Petroleum and Gas Revenue Tax Act (R.S.C., 1985, c. P-12)

Short Title

Marginal note:Short title

1 This Act may be cited as the Petroleum and Gas Revenue Tax Act.

Interpretation and Application

Marginal note:Definitions

• 2 (1) In this Act,

  approved recovery project

  approved recovery project means

  • (a) a project certified in writing by the Minister of Natural Resources to have commenced operations after March 31, 1985 and to be a water-flood or a major expansion to a water-flood,

  • (b) a prescribed project certified in writing by the Minister of Natural Resources to have commenced operations after 1982, or

  • (c) a project certified in writing by the Minister of Finance and the Minister of Natural Resources as a major energy project that commenced operations after March 31, 1985; (installation approuvée de récupération)

  Crown royalty

  Crown royalty of a person for a taxation year in respect of the production in the year of petroleum or gas from a well or bituminous sands, oil sands or oil shale deposit or the ownership of a natural reservoir of gas or petroleum in Canada or a bituminous sands, oil sands or oil shale deposit in Canada means the amount, if any, by which the aggregate of the amounts,

  • (a) paid, payable or receivable as prescribed in respect of that production or ownership,

  • (b) included in computing his income for the year by virtue of paragraph 12(1)(o) of the Income Tax Act in respect of that production or ownership,

  • (c) that were not deductible in computing his income for the year by virtue of paragraph 18(1)(m) of the Income Tax Act in respect of that production or ownership,

  • (d) by which, in respect of the disposition by him of that production, his proceeds of disposition were increased by virtue of subsection 69(6) of the Income Tax Act, and

  • (e) by which, in respect of the acquisition by him of that production, his cost was reduced by virtue of subsection 69(7) of the Income Tax Act

  exceeds the aggregate of all reimbursements referred to in section 80.2 of the Income Tax Act received or receivable by him for the year in respect of that production or ownership; (redevance à la Couronne ou redevance en faveur de la Couronne)

  crude oil

  crude oil means a liquid mixture of hydrocarbons, other than heavy oil, recovered from a natural reservoir in Canada; (pétrole brut)

  deepened well

  deepened well means an oil or gas well that, after

  • (a) being capable of producing petroleum or gas from an accumulation of petroleum or gas, or

  • (b) being drilled for the purpose of producing petroleum or gas from an accumulation of petroleum or gas and having been abandoned,

  is deepened by further drilling commenced after March 31, 1985 for the purpose of producing petroleum or gas from a different accumulation of petroleum or gas; (puits approfondi de pétrole ou de gaz)

  exempt percentage

  exempt percentage, for a period in respect of an approved recovery project, means a percentage approved in writing by the Minister of Natural Resources for that period in respect of the project; (pourcentage d’exonération)

  Federal Court

  Federal Court[Repealed, R.S., 1985, c. 51 (4th Supp.), s. 16]

  gas

  gas means natural gas or any fluid hydrocarbon, other than a hydrocarbon that is a liquid in its naturally occurring state, recovered from a natural reservoir in Canada; (gaz)

  incremental Crown royalty

  incremental Crown royalty[Repealed, R.S., 1985, c. 2 (2nd Supp.), s. 1]

  incremental oil revenue

  incremental oil revenue[Repealed, R.S., 1985, c. 2 (2nd Supp.), s. 1]

  incremental payout

  incremental payout[Repealed, R.S., 1985, c. 2 (2nd Supp.), s. 1]

  incremental production royalty

  incremental production royalty[Repealed, R.S., 1985, c. 2 (2nd Supp.), s. 1]

  incremental resource royalty

  incremental resource royalty[Repealed, R.S., 1985, c. 2 (2nd Supp.), s. 1]

  Minister

  Minister means the Minister of National Revenue; (ministre)

  new deep production

  new deep production means that part of the production from a deepened well that is directly attributable to the deepening; (production nouvelle en profondeur)

  old oil

  old oil[Repealed, R.S., 1985, c. 2 (2nd Supp.), s. 1]

  old oil base price

  old oil base price[Repealed, R.S., 1985, c. 2 (2nd Supp.), s. 1]

  payout

  payout, in respect of a royalty, has the meaning assigned by subsection 26(7) or (9), whichever is applicable; (reversement)

  petroleum

  petroleum means crude oil or heavy oil recovered from a natural reservoir in Canada and any liquid or solid hydrocarbon recovered from a bituminous sands, oil sands or oil shale deposit in Canada; (pétrole)

  production revenue

  production revenue means petroleum and gas production revenue within the meaning of section 5; (revenu de production)

  production royalty

  production royalty means an amount computed by reference to the amount or value of production after December 31, 1981 of petroleum or gas, including any minimum or advance royalty payment with respect to the amount or value of production, but does not include

  • (a) a resource royalty, or

  • (b) an amount to which paragraph 7(e) applies paid to a person referred to therein; (redevance de production)

  resource royalty

  resource royalty means an amount, other than an amount to which paragraph 7(e) applies paid to a person referred to therein, computed by reference to the amount or value of production

  • (a) after December 31, 1980 and before January 1, 1982, of petroleum or gas, including any minimum or advance royalty payment with respect to the amount or value of production, or

  • (b) after December 31, 1981, of petroleum or gas, including any minimum or advance royalty payment with respect to the amount or value of such production, but not including an amount computed by reference to the amount or value of such production of petroleum or gas where

    • (i) the recipient of the amount so computed would have a Crown royalty in respect of

      • (A) such production, or

      • (B) the ownership of property to which such production relates where the Crown royalty is computed by reference to an amount of production from the property

      if the definition Crown royalty were read without reference to a taxation year and if the determination of the amount of the Crown royalty under that definition were made only in respect of such production or such ownership, or

    • (ii) the recipient of the amount so computed would, but for an exemption or allowance, other than a rate of nil, that is provided by statute by a person referred to in paragraph 7(e), have a Crown royalty determined pursuant to subparagraph (i); (redevance pétrolière)

  synthetic production

  synthetic production means the production of petroleum from a mine in a bituminous sands deposit; (production par synthèse)

  synthetic production revenue

  synthetic production revenue means that portion of production revenue that is derived from synthetic production; (revenu de production par synthèse)

  taxable incremental oil revenue

  taxable incremental oil revenue[Repealed, R.S., 1985, c. 2 (2nd Supp.), s. 1]

  taxation year

  taxation year of a person means

  • (a) the taxation year of that person as determined for the purposes of the Income Tax Act,

  • (b) where that person has no taxation year referred to in paragraph (a), the period for which his accounts have been ordinarily made up for the purposes of assessment under this Act, or

  • (c) where neither paragraph (a) nor (b) applies in respect of the person, such taxation year as may be adopted by the person,

  but in no case shall a taxation year exceed fifty-three weeks. (année d’imposition)

• Marginal note:Other words and expressions

  (2) All words and expressions used in this Act and not otherwise defined have, with such modifications as the circumstances require, the same meanings as in the Income Tax Act.

• Marginal note:Trusts

  (3) A trust shall, for the purposes of this Act, and without affecting the liability of the trustee or legal representative for his own tax under this Act, be deemed to be, in respect of the trust property, an individual.

• Marginal note:Changes in taxation year

  (4) No change in the taxation year of a person shall be made for the purposes of this Act unless the Minister consents in writing to the change.

• Marginal note:Interpreting tax imposed

  (5) For greater certainty and notwithstanding anything in any other Act of Parliament or anything approved, made or declared to have the force of law thereunder, a tax imposed under this Act shall, for all purposes, be deemed not to be an income or profits tax, a surtax or an excess profits tax.

• Marginal note:Associated corporations

  (6) For the purposes of this Act, one corporation is associated with another corporation in a taxation year if

  • (a) the corporations are associated with each other in the year by virtue of a direction made under subsection 247(2) of the Income Tax Act; or

  • (b) the corporations would be associated with each other in the year by virtue of section 256 of the Income Tax Act, if the references in paragraphs (1)(c) to (e) thereof to “capital stock thereof” were read as references to “capital stock thereof, or had an equity percentage (within the meaning of paragraph 95(4)(b)) in each corporation of not less than 10%”.

• Marginal note:Deeming of association

  (7) Where, in the case of two or more corporations, the Minister is satisfied

  • (a) that

    • (i) the separate existence of the corporations in a taxation year is not solely for the purpose of carrying out the business of the corporations in the most effective manner, and

    • (ii) one of the main reasons for the separate existence in the year is to reduce the amount of tax that would be payable under this Act, or

  • (b) that the corporations have at any time entered into an agreement or transaction that lacks any substantial business purpose other than to increase the aggregate deduction from tax allowed to the corporations under subsection 10(1) in a taxation year,

  the corporations shall, if the Minister so directs, be deemed, for the purposes of this Act, to be associated with each other in the year.

• Marginal note:Idem

  (8) Where two corporations are associated by virtue of subsection (6) or (7), or are deemed by this subsection to be associated with the same corporation at the same time, they shall, for the purposes of this Act, be deemed to be associated with each other.

• Marginal note:Deeming of non-association

  (9) Where all the shares and rights to acquire shares of the capital stock of a corporation are owned directly or indirectly by one or more registered pension funds or plans and the corporation would, but for this subsection, be associated with another corporation in a taxation year under paragraph (6)(b) by reason that the corporations are controlled by the same trustee or trustees, the corporations shall be deemed not to be associated with each other in the year unless one of the main reasons for the separate existence of the corporations in the year is to reduce the amount of tax that would otherwise be payable under this Act.

• Marginal note:Appeal

  (10) On an appeal from an assessment made pursuant to a direction of the Minister under subsection (7), the Tax Court of Canada may

  • (a) confirm the direction;

  • (b) vacate the direction if

    • (i) in the case of a direction under paragraph (7)(a), it determines that none of the main reasons for the separate existence of the corporations was to reduce the amount of tax payable under this Act, or

    • (ii) in the case of a direction under paragraph (7)(b), it determines that the agreement or transaction referred to in that paragraph had a substantial business purpose, other than to increase the aggregate deduction from tax allowed under subsection 10(1); or

  • (c) vary the direction and refer the matter back to the Minister for reassessment.

• Marginal note:Certification of prescribed project

  (11) The Minister of Natural Resources shall not certify

  • (a) a project for the purposes of paragraph (a) of the definition “approved recovery project” in subsection (1) unless a request for the certification is filed with the Minister of Natural Resources within 180 days after the project commenced operations; or

  • (b) a prescribed project to have commenced operations after 1982 for the purposes of paragraph (b) of the definition “approved recovery project” in subsection (1) unless a joint election made under subsection 5(9) in respect of the project has been filed with the Minister of National Revenue in accordance with subsection 5(10).

• Marginal note:Late-filed request

  (12) Where, in the opinion of the Minister of Natural Resources, the circumstances of a case are such that it would be just and equitable to permit a request for certification to be filed under paragraph (11)(a) after the day on or before which it is required by that paragraph to be filed, that Minister may permit the request to be filed after that day and, where the request is filed pursuant to the permission, the request shall be deemed to have been filed on the day on or before which it is required to be filed.

