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

Marginal note:Scientific research and experimental development tax credit

• 127.3 (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 the taxpayer’s

  • (a) scientific research and experimental development tax credit for the year, and

  • (b) unused scientific research and experimental development tax credit for the taxation year immediately following the year.

• Marginal note:Definitions

  (2) In this section,

  scientific research and experimental development tax credit

  scientific research and experimental development tax credit of a taxpayer for a taxation year means the amount determined by the formula

  A - B

  where

  A

  is the total of all amounts each of which is an amount equal to

  • (a) where the taxpayer is a corporation, 50%, or

  • (b) where the taxpayer is an individual other than a trust, 34%

  of an amount designated by a corporation under subsection 194(4) in respect of

  • (c) 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 thereof,

  • (d) a bond, debenture, bill, note, mortgage, hypothecary claim or similar obligation (in this section referred to as a “debt obligation”) 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 of that debt obligation, or

  • (e) a right acquired by the taxpayer in the year where the taxpayer is the first person, other than a broker or dealer in securities, to have acquired that right, and

  B

  is the total of all amounts required by subsection 127.3(5) to be deducted in computing the taxpayer’s scientific research and experimental development tax credit for the year; (crédit d’impôt pour des activités de recherche scientifique et de développement expérimental)

  unused scientific research and experimental development tax credit

  unused scientific research and experimental development 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 scientific research and experimental development tax credit for the year,

  B

  is the taxpayer’s tax otherwise 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 VIII tax on hand at the end of the year. (partie inutilisée du crédit d’impôt pour des activités de recherche scientifique et de développement expérimental)

• Marginal note:Trust

  (3) For the purposes of this section and section 53, where a taxpayer, other than a broker or dealer in securities, is a beneficiary under a trust and an amount is designated by a corporation under subsection 194(4) in respect of a share, debt obligation or right acquired by the trust in a taxation year of the trust where the trust is the first person, other than a broker or dealer in securities, to be a registered holder of the share or debt obligation or to have acquired the right, as the case may be,

  • (a) the trust may, in its return of income for that year, specify such portion of that amount 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 as was not specified by the trust in respect of any other beneficiary under that trust; and

  • (b) the portion specified pursuant to paragraph 127.3(3)(a) shall be deemed to be an amount designated on the last day of that year by the corporation under subsection 194(4) in respect of a share, debt obligation or right, as the case may be, acquired by the taxpayer on that day where the taxpayer is the first person, other than a broker or dealer in securities, to be a registered holder of the share or debt obligation or to have acquired the right, as the case may be.

• Marginal note:Exclusion of certain trusts

  (3.1) For the purposes of subsection (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) For the purposes of this section and section 53, where a taxpayer, other than a broker or dealer in securities, is a member of a partnership and an amount is designated by a corporation under subsection 194(4) in respect of a share, debt obligation or right acquired by the partnership in a taxation year of the partnership where the partnership is the first person, other than a broker or dealer in securities, to be a registered holder of the share or debt obligation or to have acquired the right, as the case may be, such portion of that amount as may reasonably be considered to be the taxpayer’s share thereof shall be deemed to be an amount designated on the last day of that year by the corporation under subsection 194(4) in respect of a share, debt obligation or right, as the case may be, acquired by the taxpayer on that day where the taxpayer is the first person, other than a broker or dealer in securities, to be a registered holder of the share or debt obligation or to have acquired the right, as the case may be.

• 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 scientific research and experimental development 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 scientific research and experimental development 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:Deduction from cost

  (6) For the purposes of this Act, where at any time in a taxation year a taxpayer has acquired a share, debt obligation or right and is the first registered holder of the share or debt obligation or the first person to have acquired the right, as the case may be, other than a broker or dealer in securities, and an amount is, at any time, designated by a corporation under subsection 194(4), in respect of the share, debt obligation or right, the following rules apply:

  • (a) the taxpayer shall be deemed to have acquired the share, debt obligation or right at a cost to the taxpayer equal to the amount by which

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

    exceeds

    • (ii) 50% of the amount so designated in respect thereof; and

  • (b) where the amount determined under subparagraph 127.3(6)(a)(ii) exceeds the amount determined under subparagraph (a)(i), the excess shall

    • (i) where the share, debt obligation or right, as the case may be, 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, debt obligation or right, as the case may be, shall be deemed to be nil.

• Marginal note:Partnership

  (7) For the purposes of this section and Part VIII, a partnership shall be deemed to be a person and its taxation year shall be deemed to be its fiscal period.

• Definition of tax otherwise payable

  (8) 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:Election re first holder

  (9) Where a share or debt obligation 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 that public authority, the corporation, if it has designated an amount under subsection 194(4) in respect of the share or debt obligation, 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 or debt obligation, as the case may be, (and no other person) shall be considered to be the first person to be a registered holder thereof.

• Marginal note:Calculation of consideration

  (10) For greater certainty,

  • (a) for the purposes of this section and Part VIII, the amount of consideration for which a share, debt obligation or right was acquired and issued or granted includes the amount of any consideration for the designation under subsection 194(4) in respect of the share, debt obligation or right; and

  • (b) the amount received by a corporation as consideration for a designation under subsection 194(4) in respect of a share, debt obligation or right issued or granted by it shall not be included in computing its income.

