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

Full Document:  

Act current to 2024-02-20 and last amended on 2024-01-22. Previous Versions

PART VTax and Penalties in Respect of Qualified Donees (continued)

Marginal note:Tax regarding non-qualified investment

  •  (1) Where at any particular time in a taxation year a debt (other than a debt in respect of which subsection 80.4(1) applies or would apply but for subsection 80.4(3)) is owing by a taxpayer to a registered charity that is a private foundation and at that time the debt was a non-qualified investment of the foundation, the taxpayer shall pay a tax under this Part for the year equal to the amount, if any, by which

    • (a) the amount that would be payable as interest on that debt for the period in the year during which it was outstanding and was a non-qualified investment of the foundation if the interest were payable at such prescribed rates as are in effect from time to time during the period

    exceeds

    • (b) the amount of interest for the year paid on that debt by the taxpayer not later than 30 days after the end of the year.

  • Marginal note:Computation of interest on debt

    (2) For the purpose of paragraph 189(1)(a), where a debt in respect of which subsection 189(1) applies (other than a share or right that is deemed by subsection 189(3) to be a debt) is owing by a taxpayer to a private foundation, interest on that debt for the period referred to in that paragraph shall be computed at the least of

    • (a) such prescribed rates as are in effect from time to time during the period,

    • (b) the rate per annum of interest on that debt that, having regard to all the circumstances (including the terms and conditions of the debt), would have been agreed on, at the time the debt was incurred, had the taxpayer and the foundation been dealing with each other at arm’s length and had the ordinary business of the foundation been the lending of money, and

    • (c) where that debt was incurred before April 22, 1982, a rate per annum equal to 6% plus 2% for each calendar year after 1982 and before the taxation year referred to in subsection 189(1).

  • Marginal note:Share deemed to be debt

    (3) For the purpose of subsection 189(1), where a share, or a right to acquire a share, of the capital stock of a corporation held by a private foundation at any particular time during the corporation’s taxation year was at that time a non-qualified investment of the foundation, the share or right shall be deemed to be a debt owing at that time by the corporation to the foundation

    • (a) the amount of which was equal to,

      • (i) in the case of a share or right last acquired before April 22, 1982, the greater of its fair market value on April 21, 1982 and its cost amount to the foundation at the particular time, or

      • (ii) in any other case, its cost amount to the foundation at the particular time,

    • (b) that was outstanding throughout the period for which the share or right was held by the foundation during the year, and

    • (c) in respect of which the amount of interest paid in the year is equal to the total of all amounts each of which is the amount of a dividend received on the share by the foundation in the year,

    and the reference in paragraph 189(1)(a) to “such prescribed rates as are in effect from time to time during the period” shall be read as a reference to “2/3 of such prescribed rates as are in effect from time to time during the period”.

  • Marginal note:Computation of interest with respect to a share

    (4) For the purposes of subsection 189(3), where a share or right in respect of which that subsection applies was last acquired before April 22, 1982, the reference therein to “2/3 of such prescribed rates as are in effect from time to time during the period” shall be read as a reference to “the lesser of

    • (a) a rate per annum equal to 4% plus 1% for each 5 calendar years contained in the period commencing after 1982 and ending before the particular time, and

    • (b) a rate per annum equal to 2/3 of such prescribed rates as are in effect from time to time during the year”.

  • Marginal note:Share substitution

    (5) For the purpose of subsection 189(3), where a share or right is acquired by a charity in exchange for another share or right in a transaction after April 21, 1982 to which section 51, 85, 85.1, 86 or 87 applies, it shall be deemed to be the same share or right as the one for which it was substituted.

