Income Tax Act
Marginal note:Exploration and development expenses of principal-business corporations
66 (1) A principal-business corporation may deduct, in computing its income for a taxation year, the lesser of
(a) the total of such of its Canadian exploration and development expenses as were incurred by it before the end of the taxation year, to the extent that they were not deductible in computing income for a previous taxation year, and
(b) of that total, an amount equal to its income for the taxation year if no deduction were allowed under this subsection, section 65 or subsection 66.1(2), minus the deductions allowed for the year by sections 112 and 113.
Marginal note:Expenses of special product corporations
(2) A corporation (other than a principal-business corporation the principal business of which is described in paragraph (a) or (b) of the definition principal-business corporation in subsection 66(15)), whose principal business is the production or marketing of sodium chloride or potash or whose business includes manufacturing products the manufacturing of which involves processing sodium chloride or potash, may deduct, in computing its income for a taxation year, the drilling and exploration expenses incurred by it in the year and before May 7, 1974 on or in respect of exploring or drilling for halite or sylvite.
Marginal note:Expenses of other taxpayers
(3) A taxpayer other than a principal-business corporation may deduct, in computing the taxpayer’s income for a taxation year, the total of the taxpayer’s Canadian exploration and development expenses to the extent that they were not deducted in computing the taxpayer’s income for a preceding taxation year.
Marginal note:Foreign exploration and development expenses
(4) A taxpayer who is resident throughout a taxation year in Canada may deduct, in computing the taxpayer’s income for that taxation year, the lesser of
(a) the amount, if any, by which
(i) the total of the foreign exploration and development expenses incurred by the taxpayer
(A) before the end of the year,
(B) at a time at which the taxpayer was resident in Canada, and
(C) where the taxpayer became resident in Canada before the end of the year, after the last time (before the end of the year) that the taxpayer became resident in Canada,
exceeds the total of
(ii) such of the expenses described in subparagraph 66(4)(a)(i) as were deductible in computing the taxpayer’s income for a preceding taxation year, and
(iii) all amounts by which the amount described in this paragraph in respect of the taxpayer is required because of subsection 80(8) to be reduced at or before the end of the year, and
(b) of that total, the greater of
(i) the amount, if any, claimed by the taxpayer not exceeding 10% of the amount determined under paragraph (a) in respect of the taxpayer for the year, and
(ii) the total of
(A) the part of the taxpayer’s income for the year, determined without reference to this subsection and subsection 66.21(4), that can reasonably be regarded as attributable to
(I) the production of petroleum or natural gas from natural accumulations outside Canada or from oil or gas wells outside Canada, or
(II) the production of minerals from mines outside Canada,
(B) the taxpayer’s income for the year from royalties in respect of a natural accumulation of petroleum or natural gas outside Canada, an oil or gas well outside Canada or a mine outside Canada, determined without reference to this subsection and subsection 66.21(4), and
(C) all amounts each of which is an amount, in respect of a foreign resource property that has been disposed of by the taxpayer, equal to the amount, if any, by which
(I) the amount included in computing the taxpayer’s income for the year by reason of subsection 59(1) in respect of the disposition
exceeds
(II) the total of all amounts each of which is that portion of an amount deducted under subsection 66.7(2) in computing the taxpayer’s income for the year that
1 can reasonably be considered to be in respect of the foreign resource property, and
2 cannot reasonably be considered to have reduced the amount otherwise determined under clause (A) or (B) in respect of the taxpayer for the year.
Marginal note:Country-by-country FEDE allocations
(4.1) For greater certainty, the portion of an amount deducted under subsection (4) in computing a taxpayer’s income for a taxation year that can reasonably be considered to be in respect of specified foreign exploration and development expenses of the taxpayer in respect of a country is considered to apply to a source in that country.
Marginal note:Method of allocation
(4.2) For the purpose of subsection (4.1), where a taxpayer has incurred specified foreign exploration and development expenses in respect of two or more countries, an allocation to each of those countries for a taxation year shall be determined in a manner that is
(a) reasonable having regard to all the circumstances, including the level and timing of
(i) the taxpayer’s specified foreign exploration and development expenses in respect of the country, and
(ii) the profits or gains to which those expenses relate; and
(b) not inconsistent with the allocation made under subsection (4.1) for the preceding taxation year.
Marginal note:FEDE deductions where change of individual’s residence
(4.3) Where at any time in a taxation year an individual becomes or ceases to be resident in Canada,
(a) subsection (4) applies to the individual as if the year were the period or periods in the year throughout which the individual was resident in Canada; and
(b) for the purpose of applying subsection (4), subsection (13.1) does not apply to the individual for the year.
Marginal note:Dealers
(5) Subsections (3) and (4) and sections 59, 64, 66.1, 66.2, 66.21, 66.4 and 66.7 do not apply in computing the income for a taxation year of a taxpayer (other than a principal-business corporation) whose business includes trading or dealing in rights, licences or privileges to explore for, drill for or take minerals, petroleum, natural gas or other related hydrocarbons.
(10) to (10.3) [Repealed, 1997, c. 25, s. 13(1)]
Marginal note:Idem
(10.4) Where a taxpayer has, after April 19, 1983, made a payment or loan described in paragraph (a) of the definition agreed portion in subsection 66(15) to a joint exploration corporation in respect of which the corporation has at any time renounced in favour of the taxpayer any Canadian exploration expenses, Canadian development expenses or Canadian oil and gas property expenses (in this subsection referred to as “resource expenses”) under subsection 66(10.1), 66(10.2) or 66(10.3), the following rules apply:
(a) where the taxpayer receives as consideration for the payment or loan property that is capital property to the taxpayer,
(i) there shall be deducted in computing the adjusted cost base to the taxpayer of the property at any time the amount of any resource expenses renounced by the corporation in the taxpayer’s favour in respect of the loan or payment at or before that time,
(ii) there shall be deducted in computing the adjusted cost base to the taxpayer at any time of any property for which the property, or any property substituted therefor, was exchanged the amount of any resource expenses renounced by the corporation in the taxpayer’s favour in respect of the loan or payment at or before that time (except to the extent such amount has been deducted under subparagraph 66(10.4)(a)(i)), and
(iii) the amount of any resource expenses renounced by the corporation in favour of the taxpayer in respect of the loan or payment at any time, except to the extent that the renunciation of those expenses results in a deduction under subparagraph 66(10.4)(a)(i) or 66(10.4)(a)(ii), shall, for the purposes of this Act, be deemed to be a capital gain of the taxpayer from the disposition by the taxpayer of property at that time;
(b) where the taxpayer receives as consideration for the payment or loan property that is not capital property to the taxpayer,
(i) there shall be deducted in computing the cost to the taxpayer of the property at any time the amount of any resource expenses renounced by the corporation in the taxpayer’s favour in respect of the loan or payment at or before that time, and
(ii) there shall be included in computing the amount referred to in paragraph 59(3.2)(d) for a taxation year the amount of any resource expenses renounced by the corporation in the taxpayer’s favour in respect of the loan or payment at any time in the year, except to the extent that the amount has been deducted under subparagraph 66(10.4)(b)(i); and
(c) where the taxpayer does not receive any property as consideration for the payment, there shall be included in computing the amount referred to in paragraph 59(3.2)(e) for a taxation year the amount of any resource expenses renounced by the corporation in the taxpayer’s favour in respect of the payment in the year, except to the extent that the amount has been deducted from the adjusted cost base to the taxpayer of shares of the corporation under paragraph 53(2)(f.1) in respect of the payment.
Marginal note:Acquisition of control
(11) Where after March 31, 1977 and before November 13, 1981 control of a corporation has been acquired by a person or persons who did not control the corporation at the time when it last ceased to carry on active business,
(a) the amount by which the Canadian exploration and development expenses incurred by the corporation before it last ceased to carry on active business exceeds the total of all amounts otherwise deductible by the corporation in respect of Canadian exploration and development expenses in computing its income for taxation years ending before control was so acquired, shall be deemed to have been deductible under this section by the corporation in computing its income for taxation years ending before control was so acquired;
(b) the amount by which the cumulative Canadian exploration expense of the corporation at the time it last ceased to carry on active business exceeds the total of amounts otherwise deducted under section 66.1 in computing its income for taxation years ending after that time and before control was so acquired, shall be deemed to have been deducted under that section by the corporation in computing its income for taxation years ending before control was so acquired;
(c) the amount by which the cumulative Canadian development expense of the corporation at the time it last ceased to carry on active business exceeds the total of amounts otherwise deducted under section 66.2 in computing its income for taxation years ending after that time and before control was so acquired, shall be deemed to have been deducted under that section by the corporation in computing its income for taxation years ending before control was so acquired;
(d) the amount by which the cumulative Canadian oil and gas property expense of the corporation at the time it last ceased to carry on active business exceeds the total of amounts otherwise deducted under section 66.4 in computing its income for taxation years ending after that time and before control was so acquired, shall be deemed to have been deducted under that section by the corporation in computing its income for taxation years ending before control was so acquired; and
(e) the amount by which the foreign exploration and development expenses incurred by the corporation before it last ceased to carry on active business exceeds the total of all amounts otherwise deductible by the corporation in respect of foreign exploration and development expenses in computing its income for taxation years ending before control was so acquired, shall be deemed to have been deductible under this section by the corporation in computing its income for taxation years ending before control was so acquired.
