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

Regulations are current to 2017-11-20 and last amended on 2017-07-01. Previous Versions

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  •  (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

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

    • (b) twice that proportion of its taxable income for the year that the aggregate amount of loans and deposits of its permanent establishment in the province for the year is of the aggregate 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 aggregate 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 aggregate 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 regulations. SOR/80-949, s. 2;
  • SOR/2009-302, s. 3.

Trust and Loan Corporations

[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 regulations. SOR/80-949, s. 3;
  • SOR/94-686, s. 79(F);
  • SOR/2011-195, s. 2(F).
 
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