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Income Tax Regulations (C.R.C., c. 945)

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Regulations are current to 2022-09-22 and last amended on 2022-06-23. Previous Versions

PART IVTaxable Income Earned in a Province by a Corporation (continued)

[
  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • SOR/94-686, s. 79(F)
]

Central Paymaster

  •  (1) In this Part, if an individual (referred to in this section as the “employee”) is employed by a person (referred to in this section as the “employer”) and performs a service in a particular province for the benefit of or on behalf of a corporation that is not the employer, an amount that may reasonably be regarded as equal to the amount of salary or wages earned by the employee for the service (referred to in this section as the “particular salary”) is deemed to be salary paid by the corporation to an employee of the corporation in the corporation’s taxation year in which the particular salary is paid if

    • (a) at the time the service is performed,

      • (i) the corporation and the employer do not deal at arm’s length, and

      • (ii) the corporation has a permanent establishment in the particular province;

    • (b) the service

      • (i) is performed by the employee in the normal course of the employee’s employment by the employer,

      • (ii) is performed for the benefit of or on behalf of the corporation in the ordinary course of a business carried on by the corporation, and

      • (iii) is of a type that could reasonably be expected to be performed by employees of the corporation in the ordinary course of the business referred to in subparagraph (ii); and

    • (c) the amount is not otherwise included in the aggregate, determined for the purposes of this Part, of the salaries and wages paid by the corporation.

  • (2) In this Part, an amount deemed under subsection (1) to be salary paid by a corporation to an employee of the corporation for a service performed in a particular province is deemed to have been paid,

    • (a) if the service was performed at one or more permanent establishments of the corporation in the particular province, to an employee of the permanent establishment or establishments; or

    • (b) if paragraph (a) does not apply, to an employee of any other permanent establishment (as is reasonably determined in the circumstances) of the corporation in the particular province.

  • (3) In determining under this Part the amount of salaries and wages paid in a year by an employer, there shall be deducted the total of all amounts each of which is a particular salary paid by the employer in the year.

  • (4) Despite subparagraph (1)(a)(i), this section applies to a corporation and an employer that deal at arm’s length if the Minister determines that the corporation and the employer have entered into an arrangement the purpose of which is to reduce, through the provision of services as described in subsection (1), the total amount of income tax payable by the corporation under a law of the particular province referred to in subsection (1).

  • (5) For the purposes of this section, a partnership is deemed to be a corporation and the corporation’s taxation year is deemed to be the partnership’s fiscal period.

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • SOR/78-772, s. 2
  • SOR/94-686, s. 79(F)
  • 2009, c. 2, s. 93

 [Repealed, 2009, c. 2, s. 93]

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • SOR/81-267, s. 2
  • SOR/94-686, s. 79(F)
  • 2009, c. 2, s. 93

Insurance Corporations

  •  (1) Notwithstanding subsections 402(3) and (4), the amount of taxable income that shall be deemed to have been earned in a taxation year in a particular province by an insurance corporation is that proportion of its taxable income for the year that the aggregate of

    • (a) its net premiums for the year in respect of insurance on property situated in the province, and

    • (b) its net premiums for the year in respect of insurance, other than on property, from contracts with persons resident in the province,

    is of the total of such of its net premiums for the year as are included in computing its income for the purposes of Part I of the Act.

  • (2) In this section, net premiums of a corporation for a taxation year means the aggregate of the gross premiums received by the corporation in the year (other than consideration received for annuities), minus the aggregate for the year of

    • (a) premiums paid for reinsurance,

    • (b) dividends or rebates paid or credited to policyholders, and

    • (c) rebates or returned premiums paid in respect of the cancellation of policies,

    by the corporation.

  • (3) For the purposes of subsection (1), where an insurance corporation had no permanent establishment in a taxation year in a particular province,

    • (a) each net premium for that year in respect of insurance on property situated in the particular province shall be deemed to be a net premium in respect of insurance on property situated in the province in which the permanent establishment of the corporation to which the net premium is reasonably attributable is situated; and

    • (b) each net premium for that year in respect of insurance, other than on property, from contracts with persons resident in the particular province shall be deemed to be a net premium in respect of insurance, other than on property, from contracts with persons resident in the province in which the permanent establishment of the corporation to which the net premium is reasonably attributable is situated.

  • (4) For the purposes of subsection (1), if in a taxation year an insurance corporation has no permanent establishment in a particular country other than Canada, but provides insurance on property in the particular country or has a contract for insurance, other than on property, with a person resident in the particular country, each net premium for the taxation year in respect of the insurance is deemed to be a net premium in respect of insurance on property situated in, or from contracts with persons resident in, as the case may be, the province in Canada or country other than Canada in which is situated the permanent establishment of the corporation to which the net premium is reasonably attributable in the circumstances.