Marginal note:Control
(11.3) For the purposes of subsections 66(11) and 66.7(10), where a corporation acquired control of another corporation after November 12, 1981 and before 1983 by reason of the acquisition of shares of the other corporation pursuant to an agreement in writing concluded on or before November 12, 1981, it shall be deemed to have acquired that control on or before November 12, 1981.
Marginal note:Loss restriction event
(11.4) If
(a) at any time a taxpayer is subject to a loss restriction event,
(b) within the 12-month period that ended immediately before that time, the taxpayer, a partnership of which the taxpayer was a majority-interest partner or a trust of which the taxpayer was a majority-interest beneficiary (as defined in subsection 251.1(3)) acquired a Canadian resource property or a foreign resource property (other than a property that was held, by the taxpayer, partnership or trust or by a person that would be affiliated with the taxpayer if section 251.1 were read without reference to the definition controlled in subsection 251.1(3), throughout the period that began immediately before the 12-month period began and ended at the time the property was acquired by the taxpayer, partnership or trust), and
(c) immediately before the 12-month period began the taxpayer, partnership or trust was not, or would not be if it were a corporation, a principal-business corporation,
for the purposes of subsection (4) and sections 66.2, 66.21 and 66.4, except as those provisions apply for the purposes of section 66.7, the property is deemed not to have been acquired by the taxpayer, partnership or trust, as the case may be, before that time, except that if the property has been disposed of by it before that time and not reacquired by it before that time, the property is deemed to have been acquired by the taxpayer, partnership or trust, as the case may be, immediately before it disposed of the property.
Marginal note:Affiliation — subsection (11.4)
(11.5) For the purposes of subsection (11.4), if the taxpayer referred to in that subsection was formed or created in the 12-month period referred to in that subsection, the taxpayer is deemed to have been, throughout the period that began immediately before the 12-month period and ended immediately after it was formed or created,
(a) in existence; and
(b) affiliated with every person with whom it was affiliated (otherwise than because of a right referred to in paragraph 251(5)(b)) throughout the period that began when it was formed or created and that ended immediately before the time at which the taxpayer was subject to the loss restriction event referred to in that subsection.
Marginal note:Trust loss restriction event — successor
(11.6) If at any time a trust is subject to a loss restriction event,
(a) for the purposes of the provisions of this Act relating to deductions in respect of drilling and exploration expenses, prospecting, exploration and development expenses, Canadian exploration and development expenses, foreign resource pool expenses, Canadian exploration expenses, Canadian development expenses and Canadian oil and gas property expenses (in this subsection referred to as “resource expenses”) incurred by the trust before that time, the following rules apply:
(i) the trust is (other than for purposes of this subsection and subsections (11.4), (11.5) and 66.7(10) to (11)) deemed to be a corporation that
(A) after that time is a successor (within the meaning assigned by any of subsections 66.7(1), (2) and (2.3) to (5)), and
(B) at that time, acquired all the properties held by the trust immediately before that time from an original owner of those properties,
(ii) if the trust did not hold a foreign resource property immediately before that time, the trust is deemed to have owned a foreign resource property immediately before that time,
(iii) a joint election is deemed to have been filed in accordance with subsections 66.7(7) and (8) in respect of the acquisition described in clause (i)(B),
(iv) the resource expenses incurred by the trust before that time are deemed to have been incurred by an original owner of the properties and not by the trust,
(v) the original owner is deemed to have been resident in Canada at every time before that time at which the trust was resident in Canada,
(vi) if at that time the trust is a member of a partnership and the property of the partnership includes a Canadian resource property or a foreign resource property,
(A) for the purposes of clause (i)(B), the trust is deemed to have held immediately before that time that portion of the partnership’s property at that time that is equal to the trust’s percentage share of the total of amounts that would be paid to all members of the partnership if it were wound up at that time, and
(B) for the purposes of clauses 66.7(1)(b)(i)(C) and (2)(b)(i)(B), subparagraph 66.7(2.3)(b)(i) and clauses 66.7(3)(b)(i)(C), (4)(b)(i)(B) and (5)(b)(i)(B) for a taxation year that ends after that time, the lesser of the following amounts is deemed to be income of the trust for the year that can reasonably be regarded as attributable to production from the property:
(I) the trust’s share of the part of the income of the partnership for the fiscal period of the partnership that ends in the year that can reasonably be regarded as attributable to the production from the property, and
(II) an amount that would be determined under subclause (I) for the year if the trust’s share of the income of the partnership for the fiscal period of the partnership that ends in the year were determined on the basis of the percentage share referred to in clause (A), and
(vii) if after that time the trust disposes of property that was at that time held by the trust to another person, subsections 66.7(1) to (5) do not apply in respect of the acquisition by the other person of the property; and
(b) if before that time, the trust or a partnership of which the trust was a member acquired a property that is a Canadian resource property, a foreign resource property or an interest in a partnership and it can reasonably be considered that one of the main purposes of the acquisition is to avoid any limitation provided in any of subsections 66.7(1) to (5) on the deduction in respect of any expenses incurred by the trust, then the trust or the partnership, as the case may be, is deemed, for the purposes of applying those subsections to or in respect of the trust, not to have acquired the property.
Marginal note:Computation of exploration and development expenses
(12) In computing a taxpayer’s Canadian exploration and development expenses,
(a) there shall be deducted any amount paid to the taxpayer before May 7, 1974
(i) and after 1971 under the Northern Mineral Exploration Assistance Regulations made under an appropriation Act that provides for payments in respect of the Northern Mineral Grants Program, or
(ii) pursuant to any agreement entered into between the taxpayer and Her Majesty in right of Canada under the Northern Mineral Grants Program or the Development Program of the Department of Indian Affairs and Northern Development, to the extent that the amount has been expended by the taxpayer as or on account of Canadian exploration and development expenses incurred by the taxpayer; and
(b) there shall be included any amount, except an amount in respect of interest, paid by the taxpayer after 1971 and before May 7, 1974 under the Regulations referred to in subparagraph 66(12)(a)(i) to Her Majesty in right of Canada.
Marginal note:Limitations of Canadian exploration and development expenses
(12.1) Except as expressly otherwise provided in this Act,
(a) if as a result of a transaction occurring after May 6, 1974 an amount has become receivable by a taxpayer at a particular time in a taxation year and the consideration given by the taxpayer therefor was property (other than a share or a Canadian resource property, or an interest in or a right to — or, for civil law, a right in or to — the share or the property) or services, the original cost of which to the taxpayer may reasonably be regarded as having been primarily Canadian exploration and development expenses of the taxpayer (or would have been so regarded if they had been incurred by the taxpayer after 1971 and before May 7, 1974) or a Canadian exploration expense, there shall at that time be included in the amount determined for G in the definition cumulative Canadian exploration expense in subsection 66.1(6) in respect of the taxpayer the amount that became receivable by the taxpayer at that time; and
(b) if as a result of a transaction occurring after May 6, 1974 an amount has become receivable by a taxpayer at a particular time in a taxation year and the consideration given by the taxpayer therefor was property (other than a share or a Canadian resource property, or an interest in or a right to — or, for civil law, a right in or to — the share or the property) or services, the original cost of which to the taxpayer may reasonably be regarded as having been primarily a Canadian development expense, there shall at that time be included in the amount determined for G in the definition cumulative Canadian development expense in subsection 66.2(5) in respect of the taxpayer the amount that became receivable by the taxpayer at that time.
Marginal note:Unitized oil or gas field in Canada
(12.2) Where, pursuant to an agreement between a taxpayer and another person to unitize an oil or gas field in Canada, an amount has become receivable by the taxpayer at a particular time after May 6, 1974 from that other person in respect of Canadian exploration expense incurred by the taxpayer or Canadian exploration and development expenses incurred by the taxpayer (or expenses that would have been Canadian exploration and development expenses if they had been incurred by the taxpayer after 1971 and before May 7, 1974) in respect of that field or any part thereof, the following rules apply:
(a) there shall, at that time, be included by the taxpayer in the amount determined for G in the definition cumulative Canadian exploration expense in subsection 66.1(6) the amount that became receivable by the taxpayer; and
(b) there shall, at that time, be included by the other person in the amount referred to in paragraph (c) of the definition Canadian exploration expense in subsection 66.1(6) the amount that became payable by that person.
