer that is a cooperative corporation (within the meaning assigned by subsection 136(2)) has, as required by subsection 135(3), deducted or withheld an amount from a payment made by it to any person pursuant to an allocation in proportion to patronage, the taxpayer may deduct from the amount otherwise required by subsection 135(3) to be remitted to the Receiver General, an amount not exceeding the amount, if any, by which

    • (a) the amount that would, but for this subsection, be its share-purchase tax credit for the taxation year in which it made the payment if that year had ended immediately before the particular time

    exceeds

    • (b) the total of all amounts each of which is the amount deducted by virtue of this subsection from any amount otherwise required to be remitted by subsection 135(3) in respect of payments made by it before the particular time and in the taxation year,

    and the amount, if any, so deducted from the amount otherwise required to be remitted by subsection 135(3) shall be

    • (c) deducted in computing the share-purchase tax credit of the taxpayer for the taxation year, and

    • (d) deemed to have been remitted by the taxpayer to the Receiver General on account of tax under this Part of the person to whom that payment was made.

  • Marginal note:Definitions

    (6) In this section,

    share-purchase tax credit

    share-purchase tax credit of a taxpayer for a taxation year means the amount determined by the formula

    (A + B) - C

    where

    A
    is the total of all amounts each of which is an amount designated by a corporation under subsection 192(4) in respect of a share acquired by the taxpayer in the year where the taxpayer is the first person, other than a broker or dealer in securities, to be a registered holder,
    B
    is the total of all amounts each of which is an amount required by subsection 127.2(3) or (4) to be added in computing the taxpayer’s share-purchase tax credit for the year, and
    C
    is the total of all amounts each of which is an amount required by subsection 127.2(3), (4) or (5) to be deducted in computing the taxpayer’s share-purchase tax credit for the year; (crédit d’impôt à l’achat d’actions)
    unused share-purchase tax credit

    unused share-purchase tax credit of a taxpayer for a taxation year means the amount determined by the formula

    A - (B + C)

    where

    A
    is the taxpayer’s share-purchase tax credit for the year,
    B
    is the taxpayer’s tax otherwise payable under this Part for the year, the amount deemed by subsection 127.2(2) to have been paid on account of the taxpayer’s tax payable under this Part for the year or, where Division E.1 is applicable to the taxpayer for the year, the amount, if any, by which the taxpayer’s tax otherwise payable under this Part for the year exceeds the taxpayer’s minimum amount for the year determined under section 127.51, as the case may be, and
    C
    is the taxpayer’s refundable Part VII tax on hand at the end of the year. (partie inutilisée du crédit d’impôt à l’achat d’actions)
  • Marginal note:Definition of tax otherwise payable

    (7) In this section, tax otherwise payable under this Part by a taxpayer means the amount that would, but for this section and section 120.1, be the tax payable under this Part by the taxpayer.

  • Marginal note:Deemed cost of acquisition

    (8) For the purposes of this Act, where, at any time in a taxation year, a taxpayer has acquired a share and is the first registered holder of the share, other than a broker or dealer in securities, and an amount is, at any time, designated by a corporation under subsection 192(4) in respect of the share, the following rules apply:

    • (a) the taxpayer shall be deemed to have acquired the share at a cost to the taxpayer equal to the amount by which

      • (i) its cost to the taxpayer as otherwise determined

      exceeds

      • (ii) the amount so designated in respect of the share; and

    • (b) where the amount determined under subparagraph 127.2(8)(a)(ii) exceeds the amount determined under subparagraph 127.2(8)(a)(i), the excess shall

      • (i) where the share is a capital property to the taxpayer, be deemed to be a capital gain of the taxpayer for the year from the disposition of that property, and

      • (ii) in any other case, be included in computing the income of the taxpayer for the year,

      and the cost to the taxpayer of the share shall be deemed to be nil.

  • Marginal note:Partnership

    (9) For the purposes of this section and subsection 193(5), a partnership shall be deemed to be a person and its taxation year shall be deemed to be its fiscal period.

  • Marginal note:Election re first holder

    (10) Where a share of a public corporation has been lawfully distributed to the public in accordance with a prospectus, registration statement or similar document filed with a public authority in Canada pursuant to and in accordance with the law of Canada or of any province, and, where required by law, accepted for filing by such a public authority, the corporation, if it has designated an amount under subsection 192(4) in respect of the share, may, in the prescribed form required to be filed under that subsection, elect that, for the purposes of this section, the first person, other than a broker or dealer in securities, to have acquired the share (and no other person) shall be considered to be the first person to be a registered holder of the share.

  • Marginal note:Calculation of consideration

    (11) For greater certainty,

    • (a) for the purposes of this section and Part VII, the amount of consideration for which a share is acquired and issued includes the amount of any consideration for the designation under subsection 192(4) in respect of the share; and

    • (b) the amount received by a corporation as consideration for a designation under subsection 192(4) in respect of a share issued by it shall not be included in computing its income.

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • 1984, c. 1, s. 73, c. 45, s. 45
  • 1988, c. 55, s. 108
 
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