  • Marginal note:Taxpayer to file return and pay tax

    (6) Every taxpayer who is liable to pay tax under this Part (except a charity that is liable to pay tax under section 188(1)) for a taxation year shall, on or before the day on or before which the taxpayer is, or would be if tax were payable by the taxpayer under Part I for the year, required to file a return of income or an information return under Part I for the year,

    • (a) file with the Minister a return for the year in prescribed form and containing prescribed information, without notice or demand therefor;

    • (b) estimate in the return the amount of tax payable by the taxpayer under this Part for the year; and

    • (c) pay to the Receiver General the amount of tax payable by the taxpayer under this Part for the year.

  • Marginal note:Revoked charity to file returns

    (6.1) If the registration of a taxpayer as a registered charity has been revoked (and subsection 188(2.1) does not apply to the taxpayer), the taxpayer shall, on or before the day that is one year from the end of the taxation year referred to in paragraph 188(1)(a), and without notice or demand,

    • (a) file with the Minister

      • (i) a return for the taxation year, in prescribed form and containing prescribed information, and

      • (ii) both an information return and a public information return for the taxation year, each in the form prescribed for the purpose of subsection 149.1(14); and

    • (b) estimate in the return referred to in subparagraph (a)(i) the amount of tax payable by the taxpayer under subsection 188(1.1) for the taxation year; and

    • (c) pay to the Receiver General the amount of tax payable by the taxpayer under subsection 188(1.1) for the taxation year.

  • Marginal note:Reduction of revocation tax liability

    (6.2) If the Minister has, during the one-year period beginning immediately after the end of a taxation year of a person, assessed the person in respect of the person’s liability for tax under subsection 188(1.1) for that taxation year, has not after that period reassessed the tax liability of the person, and that liability exceeds $1,000, that liability is, at any particular time, reduced by the total of

    • (a) the amount, if any, by which

      • (i) the total of all amounts, each of which is an expenditure made by the charity, on charitable activities carried on by it, before the particular time and during the period (referred to in this subsection as the “post-assessment period”) that begins immediately after a notice of the latest such assessment was sent and ends at the end of the one-year period

      exceeds

      • (ii) the income of the charity for the post-assessment period, including gifts received by the charity in that period from any source and any income that would be computed under section 3 if that period were a taxation year, and

    • (b) all amounts, each of which is an amount, in respect of a property transferred by the charity before the particular time and during the post-assessment period to a person that was at the time of the transfer an eligible donee in respect of the charity, equal to the amount, if any, by which the fair market value of the property, when transferred, exceeds the consideration given by the person for the transfer.

  • Marginal note:Reduction of liability for penalties

    (6.3) If the Minister has assessed a particular person in respect of the particular person’s liability for penalties under section 188.1 for a taxation year, and that liability exceeds $1,000, that liability is, at any particular time, reduced by the total of all amounts, each of which is an amount, in respect of a property transferred by the particular person after the day on which the Minister first assessed that liability and before the particular time to another person that was at the time of the transfer an eligible donee described in paragraph 188(1.3)(a) in respect of the particular person, equal to the amount, if any, by which the fair market value of the property, when transferred, exceeds the total of

    • (a) the consideration given by the other person for the transfer, and

    • (b) the part of the amount in respect of the transfer that has resulted in a reduction of an amount otherwise payable under subsection 188(1.1).

  • Marginal note:Minister may assess

    (7) Without limiting the authority of the Minister to revoke the registration of a registered charity or registered Canadian amateur athletic association, the Minister may also at any time assess a taxpayer in respect of any amount that a taxpayer is liable to pay under this Part.

  • Marginal note:Provisions applicable to Part

    (8) Subsections 150(2) and (3), sections 152 and 158, subsection 161(11), sections 162 to 167 and Division J of Part I apply in respect of an amount assessed under this Part and of a notice of suspension under subsection 188.2(1), (2) or (2.1) as if the notice were a notice of assessment made under section 152, with any modifications that the circumstances require including, for greater certainty, that a notice of suspension that is reconsidered or reassessed may be confirmed or vacated, but not varied, except that

    • (a) section 162 does not apply in respect of a return required to be filed under paragraph (6.1)(a); and

    • (b) the reference in each of subsections 165(2) and 166.1(3) to the expression “Chief of Appeals in a District Office or a Taxation Centre” is to be read as a reference to the expression “Assistant Commissioner, Appeals Branch”.