Marginal note:Idem
(12.3) Where, pursuant to an agreement between a taxpayer and another person to unitize an oil or gas field in Canada, an amount has become receivable by the taxpayer at a particular time after May 6, 1974 from that other person in respect of Canadian development expense incurred by the taxpayer in respect of that field or any part thereof, the following rules apply:
(a) there shall, at that time, be included by the taxpayer in the amount determined for G in the definition cumulative Canadian development expense in subsection 66.2(5) the amount that became receivable by the taxpayer; and
(b) there shall, at that time, be included by the other person in the amount referred to in paragraph (a) of the definition Canadian development expense in subsection 66.2(5) the amount that became payable by that person.
Marginal note:Limitation of FEDE
(12.4) Where, as a result of a transaction that occurs after May 6, 1974, an amount becomes receivable by a taxpayer at a particular time in a taxation year and the consideration given by the taxpayer for the amount receivable is property (other than a foreign resource property) or services, the original cost of which to the taxpayer can reasonably be regarded as having been primarily foreign exploration and development expenses of the taxpayer (or would have been so regarded if they had been incurred by the taxpayer after 1971 and the definition foreign exploration and development expenses in subsection (15) were read without reference to paragraph (k) of that definition), the following rules apply:
(a) in computing the taxpayer’s foreign exploration and development expenses at that time, there shall be deducted the amount receivable by the taxpayer;
(b) where the amount receivable exceeds the total of the taxpayer’s foreign exploration and development expenses incurred before that time to the extent that those expenses were not deducted or deductible, as the case may be, in computing the taxpayer’s income for a preceding taxation year, there shall be included in the amount referred to in paragraph 59(3.2)(a) the amount, if any, by which the amount receivable exceeds the total of
(i) the taxpayer’s foreign exploration and development expenses incurred before that time to the extent that those expenses were not deducted or deductible, as the case may be, in computing the taxpayer’s income for a preceding taxation year, and
(ii) the amount, designated by the taxpayer in prescribed form filed with the taxpayer’s return of income for the year, not exceeding the portion of the amount receivable for which the consideration given by the taxpayer was property (other than a foreign resource property) or services, the original cost of which to the taxpayer can reasonably be regarded as having been primarily
(A) specified foreign exploration and development expenses in respect of a country, or
(B) foreign resource expenses in respect of a country; and
(c) where an amount is included in the amount referred to in paragraph 59(3.2)(a) by virtue of paragraph 66(12.4)(b), the total of the taxpayer’s foreign exploration and development expenses at that time shall be deemed to be nil.
Marginal note:Limitations of foreign resource expenses
(12.41) Where a particular amount described in subsection (12.4) becomes receivable by a taxpayer at a particular time, there shall at that time be included in the value determined for G in the definition cumulative foreign resource expense in subsection 66.21(1) in respect of the taxpayer and a country the amount designated under subparagraph (12.4)(b)(ii) by the taxpayer in respect of the particular amount and the country.
Marginal note:Partnerships
(12.42) For the purposes of subsections (12.4) and (12.41), where a person or partnership is a member of a particular partnership and a particular amount described in subsection (12.4) becomes receivable by the particular partnership in a fiscal period of the particular partnership,
(a) the member’s share of the particular amount is deemed to be an amount that became receivable by the member at the end of the fiscal period; and
(b) the amount deemed by paragraph (a) to be an amount receivable by the member is deemed to be an amount
(i) that is described in subsection (12.4) in respect of the member, and
(ii) that has the same attributes for the member as it did for the particular partnership.
Marginal note:Unitized oil or gas field in Canada
(12.5) Where, pursuant to an agreement between a taxpayer and another person to unitize an oil or gas field in Canada, an amount has become receivable by the taxpayer at a particular time from that other person in respect of Canadian oil and gas property expense incurred by the taxpayer in respect of that field or any part thereof, the following rules apply:
(a) there shall, at that time, be included by the taxpayer in the amount determined for G in the definition cumulative Canadian oil and gas property expense in subsection 66.4(5) the amount that became receivable by the taxpayer; and
(b) there shall, at that time, be included by the other person in the amount referred to in paragraph (a) of the definition Canadian oil and gas property expense in subsection 66.4(5) the amount that became payable by that person.
Marginal note:Canadian exploration expenses to flow-through shareholder
(12.6) If a person gave consideration under an agreement to a corporation for the issue of a flow-through share of the corporation and, in the period that begins on the day on which the agreement was made and ends 24 months after the end of the month that includes that day, the corporation incurred Canadian exploration expenses (other than an expense deemed by subsection 66.1(9) to be a Canadian exploration expense of the corporation), the corporation may, after it complies with subsection (12.68) in respect of the share and before March of the first calendar year that begins after the period, renounce, effective on the day on which the renunciation is made or on an earlier day set out in the form prescribed for the purpose of subsection (12.7), to the person in respect of the share the amount, if any, by which the portion of those expenses that was incurred on or before the effective date of the renunciation (which portion is in this subsection referred to as the “specified expenses”) exceeds the total of
(a) the assistance that the corporation has received, is entitled to receive or can reasonably be expected to receive at any time, and that can reasonably be related to the specified expenses or to Canadian exploration activities to which the specified expenses relate (other than assistance that can reasonably be related to expenses referred to in paragraph 66(12.6)(b) or 66(12.6)(b.1)),
(b) all specified expenses that are prescribed Canadian exploration and development overhead expenses of the corporation,
(b.1) all specified expenses each of which is a cost of, or for the use of, seismic data
(i) that had been acquired (otherwise than as a consequence of performing work that resulted in the creation of the data) by any other person before the cost was incurred,
(ii) in respect of which a right to use had been acquired by any other person before the cost was incurred, or
(iii) all or substantially all of which resulted from work performed more than one year before the cost was incurred, and
(c) the total of amounts that are renounced on or before the date on which the renunciation is made by any other renunciation under this subsection in respect of those expenses,
but not in any case
(d) exceeding the amount, if any, by which the consideration for the share exceeds the total of other amounts renounced under this subsection or subsection 66(12.601) or 66(12.62) in respect of the share on or before the day on which the renunciation is made, or
(e) exceeding the amount, if any, by which the cumulative Canadian exploration expense of the corporation on the effective date of the renunciation computed before taking into account any amounts renounced under this subsection on the date on which the renunciation is made, exceeds the total of all amounts renounced under this subsection in respect of any other share
(i) on the date on which the renunciation is made, and
(ii) effective on or before the effective date of the renunciation.
Marginal note:COVID-19 – time extension to 36 months
(12.6001) The references to “24 months” in subsections (12.6) and (12.62) are to be read as references to “36 months” in respect of agreements entered into after February 2018 and before 2021.
Marginal note:Flow-through share rules for first $1 million of Canadian development expenses
(12.601) Where
(a) a person gave consideration under an agreement to a corporation for the issue of a flow-through share of the corporation,
(a.1) the corporation’s taxable capital amount at the time the consideration was given was not more than $15,000,000, and
(b) during the period beginning on the particular day the agreement was entered into and ending on the earlier of December 31, 2018 and the day that is 24 months after the end of the month that included that particular day, the corporation incurred Canadian development expenses (excluding expenses that are deemed by subsection (12.66) to have been incurred on December 31, 2018) described in paragraph (a) or (b) of the definition Canadian development expense in subsection 66.2(5) or that would be described in paragraph (f) of that definition if the words “paragraphs (a) to (e)” in that paragraph were read as “paragraphs (a) and (b)”,
the corporation may, after it complies with subsection 66(12.68) in respect of the share and before March of the first calendar year that begins after that period, renounce, effective on the day on which the renunciation is made or on an earlier day set out in the form prescribed for the purposes of subsection 66(12.7), to the person in respect of the share the amount, if any, by which the part of those expenses that was incurred on or before the effective date of the renunciation (which part is in this subsection referred to as the “specified expenses”) exceeds the total of
(c) the assistance that the corporation has received, is entitled to receive, or can reasonably be expected to receive at any time, and that can reasonably be related to the specified expenses or Canadian development activities to which the specified expenses relate (other than assistance that can reasonably be related to expenses referred to in paragraph 66(12.601)(d)),
(d) all specified expenses that are prescribed Canadian exploration and development overhead expenses of the corporation, and
(e) all amounts that are renounced on or before the day on which the renunciation is made by any other renunciation under this subsection or subsection 66(12.62) in respect of those expenses.
Marginal note:Taxable capital amount
(12.6011) For the purpose of subsection 66(12.601), a particular corporation’s taxable capital amount at any time is the total of
(a) its taxable capital employed in Canada for its last taxation year that ended more than 30 days before that time, and
(b) the total of all amounts each of which is the taxable capital employed in Canada of another corporation associated at that time with the particular corporation for the other corporation’s last taxation year that ended more than 30 days before that time.
