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

Act current to 2017-07-03 and last amended on 2017-07-01. Previous Versions

Marginal note:Recovery of credit
  •  (1) Where, at any time that is both in a taxation year included in the start-up period of a corporation that was registered under this Part and before its venture capital business is first discontinued,

    • (a) 80% of the amount, if any, by which the total consideration received by it for Class A shares issued by it before that time exceeds the total of all amounts paid by it before that time to its shareholders as a return of capital on such shares

    exceeds

    • (b) the total of all amounts each of which is the cost to the corporation of an eligible investment or reserve of the corporation at that time,

    the corporation shall pay a tax under this Part for the year equal to the amount determined by the formula

    (A × 20%) - B

    where

    A
    is the greatest amount by which the amount determined under paragraph 204.82(1)(a) exceeds the amount determined under paragraph 204.82(1)(b) for the year, and
    B
    is the total of all taxes payable under this subsection by the corporation for preceding taxation years.
  • Marginal note:Liability for tax

    (2) Each corporation that has been registered under this Part shall, in respect of each month that ends before its venture capital business is first discontinued and in a particular taxation year of the corporation that begins after the end of the corporation’s start-up period (or, where the corporation has no start-up period, that begins after the time the corporation first issues a Class A share), pay a tax under this Part equal to the amount obtained when the greatest investment shortfall at any time that is in the month and in the particular year (in this section and sections 204.81 and 204.83 referred to as the “monthly deficiency”) is multiplied by 1/60 of the prescribed rate of interest in effect during the month.

  • Marginal note:Determination of investment shortfall

    (2.1) Subject to subsection 204.82(2.2), a corporation’s investment shortfall at any time in a particular taxation year is the amount determined by the formula

    A - B - C

    where

    A
    is 60% of the lesser of
    • (a) the amount, if any, by which the amount of the shareholders’ equity in the corporation at the end of the preceding taxation year exceeds the specified adjustment in respect of the shareholders’ equity in the corporation at the end of that year, and

    • (b) the amount, if any, by which the amount of the shareholders’ equity in the corporation at the end of the particular taxation year exceeds the specified adjustment in respect of the shareholders’ equity in the corporation at the end of the particular year;

    B
    is the greater of
    • (a) the total of all amounts each of which is the adjusted cost to the corporation of an eligible investment of the corporation at that time, and

    • (b) 50% of the total of all amounts each of which is

      • (i) the adjusted cost to the corporation of an eligible investment of the corporation at the beginning of the particular year, or

      • (ii) the adjusted cost to the corporation of an eligible investment of the corporation at the end of the particular year; and

    C
    is 60% of the amount, if any, by which
    • (a) the total of all amounts each of which is a tax or penalty under subsection (3) or (4), or a prescribed tax or penalty, paid before that time by the corporation (other than the portion, if any, of that tax or penalty the liability for which resulted in a reduction in the amount of the shareholders’ equity at the end of any preceding taxation year)

    exceeds

    • (b) the total of all amounts each of which is a refund before that time of any portion of the total described in paragraph (a).

  • Marginal note:Investment shortfall

    (2.2) For the purpose of this subsection and for the purpose of computing a corporation’s investment shortfall under subsection (2.1) at any time in a taxation year (in this subsection referred to as the “relevant year”),

    • (a) unrealized gains and losses in respect of its eligible investments shall not be taken into account in computing the amount of the shareholders’ equity in the corporation;

    • (b) where

      • (i) the relevant year ends after 1998, and

      • (ii) it is expected that a redemption of its Class A shares will occur after the end of a particular taxation year and, as a consequence, the amount of the shareholders’ equity in the corporation at the end of the particular year would otherwise be reduced to take into account the expected redemption,

      subject to paragraph 204.82(2.2)(c), the amount (or, where the relevant year ends in 1999, 2000, 2001 or 2002, 20%, 40%, 60% or 80%, respectively of the amount) expected to be redeemed shall not be taken into account in determining the amount of the shareholders’ equity in the corporation at the end of the particular year;

    • (c) paragraph 204.82(2.2)(b) does not apply to a redemption expected to be made after the end of a taxation year where

      • (i) the redemption is made within 60 days after the end of the year, and

      • (ii) either

        • (A) tax under Part XII.5 became payable as a consequence of the redemption, or

        • (B) tax under Part XII.5 would not have become payable as a consequence of the redemption if the redemption had occurred at the end of the year;