Marginal note:Application restricted

2.1 This Act does not apply in respect of income or loss of a taxpayer from a source that is

• (a) the production after September 1986 of petroleum or gas;

• (b) the processing in Canada after September 1986 of petroleum to any stage that is not beyond the stage of crude oil or its equivalent; or

• (c) any amount received or receivable by the taxpayer as, on account of or in lieu of payment of, or in satisfaction of, a production royalty or resource royalty computed by reference to the amount or value of production after September 1986 of petroleum or gas.

Her Majesty

Marginal note:Binding on Her Majesty

3 This Act is binding on Her Majesty in right of Canada or any province.

PART IRevenue Tax

Tax and Computation

Marginal note:Tax payable

4 A tax shall be paid as required by this Part on the production revenue of every person for each taxation year.

Marginal note:Production revenue defined

• 5 (1) Petroleum and gas production revenue of a taxpayer for a taxation year is the amount, if any, by which the aggregate of all amounts each of which is the income of the taxpayer for the year from a source that is

  • (a) the production before October 1986 of petroleum or gas,

  • (b) the processing in Canada before October 1986 of petroleum to any stage that is not beyond the stage of crude oil or its equivalent, or

  • (c) an amount received or receivable by the taxpayer as a production royalty or resource royalty computed by reference to the amount or value of production after 1985 and before October 1986,

  exceeds

  • (d) the aggregate of all amounts each of which is the loss of the taxpayer for the year from a source referred to in paragraph (a), (b) or (c),

  computed in accordance with the Income Tax Act, if that Act were read without reference to paragraph 81(1)(r) thereof, on the assumption that the taxpayer had during the year no income or loss except from those sources and was allowed no deduction in computing his income for the year in respect of

  • (e) any amount, other than a prescribed amount, deductible in computing the taxpayer’s income for the year by virtue of section 20 (other than paragraph (1)(q), (s), (w), (x), (y) or (ii) thereof), 37 or 37.1, subsection 104(6) or (12) or Subdivision e of Division B of Part I of the Income Tax Act or the Income Tax Application Rules, 1971,

  • (f) the amount of any consideration paid or payable, other than a resource royalty or a production royalty, that may reasonably be considered to be for the use of, the right to use, or the preservation of any rights in respect of, property,

  • (g) any payout in respect of a production royalty or resource royalty received by the taxpayer that was computed by reference to the amount or value of production before 1986,

  • (h) any amount paid before 1981 in respect of the amount or value of production of petroleum or gas after 1980,

  • (i) any resource royalty or production royalty in respect of the year that was computed by reference to the amount or value of production before 1986 and was not paid on or before the day that is sixty days after the end of the year,

  • (i.1) any resource royalty in respect of the year, computed by reference to the amount or value of production after 1985, that is

    • (i) payable by the taxpayer to a non-resident person who would be liable to taxation thereon under subsection 26(1) if he had received the resource royalty, and

    • (ii) not paid by the taxpayer on or before the later of the day that is 60 days after the end of the year and February 28, 1987,

  • (j) any amount, other than a prescribed amount, paid or payable as a royalty, tax, lease rental or bonus referred to in paragraph 7(e),

  • (k) any deduction except to the extent that it may reasonably be considered to be applicable to those sources, and

  • (l) any resource royalty or production royalty computed by reference to the amount or value of production after September 1986.

• Marginal note:Rules for calculating income

  (2) For the purposes of computing the income of a taxpayer for a taxation year from any source referred to in subsection (1),

  • (a) where petroleum is processed to any stage that is beyond the stage of crude oil or its equivalent, the petroleum shall be deemed to be disposed of at the time that it reaches the crude oil stage or its equivalent for proceeds of disposition equal to its fair market value at that time;

  • (b) where petroleum or gas produced or processed by a taxpayer is used or consumed at any time by that taxpayer for any purpose, other than a prescribed purpose, it shall be deemed to be disposed of by him at that time for proceeds of disposition equal to its fair market value at that time;

  • (c) where an amount has been included in computing a taxpayer’s income for the year or a previous taxation year in respect of petroleum or gas not delivered before the end of the year,

    • (i) there shall be deducted in computing the income of the taxpayer for the year a reasonable amount as a reserve in respect of petroleum or gas that it is reasonably anticipated will have to be delivered after the end of the year,

    • (ii) there shall be included in computing the income of a taxpayer for the year any amount so deducted in computing his income for the immediately preceding taxation year, except to the extent that the amount may reasonably be attributed to petroleum or gas produced after September 1986 and delivered before the end of the year, and

    • (iii) there shall be deducted in computing the income of the taxpayer for the year any repayment in the year by the taxpayer of an amount that has been included in computing his income for the year or a previous taxation year for the purposes of this Act in respect of petroleum or gas not delivered before the end of the year;

  • (c.1) where, in computing the income of a taxpayer for a taxation year, amounts are included in respect of petroleum or gas not delivered before the end of the year and the taxpayer has paid a reasonable amount in a particular taxation year to another taxpayer for undertaking to deliver the petroleum or gas, the taxpayers may jointly elect to be bound by the following subparagraphs by filing with the Minister a notice in writing on or before the earliest day on or before which either of the taxpayers is required under section 11 to file a return of production revenue for the taxation year in which the payment to which the election relates is made:

    • (i) the payment may be deducted in computing the income for the particular year of the taxpayer who made the payment and no amount is deductible in respect of the petroleum or gas under subparagraph (c)(i) in computing the income of that taxpayer for that or any subsequent taxation year, and

    • (ii) the taxpayer who received the payment shall be deemed to have received the payment in the course of a business on account of petroleum or gas not delivered before the end of the taxation year in which the payment was received and the payment shall be included in computing the income of that taxpayer for that year;

  • (d) there shall be included any amount required to be included in computing the income of the taxpayer by virtue of paragraph 12(1)(o) of the Income Tax Act that may reasonably be regarded as being in relation to the production of petroleum or gas before October 1986;

  • (e) there may be deducted such amount as an allowance, if any, in respect of the income of the taxpayer for the year from a source referred to in paragraph (1)(a), (b) or (c) as is allowed to the taxpayer by regulation; and

  • (f) there shall be deducted

    • (i) in computing the income of the taxpayer for the 1984 taxation year, any amount that would be deductible in the year by virtue of paragraph 20(1)(mm) of the Income Tax Act if the reference in that paragraph to “injected before that time” were read as “injected after 1980 and before that time”, and

    • (ii) in computing the income of the taxpayer for a taxation year ending after 1984, any amount that would be deductible in the year by virtue of paragraph 20(1)(mm) of the Income Tax Act if the reference in that paragraph to “injected before that time” were read as “injected in the year and before October 1986”.

• Marginal note:Deduction for synthetic production

  (2.1) A taxpayer may deduct in computing his production revenue for a taxation year an amount equal to that portion of the taxpayer’s synthetic production revenue for the year that may reasonably be attributed to production of petroleum after April 1986 and before October 1986.

• Marginal note:Deduction of royalties

  (3) Where a resource royalty or production royalty is not deductible in computing the production revenue of a taxpayer for a taxation year by virtue only of paragraph (1)(i), the resource royalty or production royalty may be deducted by the taxpayer in computing his production revenue for the subsequent taxation year in which the royalty is paid.

• Marginal note:Idem

  (3.1) Where a resource royalty is not deductible in computing the production revenue of a taxpayer for a taxation year by virtue only of paragraph (1)(i.1), the resource royalty may be deducted by the taxpayer in computing the taxpayer’s production revenue for the subsequent taxation year in which the royalty is paid.

• Marginal note:Individual deduction

  (3.2) An individual, other than a trust, may deduct in computing his production revenue for the 1986 taxation year an amount not exceeding $1,500,000.

• Marginal note:Royalties re production before 1982

  (4) Notwithstanding subsections (1) and (3), not more than one-half of any resource royalty computed by reference to the amount or value of production before 1982 may be deducted in computing the production revenue of a taxpayer that may reasonably be attributed to a period after 1981.

• Marginal note:Corporation as beneficiary under a trust

  (5) Where a corporation is a beneficiary under a trust, an amount that may, having regard to all the circumstances including the terms and conditions of the trust arrangement, reasonably be considered to be the corporation’s share of an amount that would be the production revenue of the trust for a taxation year that may reasonably be attributed to the period in the year commencing after the later of May 31, 1982 and the date the corporation first became a beneficiary under the trust, if

  • (a) subsection (1) were read without reference to paragraph (c) thereof,

  • (b) the reference in paragraph (1)(d) to “paragraph (a), (b) or (c)” were read as a reference to “paragraph (a) or (b)”, and

  • (c) the reference to “a production royalty” in paragraph (1)(f) were read as a reference to “production royalty in respect of production of petroleum or gas of the trust”,

  shall, if so designated by the trust in respect of the corporation in the trust’s return of production revenue for the year and not designated by the trust in respect of any other beneficiary thereunder, be deemed to be production revenue of the corporation for the taxation year of the corporation in which the taxation year of the trust ended.

• Marginal note:Taxpayer as beneficiary under trust

  (5.1) Where a taxpayer is a beneficiary under a trust, an amount, other than an amount deemed to be production revenue of the taxpayer pursuant to subsection (5), that may, having regard to all the circumstances, including the terms and conditions of the trust arrangement, reasonably be considered to be the taxpayer’s share of such portion of the production revenue of the trust for a taxation year as may reasonably be attributed to the period in the year commencing on the latest of

  • (a) the first day of the year,

  • (b) January 1, 1986, and

  • (c) the date on which the taxpayer first became a beneficiary under the trust,

  shall, if so designated by the trust in respect of the taxpayer in the trust’s return of production revenue for the year and not designated under this section by the trust in respect of any other beneficiary thereunder, be deemed to be production revenue of the taxpayer for the taxation year of the taxpayer in which the taxation year of the trust ended.

• Marginal note:Non-application of subsection (5.1)

  (5.2) Subsection (5.1) does not apply in respect of a non-resident person not carrying on a business described in subparagraph 66(15)(h)(i) of the Income Tax Act through one or more fixed places of business in Canada.

• Marginal note:Presumption of payment of tax

  (6) Where an amount, referred to in this subsection as the “designated amount”, included in the production revenue of a trust for a taxation year is designated by the trust under subsection (5) or (5.1) in respect of a taxpayer, the amount of the tax paid by the trust on its production revenue for the year that may reasonably be considered to relate to the designated amount shall be deemed to have been paid by the taxpayer on account of the tax payable under this Part by the taxpayer on the production revenue of the taxpayer for the taxpayer’s taxation year in which the taxation year of the trust ended.