Marginal note:Taxable capital employed in Canada
(12.6012) For the purpose of determining a corporation’s taxable capital amount at a particular time under subsection 66(12.6011) and for the purpose of subsection 66(12.6013), a particular corporation’s taxable capital employed in Canada for a taxation year is the amount that would be its taxable capital employed in Canada for the year, determined in accordance with subsection 181.2(1) and without reference to the portion of its investment allowance (as determined under subsection 181.2(4)) that is attributable to shares of the capital stock of, dividends payable by, or indebtedness of, another corporation that
(a) was not associated with the particular corporation at the particular time; and
(b) was associated with the particular corporation at the end of the particular corporation’s last taxation year that ended more than 30 days before that time.
Marginal note:Amalgamations and mergers
(12.6013) For the purpose of determining the taxable capital amount at a particular time under subsection 66(12.6011) of any corporation and for the purpose of this subsection, a particular corporation that was created as a consequence of an amalgamation or merger of other corporations (each of which is in this subsection referred to as a “predecessor corporation”), and that does not have a taxation year that ended more than 30 days before the particular time, is deemed to have taxable capital employed in Canada for a taxation year that ended more than 30 days before the particular time equal to the total of all amounts each of which is the taxable capital employed in Canada of a predecessor corporation for its last taxation year that ended more than 30 days before the particular time.
Marginal note:Idem
(12.602) A corporation shall be deemed not to have renounced any particular amount under subsection 66(12.601) in respect of a share where
(a) the particular amount exceeds the amount, if any, by which the consideration for the share exceeds the total of other amounts renounced in respect of the share under subsection 66(12.6), 66(12.601) or 66(12.62) on or before the day on which the renunciation is made;
(b) the particular amount exceeds the amount, if any, by which
(i) the cumulative Canadian development expense of the corporation on the effective date of the renunciation, computed before taking into account any amounts renounced under subsection 66(12.601) on the day on which the renunciation is made,
exceeds
(ii) the total of all amounts renounced under subsection 66(12.601) by the corporation in respect of any other share
(A) on the day on which the renunciation is made, and
(B) effective on or before the effective date of the renunciation; or
(c) the particular amount relates Canadian development expenses incurred by the corporation in a calendar year and the total amounts renounced, on or before the day on which the renunciation is made, under subsection 66(12.601) in respect of
(i) Canadian development expenses incurred by the corporation in that calendar year, or
(ii) Canadian development expenses incurred in that calendar year by another corporation associated with the corporation at the time the other corporation incurred such expenses
exceeds $1,000,000.
Marginal note:Effect of renunciation
(12.61) Subject to subsections 66(12.69) to 66(12.702), where under subsection 66(12.6) or 66(12.601) a corporation renounces an amount to a person,
(a) the Canadian exploration expenses or Canadian development expenses to which the amount relates shall be deemed to be Canadian exploration expenses incurred in that amount by the person on the effective date of the renunciation; and
(b) the Canadian exploration expenses or Canadian development expenses to which the amount relates shall, except for the purposes of that renunciation, be deemed on and after the effective date of the renunciation never to have been Canadian exploration expenses or Canadian development expenses incurred by the corporation.
Marginal note:Canadian development expenses to flow-through shareholder
(12.62) Where a person gave consideration under an agreement to a corporation for the issue of a flow-through share of the corporation and, in the period that begins on the day the agreement was made and ends 24 months after the end of the month that includes that day, the corporation incurred Canadian development expenses, the corporation may, after it complies with subsection 66(12.68) in respect of the share and before March of the first calendar year that begins after the period, renounce, effective on the day on which the renunciation is made or on an earlier day set out in the form prescribed for the purposes of subsection 66(12.7), to the person in respect of the share the amount, if any, by which the part of those expenses that was incurred on or before the effective date of the renunciation (which part is in this subsection referred to as the “specified expenses”) exceeds the total of
(a) the assistance that the corporation has received, is entitled to receive, or can reasonably be expected to receive at any time, and that can reasonably be related to the specified expenses or to Canadian development activities to which the specified expenses relate (other than assistance that can reasonably be related to expenses referred to in paragraph 66(12.62)(b) or 66(12.62)(b.1)),
(b) all specified expenses that are prescribed Canadian exploration and development overhead expenses of the corporation,
(b.1) all specified expenses that are described in paragraph (e) of the definition Canadian development expense in subsection 66.2(5) or that are described in paragraph (f) of that definition because of the reference in the latter paragraph to paragraph 66(12.62)(e), and
(c) the total of amounts that are renounced on or before the day on which the renunciation is made by any other renunciation under this subsection or subsection 66(12.601) in respect of those expenses,
but not in any case
(d) exceeding the amount, if any, by which the consideration for the share exceeds the total of other amounts renounced in respect of the share under this subsection or subsection 66(12.6) or 66(12.601) on or before the day on which the renunciation is made, or
(e) exceeding the amount, if any, by which the cumulative Canadian development expense of the corporation on the effective date of the renunciation computed before taking into account any amounts renounced under this subsection on the date on which the renunciation is made, exceeds the total of all amounts renounced under this subsection in respect of any other share
(i) on the date on which the renunciation is made, and
(ii) effective on or before the effective date of the renunciation.
Marginal note:Effect of renunciation
(12.63) Subject to subsections (12.69) to (12.702), if under subsection (12.62) a corporation renounces an amount to a person,
(a) the Canadian development expenses to which the amount relates shall be deemed to be Canadian development expenses incurred in that amount by the person on the effective date of the renunciation; and
(b) the Canadian development expenses to which the amount relates shall, except for the purposes of that renunciation, be deemed on and after the effective date of the renunciation never to have been Canadian development expenses incurred by the corporation.
(12.64) and (12.65) [Repealed, 1997, c. 25, s. 13(15)]
Marginal note:Expenses in the first 60 days of year
(12.66) Where
(a) a corporation that issues a flow-through share to a person under an agreement incurs, in a particular calendar year, Canadian exploration expenses or Canadian development expenses,
(a.1) the agreement was made in the preceding calendar year,
(b) the expenses
(i) are described in paragraph (a), (d), (f) or (g.1) of the definition Canadian exploration expense in subsection 66.1(6) or paragraph (a) or (b) of the definition Canadian development expense in subsection 66.2(5),
(ii) would be described in paragraph (h) of the definition Canadian exploration expense in subsection 66.1(6) if the reference to “paragraphs (a) to (d) and (f) to (g.4)” in that paragraph were read as “paragraphs (a), (d), (f) and (g.1)”, or
(iii) would be described in paragraph (f) of the definition Canadian development expense in subsection 66.2(5) if the words “any of paragraphs 66(12.66)(a) to (e)” were read as “paragraph 66(12.66)(a) or (b)”,
(c) before the end of that preceding year the person paid the consideration in money for the share to be issued,
(d) the corporation and the person deal with each other at arm’s length throughout the particular year, and
(e) in January, February or March of the particular year, the corporation renounces an amount in respect of the expenses to the person in respect of the share in accordance with subsection 66(12.6) or 66(12.601) and the effective date of the renunciation is the last day of that preceding year,
the corporation is, for the purpose of subsection (12.6), or of subsection (12.601) and paragraph (12.602)(b), as the case may be, deemed to have incurred the expenses on the last day of that preceding year.
Marginal note:Restrictions on renunciation
(12.67) A corporation shall be deemed
(a) not to have renounced under any of subsections 66(12.6), 66(12.601) and 66(12.62) any expenses that are deemed to have been incurred by it because of a renunciation under this section by another corporation that is not related to it;
(b) not to have renounced under subsection 66(12.601) to a trust, corporation or partnership any Canadian development expenses (other than expenses renounced to another corporation that renounces under subsection 66(12.6) any Canadian exploration expense deemed to have been incurred by it because of the renunciation under subsection 66(12.601)) if, in respect of the renunciation under subsection 66(12.601), it has a prohibited relationship with the trust, corporation or partnership;
(c) not to have renounced under subsection 66(12.601) any Canadian development expenses deemed to have been incurred by it because of a renunciation under subsection 66(12.62); and
(d) not to have renounced under subsection 66(12.6) to a particular trust, corporation or partnership any Canadian exploration expenses (other than expenses ultimately renounced by another corporation under subsection 66(12.6) to an individual (other than a trust) or to a trust, corporation or partnership with which that other corporation does not have, in respect of that ultimate renunciation, a prohibited relationship) deemed to be incurred by it because of a renunciation under subsection 66(12.601) if, in respect of the renunciation under subsection 66(12.6), it has a prohibited relationship with the particular trust, corporation or partnership.
