Income Tax Act

Marginal note:Amounts to be included in respect of share of foreign affiliate

• 91 (1) In computing the income for a taxation year of a taxpayer resident in Canada, there shall be included, in respect of each share owned by the taxpayer of the capital stock of a controlled foreign affiliate of the taxpayer, as income from the share, the percentage of the foreign accrual property income of any controlled foreign affiliate of the taxpayer, for each taxation year of the affiliate ending in the taxation year of the taxpayer, equal to that share’s participating percentage in respect of the affiliate, determined at the end of each such taxation year of the affiliate.

• Marginal note:Reserve where foreign exchange restriction

  (2) Where an amount in respect of a share has been included in computing the income of a taxpayer for a taxation year by virtue of subsection 91(1) or 91(3) and the Minister is satisfied that, by reason of the operation of monetary or exchange restrictions of a country other than Canada, the inclusion of the whole amount with no deduction for a reserve in respect thereof would impose undue hardship on the taxpayer, there may be deducted in computing the taxpayer’s income for the year such amount as a reserve in respect of the amount so included as the Minister deems reasonable in the circumstances.

• Marginal note:Reserve for preceding year to be included

  (3) In computing the income of a taxpayer for a taxation year, there shall be included each amount in respect of a share that was deducted by virtue of subsection 91(2) in computing the taxpayer’s income for the immediately preceding year.

• Marginal note:Amounts deductible in respect of foreign taxes

  (4) Where, by virtue of subsection 91(1), an amount in respect of a share has been included in computing the income of a taxpayer for a taxation year or for any of the 5 immediately preceding taxation years (in this subsection referred to as the “income amount”), there may be deducted in computing the taxpayer’s income for the year the lesser of

  • (a) the product obtained when

    • (i) the portion of the foreign accrual tax applicable to the income amount that was not deductible under this subsection in any previous year

    is multiplied by

    • (ii) the taxpayer’s relevant tax factor for the year, and

  • (b) the amount, if any, by which the income amount exceeds the total of the amounts in respect of that share deductible under this subsection in any of the 5 immediately preceding taxation years in respect of the income amount.

• Marginal note:Denial of foreign accrual tax

  (4.1) For the purposes of the definition foreign accrual tax in subsection 95(1), foreign accrual tax applicable to a particular amount included in computing a taxpayer’s income under subsection (1) for a taxation year of the taxpayer in respect of a particular foreign affiliate of the taxpayer is not to include the amount that would, in the absence of this subsection, be foreign accrual tax applicable to the particular amount if, at any time in the taxation year (referred to in this subsection as the “affiliate year”) of the particular affiliate that ends in the taxation year of the taxpayer,

  • (a) a specified owner in respect of the taxpayer is considered,

    • (i) under the income tax laws (referred to in subsections (4.5) and (4.6) as the “relevant foreign tax law”) of any country other than Canada under the laws of which any income of a particular corporation — that is, at any time in the affiliate year, a pertinent person or partnership in respect of the particular affiliate — is subject to income taxation, to own less than all of the shares of the capital stock of the particular corporation that are considered to be owned by the specified owner for the purposes of this Act, or

    • (ii) under the income tax laws (referred to in subsections (4.5) and (4.6) as the “relevant foreign tax law”) of any country other than Canada under the laws of which any income of a particular partnership — that is, at any time in the affiliate year, a pertinent person or partnership in respect of the particular affiliate — is subject to income taxation, to have a lesser direct or indirect share of the income of the particular partnership than the specified owner is considered to have for the purposes of this Act; or

  • (b) where the taxpayer is a partnership, the direct or indirect share of the income of the partnership of any member of the partnership that is, at any time in the affiliate year, a person resident in Canada or a foreign affiliate of such a person is, under the income tax laws (referred to in subsection (4.6) as the “relevant foreign tax law”) of any country other than Canada under the laws of which any income of the partnership is subject to income taxation, less than the member’s direct or indirect share of that income for the purposes of this Act.

• Marginal note:Specified owner

  (4.2) For the purposes of subsections (4.1) and (4.5), a specified owner, at any time, in respect of a taxpayer means the taxpayer or a person or partnership that is, at that time,

  • (a) a partnership of which the taxpayer is a member;

  • (b) a foreign affiliate of the taxpayer;

  • (c) a partnership a member of which is a foreign affiliate of the taxpayer; or

  • (d) a person or partnership referred to in any of subparagraphs (4.4)(a)(i) to (iii).

• Marginal note:Pertinent person or partnership

  (4.3) For the purposes of this subsection and subsection (4.1), a pertinent person or partnership, at any time, in respect of a particular foreign affiliate of a taxpayer means the particular affiliate or a person or partnership that is, at that time,

  • (a) another foreign affiliate of the taxpayer

    • (i) in which the particular affiliate has an equity percentage, or

    • (ii) that has an equity percentage in the particular affiliate;

  • (b) a partnership a member of which is at that time a pertinent person or partnership in respect of the particular affiliate under this subsection; or

  • (c) a person or partnership referred to in any of subparagraphs (4.4)(b)(i) to (iii).