• (7) [Repealed, R.S., 1985, c. 2 (2nd Supp.), s. 3]

• Marginal note:Income deductions and inclusions

  (8) For the purposes of computing the income of a taxpayer for a taxation year from a source referred to in paragraph (1)(a) or (b),

  • (a) subject to subsection (9), there shall be deducted in respect of a particular prescribed project, the amount equal to the lesser of

    • (i) the production revenue of the taxpayer for the year that may reasonably be attributable to the production after December 31, 1982 of petroleum or gas or the processing after December 31, 1982 of petroleum to any stage that is not beyond the stage of crude oil or its equivalent from a prescribed reservoir in which the project is located, computed on the assumption that for the year the taxpayer was allowed no deductions under paragraph (2)(e) or this paragraph, and

    • (ii) the cumulative enhanced recovery capital expense of the taxpayer at the end of the year in respect of the project; and

  • (b) there shall be included, in respect of a particular prescribed project, the amount, if any, by which

    • (i) the aggregate of all amounts referred to in paragraphs 6(2)(e) to (k) that would be taken into account in computing the taxpayer’s cumulative enhanced recovery capital expense at the end of the year in respect of the project

    exceeds

    • (ii) the aggregate of all amounts referred to in paragraphs 6(2)(a) to (d) that would be taken into account in computing the taxpayer’s cumulative enhanced recovery capital expense at the end of the year in respect of the project.

• Marginal note:Election respecting deductions

  (9) Where all taxpayers who

  • (a) have made or incurred prescribed exploration and development expenses,

  • (b) have acquired prescribed enhanced recovery equipment, or

  • (c) are obligated to make or incur prescribed exploration and development expenses or to acquire prescribed enhanced recovery equipment,

  in respect of a prescribed project, jointly make a valid election not to make any deductions under paragraph (8)(a) in respect of the project, deductions shall not be made under that paragraph in respect of the project in computing the income of any taxpayer for any taxation year.

• Marginal note:Filing of election

  (10) An election referred to in subsection (9) in respect of a prescribed project is not valid unless it is made in prescribed form and is filed with the Minister on or before the earliest day on or before which any taxpayer who is required to join in the election is required under section 11 to file a return of production revenue for the taxation year in which the taxpayer first

  • (a) makes or incurs a prescribed exploration and development expense, or

  • (b) acquires prescribed enhanced recovery equipment,

  in respect of the project.

• Marginal note:Election binding on all interests

  (11) Where an election in respect of a prescribed project is filed in accordance with subsection (10), any taxpayer who at any time thereafter

  • (a) makes or incurs prescribed exploration and development expenses, or

  • (b) acquires prescribed enhanced recovery equipment,

  in respect of the project shall be deemed to have joined in the election and is bound by it.

• Marginal note:Late-filed request

  (12) Where, in the opinion of the Minister, the circumstances of a case are such that it would be just and equitable to permit an election to be filed under subsection (10) after the day on or before which it is required by that subsection to be filed, the Minister may permit the election to be filed after that day and, where the election is filed pursuant to the permission, the election shall be deemed to have been filed on the day on or before which it is required to be filed.

Marginal note:Definition of “proceeds of disposition”

• 6 (1) In this section, proceeds of disposition has, subject to subsection (4), the same meaning as in section 13 of the Income Tax Act.

• Marginal note:Definition of “cumulative enhanced recovery capital expense”

  (2) For the purposes of subsection 5(8), cumulative enhanced recovery capital expense of a taxpayer in respect of a particular prescribed project at any time in a taxation year means the amount, if any, by which the aggregate of

  • (a) the aggregate of all prescribed exploration and development expenses made or incurred by the taxpayer after 1982, before October 1986 and before that time in respect of the project,

  • (b) the amount by which the capital cost to the taxpayer of each property that is prescribed enhanced recovery equipment acquired by the taxpayer after 1982, before October 1986 and before that time for use in the project exceeds any amount included therein that is in respect of financing,

  • (c) the aggregate of all amounts in respect of the project required by paragraph 5(8)(b) to be included in computing the taxpayer’s production revenue for his taxation years ending before that time, and

  • (d) any amount referred to in paragraph (f), (g) or (h) that is established by the taxpayer to have become a bad debt before October 1986 and before that time

  exceeds the aggregate of all amounts each of which is

  • (e) any amount deductible by the taxpayer under paragraph 5(8)(a) for a taxation year ending before that time in respect of the project,

  • (f) any amount that became receivable by the taxpayer before that time, as a result of a transaction that occurred after 1982 and before October 1986 for which the consideration given by the taxpayer was property, other than a share or Canadian resource property or an interest therein or a right thereto, or services, the original cost of which to the taxpayer may reasonably be regarded as having been an expense referred to in paragraph (a) in respect of the project,

  • (g) any amount that is, in respect of a disposition before October 1986 and before that time of a property referred to in paragraph (b), the lesser of

    • (i) the proceeds of disposition of the property minus any outlays and expenses to the extent that they were made or incurred by the taxpayer for the purpose of making the disposition, and

    • (ii) the amount by which the capital cost to the taxpayer of the property exceeds any amount that is included therein that is in respect of financing,

  • (h) any amount that became receivable by the taxpayer after 1982, before October 1986 and before that time, in respect of an expense referred to in paragraph (a) in respect of the project, from another person pursuant to an agreement between the taxpayer and that other person to unitize the field in which the project is located,

  • (i) any amount received before October 1986 and before that time on account of any amount referred to in paragraph (d),

  • (j) any amount of assistance or benefit that the taxpayer has received or is entitled to receive before that time in respect of any expense referred to in paragraph (a) in respect of the project, whether the amount is by way of 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, or

  • (k) any amount of assistance or benefit that the taxpayer has received or is entitled to receive before that time in respect of the cost of property referred to in paragraph (b) in respect of the project, whether the amount is by way of 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, to the extent that the amount has not been deducted in determining the capital cost of the property.

• Marginal note:Where taxpayer member of partnership

  (3) For the purposes of subsection (2), where a taxpayer was a member of a partnership at the end of a fiscal period of the partnership,

  • (a) any property acquired or disposed of by the partnership shall be deemed to have been acquired or disposed of by the taxpayer to the extent of his share thereof;

  • (b) any property deemed by paragraph (a) to have been acquired or disposed of by the taxpayer shall be deemed to have been acquired or disposed of by him on the day the property was acquired or disposed of by the partnership;

  • (c) if the partnership has received, or is entitled to receive, an amount referred to in paragraph (2)(j) or (k), the taxpayer shall be deemed to have received, or to be entitled to receive, the amount to the extent of his share thereof, on the day the partnership received, or is entitled to receive, the amount;

  • (d) any expenditure incurred or expense recovered by the partnership shall be deemed to have been incurred or recovered, as the case may be, by the taxpayer to the extent of his share thereof;

  • (e) any expenditure or expense deemed by paragraph (d) to have been incurred or recovered, as the case may be, by the taxpayer shall be deemed to have been incurred or recovered by him on the day the expenditure was incurred or the expense was recovered by the partnership;

  • (f) if an amount referred to in paragraph (2)(f) or (h) has become receivable by the partnership, the amount shall be deemed to have become receivable by the taxpayer, to the extent of his share thereof, on the day the amount became receivable by the partnership;

  • (g) any amount referred to in paragraph (2)(f), (g) or (h) in respect of the partnership that is established by the partnership to have become a bad debt before a particular time shall be deemed to have become an amount referred to in that paragraph that was established by the taxpayer to have become a bad debt before the particular time to the extent of his share thereof; and

  • (h) any amount referred to in paragraph (2)(i) received by the partnership shall be deemed to be an amount referred to in that paragraph received by the taxpayer at the time it was received by the partnership to the extent of the taxpayer’s share thereof.

• Marginal note:Proceeds of disposition of property

  (4) For the purposes of subsection (2), where a taxpayer disposes of a property referred to in paragraph (2)(b), his proceeds of disposition shall be deemed to be the greater of

  • (a) his actual proceeds of disposition, and

  • (b) the fair market value of the property.

• Marginal note:Interpretation

  (5) For the purposes of subsection (6),

  former corporation

  former corporation means, in respect of

  • (a) an amalgamation of corporations, a “predecessor corporation” described in subsection 87(1) of the Income Tax Act, or

  • (b) a winding-up of a corporation, a “subsidiary” described in subsection 88(1) of the Income Tax Act; (personne morale remplacée)

  successor corporation

  successor corporation means, in respect of

  • (a) an amalgamation of corporations, a “new corporation” described in subsection 87(1) of the Income Tax Act, or

  • (b) a winding-up of a corporation, a “parent” described in subsection 88(1) of the Income Tax Act. (personne morale remplaçante)

• Marginal note:Rules where amalgamation or winding-up

  (6) Notwithstanding subsection (4), where at a particular time after December 31, 1982 there is an amalgamation of corporations within the meaning of subsection 87(1) of the Income Tax Act or a winding-up of a corporation as described in subsection 88(1) of that Act, the following rules apply for the purposes of subsection 5(8) and this section in respect of the successor corporation after the particular time:

  • (a) any prescribed exploration and development expense made or incurred by a former corporation shall be deemed to be a prescribed exploration and development expense made or incurred by the successor corporation at the time when the expense was made or incurred by the former corporation;

  • (b) any prescribed enhanced recovery equipment acquired by a former corporation shall be deemed to have been acquired by the successor corporation at the time when it was acquired by the former corporation, and that property shall be deemed to be prescribed enhanced recovery equipment acquired by the successor corporation at a capital cost to it equal to the capital cost of the property to the former corporation;

  • (c) any amount in respect of a particular prescribed project required by paragraph 5(8)(b) to be included in computing a former corporation’s production revenue for a taxation year of the former corporation shall be deemed to have been an amount in respect of the project required by paragraph 5(8)(b) to be included in computing the successor corporation’s production revenue for a taxation year of the successor corporation ending before the particular time;

  • (d) any amount referred to in paragraph (2)(f), (g) or (h) in respect of a former corporation that was established by a former corporation to have become a bad debt before the particular time shall be deemed to have been an amount referred to in that paragraph that was established by the successor corporation to have become a bad debt before the particular time;

  • (e) any amount in respect of a particular prescribed project that was deductible by a former corporation under paragraph 5(8)(a) for a taxation year of the former corporation shall be deemed to be an amount deductible in respect of the project by the successor corporation under paragraph 5(8)(a) for a taxation year of the successor corporation ending before the particular time;

  • (f) any amount referred to in paragraph (2)(f) or (h) in respect of a particular prescribed project that became receivable by a former corporation shall be deemed to be an amount referred to in that paragraph in respect of the project that became receivable by the successor corporation before the particular time;

  • (g) any amount referred to in paragraph (2)(g) in respect of a disposition by a former corporation shall be deemed to be an amount referred to in that paragraph in respect of a disposition by the successor corporation before the particular time;

  • (h) any amount referred to in paragraph (2)(i) received by a former corporation shall be deemed to be an amount referred to in that paragraph received by the successor corporation before the particular time;

  • (i) any amount of assistance or benefit referred to in paragraph (2)(j) or (k) that a former corporation has received or was entitled to receive shall be deemed to be an amount of assistance or benefit referred to in that paragraph that the successor corporation received or was entitled to receive before the particular time; and

  • (j) the successor corporation shall be deemed to have been in existence throughout the period in which the former corporation was in existence.