Marginal note:Prohibited relationship
(12.671) For the purposes of subsection 66(12.67), where a trust, corporation (in paragraph 66(12.671)(b) referred to as the “shareholder corporation”) or partnership, as the case may be, gave consideration under a particular agreement for the issue of a flow-through share of a particular corporation, the particular corporation has, in respect of a renunciation under subsection 66(12.6) or 66(12.601) in respect of the share, a prohibited relationship
(a) with the trust if, at any time after the particular agreement was entered into and before the share is issued to the trust, the particular corporation or any corporation related to the particular corporation is beneficially interested in the trust;
(b) with the shareholder corporation if, immediately before the particular agreement was entered into, the shareholder corporation was related to the particular corporation; or
(c) with the partnership if any part of the amount renounced would, but for subsection 66(12.7001), be included, because of paragraph (h) of the definition Canadian exploration expense in subsection 66.1(6), in the Canadian exploration expense of
(i) the particular corporation, or
(ii) any other corporation that, at any time
(A) after the particular agreement was entered into, and
(B) before that part of the amount renounced would, but for this paragraph, be incurred,
would, if flow-through shares issued by the particular corporation under agreements entered into at the same time as or after the time the particular agreement was entered into were disregarded, be related to the particular corporation.
Marginal note:Filing selling instruments
(12.68) A corporation that agrees to issue or prepares a selling instrument in respect of flow-through shares shall file with the Minister a prescribed form together with a copy of the selling instrument or agreement to issue the shares on or before the last day of the month following the earlier of
(a) the month in which the agreement to issue the shares is entered into, and
(b) the month in which the selling instrument is first delivered to a potential investor,
and the Minister shall thereupon assign an identification number to the form and notify the corporation of the number.
Marginal note:Filing re partners
(12.69) Where, in a fiscal period of a partnership, an expense is incurred by the partnership as a consequence of a renunciation of an amount under subsection 66(12.6), 66(12.601) or 66(12.62), the partnership shall, before the end of the third month that begins after the end of the period, file with the Minister a prescribed form identifying the share of the expense attributable to each member of the partnership at the end of the period.
Marginal note:Consequences of failure to file
(12.6901) Where a partnership fails to file a prescribed form as required under subsection 66(12.69) in respect of an expense, except for the purpose of subsection 66(12.69) the partnership is deemed not to have incurred the expense.
Marginal note:Filing re assistance
(12.691) Where a partnership receives or becomes entitled to receive assistance as an agent for its members or former members at a particular time in respect of any Canadian exploration expense or Canadian development expense that is or, but for paragraph 66(12.61)(b) or 66(12.63)(b), would be incurred by a corporation, the following rules apply:
(a) where the entitlement of any such member or former member to any part of the assistance is known by the partnership as of the end of the partnership’s first fiscal period ending after the particular time and that part of the assistance was not required to be reported under paragraph 66(12.691)(b) in respect of a calendar year ending before the end of that fiscal period, the partnership shall, on or before the last day of the third month following the end of that fiscal period, file with the Minister a prescribed form indicating the share of that part of the assistance paid to each of those members or former members before the end of that fiscal period or to which each of those members or former members is entitled at the end of that fiscal period;
(b) where the entitlement of any of those members or former members to any part of the assistance is known by the partnership as of the end of a calendar year that ends after the particular time and that part of the assistance was not required to be reported under paragraph 66(12.691)(a) in respect of a fiscal period ending at or before the end of that calendar year, or under this paragraph in respect of a preceding calendar year, the partnership shall, on or before the last day of the third month following the end of that calendar year, file with the Minister a prescribed form indicating the share of that part of the assistance paid to each of those members or former members before the end of that fiscal period or to which each of those members or former members is entitled at the end of that calendar year; and
(c) where a prescribed form required to be filed under paragraph 66(12.691)(a) or 66(12.691)(b) is not so filed, the part of that expense relating to the assistance required to be reported in the prescribed form shall be deemed not to have been incurred by the partnership.
Marginal note:Filing re renunciation
(12.7) Where a corporation renounces an amount in respect of Canadian exploration expenses or Canadian development expenses under subsection 66(12.6), 66(12.601) or 66(12.62), the corporation shall file a prescribed form in respect of the renunciation with the Minister before the end of the first month after the month in which the renunciation is made.
Marginal note:Consequences of failure to file
(12.7001) Where a corporation fails to file a prescribed form as required under subsection 66(12.7) in respect of a renunciation of an amount, subsections 66(12.61) and 66(12.63) do not apply in respect of the amount.
Marginal note:Filing re assistance
(12.701) Where a corporation receives or becomes entitled to receive assistance as an agent in respect of any Canadian exploration expense or Canadian development expense that is or, but for paragraph 66(12.61)(b) or 66(12.63)(b), would be incurred by the corporation, the corporation shall, before the end of the first month after the particular month in which it first becomes known to the corporation that a person that holds a flow-through share of the corporation is entitled to a share of any part of the assistance, file with the Minister a prescribed form identifying the share of the assistance to which each of those persons is entitled at the end of the particular month.
Marginal note:Consequences of failure to file
(12.702) Where a corporation fails to file a prescribed form as required under subsection 66(12.701) in respect of assistance, except for the purpose of subsection 66(12.701) the Canadian exploration expense or Canadian development expense to which the assistance relates is deemed not to have been incurred by the corporation.
Marginal note:Restriction on renunciation
(12.71) A corporation may renounce an amount under subsection 66(12.6), 66(12.601) or 66(12.62) in respect of Canadian exploration expenses or Canadian development expenses incurred by it only to the extent that, but for the renunciation, it would be entitled to a deduction in respect of the expenses in computing its income.
(12.72) [Repealed, 1997, c. 25, s. 13(23)]
Marginal note:Reductions in renunciations
(12.73) Where an amount that a corporation purports to renounce to a person under subsection 66(12.6), 66(12.601) or 66(12.62) exceeds the amount that it can renounce to the person under that subsection,
(a) the corporation shall file a statement with the Minister in prescribed form where
(i) the Minister sends a notice in writing to the corporation demanding the statement, or
(ii) the excess arose as a consequence of a renunciation purported to be made in a calendar year under subsection 66(12.6) or 66(12.601) because of the application of subsection 66(12.66) and, at the end of the year, the corporation knew or ought to have known of all or part of the excess;
(b) where subparagraph 66(12.73)(a)(i) applies, the statement shall be filed not later than 30 days after the Minister sends a notice in writing to the corporation demanding the statement;
(c) where subparagraph 66(12.73)(a)(ii) applies, the statement shall be filed before March of the calendar year following the calendar year in which the purported renunciation was made;
(d) except for the purpose of Part XII.6, any amount that is purported to have been so renounced to any person is deemed, after the statement is filed with the Minister, to have always been reduced by the portion of the excess identified in the statement in respect of that purported renunciation; and
(e) where a corporation fails in the statement to apply the excess fully to reduce one or more purported renunciations, the Minister may at any time reduce the total amount purported to be renounced by the corporation to one or more persons by the amount of the unapplied excess in which case, except for the purpose of Part XII.6, the amount purported to have been so renounced to a person is deemed, after that time, always to have been reduced by the portion of the unapplied excess allocated by the Minister in respect of that person.
Marginal note:COVID-19 – agreements in 2019 or 2020
(12.731) If an agreement is entered into in 2019 or 2020 by a corporation to issue flow-through shares of the corporation,
(a) the reference in subparagraph (12.73)(a)(ii) to “at the end of the year” is to be read as a reference to “at the end of the subsequent year”; and
(b) the reference in paragraph (12.73)(c) to “before March of the calendar year” is to be read as a reference to “before March of the second calendar year”.
Marginal note:Late filed forms
(12.74) A corporation or partnership may file with the Minister a document referred to in subsection 66(12.68), 66(12.69), 66(12.691), 66(12.7) or 66(12.701) after the particular day on or before which the document is required to be filed under the applicable subsection and the document shall, except for the purposes of this subsection and subsection 66(12.75), be deemed to have been filed on the day on or before which it was required to be filed if
(a) it is filed
(i) on or before the day that is 90 days after the particular day, or
(ii) after the day that is 90 days after the particular day where, in the opinion of the Minister, the circumstances are such that it would be just and equitable to permit the document to be filed; and
(b) the corporation or partnership, as the case may be, pays to the Receiver General at the time of filing a penalty in respect of the late filing.
Marginal note:Late renunciation
(12.741) Where a corporation purports to renounce an amount under subsection 66(12.6), 66(12.601) or 66(12.62) after the period in which the corporation was entitled to renounce the amount, the amount is deemed, except for the purposes of this subsection and subsections 66(12.7) and 66(12.75), to have been renounced at the end of the period if
(a) the corporation purports to renounce the amount
(i) on or before the day that is 90 days after the end of that period, or
(ii) after the day that is 90 days after the end of that period where, in the opinion of the Minister, the circumstances are such that it would be just and equitable that the amount be renounced; and
(b) the corporation pays to the Receiver General a penalty in respect of the renunciation not more than 90 days after the renunciation.
