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

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Regulations are current to 2022-01-12 and last amended on 2021-12-17. Previous Versions

PART LIICanadian Manufacturing and Processing Profits (continued)

Partnerships

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

 Where a corporation is a member of a partnership at any time in a taxation year of the corporation, the following rules apply:

cost of capital

cost of capital of the corporation for the year means an amount equal to the aggregate of

  • (a) 10 per cent of the aggregate of all amounts each of which is the gross cost to the corporation of a property referred to in paragraph 1100(1)(e), (f), (g) or (h), paragraph 1102(1)(d) or (g) or Schedule II that

    • (i) was owned by the corporation at the end of the year, and

    • (ii) was used by the corporation at any time during the year,

  • (b) the aggregate of all amounts each of which is the rental cost incurred by the corporation during the year for the use of any property a portion of the gross cost of which would be included by virtue of paragraph (a) if the property were owned by the corporation at the end of the year, and

  • (c) that proportion of the aggregate of the amounts that would be determined under paragraphs (a) and (b) in respect of the partnership for its fiscal period coinciding with or ending in the taxation year of the corporation if the references in those paragraphs to “the corporation” were read as references to “the partnership” and the references in those paragraphs to “the year” were read as references to “the fiscal period of the partnership coinciding with or ending in the year”, that

    • (i) the corporation’s share of the income or loss of the partnership for that fiscal period

    is of

    • (ii) the income or loss of the partnership for that fiscal period, as the case may be,

but for the purposes of this definition, the gross cost of a property or rental cost for the use of any property does not include that portion of those costs that reflects the extent to which the property was used by the corporation during the year or by the partnership during its fiscal period coinciding with or ending in the year

  • (d) in an active business carried on outside Canada,

  • (e) to earn Canadian investment income or foreign investment income as defined in subsection 129(4) of the Act on the assumption that subsection 129(4) of the Act applied to a partnership as well as to a corporation,

  • (f) in activities engaged in for the purpose of earning Canadian resource profits of the corporation or the partnership, as the case may be, or

  • (g) in activities referred to in subparagraph 66(15)(b)(i), (ii) or (v), subparagraph 66(15)(e)(i) or (ii), subparagraph 66.1(6)(a)(i), (ii), (iii) or (v) or subparagraph 66.2(5)(a)(i), (ii) or (v) of the Act; (coût en capital)

cost of labour

cost of labour of the corporation for the year means an amount equal to the aggregate of

  • (a) the salaries and wages paid or payable during the year to all employees of the corporation for services performed during the year,

  • (b) all other amounts each of which is an amount paid or payable during the year for the performance during the year, by any person other than an employee of the corporation, of functions relating to

    • (i) the management or administration of the corporation,

    • (ii) scientific research as defined in section 2900, or

    • (iii) a service or function that would normally be performed by an employee of the corporation, and

  • (c) that proportion of the aggregate of the amounts that would be determined under paragraphs (a) and (b) in respect of the partnership for its fiscal period coinciding with or ending in the taxation year of the corporation if the references in those paragraphs to “the corporation” were read as references to “the partnership” and the references in those paragraphs to “the year” were read as references to the “fiscal period of the partnership coinciding with or ending in the year”, that

    • (i) the corporation’s share of the income or loss of the partnership for that fiscal period

    is of

    • (ii) the income or loss of the partnership for that fiscal period, as the case may be,

but for the purposes of this definition, the salaries and wages referred to in paragraph (a) or other amounts referred to in paragraph (b), of the corporation or the partnership, as the case may be, do not include that portion of those amounts that

  • (d) was included in the gross cost to the corporation or partnership of a property (other than a property that was manufactured by the corporation or partnership and leased during the year by the corporation or the partnership to another person) that was included in computing the cost of capital of the corporation for the year,

  • (e) was related to an active business carried on outside Canada by the corporation or the partnership,

  • (f) was related to the activities engaged in for the purpose of earning Canadian resource profits of the corporation or the partnership, as the case may be, or

  • (g) was included in the Canadian exploration and development expenses, foreign exploration and development expenses, Canadian exploration expense or Canadian development expense, within the meanings assigned by paragraphs 66(15)(b) and (e), 66.1(6)(a) and 66.2(5)(a) of the Act respectively, of the corporation; (coût en main-d’oeuvre)

cost of manufacturing and processing capital

cost of manufacturing and processing capital of the corporation for the year means 100/85 of that portion of the cost of capital of the corporation for that year that reflects the extent to which each property included in the calculation thereof was used directly in qualified activities

  • (a) of the corporation during the year, or

  • (b) of the partnership during its fiscal period coinciding with or ending in the year, as the case may be,

but the amount so calculated shall not exceed the cost of capital of the corporation for the year; (coût en capital de fabrication et de transformation)

cost of manufacturing and processing labour

cost of manufacturing and processing labour of the corporation for the year means 100/75 of that portion of the cost of labour of the corporation for that year that reflects the extent to which