  • Marginal note:Clarification re objections under subsection 168(4)

    (8.1) For greater certainty, in applying the provisions referred to in subsection (8), with any modifications that the circumstances require,

    • (a) a notice of objection referred to in subsection 168(4) does not constitute a notice of objection to a tax assessed under subsection 188(1.1); and

    • (b) an issue that could have been the subject of a notice of objection referred to in subsection 168(4) may not be appealed to the Tax Court of Canada under subsection 169(1).

  • Marginal note:Interest

    (9) Subsection 161(11) does not apply to a liability of a taxpayer for a taxation year

    • (a) under subsection 188(1.1) to the extent that the liability is reduced by subsection (6.2), or paid, before the end of the one-year period that begins immediately after the end of the taxation year deemed to have ended by paragraph 188(1)(a); or

    • (b) under section 188.1 to the extent that the liability is reduced by subsection (6.3), or paid, before the end of the one-year period that begins immediately after the liability was first assessed.

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • R.S., 1985, c. 1 (5th Supp.), s. 189
  • 1994, c. 21, s. 85
  • 2005, c. 19, s. 45
  • 2010, c. 25, s. 52
  • 2011, c. 24, s. 61
  • 2018, c. 12, s. 31
  • 2023, c. 26, s. 57

PART VITax on Capital of Financial Institutions

Marginal note:Definitions

  •  (1) For the purposes of this Part,

    contractual service margin

    contractual service margin for a group of insurance contracts of an insurer, or a group of reinsurance contracts held by the insurer, at the end of a taxation year, has the same meaning as in subsection 138(12); (marge sur services contractuels)

    financial institution

    financial institution means a corporation that

    • (a) is a bank,

    • (b) is authorized under the laws of Canada or a province to carry on the business of offering its services as a trustee to the public,

    • (c) is authorized under the laws of Canada or a province to accept deposits from the public and carries on the business of lending money on the security of real property or immovables or investing in indebtedness on the security of mortgages on real property or of hypothecs on immovables,

    • (d) is a life insurance corporation that carries on business in Canada, or

    • (e) is a corporation all or substantially all of the assets of which are shares or indebtedness of corporations described in any of paragraphs (a) to (d) or this paragraph to which the corporation is related; (institution financière)

    group of insurance contracts

    group of insurance contracts of an insurer has the same meaning as in subsection 138(12); (groupe de contrats d’assurance)

    group of reinsurance contracts

    group of reinsurance contracts held by an insurer has the same meaning as in subsection 138(12); (groupe de contrats de réassurance)

    group of segregated fund policies

    group of segregated fund policies of an insurer has the same meaning as in subsection 138(12); (groupe de polices à fonds réservé)

    long-term debt

    long-term debt means

    • (a) in the case of a bank, its subordinated indebtedness (within the meaning assigned by section 2 of the Bank Act) evidenced by obligations issued for a term of not less than 5 years,

    • (b) in the case of an insurance corporation, its subordinated indebtedness (within the meaning assigned by section 2 of the Insurance Companies Act) evidenced by obligations issued for a term of not less than 5 years, and

    • (c) in the case of any other corporation, its subordinated indebtedness (within the meaning that would be assigned by section 2 of the Bank Act if the definition of that expression in that section were applied with such modifications as the circumstances require) evidenced by obligations issued for a term of not less than 5 years; (passif à long terme)

    policyholders’ liabilities

    policyholders’ liabilities of an insurer at the end of a taxation year has the same meaning as in subsection 138(12); (obligation envers les titulaires de polices)

    reserves

    reserves, in respect of a financial institution for a taxation year, means the amount at the end of the year of all of the institution’s reserves, provisions and allowances (other than allowances in respect of depreciation or depletion) and, for greater certainty, includes any provision in respect of deferred taxes. (réserves)

  • Marginal note:Prescribed meanings

    (1.1) For the purposes of this Part, the expressions attributed surplus, Canadian assets, Canadian reserve liabilities, total assets and total reserve liabilities have the meanings that are prescribed.