• Marginal note:Deemed disposition

  (7) For the purposes of this section, any transaction or event entitling a taxpayer to proceeds of disposition of property shall be deemed to be a disposition of that property by the taxpayer.

Marginal note:Income or loss from a source

• 7 (1) Income or loss from a source described in section 5 does not include

  • (a) income or loss from transporting or transmitting petroleum or refining crude oil or its equivalent;

  • (b) income or loss from transporting, transmitting or processing gas, other than treating gas to remove water and other impurities;

  • (c) any amount on which tax under Part II is required to be deducted or withheld that is a resource royalty or that is a production royalty received after December 31, 1983;

  • (d) any amount required by section 13 of the Income Tax Act to be included in computing the taxpayer’s income for the year;

  • (e) with respect to

    • (i) Her Majesty in right of Canada or a province,

    • (ii) an agent of Her Majesty in right of Canada or a province, or

    • (iii) a corporation, commission or association, (other than a prescribed person), that is controlled directly or indirectly in any manner whatever by Her Majesty in right of Canada or a province or by an agent of Her Majesty in either right,

    a royalty, tax, lease rental or bonus received or receivable by a person described in subparagraph (i), (ii) or (iii) by virtue of an obligation imposed by statute or a contractual obligation substituted for an obligation imposed by statute;

  • (f) income or loss from the production of petroleum or gas from a prescribed oil or gas well;

  • (g) income or loss from the new deep production of petroleum or gas from a deepened well, other than a well located in a prescribed project or an approved recovery project;

  • (h) the portion of the income or loss that may reasonably be attributed to the production in a period after March 31, 1985 of petroleum or gas from an approved recovery project that is the exempt percentage of that income or loss for that period in respect of that project;

  • (i) the portion of the amount received or receivable as a production royalty or resource royalty, computed by reference to the amount or value of production in a period after 1985 of petroleum or gas from an approved recovery project, that is the exempt percentage of that amount for that period in respect of that project;

  • (j) an amount received or receivable as a production royalty or resource royalty computed by reference to the amount or value of production of petroleum or gas after 1985 from a prescribed oil or gas well; or

  • (k) the portion of the amount received or receivable as a production royalty or resource royalty, computed by reference to the amount or value of production after 1985 of petroleum or gas from a deepened well, other than a well located in a prescribed project or an approved recovery project, that is attributable to the new deep production from the well.

• Marginal note:Separate projects included in prescribed project

  (2) For the purposes of

  • (a) the approval referred to in the definition “exempt percentage” in subsection 2(1), and

  • (b) paragraphs (1)(h) and (i) and 26(10)(a),

  where a particular prescribed project that is an approved recovery project referred to in paragraph (b) of the definition “approved recovery project” in subsection 2(1) includes any other project that, but for the existence of the particular project, would be a separate prescribed project, each such project shall be deemed to be a separate approved recovery project and income or loss from each such separate approved recovery project shall not include income or loss from the production of petroleum or gas not attributable to that separate project.

8 [Repealed, R.S., 1985, c. 2 (2nd Supp.), s. 5]

Marginal note:Amount of tax

• 9 (1) The tax payable under this Part in respect of a taxpayer for a taxation year,

  • (a) where the taxation year ends in 1986, is the aggregate of

    • (i) the aggregate of

      • (A) 16% of the lesser of

        • (I) that portion of the production revenue of the taxpayer for the year that may reasonably be attributed to a period in the year before 1986, and

        • (II) the production revenue of the taxpayer for the year, and

      • (B) 13.33% of the amount, if any, by which the production revenue of the taxpayer for the year exceeds the aggregate of

        • (I) the lesser of the amounts determined under subclauses (A)(I) and (II), and

        • (II) that portion of the synthetic production revenue of the taxpayer for the year that may reasonably be attributed to a period in the year after 1985, and

    • (ii) 12% of the lesser of

      • (A) the amount determined under subclause (i)(B)(II), and

      • (B) the production revenue of the taxpayer for the year; and

  • (b) where the taxation year ends after 1986, is the aggregate of

    • (i) 13.33% of the lesser of

      • (A) the amount, if any, by which the production revenue of the taxpayer for the year exceeds the synthetic production revenue of the taxpayer for the year, and

      • (B) the production revenue of the taxpayer for the year, and

    • (ii) 12% of the lesser of

      • (A) the amount, if any, by which the production revenue of the taxpayer for the year exceeds the lesser of the amounts determined under clauses (i)(A) and (B), and

      • (B) the synthetic production revenue of the taxpayer for the year.

  • (c) and (d) [Repealed, R.S., 1985, c. 45 (2nd Supp.), s. 4]

• Marginal note:Partnership revenue

  (2) Where the production revenue of a taxpayer for a taxation year includes a share of a partnership’s production revenue and

  • (a) the tax that would be payable under subsection (1) by the partnership on an amount equal to that share if the partnership were a person and its fiscal period were its taxation year,

  exceeds

  • (b) the tax that would, but for this subsection, be payable under subsection (1) by the taxpayer for that taxation year of the taxpayer computed on the assumption that he had no income other than that share and was allowed no deduction under subsection 5(3.2) for the year,

  the excess shall be added to the tax otherwise payable by the taxpayer under this Part for the year.

• Marginal note:Trust revenue

  (3) Where a corporation has included an amount in computing its production revenue for a taxation year by virtue of subsection 5(5) or (5.1) and

  • (a) the tax that the corporation is deemed by subsection 5(6) to have paid for the year in respect of that amount,

  exceeds

  • (b) the tax that would, but for this subsection, be payable by the corporation for the year under subsection (1), computed on the assumption that the corporation had no income other than that amount,

  the excess shall be added to the tax otherwise payable by the corporation under this Part for the year.

• (4) [Repealed, R.S., 1985, c. 2 (2nd Supp.), s. 6]

• Marginal note:Deduction

  (5) There may be deducted from the tax otherwise payable by a taxpayer on his production revenue for a taxation year, an amount not exceeding the exploration and development expense tax credit of that taxpayer at the end of the year.

• Marginal note:Definition of “exploration and development expense tax credit”

  (6) For the purposes of this section, exploration and development expense tax credit of a taxpayer at the end of a taxation year means the amount, if any, by which

  • (a) the aggregate of all amounts each of which is an amount that the taxpayer

    • (i) would have been eligible to receive in respect of outlays or expenses made or incurred by him before the end of the taxation year under a prescribed program of the Government of Canada or of a province providing incentives for the exploration for and development of petroleum and gas in Canada, and

    • (ii) has waived his entitlement to receive, in accordance with the applicable provisions of that program, on or before the date he is required to file a return of production revenue pursuant to section 11 for the taxation year

  exceeds

  • (b) the aggregate of all amounts, if any, each of which was an amount deducted under subsection (5) from the tax payable under this Part by the taxpayer for any preceding taxation year.

• Marginal note:Amalgamations

  (7) Where after 1980 there has been an amalgamation within the meaning of subsection 87(1) of the Income Tax Act and one or more of the predecessor corporations referred to in that subsection had an exploration and development expense tax credit, for the purposes only of determining the exploration and development expense tax credit of the new corporation referred to in that subsection, the new corporation shall be deemed to be the same corporation as, and a continuation of, each such predecessor corporation.

• Marginal note:Winding-up

  (8) Where after 1980 there has been a winding-up described in subsection 88(1) of the Income Tax Act and the subsidiary referred to in that subsection had an exploration and development expense tax credit, for the purposes only of determining the exploration and development expense tax credit of the parent referred to in that subsection, the parent shall be deemed to be the same corporation as, and a continuation of, the subsidiary.

• Marginal note:Refund of tax credit

  (9) Where the exploration and development expense tax credit of a taxpayer at the end of a taxation year exceeds the amount deducted under subsection (5) from the tax payable under this Part by him for the year, the taxpayer may, by filing an election in prescribed form with the Minister within three years after the end of the year, elect to have this subsection apply to the taxpayer for the year in respect of the amount, not exceeding the excess, set out in the election and, in that case, the following rules apply:

  • (a) the taxpayer shall be deemed to have paid, on the day the election is filed with the Minister, the amount set out in the election on account of the taxpayer’s tax payable under this Part for the year; and

  • (b) for the purpose of computing the taxpayer’s exploration and development expense tax credit at the end of any subsequent taxation year, the amount set out in the election shall be deemed to have been deducted under subsection (5) from the tax payable under this Part by the taxpayer for the year for which the election was filed.

• Marginal note:Replacing election

  (10) Where a taxpayer has made an election under subsection (9) for a taxation year, the taxpayer shall not make another election under that subsection for that year.

Marginal note:Credit deductions

• 10 (1) Where a taxpayer is a corporation, there may be deducted from the tax otherwise payable (computed without reference to subsections (7) and 9(5)) by it on its production revenue for a taxation year, an amount equal to the aggregate of

  • (a) the lesser of

    • (i) the tax that would otherwise be payable by the corporation under this Part on its production revenue for the year if the reference to “production revenue” in section 9 were read as “eligible production revenue”, and

    • (ii) the corporation’s credit limit for the taxation year,

  • (b) in respect of the taxation year of the corporation that ends in 1985, the lesser of

    • (i) the amount of tax determined under subparagraph (a)(i) for the year that may reasonably be attributed to the eligible production revenue for the period in the year commencing after December 31, 1984, and

    • (ii) that proportion of the corporation’s allocated limit for the year that the number of days after December 31, 1984 in the year is of three hundred and sixty-five, and

  • (c) in respect of the taxation years of the corporation that end after 1985, the least of

    • (i) the amount of tax determined under subparagraph (a)(i) for the year on that portion of its eligible production revenue for the year that may reasonably be attributed to production in the period in the year commencing May 1, 1986,

    • (ii) three times that proportion of the corporation’s allocated limit for the year that the number of days after April 1986 and before October 1986 in the year is of three hundred and sixty-five, and

    • (iii) the amount, if any, by which the tax determined under subparagraph (a)(i) for the year exceeds the amount determined under paragraph (a) for the year.

• Marginal note:Definition of “credit limit”

  (2) For the purposes of subsection (1), the credit limit of a corporation for a taxation year is that proportion of the corporation’s allocated limit for the year that the number of days before October 1986 in the year is of three hundred and sixty-five.

• Marginal note:Definition of “allocated limit”

  (3) For the purposes of subsections (1) and (2), the allocated limit of a corporation for a taxation year in which the corporation

  • (a) is not associated with one or more other corporations, is

    • (i) two hundred and fifty thousand dollars where the year ends before 1986, or

    • (ii) five hundred thousand dollars where the year ends after 1985; and

  • (b) is associated with one or more other corporations, is the amount allocated to the corporation under subsection (4) or (5).