  • (a) the salaries and wages included in the calculation thereof were paid or payable to persons for the portion of their time that they were directly engaged in qualified activities

    • (i) of the corporation during the year, or

    • (ii) of the partnership during its fiscal period coinciding with or ending in the year, and

  • (b) the other amounts included in the calculation thereof were paid or payable to persons for the performance of functions that would be directly related to qualified activities

    • (i) of the corporation during the year, or

    • (ii) of the partnership during its fiscal period coinciding with or ending in the year,

    if those persons were employees of the corporation or the partnership, as the case may be,

but the amount so calculated shall not exceed the cost of labour of the corporation for the year; (coût en main-d’oeuvre de fabrication et de transformation)

gross cost

gross cost of a property at any time means

  • (a) in respect of a property that has become available for use by the partnership for the purposes of subsection 13(26) of the Act, the capital cost to the partnership of the property computed without reference to subsections 13(7.1), (7.4) and (10) and sections 21 and 80 of the Act, and

  • (b) in respect of any other property of the partnership, nil,

and, for the purposes of paragraph (a), if the partnership acquired the property from a person who was a majority-interest partner of the partnership immediately after the property was acquired, the capital cost to the partnership of the property is to be computed as if the property had been acquired at a capital cost equal to the gross cost to the person of the property, except that if the property was partnership property on December 31, 1971, its gross cost is its capital cost to the partnership as determined under subsection 20(3) or (5) of the Income Tax Application Rules. (coût brut)

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • SOR/78-377, s. 14
  • SOR/94-140, s. 13
  • SOR/94-169, s. 8
  • SOR/94-686, ss. 48, 78(F) to 81(F)
  • 2013, c. 40, s. 110

PART LIIIInstalment Base

[
  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • SOR/88-165, s. 25(F)
]

Individuals

 For the purposes of subsections 155(2), 156(3) and 161(9) of the Act, the instalment base of an individual for a taxation year is the amount by which

  • (a) the individual’s tax payable under Part I of the Act for the year, determined before taking into consideration the specified future tax consequences for the year,

exceeds

  • (b) the amount deemed by subsection 120(2) of the Act to have been paid on account of the individual’s tax under Part I of the Act for the year, determined before taking into consideration the specified future tax consequences for the year.

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • SOR/78-325, s. 1
  • SOR/81-855, s. 1
  • SOR/85-696, s. 15
  • SOR/86-1092, s. 15
  • SOR/88-165, s. 26(F)
  • SOR/99-92, s. 1

Corporations Under Part I of the Act

[
  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • SOR/94-686. s. 79(F)
]
  •  (1) Subject to subsections (6) and (8), for the purposes of subsections 157(4) and 161(9) of the Act, the first instalment base of a corporation for a particular taxation year means the product obtained when the aggregate of

    • (a) the tax payable under Part I of the Act by the corporation for its taxation year preceding the particular year, and

    • (b) the total of the taxes payable by the corporation under Parts VI, VI.1 and XIII.1 of the Act for its taxation year preceding the particular year

    is multiplied by the ratio that 365 is of the number of days in that preceding year.

  • (2) Subject to subsections (6) and (8), for the purposes of subsections 157(4) and 161(9) of the Act, the second instalment base of a corporation for a particular taxation year means the amount of the first instalment base of the corporation for the taxation year immediately preceding the particular year.

  • (3) For the purposes of subsection (1), where the number of days in the taxation year of a corporation immediately preceding the particular taxation year referred to therein is less than 183, the amount determined for the corporation under that subsection shall be the greater of

    • (a) the amount otherwise determined for it under subsection (1); and

    • (b) the amount that would be determined for it under subsection (1) if the reference in that subsection to “its taxation year preceding the particular year” were read as a reference to “its last taxation year, preceding the particular year, in which the number of days exceeds 182”.

  • (4) Notwithstanding subsections (1) and (2), for the purposes of subsections 157(4) and 161(9) of the Act,

    • (a) where a particular taxation year of a new corporation that was formed as a result of an amalgamation (within the meaning assigned by section 87 of the Act) is its first taxation year,

      • (i) its first instalment base for the particular year means the total of all amounts each of which is equal to the product obtained when the total of

        • (A) the tax payable under Part I of the Act, and

        • (B) the total of the taxes payable under Parts VI, VI.1 and XIII.1 of the Act

        by a predecessor corporation (as defined in section 87 of the Act) for its last taxation year is multiplied by the ratio that 365 is to the number of days in that year, and

      • (ii) its second instalment base for the particular year means the aggregate of all amounts each of which is an amount equal to the amount of the first instalment base of a predecessor corporation for its last taxation year; and

    • (b) where a particular taxation year of a new corporation referred to in paragraph (a) is its second taxation year,

      • (i) its first instalment base for the particular year means

        • (A) where the number of days in its first taxation year is greater than 182, the amount that would, but for this subsection, be determined under subsection (1) for the year, and

        • (B) in any other case, the greater of the amount that would, but for this subsection, be determined under subsection (1) for the year and its first instalment base for its first taxation year, and

      • (ii) its second instalment base for the particular year means the amount of the first instalment base of the new corporation for its first taxation year.