  • Marginal note:Application of ss. 181(3) and (4)

    (2) Subsections 181(3) and 181(4) apply to this Part with such modifications as the circumstances require.

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • R.S., 1985, c. 1 (5th Supp.), s. 190
  • 1994, c. 7, Sch. II, s. 156, c. 21, s. 86
  • 2001, c. 17, s. 222
  • 2013, c. 34, s. 152
  • 2022, c. 19, s. 45

Calculation of Capital Tax

Marginal note:Tax payable

  •  (1) Every corporation that is a financial institution at any time during a taxation year shall pay a tax under this Part for the year equal to 1.25% of the amount, if any, by which its taxable capital employed in Canada for the year exceeds its capital deduction for the year.

  • (1.1) and (1.2) [Repealed, 2007, c. 2, s. 40]

  • Marginal note:Short taxation years

    (2) Where a taxation year of a corporation is less than 51 weeks, the amount determined under subsection 190.1(1) for the year in respect of the corporation shall be reduced to that proportion of that amount that the number of days in the year is of 365.

  • Marginal note:Deduction

    (3) There may be deducted in computing a corporation’s tax payable under this Part for a taxation year an amount equal to the total of

    • (a) the corporation’s tax payable under Parts I and VI.2 (determined in accordance with subsection 191.5(9)) for the year; and

    • (b) such part as the corporation claims of its unused Part I tax credits and unused surtax credits for its 7 taxation years immediately before and its 3 taxation years immediately after the year.

    • (c) and (d) [Repealed, 2007, c. 2, s. 40]

  • Marginal note:Idem

    (4) For the purposes of this subsection and subsections 190.1(3), 190.1(5) and 190.1(6),

    • (a) an amount may not be claimed under subsection 190.1(3) in computing a corporation’s tax payable under this Part for a particular taxation year

      • (i) in respect of its unused Part I tax credit for another taxation year, until its unused Part I tax credits for taxation years preceding the other year that may be claimed under this Part for the particular year have been claimed, and

      • (ii) in respect of its unused surtax credit for another taxation year, until its unused surtax credits for taxation years preceding the other year that may be claimed under Part I.3 or this Part for the particular year have been claimed;

    • (b) an amount may be claimed under subsection 190.1(3) in computing a corporation’s tax payable under this Part for a particular taxation year

      • (i) in respect of its unused Part I tax credit for another taxation year, only to the extent that it exceeds the total of all amounts each of which is the amount claimed in respect of that unused Part I tax credit in computing its tax payable under this Part for a taxation year preceding the particular year, and

      • (ii) in respect of its unused surtax credit for another taxation year, only to the extent that it exceeds the total of all amounts each of which is the amount claimed in respect of the unused surtax credit

        • (A) in computing its tax payable under this Part for a taxation year preceding the particular year, or

        • (B) in computing its tax payable under Part I.3 for the particular year or a taxation year preceding the particular year; and

    • (c) an amount may be claimed under paragraph (3)(b) in computing a corporation’s tax payable under this Part for a taxation year that ends before July 1, 2006 in respect of its unused Part I tax credit for a taxation year that ends after July 1, 2006 (referred to in this paragraph as the “credit taxation year”) only to the extent that the unused Part I tax credit exceeds the amount, if any, by which

      • (i) the amount that would, if this Part were read as it applied to the 2005 taxation year, be the corporation’s tax payable under this Part for the credit taxation year

      exceeds

      • (ii) the corporation’s tax payable under this Part for the credit taxation year.