• Marginal note:Series of transactions

  (4.4) For the purposes of subsections (4.2) and (4.3), if, as part of a series of transactions or events that includes the earning of the foreign accrual property income that gave rise to the particular amount referred to in subsection (4.1), a foreign affiliate (referred to in this subsection as the “funding affiliate”) of the taxpayer or of a person (referred to in this subsection as the “related person”) resident in Canada that is related to the taxpayer, or a partnership (referred to in this subsection as the “funding partnership”) of which such an affiliate is a member, directly or indirectly provided funding to the particular affiliate, or a partnership of which the particular affiliate is a member, otherwise than by way of loans or other indebtedness that are subject to terms or conditions made or imposed, in respect of the loans or other indebtedness, that do not differ from those that would be made or imposed between persons dealing at arm’s length or by way of an acquisition of shares of the capital stock of any corporation, then

  • (a) if the funding affiliate is, or the funding partnership has a member that is, a foreign affiliate of the related person, the following persons and partnerships are deemed, at all times during which the foreign accrual property income is earned by the particular affiliate, to be specified owners in respect of the taxpayer:

    • (i) the related person,

    • (ii) each foreign affiliate of the related person, and

    • (iii) each partnership a member of which is a person referred to in subparagraph (i) or (ii); and

  • (b) the following persons and partnerships are deemed, at all times during which the foreign accrual property income is earned by the particular affiliate, to be pertinent persons or partnerships in respect of the particular affiliate:

    • (i) the funding affiliate or the funding partnership,

    • (ii) a non-resident corporation

      • (A) in which the funding affiliate has an equity percentage, or

      • (B) that has an equity percentage in the funding affiliate, and

    • (iii) a partnership a member of which is a person or partnership referred to in subparagraph (i) or (ii).

• Marginal note:Exception — hybrid entities

  (4.5) For the purposes of subparagraph (4.1)(a)(i), a specified owner in respect of the taxpayer is not to be considered, under the relevant foreign tax law, to own less than all of the shares of the capital stock of a corporation that are considered to be owned for the purposes of this Act solely because the specified owner is not treated as a corporation under the relevant foreign tax law.

• Marginal note:Exceptions — partnerships

  (4.6) For the purposes of subparagraph (4.1)(a)(ii) and paragraph (4.1)(b), a member of a partnership is not to be considered to have a lesser direct or indirect share of the income of the partnership under the relevant foreign tax law than for the purposes of this Act solely because of one or more of the following:

  • (a) a difference between the relevant foreign tax law and this Act in the manner of

    • (i) computing the income of the partnership, or

    • (ii) allocating the income of the partnership because of the admission to, or withdrawal from, the partnership of any of its members;

  • (b) the treatment of the partnership as a corporation under the relevant foreign tax law; or

  • (c) the fact that the member is not treated as a corporation under the relevant foreign tax law.

• Marginal note:Deemed ownership

  (4.7) For the purposes of subsection (4.1), if a specified owner owns, for the purposes of this Act, shares of the capital stock of a corporation and the dividends, or similar amounts, in respect of those shares are treated under the income tax laws of any country other than Canada under the laws of which any income of the corporation is subject to income taxation as interest or another form of deductible payment, the specified owner is deemed to be considered, under those tax laws, to own less than all of the shares of the capital stock of the corporation that are considered to be owned by the specified owner for the purposes of this Act.

• Marginal note:Amounts deductible in respect of dividends received

  (5) Where in a taxation year a taxpayer resident in Canada has received a dividend on a share of the capital stock of a corporation that was at any time a controlled foreign affiliate of the taxpayer, there may be deducted, in respect of such portion of the dividend as is prescribed to have been paid out of the taxable surplus of the affiliate, in computing the taxpayer’s income for the year, the lesser of

  • (a) the amount by which that portion of the dividend exceeds the amount, if any, deductible in respect thereof under paragraph 113(1)(b), and

  • (b) the amount, if any, by which

    • (i) the total of all amounts required by paragraph 92(1)(a) to be added in computing the adjusted cost base to the taxpayer of the share before the dividend was so received by the taxpayer

    exceeds

    • (ii) the total of all amounts required by paragraph 92(1)(b) to be deducted in computing the adjusted cost base to the taxpayer of the share before the dividend was so received by the taxpayer.

• (5.1) to (5.3) [Repealed, 2009, c. 2, s. 23]

• Marginal note:Idem

  (6) Where a share of the capital stock of a foreign affiliate of a taxpayer that is a taxable Canadian corporation is acquired by the taxpayer from another corporation resident in Canada with which the taxpayer is not dealing at arm’s length, for the purpose of subsection 91(5), any amount required by section 92 to be added or deducted, as the case may be, in computing the adjusted cost base to the other corporation of the share shall be deemed to have been so required to be added or deducted, as the case may be, in computing the adjusted cost base to the taxpayer of the share.

• Marginal note:Shares acquired from a partnership

  (7) For the purpose of subsection (5), where a taxpayer resident in Canada acquires a share of the capital stock of a corporation that is immediately after the acquisition a foreign affiliate of the taxpayer from a partnership of which the taxpayer, or a corporation resident in Canada with which the taxpayer was not dealing at arm’s length at the time the share was acquired, was a member (each such person referred to in this subsection as the “member”) at any time during any fiscal period of the partnership that began before the acquisition,

  • (a) that portion of any amount required by subsection 92(1) to be added to the adjusted cost base to the partnership of the share of the capital stock of the foreign affiliate equal to the amount included in the income of the member because of subsection 96(1) in respect of the amount that was included in the income of the partnership because of subsection (1) or (3) in respect of the foreign affiliate and added to that adjusted cost base, and

  • (b) that portion of any amount required by subsection 92(1) to be deducted from the adjusted cost base to the partnership of the share of the capital stock of the foreign affiliate equal to the amount by which the income of the member from the partnership under subsection 96(1) was reduced because of the amount deducted in computing the income of the partnership under subsection (2), (4) or (5) and deducted from that adjusted cost base

  is deemed to be an amount required by subsection 92(1) to be added or deducted, as the case may be, in computing the adjusted cost base to the taxpayer of the share.