Marginal note:Definitions

• 127.4 (1) In this section,

  approved share

  approved share means a share of the capital stock of a prescribed labour-sponsored venture capital corporation, but does not include

  • (a) a share issued by a registered labour-sponsored venture capital corporation the venture capital business of which was discontinued before the time of the issue, and

  • (b) a share issued by a prescribed labour-sponsored venture capital corporation that is not a registered labour-sponsored venture capital corporation if, at the time of the issue, no province under the laws (described in section 6701 of the Income Tax Regulations) of which the corporation is registered or established provides assistance in respect of the acquisition of the share; (action approuvée)

  labour-sponsored funds tax credit

  labour-sponsored funds tax credit[Repealed, 1997, c. 25, s. 37]

  net cost

  net cost to an individual of an approved share means the amount, if any, by which

  • (a) the amount of consideration paid by the individual to acquire or subscribe for the share

  exceeds

  • (b) the amount of any assistance (other than an amount included in computing a tax credit of the individual in respect of that share) provided or to be provided by a government, municipality or any public authority in respect of, or for the acquisition of, the share; (coût net)

  original acquisition

  original acquisition of a share means the first acquisition of the share, except that

  • (a) where the share is irrevocably subscribed and paid for before its first acquisition, subject to paragraphs (b) and (c), the original acquisition of the share is the first transaction whereby the share is irrevocably subscribed and paid for,

  • (b) a share is deemed never to have been acquired and never to have been irrevocably subscribed and paid for unless the first registered holder of the share is, subject to paragraph (c), the first person to either acquire or irrevocably subscribe and pay for the share, and

  • (c) for the purpose of this definition, a broker or dealer in securities acting in that capacity is deemed never to acquire or subscribe and pay for the share and never to be the registered holder of the share; (acquisition initiale)

  qualifying trust

  qualifying trust for an individual in respect of a share means

  • (a) a trust governed by a registered retirement savings plan, under which the individual is the annuitant, that is not a spousal or common-law partner plan (in this definition having the meaning assigned by subsection 146(1)) in relation to another individual,

  • (b) a trust governed by a registered retirement savings plan, under which the individual or the individual’s spouse or common-law partner is the annuitant, that is a spousal or common-law partner plan in relation to the individual or the individual’s spouse or common-law partner, if the individual and no other person claims a deduction under subsection (2) in respect of the share, or

  • (c) a trust governed by a TFSA of which the individual is the holder; (fiducie admissible)

  tax otherwise payable

  tax otherwise payable by an individual means the amount that, but for this section, would be the individual’s tax payable under this Part. (impôt payable par ailleurs)

• Marginal note:Amalgamations or mergers

  (1.1) Subsections 204.8(2) and 204.85(3) apply for the purpose of this section.

• Marginal note:Deduction of labour-sponsored funds tax credit

  (2) There may be deducted from the tax otherwise payable by an individual (other than a trust) for a taxation year such amount as the individual claims not exceeding the individual’s labour-sponsored funds tax credit limit for the year.

• (3) and (4) [Repealed, 1999, c. 22, s. 49]

• Marginal note:Labour-sponsored funds tax credit limit

  (5) For the purpose of subsection 127.4(2), an individual’s labour-sponsored funds tax credit limit for a taxation year is the lesser of

  • (a) $750, and

  • (b) the amount, if any, by which

    • (i) the total of all amounts each of which is the individual’s labour-sponsored funds tax credit in respect of an original acquisition in the year or in the first 60 days of the following taxation year of an approved share

    exceeds

    • (ii) the portion of the total described in subparagraph 127.4(5)(b)(i) that was deducted under subsection 127.4(2) in computing the individual’s tax payable under this Part for the preceding taxation year.

• Marginal note:Deemed original acquisition

  (5.1) If the Minister so directs, an original acquisition of an approved share that occurs in an individual’s taxation year (other than in the first 60 days of the year) is deemed for the purpose of this section to have occurred at the beginning of the year and not at the time it actually occurred.

• Marginal note:Labour-sponsored funds tax credit

  (6) For the purpose of subsection (5), an individual’s labour-sponsored funds tax credit in respect of an original acquisition of an approved share is equal to the least of

  • (a) 15% of the net cost to the individual (or to a qualifying trust for the individual in respect of the share) for the original acquisition of the share by the individual or by the trust, if the share is a share of a prescribed labour-sponsored venture capital corporation (other than a corporation that is a prescribed labour-sponsored venture capital corporation solely because it is a registered labour-sponsored venture capital corporation),

  • (a.1) 5% of the net cost to the individual (or to a qualifying trust for the individual in respect of the share) for the original acquisition of the share by the individual or by the trust, if

    • (i) the taxation year for which a claim is made under subsection (2) in respect of the original acquisition is 2016, and

    • (ii) the share is a share of a corporation that is a prescribed labour-sponsored venture capital corporation solely because it is a registered labour-sponsored venture capital corporation,

  • (a.2) nil, if

    • (i) the taxation year for which a claim is made under subsection (2) in respect of the original acquisition is after 2016, and

    • (ii) the share is a share of a corporation that is a prescribed labour-sponsored venture capital corporation solely because it is a registered labour-sponsored venture capital corporation,

  • (b) nil, where the share was issued by a registered labour-sponsored venture capital corporation unless the information return described in paragraph 204.81(6)(c) is filed with the individual’s return of income for the taxation year for which a claim is made under subsection 127.4(2) in respect of the original acquisition of the share (other than a return of income filed under subsection 70(2), paragraph 104(23)(d) or 128(2)(e) or subsection 150(4)),

  • (c) nil, where the individual dies after December 5, 1996 and before the original acquisition of the share,

  • (d) nil, where a payment in respect of the disposition of the share has been made under section 211.9, and

  • (e) nil, if the share is issued in exchange for another share of the corporation.