  • (5) For the purposes of subsection (4), where the number of days in the last taxation year of a predecessor corporation is less than 183, the amount determined under subparagraph (4)(a)(i) in respect of the predecessor corporation shall be the greater of

    • (a) the amount otherwise determined under subparagraph (4)(a)(i) in respect of the predecessor corporation; and

    • (b) the amount of the first instalment base of the predecessor corporation for its last taxation year.

  • (6) Subject to subsection (7), where a subsidiary within the meaning of subsection 88(1) of the Act is winding up, and, at a particular time in the course of the winding up, all or substantially all of the property of the subsidiary has been distributed to a parent within the meaning of subsection 88(1) of the Act, the following rules apply:

    • (a) there shall be added to the amount of the parent’s first instalment base for its taxation year that includes the particular time the amount of the subsidiary’s first instalment base for its taxation year that includes the particular time;

    • (b) there shall be added to the amount of the parent’s second instalment base for its taxation year that includes the particular time the amount of the subsidiary’s second instalment base for its taxation year that includes the particular time;

    • (c) there shall be added to the amount of the parent’s first instalment base for its taxation year immediately following its taxation year referred to in paragraph (a) the amount that is the proportion of the subsidiary’s first instalment base for its taxation year referred to in paragraph (a) that

      • (i) the number of complete months that ended at or before the particular time in the taxation year of the parent that includes the particular time

      is of

      • (ii) 12; and

    • (d) there shall be added to the amount of the parent’s second instalment base for its taxation year immediately following its taxation year referred to in paragraph (a) the amount of the subsidiary’s first instalment base for its taxation year that includes the particular time.

  • (7) The amount of an instalment of tax for the taxation year referred to in paragraphs (6)(a) and (b) that a parent is deemed under subsection 161(4.1) of the Act to have been liable to pay before the particular time referred to in subsection (6) shall be determined as if subsection (6) were not applicable in respect of a distribution of property described in that subsection occurring after the day on or before which the instalment was required to be paid.

  • (8) Subject to subsection (9), if at a particular time a corporation (in this subsection referred as the “transferor”) has disposed of all or substantially all of its property to another corporation with which it was not dealing at arm’s length (in this subsection and subsection (9) referred to as the “transferee”) and subsection 85(1), (2) or 142.7(3) of the Act applied in respect of the disposition of any of the property, the following rules apply:

    • (a) there shall be added to the amount of the transferee’s first instalment base for its taxation year that includes the particular time the amount of the transferor’s first instalment base for its taxation year that includes the particular time;

    • (b) there shall be added to the amount of the transferee’s second instalment base for its taxation year that includes the particular time the amount of the transferor’s second instalment base for its taxation year that includes the particular time;

    • (c) there shall be added to the amount of the transferee’s first instalment base for its taxation year immediately following its taxation year referred to in paragraph (a) the amount that is the proportion of the transferor’s first instalment base for its taxation year referred to in paragraph (a) that

      • (i) the number of complete months that ended at or before the particular time in the taxation year of the transferee that includes the particular time

      is of

      • (ii) 12; and

    • (d) there shall be added to the amount of the transferee’s second instalment base for its taxation year immediately following its taxation year referred to in paragraph (a) the amount of the transferor’s first instalment base for its taxation year that includes the particular time.

  • (9) The amount of an instalment of tax for the taxation year referred to in paragraphs (8)(a) and (b) that a transferee is deemed under subsection 161(4.1) of the Act to have been liable to pay before the particular time referred to in subsection (8) shall be determined as if subsection (8) were not applicable in respect of a disposition of property described in that subsection occurring after the day on or before which the instalment was required to be paid.

  • (10) For the purpose of this section, tax payable under Part I, VI or XIII.1 of the Act by a corporation for a taxation year means the corporation’s tax payable for the year under the relevant Part, determined before taking into consideration the specified future tax consequences for the year.

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • SOR/78-325, s. 2
  • SOR/81-855, s. 1
  • SOR/84-948, s. 14
  • SOR/85-696, s. 16
  • SOR/88-165, s. 27
  • SOR/89-409, s. 3
  • SOR/94-298, s. 1
  • SOR/94-686, s. 79(F)
  • SOR/99-92, s. 2
  • SOR/2009-302, s. 10
 
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