    • (c.1) the specified adjustment in respect of shareholders’ equity in the corporation at the end of a taxation year is the amount determined by the formula

      (A × (B/C)) - D

      where

      A
      is the shareholders’ equity at the end of the year,
      B
      is the total of
      • (i) the fair market value at the end of the year of all Class A shares issued by it before March 6, 1996 and more than five years before the end of the year,

      • (ii) the fair market value at the end of the year of all Class A shares issued by it after March 5, 1996 and more than eight years before the end of the year,

      • (iii) the fair market value at the end of the year of all Class A shares issued by it in the last 60 days of the year, and

      • (iv) if the corporation so elects in writing filed with the Minister not more than six months after the end of the year and is not a revoked corporation at the end of the year, the fair market value at the end of the year of all shares of classes, of the capital stock of the corporation, to which clause 204.81(1)(c)(ii)(C) applies,

      C
      is the fair market value at the end of the year of all shares issued by it, and
      D
      is the amount by which the shareholders’ equity in the corporation at the end of the year has been reduced to take into account the expected subsequent redemption of shares of the capital stock of the corporation; and
    • (d) the adjusted cost to the corporation of an eligible investment of the corporation at any time is

      • (i) 150% of the cost to the corporation of the eligible investment at that time where the eligible investment is

        • (A) a property acquired by the corporation after February 18, 1997 (other than a property to which subparagraph (i.1) applies) that would be an eligible investment of the corporation if the reference to “$50,000,000” in paragraph (f) of the definition eligible investment in subsection 204.8(1) were read as “$10,000,000”, or

        • (B) a share of the capital stock of a prescribed corporation,

      • (i.1) 200% of the cost to the corporation of the eligible investment at that time where the eligible investment is a property acquired by the corporation after February 16, 1999 (other than a property described in clause (i)(B)) that would be an eligible investment of the corporation if the reference to “$50,000,000” in paragraph (f) of the definition eligible investment in subsection 204.8(1) were read as “$2,500,000”, and

      • (ii) in any other case, the cost to the corporation of the eligible investment of the corporation at that time.

  • Marginal note:Recovery of credit

    (3) Where a corporation is liable under subsection 204.82(2) to pay a tax in respect of 12 consecutive months (in this subsection referred to as the “particular period”), the corporation shall pay a tax under this Part for a taxation year in respect of each particular period that ends in the year equal to the total of the amounts determined by the formula

    (A/12 × 20%) - (B - C)

    where

    A
    is the total of the monthly deficiencies for each month in the particular period;
    B
    is the total of all taxes payable by the corporation under subsection 204.82(1) for preceding taxation years and taxes payable by it under this subsection in respect of a period ending before the end of the particular period; and
    C
    is the total of all amounts refunded under section 204.83 in respect of the tax paid under this subsection by the corporation for preceding taxation years.
  • Marginal note:Penalty

    (4) Where a corporation is liable under subsection 204.82(3) to pay a tax for a taxation year, the corporation shall pay, in addition to the tax payable under that subsection, a penalty for the year equal to that tax.

  • Marginal note:Provincially registered LSVCCs

    (5) Where

    • (a) an amount (other than interest on an amount to which this subsection applies or an amount payable under or as a consequence of a prescribed provision of a law of a province) is payable to the government of a province by a corporation,

    • (b) the amount is payable as a consequence of a failure to acquire sufficient properties of a character described in the law of the province,

    • (c) the corporation has been prescribed for the purpose of the definition approved share in subsection 127.4(1), and

    • (d) the corporation is not a registered labour-sponsored venture capital corporation or a revoked corporation,

    the corporation shall pay a tax under this Part for the taxation year in which the amount became payable equal to that amount.

  • Marginal note:Further matching of amounts payable to a province

    (6) Where

    • (a) a particular amount is payable (other than interest on an amount to which this subsection applies) by a registered labour-sponsored venture capital corporation or a revoked corporation to the government of a province as a consequence of a failure of a prescribed corporation to acquire sufficient properties of a character described in a law of the province, and

    • (b) the particular amount became payable before the corporation first discontinued its venture capital business,

    the corporation shall pay a tax under this Part for the taxation year in which the particular amount became payable equal to that amount.

  • NOTE: Application provisions are not included in the consolidated text;
  • see relevant amending Acts. 1994, c. 7, Sch. II, s. 164;
  • 1998, c. 19, s. 53;
  • 1999, c. 22, s. 69;
  • 2000, c. 19, s. 56.
 
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