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

Marginal note:Return

• 183.4 (1) If a covered entity redeems, acquires or cancels equity of the entity in a taxation year,

  • (a) if the entity is a corporation, on or before the day it is required to file its return of income under Part I for the year, the corporation shall file with the Minister a return for the year under this Part in prescribed form;

  • (b) if the entity is a trust, within 90 days after the end of the taxation year, the trustee of the trust shall file with the Minister a return for the year under this Part in prescribed form; and

  • (c) if the entity is a partnership, a member of the partnership that has authority to act for the partnership shall file with the Minister a return for the year under this Part in prescribed form on or before the earlier of

    • (i) the day that is five months after the end of the taxation year, and

    • (ii) March 31 in the calendar year immediately following the calendar year in which the taxation year ended.

• Marginal note:Payment

  (2) Every covered entity that is liable to pay tax under this Part for a taxation year, shall

  • (a) if the entity is a corporation or trust, pay its tax payable under this Part for the year to the Receiver General on or before its balance-due day for the year; and

  • (b) if the entity is a partnership, pay its tax payable under this Part for the year to the Receiver General on or before the day which the partnership is required to file a return for the year under paragraph (1)(c).

• Marginal note:Provisions applicable to Part

  (3) Subsections 150(2) and (3), sections 152, 158 and 159, subsections 160.1(1) and 161(1) and (11), sections 162 to 167 and Division J of Part I are applicable to this Part with such modifications as the circumstances require.

PART IIIAdditional Tax on Excessive Elections

Marginal note:Tax on excessive elections

• 184 (2) If a corporation has elected in accordance with subsection 83(2), 130.1(4) or 131(1) in respect of the full amount of any dividend payable by it on shares of any class of its capital stock (in this section referred to as the “original dividend”) and the full amount of the original dividend exceeds the portion of the original dividend deemed by that subsection to be a capital dividend or capital gains dividend, as the case may be, the corporation shall, at the time of the election, pay a tax under this Part equal to 3/5 of the excess.

• (2.1) [Repealed, 2013, c. 34, s. 327]

• Marginal note:Election to treat excess as separate dividend

  (3) If, in respect of an original dividend payable at a particular time, a corporation would, but for this subsection, be required to pay a tax under this Part in respect of an excess referred to in subsection (2), and the corporation elects in prescribed manner on or before the day that is 90 days after the day of sending of the notice of assessment in respect of the tax that would otherwise be payable under this Part, the following rules apply:

  • (a) the portion of the original dividend deemed by subsection 83(2), 130.1(4) or 131(1) to be a capital dividend or capital gains dividend, as the case may be, is deemed for the purposes of this Act to be the amount of a separate dividend that became payable at the particular time;

  • (b) if the corporation identifies in its election any part of the excess, that part is, for the purposes of any election under subsection 83(2), 130.1(4) or 131(1) in respect of that part, and, where the corporation has so elected, for all purposes of this Act, deemed to be the amount of a separate dividend that became payable immediately after the particular time;

  • (c) the amount by which the excess exceeds any portion deemed by paragraph (b) to be a separate dividend for all purposes of this Act is deemed to be a separate taxable dividend that became payable at the particular time; and

  • (d) each person who held any of the issued shares of the class of shares of the capital stock of the corporation in respect of which the original dividend was paid is deemed

    • (i) not to have received any portion of the original dividend, and

    • (ii) to have received, at the time that any separate dividend determined under any of paragraphs (a) to (c) became payable, the proportion of that dividend that the number of shares of that class held by the person at the particular time is of the number of shares of that class outstanding at the particular time except that, for the purpose of Part ​XIII, the separate dividend is deemed to be paid on the day that the election in respect of this subsection is made.

• (3.1) and (3.2) [Repealed, 2013, c. 34, s. 327]

• Marginal note:Concurrence with election

  (4) An election under subsection (3) is valid only if

  • (a) it is made with the concurrence of the corporation and all its shareholders

    • (i) who received or were entitled to receive all or any portion of the original dividend, and

    • (ii) whose addresses were known to the corporation; and

  • (b) either

    • (i) it is made on or before the day that is 30 months after the day on which the original dividend became payable, or

    • (ii) each shareholder described in subparagraph (a)(i) concurs with the election, in which case, notwithstanding subsections 152(4) to (5), any assessment of the tax, interest and penalties payable by each of those shareholders for any taxation year shall be made that is necessary to take the corporation’s election into account.