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • SOR/94-686, ss. 5(F), 57(F)
  • 2009, c. 2, s. 94

Banks

[
  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • SOR/2009-302, s. 2
]
  •  (1) Notwithstanding subsections 402(3) and (4), the amount of taxable income that is deemed to have been earned by a bank in a taxation year in a province in which it had a permanent establishment is 1/3 of the total of

    • (a) the proportion of its taxable income for the year that the total of the salaries and wages paid in the year by the bank to employees of its permanent establishment in the province is of the total of all salaries and wages paid in the year by the bank; and

    • (b) twice the proportion of its taxable income for the year that the total amount of loans and deposits of its permanent establishment in the province for the year is of the total amount of all loans and deposits of the bank for the year.

  • (2) For the purposes of subsection (1), the amount of loans for a taxation year is 1/12 of the total of the amounts outstanding, on the loans made by the bank, at the close of business on the last day of each month in the year.

  • (3) For the purposes of subsection (1), the amount of deposits for a taxation year is 1/12 of the total of the amounts on deposit with the bank at the close of business on the last day of each month in the year.

  • (4) For the purposes of subsections (2) and (3), loans and deposits do not include bonds, stocks, debentures, items in transit and deposits in favour of Her Majesty in right of Canada.

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • SOR/80-949, s. 2
  • SOR/2009-302, s. 3
  • 2017, c. 33, s. 86
  •  (1) Notwithstanding subsections 402(3) and (4), the amount of taxable income that is deemed to have been earned by a federal credit union in a taxation year in a province in which it had a permanent establishment is 1/3 of the total of

    • (a) the proportion of its taxable income for the year that the total of the salaries and wages paid in the year by the federal credit union to employees of its permanent establishment in the province is of the total of all salaries and wages paid in the year by the federal credit union, and

    • (b) twice the proportion of its taxable income for the year that the total amount of loans and deposits of its permanent establishment in the province for the year is of the total amount of all loans and deposits of the federal credit union for the year.

  • (2) For the purposes of subsection (1), the amount of loans for a taxation year is 1/12 of the total of the amounts outstanding, on the loans made by the federal credit union, at the close of business on the last day of each month in the year.

  • (3) For the purposes of subsection (1), the amount of deposits for a taxation year is 1/12 of the total of the amounts on deposit with the federal credit union at the close of business on the last day of each month in the year.

  • (4) For the purposes of subsections (2) and (3), loans and deposits do not include bonds, stocks, debentures, items in transit and deposits in favour of Her Majesty in right of Canada.

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • 2017, c. 33, s. 87

Trust and Loan Corporations

[
  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • SOR/94-686, s. 79(F)
]
  •  (1) Notwithstanding subsections 402(3) and (4), the amount of taxable income that shall be deemed to have been earned in a taxation year by a trust and loan corporation, trust corporation or loan corporation in a province in which it had a permanent establishment is that proportion of its taxable income for the year that the gross revenue for the year of its permanent establishment in the province is of the total gross revenue for the year of the corporation.

  • (2) In subsection (1), gross revenue for the year of its permanent establishment in the province means the aggregate of the gross revenue of the corporation for the year arising from

    • (a) loans secured by lands situated in the province;

    • (b) loans, not secured by land, to persons residing in the province;

    • (c) loans

      • (i) to persons residing in a province or country other than Canada in which the corporation has no permanent establishment, and

      • (ii) administered by a permanent establishment in the province,

      except loans secured by land situated in a province or country other than Canada in which the corporation has a permanent establishment; and

    • (d) business conducted at the permanent establishment in the province, other than revenue in respect of loans.

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • SOR/80-949, s. 3
  • SOR/94-686, s. 79(F)
  • SOR/2011-195, s. 2(F)

Railway Corporations

[
  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • SOR/94-686, s. 57(F)
]
  •  (1) Notwithstanding subsections 402(3) and (4), the amount of taxable income that shall be deemed to have been earned by a railway corporation in a taxation year in a province in which it had a permanent establishment is, unless subsection (2) applies, 1/2 the aggregate of

    • (a) that proportion of the taxable income of the corporation for the year that the equated track miles of the corporation in the province is of the equated track miles of the corporation in Canada; and

    • (b) that proportion of the taxable income of the corporation for the year that the gross ton miles of the corporation for the year in the province is of the gross ton miles of the corporation for the year in Canada.