Marginal note:Penalty
(12.75) For the purposes of subsections 66(12.74) and 66(12.741), the penalty in respect of the late filing of a document referred to in subsection 66(12.68), 66(12.69), 66(12.691), 66(12.7) or 66(12.701) or in respect of a renunciation referred to in subsection 66(12.741) is the lesser of $15,000 and
(a) where the penalty is in respect of the late filing of a document referred to in subsection 66(12.68), 66(12.69) or 66(12.7), the greater of
(i) $100, and
(ii) 1/4 of 1% of the maximum amount in respect of the Canadian exploration expenses and Canadian development expenses renounced or attributed or to be renounced or attributed as set out in the document;
(b) where the penalty is in respect of the late filing of a document referred to in subsection 66(12.691) or 66(12.701), the greater of
(i) $100, and
(ii) 1/4 of 1% of the assistance reported in the document; and
(c) where the penalty is in respect of a renunciation referred to in subsection 66(12.741), the greater of
(i) $100, and
(ii) 1/4 of 1% of the amount of the renunciation.
Marginal note:Limitation
(13) Where a taxpayer has incurred an outlay or expense in respect of which a deduction from income is authorized under more than one provision of this section or section 66.1, 66.2 or 66.4, the taxpayer is not entitled to make the deduction under more than one provision but is entitled to select the provision under which to make the deduction.
Marginal note:Short taxation year
(13.1) If a taxpayer has a taxation year that is less than 51 weeks, the amount determined in respect of the year under each of subparagraph (4)(b)(i), paragraphs 66.2(2)(c) and (d), subparagraph (b)(i) of the definition global foreign resource limit in subsection 66.21(1), subparagraph 66.21(4)(a)(i), clause 66.21(4)(a)(ii)(B) and paragraphs 66.4(2)(b) and (c) and 66.7(2.3)(a), (4)(a) and (5)(a) shall not exceed that proportion of the amount otherwise determined that the number of days in the year is of 365.
Marginal note:Amounts deemed deductible under this Subdivision
(14) For the purposes of section 3, any amount deductible under the Income Tax Application Rules in respect of this subsection shall be deemed to be deductible under this Subdivision.
Marginal note:Designation respecting Canadian exploration expense
(14.1) A corporation may designate for a taxation year, by filing a designation in prescribed form with the Minister on or before the day on or before which it is required to file a return of its income for the year under section 150, a particular amount not exceeding the lesser of
(a) its prescribed Canadian exploration expense for the year, and
(b) its cumulative Canadian exploration expense at the end of the year,
and the particular amount shall be added in computing its cumulative offset account immediately before the end of the year and deducted in computing its cumulative Canadian exploration expense at any time after the end of the year.
Marginal note:Designation respecting cumulative Canadian development expense
(14.2) A corporation may designate for a taxation year, by filing a designation in prescribed form with the Minister on or before the day on or before which it is required to file a return of its income for the year under section 150, a particular amount not exceeding
(a) where a deduction has been made under subsection 66.2(2) in computing its income for the year, the lesser of
(i) 30% of its prescribed Canadian development expense for the year, and
(ii) the amount, if any, by which 30% of its cumulative Canadian development expense at the end of the year exceeds the amount, if any, deducted for the year under subsection 66.2(2) in computing its income for the year, or
(b) where a deduction has not been made under subsection 66.2(2) in computing its income for the year, the lesser of
(i) 30% of its prescribed Canadian development expense for the year, and
(ii) 30% of the amount, if any, of its adjusted cumulative Canadian development expense at the end of the year,
and the particular amount shall be added in computing its cumulative offset account immediately before the end of the year and deducted in computing its cumulative Canadian development expense at any time after the end of the year.
Definition of adjusted cumulative Canadian development expense
(14.3) For the purposes of paragraph 66(14.2)(b), adjusted cumulative Canadian development expense of a corporation at the end of a taxation year means the amount, if any, that would be its cumulative Canadian development expense at the end of the year, if no Canadian resource property were disposed of by it in the year.
Marginal note:Special cases
(14.4) Where, in the opinion of the Minister, the circumstances of a case are such that it would be just and equitable
(a) to permit a designation under subsection 66(14.1) or 66(14.2) to be filed after the day on or before which it is required by that subsection to be filed, or
(b) to permit a designation filed under subsection 66(14.1) or 66(14.2) to be amended,
the Minister may permit the designation to be filed or amended, as the case may be, after that day, and where the designation or amendment is filed pursuant to that permission, it shall be deemed to have been filed on the day on or before which it was required to be filed if
(c) it is filed with the Minister in prescribed form, and
(d) the corporation filing it pays to the Receiver General at the time of filing the penalty in respect of it,
and where a designation is amended under this subsection, the designation to which the amendment is made shall be deemed not to have been effective.
Marginal note:Penalty for late designation
(14.5) For the purposes of this section, the penalty in respect of a designation or amended designation referred to in paragraph 66(14.4)(a) or 66(14.4)(b) is the lesser of
(a) an amount determined by the formula
0.0025 × A × B
where
- A
- is
(i) in the case of a late-filed designation, the amount designated therein, and
(ii) in the case of an amended designation, the amount, if any, by which the amount designated in the designation being amended differs from the amount designated in the amended designation, and
- B
- is the number of months each of which is included in whole or in part in the period commencing on the day on or before which the designation was required to be filed under subsection 66(14.1) or 66(14.2), as the case may be, and ending on the day the late-filed designation or amended designation, as the case may be, is filed, and
(b) an amount, not exceeding $8,000, equal to the product obtained by multiplying $100 by the number of months each of which is included in whole or in part in the period referred to in the description of B in paragraph 66(14.5)(a).
Marginal note:Deduction of carved-out income
(14.6) A taxpayer may deduct in computing the taxpayer’s income under this Part for a taxation year, an amount equal to the total of the taxpayer’s carved-out incomes for the year within the meaning assigned by subsection 209(1).
Marginal note:Definitions
(15) In this section,
- agreed portion
agreed portion in respect of a corporation that was a shareholder corporation of a joint exploration corporation means such amount as may be agreed on between the joint exploration corporation and the shareholder corporation not exceeding
(a) the total of all amounts each of which is a payment or loan referred to in paragraph (b) of the definition shareholder corporation in this subsection 66(15) except to the extent that the payment or loan was made by a shareholder corporation that was not a Canadian corporation and was used by the joint exploration corporation to acquire a Canadian resource property after December 11, 1979 from a shareholder corporation that was not a Canadian corporation) made by the shareholder corporation to the joint exploration corporation during the period it was a shareholder corporation of the joint exploration corporation,
minus
(b) the total of the amounts, if any, previously renounced by the joint exploration corporation under any of subsections 66(10) to 66(10.3) in favour of the shareholder corporation; (partie convenue)
- assistance
assistance means any amount, other than a prescribed amount, received or receivable at any time from a person or government, municipality or other public authority whether the amount is by way of a grant, subsidy, rebate, forgivable loan, deduction from royalty or tax, rebate of royalty or tax, investment allowance or any other form of assistance or benefit; (montant à titre d’aide)
- Canadian exploration and development expenses
Canadian exploration and development expenses incurred by a taxpayer means any expense incurred before May 7, 1974 that is
(a) any drilling or exploration expense, including any general geological or geophysical expense, incurred by the taxpayer after 1971 on or in respect of exploring or drilling for petroleum or natural gas in Canada,
(b) any prospecting, exploration or development expense incurred by the taxpayer after 1971 in searching for minerals in Canada,
(c) the cost to the taxpayer of any Canadian resource property acquired by the taxpayer after 1971,
(d) the taxpayer’s share of the Canadian exploration and development expenses incurred after 1971 by any association, partnership or syndicate in a fiscal period thereof, if at the end of that fiscal period the taxpayer was a member or partner thereof,
(e) any expense incurred by the taxpayer after 1971 pursuant to an agreement with a corporation under which the taxpayer incurred the expense solely in consideration for shares of the capital stock of the corporation issued to the taxpayer by the corporation or any interest in such shares or right thereto, to the extent that the expense was incurred as or on account of the cost of
(i) drilling or exploration activities, including any general geological or geophysical activities, in or in respect of exploring or drilling for petroleum or natural gas in Canada,
(ii) prospecting, exploration or development activities in searching for minerals in Canada, or
(iii) acquiring a Canadian resource property, and
(f) any annual payment made by the taxpayer for the preservation of a Canadian resource property,
but, for greater certainty, does not include
(g) any consideration given by the taxpayer for any share or any interest therein or right thereto, except as provided by paragraph (e), or
(h) any expense described in paragraph (e) incurred by another taxpayer to the extent that the expense was, by virtue of that paragraph, a Canadian exploration and development expense of that other taxpayer; (frais d’exploration et d’aménagement au Canada)
- Canadian resource property
Canadian resource property of a taxpayer means any property of the taxpayer that is