  • Marginal note:Definitions

    (5) For the purposes of subsections 190.1(3), 190.1(4) and 190.1(6),

    unused Part I tax credit

    unused Part I tax credit, of a corporation for a taxation year, means the amount, if any, by which

    • (a) the corporation’s tax payable under Part I for the year

    exceeds

    • (b) the amount that would, but for subsection (3), be its tax payable under this Part for the year; (crédit d’impôt de la partie I inutilisé)

    unused surtax credit

    unused surtax credit of a corporation for a taxation year has the meaning assigned by subsection 181.1(6). (crédit de surtaxe inutilisé)

  • Marginal note:Acquisition of control

    (6) Where at any time control of a corporation was acquired by a person or group of persons, no amount in respect of its unused Part I tax credit or unused surtax credit for a taxation year ending before that time is deductible by the corporation for a taxation year ending after the time and no amount in respect of its unused Part I tax credit or unused surtax credit for a taxation year ending after that time is deductible by the corporation for a taxation year ending before that time, except that

    • (a) the corporation’s unused Part I tax credit and unused surtax credit for a particular taxation year that ended before that time is deductible by the corporation for a taxation year that ends after that time (in this paragraph referred to as the “subsequent year”) to the extent of that proportion of the corporation’s tax payable under Part I for the particular year that

      • (i) the amount, if any, by which

        • (A) the total of all amounts each of which is

          • (I) its income under Part I for the particular year from a business that was carried on by the corporation for profit or with a reasonable expectation of profit throughout the subsequent year, or

          • (II) where properties were sold, leased, rented or developed or services were rendered in the course of carrying on that business before that time, its income under Part I for the particular year from any other business all or substantially all of the income of which was derived from the sale, leasing, rental or development, as the case may be, of similar properties or the rendering of similar services

        exceeds

        • (B) the total of all amounts each of which is an amount deducted under paragraph 111(1)(a) or 111(1)(d) in computing its taxable income for the particular year in respect of a non-capital loss or a farm loss, as the case may be, for a taxation year in respect of any business referred to in clause 190.1(6)(a)(i)(A)

      is of the greater of

      • (ii) the amount determined under subparagraph 190.1(6)(a)(i), and

      • (iii) the corporation’s taxable income for the particular year; and

    • (b) the corporation’s unused Part I tax credit and unused surtax credit for a particular taxation year that ends after that time is deductible by the corporation for a taxation year (in this paragraph referred to as the“preceding year”) that ended before that time to the extent of that proportion of the corporation’s tax payable under Part I for the particular year that

      • (i) the amount, if any, by which

        • (A) the total of all amounts each of which is

          • (I) its income under Part I for the particular year from a business that was carried on by the corporation in the preceding year and throughout the particular year for profit or with a reasonable expectation of profit, or

          • (II) where properties were sold, leased, rented or developed or services were rendered in the course of carrying on that business before that time, its income under Part I for the particular year from any other business all or substantially all of the income of which was derived from the sale, leasing, rental or development, as the case may be, of similar properties or the rendering of similar services

        exceeds

        • (B) the total of all amounts each of which is an amount deducted under paragraph 111(1)(a) or 111(1)(d) in computing its taxable income for the particular year in respect of a non-capital loss or a farm loss, as the case may be, for a taxation year in respect of any business referred to in clause 190.1(6)(b)(i)(A)

      is of the greater of

      • (ii) the amount determined under subparagraph 190.1(6)(b)(i), and

      • (iii) the corporation’s taxable income for the particular year.

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • R.S., 1985, c. 1 (5th Supp.), s. 190.1
  • 1994, c. 7, Sch. VIII, s. 111, c. 21, s. 87
  • 1996, c. 21, s. 49
  • 1997, c. 25, s. 53
  • 1998, c. 19, ss. 48, 202
  • 1999, c. 22, s. 68
  • 2000, c. 19, s. 53
  • 2001, c. 17, s. 165
  • 2007, c. 2, s. 40
  • 2013, c. 34, s. 329
  • 2022, c. 19, s. 46
 

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