• Marginal note:Idem

  (4) The corporations in a group that, in a taxation year, are associated with each other may file with the Minister in prescribed form an agreement whereby, for the purpose of this section, they allocate an amount to one or more of them for the year, which amount or the aggregate of which amounts, as the case may be, is

  • (a) two hundred and fifty thousand dollars for the year ending before 1986; or

  • (b) five hundred thousand dollars for the year ending after 1985.

• Marginal note:Idem

  (5) If any of the corporations in a group referred to in subsection (4) fails to file with the Minister an agreement as contemplated by that subsection within thirty days after notice in writing by the Minister has been forwarded to any of them that such an agreement is required for the purpose of any assessment of tax for a taxation year under this Part, the Minister shall, for the purpose of this section, allocate an amount to one or more of them for the year, which amount or the aggregate of which amounts, as the case may be, is an amount referred to in paragraph (4)(a) or (b), as the case may be.

• Marginal note:Definition of “eligible production revenue”

  (6) For the purposes of this section, the eligible production revenue of a corporation for a taxation year is the aggregate of all amounts each of which is

  • (a) the amount that would be the production revenue for the year of the corporation, other than an amount, if any, included therein by virtue of subsection 5(5) or (5.1) or by virtue of the corporation being a member of a partnership, that may reasonably be attributed to the period in the year commencing after May 31, 1982, if

    • (i) subsection 5(1) were read without reference to paragraph (c) thereof,

    • (ii) the reference in paragraph 5(1)(d) to “paragraph (a), (b) or (c)” were read as a reference to “paragraph (a) or (b)”, and

    • (iii) the reference to “a production royalty” in paragraph 5(1)(f) were read as a reference to “production royalty in respect of production of petroleum or gas of the corporation”;

  • (b) the amount that would be the production revenue included in the income for the year of the corporation by virtue of the corporation being a member of a partnership that may reasonably be attributed to the period in the year commencing after the later of May 31, 1982 and the date the corporation first became a member of the partnership, if

    • (i) subsection 5(1) were read without reference to paragraph (c) thereof,

    • (ii) the reference in paragraph 5(1)(d) to “paragraph (a), (b) or (c)” were read as a reference to “paragraph (a) or (b)”, and

    • (iii) the reference to “a production royalty” in paragraph 5(1)(f) were read as a reference to “production royalty in respect of production of petroleum or gas of the partnership”;

  • (c) the amount that is deemed by subsection 5(5) to be production revenue of the corporation for the year; or

  • (d) the lesser of

    • (i) the amount by which the production revenue of the corporation for the year exceeds the aggregate of the amounts determined under paragraphs (a) to (c) in respect of the corporation for the year, and

    • (ii) its royalty exemption limit for the year.

• Marginal note:Royalty exemption limit

  (6.1) For the purposes of subparagraph 10(6)(d)(ii), the royalty exemption limit of a corporation for a taxation year is that proportion of the corporation’s allocated exemption limit for the year that the number of days after 1985 and before October 1986 in the year is of three hundred and sixty-five.

• Marginal note:Allocated exemption limit

  (6.2) For the purposes of subsection (6.1), the allocated exemption limit of a corporation for a taxation year is

  • (a)  $2,000,000, where the corporation is not associated in the year with one or more other corporations; or

  • (b) the amount allocated to the corporation under subsection (6.3) or (6.4), where the corporation is associated in the year with one or more other corporations.

• Marginal note:Allocation of exemption limit

  (6.3) The corporations in a group that, in a taxation year, are associated with each other may file with the Minister in prescribed form an agreement whereby, for the purpose of paragraph (6.2)(b), they allocate an amount to one or more of them for the year, which amount or the aggregate of which amounts, as the case may be, is $2,000,000.

• Marginal note:Failure to file agreement

  (6.4) If any of the corporations in a group referred to in subsection (6.3) fails to file with the Minister an agreement, as contemplated by that subsection, within thirty days after notice in writing by the Minister has been forwarded to any of them that such an agreement is required for the purpose of any assessment of tax for a taxation year under this Part, the Minister shall, for the purpose of paragraph (6.2)(b), allocate an amount to one or more of them for the year, which amount or the aggregate of which amounts, as the case may be, is $2,000,000.

• Marginal note:Other deduction by corporation

  (7) Where a taxpayer is a corporation, there may be deducted from the tax otherwise payable (computed without reference to subsection 9(5)) by it on its production revenue for a taxation year, an amount not exceeding 30% of the aggregate of the amounts added in computing its cumulative offset account within the meaning of subsection 66.5(2) of the Income Tax Act in the year pursuant to subsections 66(14.1) and (14.2) of that Act.

Returns

Marginal note:To be filed with Minister

• 11 (1) A return of production revenue for each taxation year for which a tax under this Part is payable shall, without notice or demand therefor, be filed with the Minister in prescribed form containing prescribed information,

  • (a) in the case of a corporation, commission or association, by it or on its behalf within six months from the end of the year;

  • (b) in the case of an individual who has died without making the return, by the legal representative of that individual within six months from the day of death;

  • (c) in the case of an estate or trust, by the trustee or legal representative of the estate or trust within ninety days from the end of the year;

  • (d) in the case of any other person, by that person on or before the last day of April in the next year or, if he is unable for any reason to file the return, by the guardian, curator, tutor, committee or other legal representative of that person on or before that day; or

  • (e) where no person described in any of paragraphs (a) to (d) has filed the return, by such person as is required by notice in writing from the Minister to file the return, within such reasonable time as the notice specifies.

• Marginal note:Demand for returns

  (2) Whether or not he is liable to pay tax under this Part for a taxation year and whether or not a return has been filed under subsection (1) or (3), every person shall, on demand from the Minister, served personally or by registered letter, file, within such reasonable time as may be stipulated therein, with the Minister in prescribed form and containing prescribed information a return of the production revenue for the taxation year designated in the demand.

• Marginal note:Trustees, etc.

  (3) Every trustee in bankruptcy, assignee, liquidator, curator, receiver, trustee or committee and every agent or other person administering, managing, winding-up, controlling or otherwise dealing with the property, business, estate or income of a person who has not filed a return for a taxation year as required by this section shall file a return in prescribed form of the production revenue of that person for that year.

• (4) [Repealed, R.S., 1985, c. 2 (2nd Supp.), s. 8]

Marginal note:Estimate of tax

12 Every person required by section 11 to file a return of production revenue shall, in the return, estimate the amount of tax payable.

Marginal note:Assessment

• 13 (1) The Minister shall, with all due dispatch, examine a taxpayer’s return of production revenue for a taxation year and assess the tax for the year and the interest and penalties, if any, payable.

• Marginal note:Notice of assessment

  (2) After examination of a return of production revenue, the Minister shall send a notice of assessment to the person by whom the return was filed.

• Marginal note:Liability unaffected

  (3) Liability for the tax payable under this Part is not affected by an incorrect or incomplete assessment or by the fact that no assessment has been made.

• Marginal note:Notice of assessment, etc., at later date

  (4) The Minister may at any time assess tax, interest or penalties under this Part or notify in writing any person by whom a return of production revenue for a taxation year has been filed that no tax is payable for the taxation year, and may

  • (a) at any time, if the taxpayer or person filing the return

    • (i) has made any misrepresentation that is attributable to negligence, carelessness or wilful default or has committed any fraud in filing the return or in supplying any information under this Part, or

    • (ii) has filed with the Minister a waiver in prescribed form within four years from the day of mailing of a notice of an original assessment or of a notification that no tax is payable for a taxation year, and

  • (b) within four years from the day referred to in subparagraph (a)(ii), in any other case,

  reassess or make additional assessments, or assess tax, interest or penalties under this Part, as the circumstances require.

• Marginal note:Revocation of waiver

  (4.1) Where the Minister would, but for this subsection, be entitled to reassess, make an additional assessment or assess tax, interest or penalties by virtue only of the filing of a waiver under subparagraph (4)(a)(ii), the Minister may not make such reassessment, additional assessment or assessment after the day that is six months after the date on which a notice of revocation of the waiver in prescribed form is filed.

• Marginal note:Non-inclusion of certain amounts

  (5) Notwithstanding subsection (4), there shall not be included in computing the production revenue of a taxpayer, for the purposes of any reassessment, additional assessment or assessment of tax, interest or penalties under this Part that is made after the expiration of four years from the day referred to in subparagraph (4)(a)(ii),

  • (a) any amount that was not included in computing the production revenue of the taxpayer for the purposes of an assessment of tax under this Part made before the expiration of four years from that day;

  • (b) any amount in respect of which the taxpayer establishes that the failure so to include it did not result from any misrepresentation that is attributable to negligence, carelessness or wilful default or from any fraud in filing a return of his production revenue or supplying any information under this Part; and

  • (c) where any waiver has been filed with the Minister, in the form and within the time referred to in subsection (4), with respect to a taxation year to which the reassessment, additional assessment or assessment of tax, interest or penalties, as the case may be, relates, any amount that the taxpayer establishes cannot reasonably be regarded as relating to a matter specified in the waiver.

• Marginal note:Minister not bound

  (6) The Minister is not bound by a return or information supplied by or on behalf of a taxpayer and, in making an assessment, may, notwithstanding a return or information so supplied or if no return has been filed, assess the tax payable under this Part.

• Marginal note:Assessment deemed valid

  (7) An assessment shall, subject to being varied or vacated on an objection or appeal under this Part and subject to a reassessment, be deemed to be valid and binding notwithstanding any error, defect or omission therein or in any proceeding under this Act relating thereto.

Payment of Tax

Marginal note:By whom payable

• 14 (1) Every person who has production revenue shall pay the tax required by this Part to be paid thereon.

• Marginal note:Corporations, when payable

  (2) Every corporation, commission and association shall, during the period commencing on the first day of a taxation year and ending two months after the end of the year, pay, in accordance with one of the following paragraphs, to the Receiver General:

  • (a) on or before the last day of each month in the year, an amount equal to one-twelfth of the amount, if any, by which the amount estimated by it to be the tax payable on its production revenue for the year exceeds the aggregate of all amounts each of which is the amount, if any, estimated by it to be deductible from its tax otherwise payable for the year under subsection 9(5) or 10(1) or (7),

  • (b) on or before the last day of each month in the year, an amount equal to one-twelfth of its first instalment base for the year, or

  • (c) on or before the last day of each of the first two months in the year, an amount equal to one-twelfth of its second instalment base for the year, and on or before the last day of each other month in the year, an amount equal to one-tenth of the amount remaining after deducting the amount computed pursuant to this paragraph in respect of the first two months in the year from its first instalment base for the year,

  and shall, on or before the last day of the period, pay to the Receiver General the remainder of the amount, if any, by which the amount estimated by it to be the tax payable on its production revenue for the year exceeds the aggregate of all amounts each of which is the amount, if any, estimated by it to be deductible from its tax otherwise payable for the year under subsection 9(5) or 10(1) or (7).

• (3) [Repealed, R.S., 1985, c. 2 (2nd Supp.), s. 10]

• Marginal note:Individuals, when payable

  (4) Every individual other than a trust, shall pay to the Receiver General

  • (a) on or before March 31, June 30, September 30 and December 31, in each taxation year, an amount equal to one-fourth of

    • (i) the amount, if any, by which the amount estimated by the individual to be the tax payable under this Part by that individual for the year exceeds the amount estimated by him to be deductible from his tax otherwise payable for the year under subsection 9(5), or

    • (ii) his instalment base for the year; and

  • (b) on or before the day on which that individual is required to file a return of production revenue for the year, the remainder of the amount, if any, by which the amount estimated by that individual to be the tax payable under this Part by him for the year exceeds the amount estimated by him to be deductible from his tax otherwise payable for the year under subsection 9(5).

• Marginal note:Where individual a trust

  (5) Every individual that is a trust shall pay to the Receiver General

  • (a) on or before the last day of each of the third month, the sixth month, the ninth month and the twelfth month of each taxation year, an amount equal to one-fourth of

    • (i) the amount, if any, by which the amount estimated by it to be the tax payable on its production revenue for the year exceeds the amount estimated by it to be deductible from its tax otherwise payable for the year under subsection 9(5), or

    • (ii) its instalment base for the year; and

  • (b) on or before the day on which it is required to file a return of production revenue for the year, the remainder of the amount, if any, by which the amount estimated by it to be the tax payable on its production revenue for the year exceeds the amount estimated by it to be deductible from its tax otherwise payable for the year under subsection 9(5).

• Marginal note:Tax to be paid on assessment

  (6) Every taxpayer shall, within thirty days after the day of mailing to the taxpayer of a notice of assessment, pay to the Receiver General any part of the assessed tax, interest and penalties then remaining unpaid, whether or not an objection to or appeal from the assessment is outstanding.

• Marginal note:Direction to pay forthwith

  (7) Where, in the opinion of the Minister, a taxpayer is attempting to avoid payment of taxes under this Part, the Minister may, in writing, direct that all taxes, interest and penalties be paid forthwith on assessment.

• Marginal note:Payments on behalf of taxpayer

  (8) Every person required by section 11 to file a return of the production revenue of any other person for a taxation year shall, within thirty days from the day of mailing of the notice of assessment, pay all taxes, interest and penalties payable by or in respect of that other person under this Part to the extent that he has or had, at any time since the taxation year, in his possession or control property belonging to that other person or his estate and shall thereupon be deemed to have made that payment on behalf of the taxpayer.

• Marginal note:Certificate of Minister required

  (9) Every assignee, liquidator, administrator, executor and other like person, other than a trustee in bankruptcy, shall, before distributing any property under his control, obtain a certificate from the Minister certifying that taxes, interest or penalties that have been assessed under this Part and that are chargeable against or payable out of the property have been paid or that security for the payment thereof has been accepted by the Minister.

• Marginal note:Liability where no certificate

  (10) Distribution of property without a certificate required by subsection (9) renders the person required to obtain the certificate personally liable for the unpaid taxes, interest and penalties.

• Marginal note:Definition of “instalment base”

  (11) In this section and section 15, “first instalment base” and “second instalment base” in respect of a corporation, commission or association for a taxation year and instalment base in respect of an individual for a taxation year have the meanings assigned to those expressions by the regulations.

• (12) [Repealed, R.S., 1985, c. 2 (2nd Supp.), s. 10]

General Provisions

Marginal note:Interest

• 15 (1) Where at any particular time after the day on or before which a return of a taxpayer’s production revenue was required to be filed under this Part for a taxation year,

  • (a) the amount of the taxpayer’s tax payable for the year under this Part

  exceeds

  • (b) the aggregate of all amounts each of which is an amount paid at or before the particular time on account of the taxpayer’s tax payable and applied as at that time by the Minister against the taxpayer’s liability for an amount payable under this Part for the year,

  the person liable to pay the tax shall pay interest on such excess, for the period during which it is outstanding, at such rates per annum prescribed for the purposes of subsection 161(1) of the Income Tax Act as are in effect from time to time during the period.

• Marginal note:Idem

  (2) In addition to the interest payable under subsection (1), where a taxpayer, being required by this Part to pay a part or an instalment of tax, has failed to pay all or any part thereof, that taxpayer shall, on payment of the amount he failed to pay, pay interest at the rate per annum referred to in subsection (1) from the day on or before which he was required to make the payment to the day of payment or the beginning of the period in respect of which he becomes liable to pay interest thereon under subsection (1), whichever is earlier.

• Marginal note:Deemed liability of individual

  (3) For the purposes of subsection (2), where an individual, other than a trust, is required to pay a part or an instalment of tax for a taxation year computed by reference to

  • (a) the amount, if any, by which the amount estimated by that individual to be the tax payable under this Part by him for the year exceeds the amount estimated by him to be deductible from his tax otherwise payable for the year under subsection 9(5), or

  • (b) his instalment base for the year,

  he shall be deemed to have been liable to pay a part or an instalment computed by reference to the lesser of

  • (c) the amount, if any, by which the tax payable under this Part by him for the year exceeds the amount deducted under subsection 9(5) from his tax otherwise payable, and

  • (d) his instalment base for the year.

• Marginal note:Where individual a trust

  (4) For the purposes of subsection (2), where an individual that is a trust is required to pay a part or an instalment of tax for a taxation year computed by reference to

  • (a) the amount, if any, by which the amount estimated by it to be the tax payable on its production revenue for the year exceeds the amount estimated by it to be deductible from its tax otherwise payable for the year under subsection 9(5), or

  • (b) its instalment base for the year,

  it shall be deemed to have been liable to pay a part or an instalment computed by reference to the lesser of

  • (c) the amount, if any, by which the tax payable by it on its production revenue for the year exceeds the amount deducted under subsection 9(5) from its tax otherwise payable, and

  • (d) its instalment base for the year.

• Marginal note:Deemed liability of corporation

  (5) For the purposes of subsection (2), where a corporation, commission or association is required to pay a part or an instalment of tax for a taxation year computed by reference to a method described in subsection 14(2), it shall be deemed to have been liable to pay a part or an instalment computed by reference to

  • (a) the amount, if any, by which the tax payable by it on its production revenue for the year exceeds the aggregate of all amounts each of which is the amount, if any, deducted under subsection 9(5) or 10(1) from its tax otherwise payable for the year,

  • (b) its first instalment base for the year, or

  • (c) its second instalment base for the year and its first instalment base for the year,

  whichever method gives rise to the least amount required to be paid by it on or before the days referred to in paragraph 14(2)(a), (b) or (c).

• (6) [Repealed, R.S., 1985, c. 2 (2nd Supp.), s. 11]

Marginal note:Excessive refund provisions

16 Where at any time the Minister determines that, as a consequence of the operation of subsection 5(6), an amount has been refunded to a taxpayer for a taxation year in excess of the amount to which the taxpayer was entitled as a refund,

• (a) the excess shall be deemed to be an amount that became payable under this Part by the taxpayer on the day on which the amount was refunded;

• (b) the taxpayer shall pay interest at the rate prescribed for the purposes of subsection 161(1) of the Income Tax Act on the excess from the day it became payable to the date of a payment; and

• (c) the Minister may at any time assess a taxpayer in respect of any amount payable by the taxpayer by virtue of this section and, in such case, the provisions of this Part are applicable, with such modifications as the circumstances require, in respect of the assessment as though it had been made under section 13.

Marginal note:Penalties

• 17 (1) Every person who fails to file a return of production revenue as and when required by subsection 11(1) is liable to a penalty of

  • (a) an amount equal to five per cent of the tax under this Part that was unpaid when the return was required to be filed; and

  • (b) the product obtained when one per cent of the tax under this Part that was unpaid when the return was required to be filed is multiplied by the number of complete months, not exceeding twelve, in the period between the date on which the return was required to be filed and the date on which the return was filed.

• Marginal note:Evasion

  (2) Every person who wilfully attempts to evade payment of the tax payable by him under this Part by failing to file a return of production revenue as and when required by subsection 11(1) is liable to a penalty of fifty per cent of the amount of the tax sought to be evaded.

• Marginal note:False statements, etc.

  (3) Every person who, knowingly or under circumstances amounting to gross negligence in the carrying out of any duty or obligation imposed by or under this Act, makes or participates in, assents to or acquiesces in the making of, a false statement or an omission in a return, form, certificate, statement or an answer, in this section referred to as a “return”, filed or made in respect of a taxation year as required by or under this Act is liable to a penalty of twenty-five per cent of the amount, if any, by which

  • (a) the tax for the year that would be payable under this Part by the person if the production revenue of the person for the year were computed by adding to such revenue reported in the person’s return for the year that portion of the understatement of such revenue for the year that is reasonably attributable to the false statement or omission,

  exceeds

  • (b) the tax for the year that would have been payable under this Part by that person had his tax payable for the year been assessed on the basis of the information provided in his return for the year.

• Marginal note:Understatement of revenue

  (4) For the purposes of subsection (3), the production revenue reported in a return of a person for a taxation year shall be deemed not to be less than nil and the understatement of production revenue for the year of a person means the aggregate of

  • (a) the amount, if any, by which

    • (i) the aggregate of amounts that were not reported by that person in his return and that were required to be included in computing that revenue for the year

    exceeds

    • (ii) the aggregate of such of the amounts deductible by that person in computing that revenue for the year under this Part as were wholly applicable to the amounts referred to in subparagraph (i) and were not deducted by him in computing that revenue for the year reported by him in his return, and

  • (b) the amount, if any, by which

    • (i) the aggregate of amounts deducted by that person in computing that revenue for the year reported by him in his return

    exceeds

    • (ii) the aggregate of such of the amounts referred to in subparagraph (i) as were deductible by him in computing that revenue for the year in accordance with this Part.

• Marginal note:Burden of proof

  (5) Where, in any appeal under this Act, any penalty assessed by the Minister under this section is in issue, the burden of establishing the facts justifying the assessment of the penalty is on the Minister.

Marginal note:Refunds

• 18 (1) If the return of a taxpayer’s production revenue for a taxation year has been made within four years from the end of the year, the Minister

  • (a) may, on or after mailing the notice of assessment for the year, refund to a taxpayer, without application therefor, any overpayment made on account of his tax for the year; and

  • (b) shall make such a refund after mailing the notice of assessment if application therefor has been made in writing by the taxpayer within four years from the end of the year.

• Marginal note:Application of overpayments

  (2) Instead of making a refund to a taxpayer that might otherwise be made under this section, the Minister may, where the taxpayer is liable or about to become liable to make any payment under this Act, apply the amount of the overpayment to that other liability and notify the taxpayer of that action.

• Marginal note:Interest on overpayments

  (3) Where an amount in respect of an overpayment is refunded to a taxpayer or applied under this section on other liability, interest at the rate per annum referred to in subsection 15(1) shall be paid or applied thereon for the period commencing with the latest of

  • (a) the day when the overpayment occurred,

  • (b) the day on or before which the return of the production revenue in respect of which the tax was paid was required to be filed, and

  • (c) the day when the return of the production revenue was actually filed,

  and ending with the day of the refund or the application on the other liability, as the case may be, unless the amount of the interest so calculated is less than one dollar, in which event no interest shall be paid or applied under this subsection.

• Marginal note:Excessive interest provisions

  (4) Where interest has been paid to, or applied to a liability of, a taxpayer pursuant to subsection (3) in respect of an overpayment and it is subsequently determined that the actual overpayment, if any, was less than the overpayment in respect of which interest was paid or applied,

  • (a) the amount by which the interest that has been paid or applied exceeds the interest, if any, computed in respect of the amount subsequently determined to be the actual overpayment shall, on the date on which the interest was so paid or applied, be deemed to be an amount payable by the taxpayer under this Part;

  • (b) the taxpayer shall pay interest at the rate prescribed for the purposes of subsection 161(1) of the Income Tax Act on the amount payable by virtue of this subsection from the date referred to in paragraph (a) to the date the amount is paid; and

  • (c) the Minister may at any time assess a taxpayer in respect of the amount payable by him by virtue of this subsection and in such case the provisions of this Part are applicable, with such modifications as the circumstances require, in respect of the assessment as though it had been made under section 13.

• Marginal note:Definition of “overpayment”

  (5) In this section, overpayment made on account of the tax for a taxation year of a taxpayer means the aggregate of all amounts paid on account of his tax for the year minus all amounts payable by him under this Act.

Marginal note:Objections to assessments

• 19 (1) A taxpayer who objects to an assessment under this Part may, within ninety days from the day of mailing of the notice of assessment, serve on the Minister a notice of objection in duplicate in prescribed form setting out the reasons for the objection and all relevant facts.

• Marginal note:Service

  (2) A notice of objection under this section shall, subject to subsection (6), be served by being sent by registered mail addressed to the Commissioner of Revenue at Ottawa.

• Marginal note:Duties of Minister re objections

  (3) On receipt of a notice of objection under this section, the Minister shall,

  • (a) with all due dispatch, reconsider the assessment and vacate, confirm or vary the assessment or reassess, or

  • (b) where the taxpayer indicates in the notice of objection that the taxpayer wishes to appeal immediately to the Tax Court of Canada and that the taxpayer waives reconsideration of the assessment and the Minister consents to the waiver, file a copy of the notice of objection with the Registrar of the Tax Court of Canada,

  and the Minister shall thereupon notify the taxpayer of his action by registered mail.

• Marginal note:When assessment deemed confirmed

  (4) Where the Minister files a copy of a notice of objection pursuant to paragraph (3)(b), the Minister shall be deemed, for the purposes of section 22, to have confirmed the assessment to which the notice relates and the taxpayer who served the notice shall be deemed to have thereupon instituted an appeal in accordance with that section.

• Marginal note:Idem

  (5) A reassessment made by the Minister pursuant to subsection (3) is not invalid by reason only that it was not made within four years from the day of mailing of a notice of an original assessment or of a notification described in subsection 13(4).

• Marginal note:Acceptance of notice of objection

  (6) The Minister may accept a notice of objection as having been duly served under this section notwithstanding that it was not served in duplicate or in the manner required by subsection (2).

• Marginal note:Appeals

  (7) Where a taxpayer has served a notice of objection to an assessment in accordance with this section and thereafter the Minister reassesses the taxpayer’s tax for the taxation year in respect of which the notice of objection was served or makes an additional assessment in respect thereof, and sends to the taxpayer a notice of the reassessment or of the additional assessment, as the case may be, the taxpayer may, without serving a notice of objection to the reassessment or additional assessment,

  • (a) appeal therefrom to the Tax Court of Canada in accordance with section 22; or

  • (b) if an appeal to the Tax Court of Canada has been instituted with respect to the assessment, amend that appeal by joining thereto an appeal in respect of the reassessment or the additional assessment in such manner and on such terms, if any, as that Court directs.

Marginal note:When assessment unaffected

20 An assessment shall not be vacated or varied on appeal by reason only of any irregularity, informality, omission or error on the part of any person in the observation of any directory provision of this Act.

Marginal note:Application to Tax Court of Canada for time extension

• 21 (1) Where no objection to an assessment under section 19 or appeal to the Tax Court of Canada under section 22 has been made or instituted within the time limited by section 19 or 22, as the case may be, an application may be made to the Tax Court of Canada for an order extending the time within which a notice of objection may be served or an appeal instituted and the Tax Court of Canada may, if in its opinion the circumstances of the case are such that it would be just and equitable to do so, make an order extending the time for objecting or appealing and may impose such terms as it deems just.

• Marginal note:Reasons in application

  (2) An application under subsection (1) shall set out the reasons why it was not possible to serve the notice of objection or institute the appeal to the Tax Court of Canada within the time otherwise limited by this Act for so doing.

• Marginal note:Filing application

  (3) An application under subsection (1) shall be made by filing with the Registrar of the Tax Court of Canada or by sending by registered mail addressed to the Registrar at Ottawa three copies of the application accompanied by three copies of a notice of objection or notice of appeal, as the case may be.

• (4) [Repealed, R.S., 1985, c. 51 (4th Supp.), s. 18]

• Marginal note:Where order not to be made

  (5) No order shall be made under subsection (1)

  • (a) unless the application to extend the time for objecting or appealing is made within one year after the expiration of the time otherwise limited by this Act for objecting to or appealing from the assessment in respect of which the application is made;

  • (b) if the Tax Court of Canada has previously made an order extending the time for objecting to or appealing from the assessment; and

  • (c) unless the Tax Court of Canada is satisfied that

    • (i) but for the circumstances mentioned in subsection (1), an objection or appeal would have been made or taken within the time otherwise limited by this Act for so doing,

    • (ii) the application was brought as soon as circumstances permitted it to be brought, and

    • (iii) there are reasonable grounds for objecting to or appealing from the assessment.

Marginal note:Appeals to the Tax Court of Canada

• 22 (1) Where a taxpayer has served a notice of objection to an assessment under section 19, he may appeal to the Tax Court of Canada to have the assessment vacated or varied after

  • (a) the Minister has confirmed the assessment or reassessed, or

  • (b) one hundred and eighty days have elapsed after service of the notice of objection and the Minister has not notified the taxpayer that he has vacated or confirmed the assessment or reassessed,

  but no appeal under this subsection may be instituted after the expiration of ninety days from the day notice has been mailed to the taxpayer under section 19 that the Minister has confirmed the assessment or reassessed.

• Marginal note:Notice of appeal

  (2) Where an appeal is made to the Tax Court of Canada, the Tax Court shall forthwith send a notice of the appeal to the office of the Commissioner of Revenue.

• Marginal note:Copies of material to be forwarded

  (3) Forthwith after receiving notice under subsection (2) of an appeal, the Commissioner of Revenue shall forward to the Tax Court of Canada copies of all returns, notices of assessment, notices of objection and notification, if any, that are relevant to the appeal.

• Marginal note:Disposition of appeal

  (4) The Tax Court of Canada may dispose of an appeal by

  • (a) dismissing it; or

  • (b) allowing it and vacating the assessment, varying the assessment or referring the assessment back to the Minister for reconsideration and reassessment.

• (5) [Repealed, R.S., 1985, c. 51 (4th Supp.), s. 19]

• Marginal note:Copy of decision

  (6) On the disposition of an appeal, the Tax Court of Canada shall forthwith forward, by registered mail, a copy of the decision and any written reasons given therefor to the Minister and the appellant.

23 [Repealed, R.S., 1985, c. 51 (4th Supp.), s. 20]

Marginal note:Application of Income Tax Act provisions

24 Sections 173 and 174 of the Income Tax Act apply in respect of the tax imposed under this Part except that references therein to subsection 152(4) and sections 165 and 169 of that Act shall be read, respectively, as references to subsection 13(4) and sections 19 and 22 of this Act.

Marginal note:When proceedings held in camera

25 Proceedings under sections 22 and 23 shall be held in camera on request made to the Federal Court by the taxpayer.

PART IIRoyalties Tax

Tax and Computation

Marginal note:Tax payable by non-resident persons

• 26 (1) A tax shall be payable by every non-resident person, in this section referred to as the “recipient”, on every amount received by the recipient as, on account of or in lieu of payment of, or in satisfaction of a resource royalty, computed by reference to the amount or value of production of petroleum or gas after 1985 and before October 1986, unless the recipient, at the time of the receipt of the resource royalty, carries on a business described in subparagraph 66(15)(h)(i) of the Income Tax Act through one or more fixed places of business in Canada.

• Marginal note:Computation of tax

  (2) The tax payable by a person under this Part in respect of

  • (a) a resource royalty, other than a resource royalty on synthetic production, shall, where the royalty is computed by reference to the amount or value of production of petroleum or gas, be 13.33% of the amount of such royalty; and

  • (b) a resource royalty on synthetic production shall, where the royalty is computed by reference to the amount or value of production of petroleum or gas, be 12% of the amount of such royalty.

• (3) and (4) [Repealed, R.S., 1985, c. 2 (2nd Supp.), s. 13]

• Marginal note:Deduction or withholding required

  (5) A person who pays a resource royalty on which a tax is payable under this Part shall, notwithstanding any agreement or law to the contrary, deduct or withhold therefrom the tax payable under this Part and the amount so deducted or withheld shall be deemed to have been paid on behalf of the recipient on account of the recipient’s tax.

• Marginal note:Amount to be remitted

  (6) A person who has deducted or withheld tax from a royalty as required by subsection (5) shall, on or before the fifteenth day of the month next following the month in which the royalty was paid, remit the amount deducted or withheld, accompanied by a return in prescribed form, to the Receiver General.

• (7) to (9) [Repealed, R.S., 1985, c. 2 (2nd Supp.), s. 13]

• Marginal note:Where no tax is payable

  (10) Notwithstanding subsection (1), no tax shall be payable under this Part by a taxpayer on

  • (a) any portion of the amount received by the taxpayer as a production royalty or resource royalty, computed by reference to the amount or value of production in a period after March 31, 1985 from an approved recovery project, that is the exempt percentage of the amount for that period in respect of that project;

  • (b) any portion of the amount received by the taxpayer as a production royalty or resource royalty, computed by reference to the amount or value of production of petroleum or gas from a deepened well that is attributable to the new deep production from the well; or

  • (c) an amount received by the taxpayer as a production royalty or resource royalty computed by reference to the amount or value of production from a prescribed oil or gas well.

General

Marginal note:When tax deemed received

• 27 (1) When tax has been deducted or withheld from a royalty as required by subsection 26(5), it shall be deemed to have been received at that time by the person to whom the royalty was paid.

• Marginal note:Trustee, etc.

  (2) For the purposes of subsections 26(5) and (6), where a trustee who is administering, managing, distributing, winding-up, controlling or otherwise dealing with the property, business, estate or income of another person authorizes or otherwise causes a resource royalty or a production royalty to be paid on behalf of that other person, the trustee shall be deemed to be a person making the payment and the trustee and that other person shall be jointly and severally liable in respect of the amount required by subsection 26(6) to be remitted on account of any amount required by subsection 26(5) to be deducted or withheld from the payment.

• Marginal note:Returns required

  (3) Every person who pays a resource royalty or production royalty in a calendar year shall

  • (a) make an information return in prescribed form and containing prescribed information in respect of all such payments made in the year;

  • (b) file the return with the Minister, without notice or demand therefor,

    • (i) in any case where the person discontinues his business or activity, within thirty days of the date of the discontinuance of the business or activity, or

    • (ii) in any other case, on or before the last day of February of the next following year; and

  • (c) forward to each taxpayer, in respect of whose resource royalty or production royalty the return relates, at the taxpayer’s latest known address or deliver to the taxpayer in person, one copy of the portion of the return relating to the taxpayer on or before the date the return is required to be filed with the Minister.

• Marginal note:Returns by trustees

  (4) Every trustee who is administering, managing, winding-up, controlling or otherwise dealing with the property, business, estate or income of a person who has not filed a return as required by subsection (3) shall file that return.

• Marginal note:Definition of “trustee”

  (5) In subsections (2) and (4), trustee includes a liquidator, receiver, receiver-manager, trustee in bankruptcy, assignee, executor, administrator, sequestrator or any other person performing a function similar to that performed by any such person.

Marginal note:Actions for deducting, etc., prohibited

• 28 (1) No action lies against any person for deducting or withholding any sum of money in compliance or intended compliance with this Part.

• Marginal note:Deduction, etc., deemed held in trust

  (2) Every person who deducts or withholds any amount that is required under this Part to be remitted shall be deemed to hold that amount in trust for Her Majesty in right of Canada and all such amounts shall be kept separate and apart from that person’s own moneys and, in the event of any liquidation, assignment or bankruptcy, those amounts shall remain apart and form no part of the estate in liquidation, assignment or bankruptcy.

• Marginal note:Payment by Minister where no liability for tax

  (3) Where a person on whose behalf an amount has been deducted or withheld under this Part is not liable to pay any tax under this Part or the amount deducted or withheld is in excess of the tax that the person is liable to pay, the Minister shall, on application in writing by or on behalf of the person made to the Minister within two years from the end of the calendar year in which the amount was so deducted or withheld, pay to that person the amount or such part thereof as he was not liable to pay, unless he is otherwise liable or about to become liable to make a payment under this Act, in which case the Minister may apply the amount otherwise payable under this subsection to that payment and notify the person of that fact.

• Marginal note:Assessment in certain cases

  (4) Where, on application by or on behalf of a person pursuant to subsection (3) in respect of an amount that was deducted or withheld under this Part, the Minister is not satisfied

  • (a) that the person was not liable to pay any tax under this Part, or

  • (b) that the amount was in excess of the tax that the person was liable to pay,

  the Minister shall assess that person for any amount payable by him under this Part and send a notice of assessment to that person, whereupon subsections 13(3), (4) and (7) and sections 18 to 25 apply, with such modifications as the circumstances require, in respect of the assessment of that person.

• Marginal note:Liability

  (5) Any person who fails to deduct or withhold tax as required by this Part is liable to pay to Her Majesty the amount that should have been deducted or withheld together with interest thereon at the rate per annum prescribed for the purposes of subsection 227(8) of the Income Tax Act.

• Marginal note:Penalty

  (6) Every person who fails to remit as required by this Part the amount of tax deducted or withheld under this Part is liable to a penalty of ten per cent of that amount or ten dollars, whichever is the greater, in addition to the amount itself, together with interest on the amount at the rate per annum referred to in subsection (5).

• Marginal note:Assessment generally

  (7) The Minister may assess any person for any amount payable by that person under this Part and send a notice of assessment to that person, whereupon subsections 13(3), (4) and (7), 14(6), (7), (9) and (10) and sections 18 to 25 apply, with such modifications as the circumstances require, in respect of the assessment of that person.

• Marginal note:Certain agreements void

  (8) Where under this Part an amount is required to be deducted or withheld, an agreement by the person on whom the obligation is imposed not to deduct or withhold is void.

• Marginal note:Receipt of Minister sufficient

  (9) The receipt of the Minister for tax deducted or withheld by any person as required by this Part is a good and sufficient discharge of the liability of any debtor to his creditor with respect thereto to the extent of the amount referred to in the receipt.

PART IIIAdministration and Enforcement

General

Marginal note:Minister’s responsibilities and powers

• 29 (1) The Minister shall administer and enforce this Act and the Commissioner of Revenue may exercise the powers and perform the duties of the Minister under this Act.

• Marginal note:Officers, etc.

  (2) Such officers, clerks and employees as are necessary for the proper administration and enforcement of this Act shall be appointed or employed in the manner authorized by law.

• Marginal note:Idem

  (3) The Minister may authorize an officer or class of officers to exercise the powers or perform the duties of the Minister under this Act.

Marginal note:Extensions of time

30 The Minister may at any time extend the time for filing a return under this Act.

Marginal note:Acceptance of security by Minister

31 The Minister may, if he considers it advisable in a particular case, accept security for payment of taxes by way of mortgage or other charge on property of the taxpayer or any other person or by way of guarantees from other persons.

Marginal note:Administration of oaths

32 Any person appointed or employed in connection with the administration or enforcement of this Act, if he is designated by the Minister for the purpose, may, in the course of his duties, administer oaths and take and receive affidavits, declarations and solemn affirmations for the purposes of or incidental to the administration or enforcement of this Act and every person so designated has for those purposes all the powers of a commissioner for administering oaths or taking affidavits.

Marginal note:Application of Income Tax Act provisions

33 Sections 221, 222, 224, 225, 226, 230, 232 and 241 of the Income Tax Act apply, with such modifications as the circumstances require, in respect of the administration and enforcement of this Act.

Marginal note:Certificates

• 34 (1) An amount payable under this Act that has not been paid or such part of an amount payable under this Act as has not been paid may be certified by the Minister

  • (a) where there has been a direction by the Minister under subsection 14(7), forthwith after that direction; and

  • (b) otherwise, on the expiration of thirty days after the default.

• Marginal note:Judgments

  (2) On production to the Federal Court, a certificate made under this section shall be registered in the Court and when registered has the same force and effect, and all proceedings may be taken thereon, as if the certificate were a judgment obtained in that Court for a debt of the amount specified in the certificate plus interest to the day of payment as provided for in this Act.

• Marginal note:Costs

  (3) All reasonable costs and charges incurred in the registration of a certificate made under this section are recoverable in like manner as if they had been certified and the certificate had been registered under this section.

Marginal note:Recovery by deduction or set-off

35 Where a person is indebted to Her Majesty under this Act, the Minister may require the retention by way of deduction or set-off of such amount as the Minister may specify out of any amount that is or may become payable to that person by Her Majesty in right of Canada.

Marginal note:Inspections and investigations

36 Sections 231 to 231.5 of the Income Tax Act apply in respect of the administration and enforcement of this Act, as if the reference in paragraph 231.2(1)(a) thereof to a “return of income” were read as a reference to “a return of production revenue.

Marginal note:Information return

37 Whether or not he has filed an information return in prescribed form, every person shall, on demand from the Minister, served personally or by registered mail, file with the Minister, within such reasonable time as may be stipulated in the demand, such information return as is designated therein.

Marginal note:Execution of documents by corporations

38 A return, certificate or other document made by a corporation pursuant to this Act or a regulation made thereunder shall be signed on its behalf by the President, Secretary or Treasurer of the corporation or by any other officer or person thereunto duly authorized by the Board of Directors or other governing body of the corporation.

Offences and Punishment

Marginal note:Offences

• 39 (1) Every person who fails to file a return as and when required by or under this Act is guilty of an offence and, in addition to any penalty otherwise provided, liable on summary conviction to a fine not exceeding one hundred dollars for each day of default.

• Marginal note:Idem

  (2) Every person who fails to comply with or contravenes subsection 26(5) or any provision of sections 231.1 to 231.5 of the Income Tax Act as it applies to the administration and enforcement of this Act is guilty of an offence and, in addition to any penalty otherwise provided, liable on summary conviction to a fine not exceeding ten thousand dollars or to imprisonment for a term not exceeding six months or to both.

Marginal note:Idem

• 40 (1) Every person who

  • (a) makes, or participates in, assents to or acquiesces in the making of, false or deceptive statements in a return, certificate, statement or answer filed or made as required by or under this Act,

  • (b) to evade payment of a tax imposed by this Act, destroys, alters, mutilates, secretes or otherwise disposes of the records or books of account of a taxpayer,

  • (c) makes, or assents to or acquiesces in the making of, false or deceptive entries or omits, or assents to or acquiesces in the omission, to enter a material particular in records or books of account of a taxpayer,

  • (d) wilfully, in any manner, evades or attempts to evade compliance with this Act or payment of taxes imposed by this Act, or

  • (e) conspires with any person to commit an offence referred to in any of paragraphs (a) to (d),

  is guilty of an offence and, in addition to any penalty otherwise provided, liable on summary conviction to a fine of not more than double the amount of the tax that was sought to be evaded or to imprisonment for a term not exceeding two years or to both.

• Marginal note:Penalty on conviction

  (2) Where a person has been convicted under this section of wilfully, in any manner, evading or attempting to evade payment of taxes imposed by Part I, he is not liable to pay a penalty imposed under section 17 for the same evasion or attempt unless he was assessed for that penalty before the information or complaint giving rise to the conviction was laid or made.

• Marginal note:Stay of appeal

  (3) Where, in any appeal under this Act, substantially the same facts are at issue as those that are at issue in a prosecution under this section, the Minister may file a stay of proceedings with the Tax Court of Canada and thereupon the proceedings before that Court are stayed pending final determination of the outcome of the prosecution.

Marginal note:Officers, etc., of corporations

41 Where a corporation commits an offence under this Act, every officer, director or agent of the corporation who directed, authorized, assented to, acquiesced in or participated in the commission of the offence is a party to and guilty of the offence and is liable on conviction to the punishment provided for the offence whether or not the corporation has been prosecuted or convicted.

Special Provisions

Marginal note:Application of Income Tax Act provisions

42 Section 244 of the Income Tax Act applies in respect of the administration and enforcement of this Act except that references therein to subsection 152(4) or Division J of Part I of that Act shall be read, respectively, as references to subsection 13(4) and sections 22 to 24 of this Act.

43 [Repealed, R.S., 1985, c. 2 (2nd Supp.), s. 15]