(a) any right, licence or privilege to explore for, drill for or take petroleum, natural gas or related hydrocarbons in Canada,
(b) any right, licence or privilege to
(i) store underground petroleum, natural gas or related hydrocarbons in Canada, or
(ii) prospect, explore, drill or mine for minerals in a mineral resource in Canada other than a bituminous sands deposit or an oil shale deposit,
(c) any oil or gas well in Canada or any real property or immovable in Canada the principal value of which depends on its petroleum, natural gas or related hydrocarbon content (not including any depreciable property),
(d) any right to a rental or royalty computed by reference to the amount or value of production from an oil or a gas well in Canada, or from a natural accumulation of petroleum, natural gas or a related hydrocarbon in Canada, if the payer of the rental or royalty has an interest in, or for civil law a right in, the well or accumulation, as the case may be, and 90% or more of the rental or royalty is payable out of, or from the proceeds of, the production from the well or accumulation,
(e) any right to a rental or royalty computed by reference to the amount or value of production from a mineral resource in Canada, other than a bituminous sands deposit or an oil shale deposit, if the payer of the rental or royalty has an interest in, or for civil law a right in, the mineral resource and 90% or more of the rental or royalty is payable out of, or from the proceeds of, the production from the mineral resource,
(f) any real property or immovable in Canada (not including any depreciable property) the principal value of which depends on its mineral resource content other than where the mineral resource is a bituminous sands deposit or an oil shale deposit,
(g) any right to or interest in — or, for civil law, any right to or in — any property described in any of paragraphs (a) to (e), other than a right or an interest that the taxpayer has because the taxpayer is a beneficiary under a trust or a member of a partnership, or
(h) an interest in real property described in paragraph (f) or a real right in an immovable described in that paragraph, other than an interest or a right that the taxpayer has because the taxpayer is a beneficiary under a trust or a member of a partnership; (avoir minier canadien)
- drilling or exploration expense
drilling or exploration expense incurred on or in respect of exploring or drilling for petroleum or natural gas includes any expense incurred on or in respect of
(a) drilling or converting a well for the disposal of waste liquids from a petroleum or natural gas well,
(b) drilling for water or gas for injection into a petroleum or natural gas formation, or
(c) drilling or converting a well for the injection of water or gas to assist in the recovery of petroleum or natural gas from another well; (frais d’exploration ou de forage)
- expense
expense, incurred before a particular time by a taxpayer,
(a) includes an amount designated by the taxpayer at that time under paragraph 98(3)(d) or (5)(d) of theIncome Tax Act, chapter 148 of the Revised Statutes of Canada, 1952, as a cost in respect of property that is a Canadian resource property or a foreign resource property,
but
(b) for greater certainty, does not include any amount paid or payable
(i) as consideration for services to be rendered after that time, or
(ii) as, on account or in lieu of payment of, or in satisfaction of, rent in respect of a period after that time; (dépenses)
- flow-through share
flow-through share means a share (other than a prescribed share) of the capital stock of a principal-business corporation, or a right (other than a prescribed right) to acquire a share of the capital stock of a principal-business corporation, issued to a person under an agreement in writing made between the person and the corporation under which the corporation, for consideration that does not include property to be exchanged or transferred by the person under the agreement in circumstances to which any of sections 51, 85, 85.1, 86 and 87 applies, agrees
(a) to incur, in the period that begins on the day on which the agreement was made and ends 24 months after the month that includes that day, Canadian exploration expenses or Canadian development expenses in an amount not less than the consideration for which the share or right is to be issued, and
(b) to renounce, in prescribed form and before March of the first calendar year that begins after that period, to the person in respect of the share or right, an amount in respect of the Canadian exploration expenses or Canadian development expenses so incurred by it not exceeding the consideration received by the corporation for the share or right; (action accréditive)
- foreign exploration and development expenses
foreign exploration and development expenses incurred by a taxpayer means
(a) any drilling or exploration expense, including any general geological or geophysical expense, incurred by the taxpayer after 1971 on or in respect of exploring or drilling for petroleum or natural gas outside Canada,
(b) any expense incurred by the taxpayer for the purpose of determining the existence, location, extent or quality of a mineral resource outside Canada, including any expense incurred in the course of
(i) prospecting,
(ii) carrying out geological, geophysical or geochemical surveys,
(iii) drilling by rotary, diamond, percussion or other method, or
(iv) trenching, digging test pits and preliminary sampling,
(c) the cost to the taxpayer of any foreign resource property acquired by him,
(d) subject to section 66.8, the taxpayer’s share of the foreign exploration and development expenses incurred after 1971 by a partnership in a fiscal period thereof, if at the end of that period the taxpayer was a member of the partnership, and
(e) any annual payment made by the taxpayer for the preservation of a foreign resource property;
but does not include
(f) any amount included at any time in the capital cost to the taxpayer of any depreciable property of a prescribed class,
(g) an expenditure incurred at any time after the commencement of production from a foreign resource property of the taxpayer in order to evaluate the feasibility of a method of recovery of petroleum, natural gas or related hydrocarbons from the portion of a natural reservoir to which the foreign resource property relates,
(h) an expenditure (other than a drilling expense) incurred at any time after the commencement of production from a foreign resource property of the taxpayer in order to assist in the recovery of petroleum, natural gas or related hydrocarbons from the portion of a natural reservoir to which the foreign resource property relates,
(i) an expenditure incurred at any time relating to the injection of any substance to assist in the recovery of petroleum, natural gas or related hydrocarbons from a natural reservoir,
(j) an expenditure that is the cost, or any part of the cost, to the taxpayer of any depreciable property of a prescribed class that was acquired after December 21, 2000,
(k) foreign resource expenses in respect of a country, or
(l) an expenditure made after February 27, 2000 by the taxpayer unless the expenditure was made
(i) pursuant to an agreement in writing made by the taxpayer before February 28, 2000,
(ii) for the acquisition of foreign resource property by the taxpayer, or
(iii) for the purpose of
(A) enhancing the value of foreign resource property that the taxpayer owned at the time the expenditure was incurred or that the taxpayer had a reasonable expectation of owning after that time, or
(B) assisting in evaluating whether a foreign resource property is to be acquired by the taxpayer; (frais d’exploration et d’aménagement à l’étranger)
- foreign resource property
foreign resource property of a taxpayer means any property that would be a Canadian resource property of the taxpayer if the definition Canadian resource property in this subsection were read as if the references therein to “in Canada” were references to “outside Canada”; (avoir minier étranger)
- joint exploration corporation
joint exploration corporation means a principal-business corporation that has not at any time since its incorporation had more than 10 shareholders, not including any individual holding a share for the sole purpose of qualifying as a director; (société d’exploration en commun)
- original owner
original owner of a Canadian resource property or a foreign resource property means a person
(a) who owned the property and disposed of it to a corporation that acquired it in circumstances in which subsection 29(25) of the Income Tax Application Rules or subsection 66.7(1), (2), (2.3), (3), (4) or (5) applies, or would apply if the corporation had continued to own the property, to the corporation in respect of the property, and
(b) who would, but for subsection 66.7(12), (13), (13.1) or (17), as the case may be, be entitled in computing that person’s income for a taxation year that ends after that person disposed of the property to a deduction under section 29 of the Income Tax Application Rules or subsection (2), (3) or (4), 66.1(2) or (3), 66.2(2), 66.21(4) or 66.4(2) of this Act in respect of expenses described in subparagraph 29(25)(c)(i) or (ii) of that Act, Canadian exploration and development expenses, foreign resource pool expenses, Canadian exploration expenses, Canadian development expenses or Canadian oil and gas property expenses incurred by the person before the person disposed of the property; (propriétaire obligé)
- outlay
outlay, made before a particular time by a taxpayer, has the meaning assigned to the expression expense by this subsection; (dépenses)
- predecessor owner
predecessor owner of a Canadian resource property or a foreign resource property means a corporation
(a) that acquired the property in circumstances in which subsection 29(25) of the Income Tax Application Rules or subsection 66.7(1), (2), (2.3), (3), (4) or (5) applies, or would apply if the corporation had continued to own the property, to the corporation in respect of the property,
(b) that disposed of the property to another corporation that acquired it in circumstances in which subsection 29(25) of the Income Tax Application Rules or subsection 66.7(1), (2), (2.3), (3), (4) or (5) applies, or would apply if the other corporation had continued to own the property, to the other corporation in respect of the property, and
(c) that would, but for subsection 66.7(14), (15), (15.1) or (17), as the case may be, be entitled in computing its income for a taxation year ending after it disposed of the property to a deduction under subsection 29(25) of the Income Tax Application Rules or subsection 66.7(1), (2), (2.3), (3), (4) or (5) in respect of expenses incurred by an original owner of the property; (propriétaire antérieur)