  • (2) Where a corporation to which subsection (1) would apply, if this subsection did not apply thereto, operates an airline service, ships or hotels or receives substantial revenues that are petroleum or natural gas royalties, or does a combination of two or more of those things, the amount of its taxable income that shall be deemed to have been earned in a taxation year in a province in which it had a permanent establishment is the aggregate of the amounts computed

    • (a) by applying the provisions of section 407 to that part of its taxable income for the year that may reasonably be considered to have arisen from the operation of the airline service;

    • (b) by applying the provisions of section 410 to that part of its taxable income for the year that may reasonably be considered to have arisen from the operation of the ships;

    • (c) by applying the provisions of section 402 to that part of its taxable income for the year that may reasonably be considered to have arisen from the operation of the hotels;

    • (d) by applying the provisions of section 402 to that part of its taxable income for the year that may reasonably be considered to have arisen from the ownership by the taxpayer of petroleum or natural gas rights or any interest therein; and

    • (e) by applying the provisions of subsection (1) to the remaining portion of its taxable income for the year.

  • (3) In this section, equated track miles in a specified place means the aggregate of

    • (a) the number of miles of first main track,

    • (b) 80 per cent of the number of miles of other main tracks, and

    • (c) 50 per cent of the number of miles of yard tracks and sidings,

    in that place.

  • (4) For the purpose of making an allocation under paragraph (2)(b), a reference in section 410 to “salaries and wages paid in the year by the corporation to employees” shall be read as a reference to salaries and wages paid by the corporation to employees employed in the operation of permanent establishments (other than ships) maintained for the shipping business.

  • (5) For the purpose of making an allocation under paragraph (2)(c),

    • (a) a reference in section 402 to “gross revenue for the year reasonably attributable to the permanent establishment in the province” shall be read as a reference to the gross revenue of the taxpayer from operating hotels therein;

    • (b) a reference in section 402 to “total gross revenue for the year” shall be read as a reference to the total gross revenue of the taxpayer for the year from operating hotels; and

    • (c) a reference in section 402 to “salaries and wages paid in the year by the corporation to employees” shall be read as a reference to salaries and wages paid to employees engaged in the operations of its hotels.

  • (6) Notwithstanding subsection 402(5), for the purpose of making an allocation under paragraph (2)(d),

    • (a) a reference in section 402 to “gross revenue for the year reasonably attributable to the permanent establishment in the province” shall be read as a reference to the gross revenue of the taxpayer from the ownership by the taxpayer of petroleum and natural gas rights in lands in the province and any interest therein;

    • (b) a reference in section 402 to “total gross revenue for the year” shall be read as a reference to the total gross revenue of the taxpayer from ownership by the taxpayer of petroleum and natural gas rights and any interest therein; and

    • (c) a reference in section 402 to “salaries and wages paid in the year by the corporation to employees” shall be read as a reference to salaries and wages paid to employees employed in connection with the corporation’s petroleum and natural gas rights and interests therein.

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • SOR/80-949, s. 4
  • SOR/94-686, ss. 57(F), 79(F)
  • SOR/2011-195, s. 3(F)

Airline Corporations

  •  (1) Notwithstanding subsections 402(3) and (4), the amount of taxable income that shall be deemed to have been earned in a taxation year by an airline corporation in a province in which it had a permanent establishment is the amount that is equal to 1/4 of the aggregate of

    • (a) that proportion of its taxable income for the year that the capital cost of all the corporation’s fixed assets, except aircraft, in the province at the end of the year is of the capital cost of all its fixed assets, except aircraft, in Canada at the end of the year; and

    • (b) that proportion of its taxable income for the year that three times the number of revenue plane miles flown by its aircraft during the year in the province is of the total of all amounts, each of which is the total number of revenue plane miles flown by its aircraft during the year in a province in which the corporation had a permanent establishment.

  • (2) For the purposes of this section, “revenue plane miles flown” shall be weighted according to take-off weight of the aircraft operated.

  • (3) For the purposes of this section, take-off weight of an aircraft means

    • (a) for an aircraft in respect of which an application form for a Certificate of Airworthiness has been submitted to and accepted by the Department of Transport, the maximum permissible take-off weight, in pounds, shown on the form; and

    • (b) for any other aircraft, the weight, in pounds, that may reasonably be considered to be the equivalent of the weight referred to in paragraph (a).

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • SOR/78-326, s. 1
  • SOR/80-949, s. 5
  • SOR/94-327, s. 2
  • SOR/94-686, s. 6(F)
  • 2013, c. 34, s. 381
 
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