• Marginal note:Exception for non-taxable shareholders

  (5) If each person who, in respect of an election made under subsection (3), is deemed by subsection (3) to have received a dividend at a particular time is also, at the particular time, a person all of whose taxable income is exempt from tax under Part I,

  • (a) subsection (4) does not apply to the election; and

  • (b) the election is valid only if it is made on or before the day that is 30 months after the day on which the original dividend became payable.

Marginal note:Assessment of tax

• 185 (1) The Minister shall, with all due dispatch, examine each election made by a corporation in accordance with subsection 83(2), 130.1(4) or 131(1), assess the tax, if any, payable under this Part in respect of the election and send a notice of assessment to the corporation.

• Marginal note:Payment of tax and interest

  (2) Where an election has been made by a corporation in accordance with subsection 83(2), 130.1(4) or 131(1) and the Minister mails a notice of assessment under this Part in respect of the election, that part of the amount assessed then remaining unpaid and interest thereon at the prescribed rate computed from the day of the election to the day of payment is payable forthwith by the corporation to the Receiver General.

• Marginal note:Provisions applicable to Part

  (3) Subsections 152(3), 152(4), 152(5), 152(7) and 152(8) and 161(11), sections 163 to 167 and Division J of Part I are applicable to this Part with such modifications as the circumstances require.

• Marginal note:Joint and several, or solidary, liability from excessive elections

  (4) Each person who has received a dividend from a corporation in respect of which the corporation elected under subsection 83(2), 130.1(4) or 131(1) is jointly and severally, or solidarily, liable with the corporation to pay that proportion of the corporation’s tax payable under this Part because of the election that

  • (a) the amount of the dividend received by the person

  is of

  • (b) the full amount of the dividend in respect of which the election was made,

  but nothing in this subsection limits the liability of any person under any other provision of this Act.

• Marginal note:Assessment

  (5) The Minister may, at any time after the last day on which a corporation may make an election under subsection 184(3) in respect of a dividend, assess a person in respect of any amount payable under subsection 185(4) in respect of the dividend, and the provisions of Division I of Part I apply, with such modifications as the circumstances require, to an assessment made under this subsection as though it were made under section 152.

• Marginal note:Rules applicable

  (6) If under subsection (4) a corporation and another person have become jointly and severally, or solidarily, liable to pay part or all of the corporation’s tax payable under this Part in respect of a dividend described in that subsection,

  • (a) a payment at any time by the other person on account of the liability shall, to the extent of the payment, discharge their liability after that time; and

  • (b) a payment at any time by the corporation on account of its liability shall discharge the other person’s liability only to the extent of the amount determined by the formula

    (A - B) × C/D

    where

    A

    is the total of

    • (i) the amount of the corporation’s liability, immediately before that time, under this Part in respect of the full amount of the dividend, and

    • (ii) the amount of the payment,

    B

    is the amount of the corporation’s liability, immediately before that time, under this Act,

    C

    is the amount of the dividend received by the other person, and

    D

    is the full amount of the dividend.

PART III.1Additional Tax on Excessive Eligible Dividend Designations

Marginal note:Tax on excessive eligible dividend designations

• 185.1 (1) A corporation that has made an excessive eligible dividend designation in respect of an eligible dividend paid by it at any time in a taxation year shall, on or before the corporation’s balance-due day for the taxation year, pay a tax under this Part for the taxation year equal to the total of

  • (a) 20% of the excessive eligible dividend designation, and

  • (b) if the excessive eligible dividend designation arises because of the application of paragraph (c) of the definition excessive eligible dividend designation in subsection 89(1), 10% of the excessive eligible dividend designation.

• Marginal note:Election to treat excessive eligible dividend designation as an ordinary dividend

  (2) If, in respect of an excessive eligible dividend designation that is not described in paragraph (1)(b) and that is made by a corporation in respect of an eligible dividend (in this subsection and subsection (3) referred to as the “original dividend”) paid by it at a particular time, the corporation would, if this Act were read without reference to this subsection, be required to pay a tax under subsection (1), and it elects in prescribed manner on or before the day that is 90 days after the day of sending the notice of assessment in respect of that tax that would otherwise be payable under subsection (1), the following rules apply:

  • (a) notwithstanding the definition eligible dividend in subsection 89(1), the amount of the original dividend paid by the corporation is deemed to be the amount, if any, by which

    • (i) the amount of the original dividend, determined without reference to this subsection

    exceeds

    • (ii) the amount claimed by the corporation in the election not exceeding the excessive eligible dividend designation, determined without reference to this subsection;

  • (b) an amount equal to the amount claimed by the corporation in the election is deemed to be a separate taxable dividend (other than an eligible dividend) that was paid by the corporation immediately before the particular time;

  • (c) each shareholder of the corporation who at the particular time held any of the issued shares of the class of shares in respect of which the original dividend was paid is deemed

    • (i) not to have received the original dividend, and

    • (ii) to have received at the particular time

      • (A) as an eligible dividend, the shareholder’s pro rata portion of the amount of any dividend determined under paragraph (a), and

      • (B) as a taxable dividend (other than an eligible dividend) the shareholder’s pro rata portion of the amount of any dividend determined under paragraph (b); and

  • (d) a shareholder’s pro rata portion of a dividend paid at any time on a class of the shares of the capital stock of a corporation is that proportion of the dividend that the number of shares of that class held by the shareholder at that time is of the number of shares of that class outstanding at that time.

• Marginal note:Concurrence with election

  (3) An election under subsection (2) in respect of an original dividend is valid only if

  • (a) it is made with the concurrence of the corporation and all its shareholders

    • (i) who received or were entitled to receive all or any portion of the original dividend, and

    • (ii) whose addresses were known to the corporation; and

  • (b) either

    • (i) it is made on or before the day that is 30 months after the day on which the original dividend was paid, or

    • (ii) each shareholder described in subparagraph (a)(i) concurs with the election, in which case, notwithstanding subsections 152(4) to (5), any assessment of the tax, interest and penalties payable by each of those shareholders for any taxation year shall be made that is necessary to take the corporation’s election into account.

• Marginal note:Exception for non-taxable shareholders

  (4) If each shareholder who, in respect of an election made under subsection (2), is deemed by subsection (2) to have received a dividend at a particular time is also, at the particular time, a person all of whose taxable income is exempt from tax under Part I,

  • (a) subsection (3) does not apply to the election; and

  • (b) the election is valid only if it is made on or before the day that is 30 months after the day on which the original dividend was paid.

Marginal note:Return

• 185.2 (1) Every corporation resident in Canada that pays a taxable dividend (other than a capital gains dividend within the meaning assigned by subsection 130.1(4) or 131(1)) in a taxation year shall file with the Minister, not later than the corporation’s filing-due date for the taxation year, a return for the year under this Part in prescribed form containing an estimate of the taxes payable by it under this Part for the taxation year.

• Marginal note:Provisions applicable to Part

  (2) Subsections 150(2) and (3), sections 151, 152, 158 and 159, subsections 161(1) and (11), sections 162 to 167 and Division J of Part I are applicable to this Part with such modifications as the circumstances require.

• Marginal note:Joint and several liability from excessive eligible dividend designations

  (3) Without limiting the liability of any person under any other provision of this Act, if a Canadian-controlled private corporation or a deposit insurance corporation pays an eligible dividend in respect of which it has made an excessive eligible dividend designation to a shareholder with whom it does not deal at arm’s length, the shareholder is jointly and severally, or solidarily, liable with the corporation to pay that proportion of the corporation’s tax payable under this Part because of the designation that the amount of the eligible dividend received by the shareholder is of the total of all amounts each of which is a dividend in respect of which the designation was made.

• Marginal note:Assessment

  (4) The Minister may, at any time after the last day on which a corporation may make an election under subsection 185.1(2) in respect of an excessive eligible dividend designation, assess a person in respect of any amount payable under subsection (3) in respect of the designation, and the provisions of Division I of Part I (including, for greater certainty, the provisions in respect of interest payable) apply, with any modifications that the circumstances require, to an assessment made under this subsection as though it were made under section 152.

• Marginal note:Rules applicable

  (5) If under subsection (3) a corporation and a shareholder have become jointly and severally, or solidarily, liable to pay part or all of the corporation’s tax payable under this Part in respect of an excessive eligible dividend designation described in subsection (3),

  • (a) a payment at any time by the shareholder on account of the liability shall, to the extent of the payment, discharge their liability after that time; and

  • (b) a payment at any time by the corporation on account of its liability shall discharge the shareholder’s liability only to the extent of the amount determined by the formula

    (A - B) × C/D

    where

    A

    is the total of

    • (i) the amount of the corporation’s liability, immediately before that time, under this Part in respect of the designation, and

    • (ii) the amount of the payment,

    B

    is the amount of the corporation’s liability, immediately before that time, under this Act,

    C

    is the amount of the eligible dividend received by the shareholder, and

    D

    the total of all amounts each of which is a dividend in respect of which the designation was made.