- principal-business corporation
principal-business corporation means a corporation the principal business of which is any of, or a combination of,
(a) the production, refining or marketing of petroleum, petroleum products or natural gas,
(a.1) exploring or drilling for petroleum or natural gas,
(b) mining or exploring for minerals,
(c) the processing of mineral ores for the purpose of recovering metals or minerals from the ores,
(d) the processing or marketing of metals or minerals that were recovered from mineral ores and that include metals or minerals recovered from mineral ores processed by the corporation,
(e) the fabrication of metals,
(f) the operation of a pipeline for the transmission of oil or gas,
(f.1) the production or marketing of calcium chloride, gypsum, kaolin, sodium chloride or potash,
(g) the manufacturing of products, where the manufacturing involves the processing of calcium chloride, gypsum, kaolin, sodium chloride or potash,
(h) the generation or distribution of energy, or the production of fuel, using property described in Class 43.1 or 43.2 of Schedule II to the Income Tax Regulations, and
(i) the development of projects for which it is reasonable to expect that at least 50% of the capital cost of the depreciable property to be used in each project would be the capital cost of property described in Class 43.1 or 43.2 of Schedule II to the Income Tax Regulations,
or a corporation all or substantially all of the assets of which are shares of the capital stock or indebtedness of one or more principal-business corporations that are related to the corporation (otherwise than because of a right referred to in paragraph 251(5)(b)), (société exploitant une entreprise principale)
- production
production from a Canadian resource property or a foreign resource property means
(a) petroleum, natural gas and related hydrocarbons produced from the property,
(b) heavy crude oil produced from the property processed to any stage that is not beyond the crude oil stage or its equivalent, (c) ore (other than iron ore or tar sands) produced from the property processed to any stage that is not beyond the prime metal stage or its equivalent,
(d) iron ore produced from the property processed to any stage that is not beyond the pellet stage or its equivalent,
(e) tar sands produced from the property processed to any stage that is not beyond the crude oil stage or its equivalent, and
(f) any rental or royalty from the property computed by reference to the amount or value of the production of petroleum, natural gas or related hydrocarbons or ore; (production)
- reserve amount
reserve amount of a corporation for a taxation year in respect of an owner or predecessor owner of a Canadian resource property means the amount determined by the formula
A - B
where
- A
- is the total of all amounts that are
(a) required by subsection 59(2) to be included in computing the corporation’s income for the year, and
(b) in respect of a reserve, deducted in computing the income of the original owner or predecessor owner and deemed by paragraph 87(2)(g) or by virtue of that paragraph and paragraph 88(1)(e.2) to have been deducted by the corporation as a reserve in computing its income for a preceding taxation year, and
- B
- is the total of amounts deducted in computing the corporation’s income for the year by virtue of subsection 64(1), 64(1.1) or 64(1.2) in respect of dispositions by the original owner or predecessor owner, as the case may be; (provision)
- selling instrument
selling instrument in respect of flow-through shares means a prospectus, registration statement, offering memorandum, term sheet or other similar document that describes the terms of the offer (including the price and number of shares) pursuant to which a corporation offers to issue flow-through shares; (avis d’émission)
- shareholder corporation
shareholder corporation of a joint exploration corporation means a corporation that for the period in respect of which the expression is being applied
(a) was a shareholder of the joint exploration corporation, and
(b) made a payment or loan to the joint exploration corporation in respect of Canadian exploration and development expenses, a Canadian exploration expense, a Canadian development expense or a Canadian oil and gas property expense incurred or to be incurred by the joint exploration corporation; (société actionnaire)
- specified foreign exploration and development expense
specified foreign exploration and development expense of a taxpayer in respect of a country (other than Canada) means an amount that is included in the taxpayer’s foreign exploration and development expenses and that is
(a) a drilling or exploration expense, including any general geological or geophysical expense, incurred by the taxpayer on or in respect of exploring or drilling for petroleum or natural gas in that country,
(a.1) an expense incurred by the taxpayer after December 21, 2000 (otherwise than pursuant to an agreement in writing made before December 22, 2000) for the purpose of determining the existence, location, extent or quality of a mineral resource in that country, including any expense incurred in the course of
(i) prospecting,
(ii) carrying out geological, geophysical or geochemical surveys,
(iii) drilling by rotary, diamond, percussion or other methods, or
(iv) trenching, digging test pits and preliminary sampling,
(b) a prospecting, exploration or development expense incurred by the taxpayer before December 22, 2000 (or after December 21, 2000 pursuant to an agreement in writing made before December 22, 2000) in searching for minerals in that country,
(c) the cost to the taxpayer of the taxpayer’s foreign resource property in respect of that country,
(d) an annual payment made by the taxpayer in a taxation year of the taxpayer for the preservation of a foreign resource property in respect of that country,
(e) an amount deemed by subsection 21(2) or (4) to be a foreign exploration and development expense incurred by the taxpayer, to the extent that it can reasonably be considered to relate to an amount that, without reference to this paragraph and paragraph (f), would be a specified foreign exploration and development expense in respect of that country, or
(f) subject to section 66.8, the taxpayer’s share of the specified foreign exploration and development expenses of a partnership incurred in respect of that country in a fiscal period of the partnership if, at the end of that period, the taxpayer was a member of the partnership. (frais d’exploration et d’aménagement à l’étranger déterminés)
Marginal note:Other definitions
(15.1) The definitions in subsections 66.1(6), 66.2(5), 66.21(1), 66.4(5) and 66.5(2) apply in this section.
Marginal note:Partnerships
(16) For the purposes of subsections 66(12.6) to 66(12.73), the definitions assistance and flow-through share in subsection 66(15) and subsections 66(18), 66(19) and 66.3(3) and 66.3(4), a partnership is deemed to be a person and its taxation year is deemed to be its fiscal period.
Marginal note:Non-arm’s length partnerships
(17) For the purpose of paragraph (12.66)(d), a partnership and a corporation are, at all times in a calendar year,
(a) deemed not to deal with each other at arm’s length, if
(i) an expense is deemed by subsection (12.61) to be incurred by the partnership,
(ii) the expense would, if this Act were read without reference to paragraph (12.61)(b), be incurred in the calendar year by the corporation, and
(iii) a share of the expense is included, because of paragraph (h) of the definition Canadian exploration expense in subsection 66.1(6), in the Canadian exploration expense of the corporation or of a member of the partnership with whom the corporation, at any time in that calendar year, does not deal at arm’s length; and
(b) deemed to deal with each other at arm’s length, in any other case.
Marginal note:Members of partnerships
(18) For the purposes of this section, subsection 21(2), sections 59.1 and 66.1 to 66.7, paragraph (d) of the definition investment expense in subsection 110.6(1), the definition pre-production mining expenditure in subsection 127(9) and the descriptions of C and D in subsection 211.91(1), where a person’s share of an outlay or expense made or incurred by a partnership in a fiscal period of the partnership is included in respect of the person under paragraph (d) of the definition foreign exploration and development expenses in subsection (15), paragraph (h) of the definition Canadian exploration expense in subsection 66.1(6), paragraph (f) of the definition Canadian development expense in subsection 66.2(5), paragraph (e) of the definition foreign resource expense in subsection 66.21(1) or paragraph (b) of the definition Canadian oil and gas property expense in subsection 66.4(5), the portion of the outlay or expense so included is deemed, except for the purposes of applying the definitions foreign exploration and development expenses, Canadian exploration expense, Canadian development expense, foreign resource expense and Canadian oil and gas property expense in respect of the person, to be made or incurred by the person at the end of that fiscal period.
Marginal note:Renunciation by corporate partner, etc.
(19) A corporation is not entitled to renounce under subsection 66(12.6), 66(12.601) or 66(12.62) to a person a specified amount in respect of the corporation where the corporation would not be entitled to so renounce the specified amount if
(a) the expression “end of that fiscal period” in subsection 66(18) were read as “time the outlay or expense was made or incurred by the partnership”; and
(b) the expression “on the effective date of the renunciation” in each of paragraphs 66(12.61)(a) and 66(12.63)(a) were read as “at the earliest time that any part of such expense was incurred by the corporation”.
Marginal note:Specified amount
(20) For the purpose of subsection 66(19), a specified amount in respect of a corporation is an amount that represents
(a) all or part of the corporation’s share of an outlay or expense made or incurred by a partnership of which the corporation is a member or former member; or
(b) all or part of an amount renounced to the corporation under subsection 66(12.6), 66(12.601) or 66(12.62).
- [NOTE: Application provisions are not included in the consolidated text
- see relevant amending Acts and regulations.]
- R.S., 1985, c. 1 (5th Supp.), s. 66
- 1994, c. 7 Sch. II, s. 38, c. 8, s. 5, c. 21, s. 28
- 1995, c. 21, s. 21
- 1997, c. 25, s. 13
- 1998, c. 19, s. 104
- 2001, c. 17, s. 44
- 2003, c. 28, s. 4
- 2007, c. 35, s. 19
- 2010, c. 25, s. 12
- 2011, c. 24, s. 13
- 2013, c. 34, ss. 111, 199, c. 40, s. 30
- 2017, c. 33, s. 19
- 2021, c. 23, s. 12
- Date modified: