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

Full Document:  

Act current to 2022-11-16 and last amended on 2022-10-18. Previous Versions

PART VITax on Capital of Financial Institutions (continued)

Calculation of Capital Tax (continued)

Marginal note:Taxable capital employed in Canada

 For the purposes of this Part, the taxable capital employed in Canada of a financial institution for a taxation year is,

  • (a) in the case of a financial institution other than a life insurance corporation, that proportion of its taxable capital for the year that its Canadian assets at the end of the year is of its total assets at the end of the year;

  • (b) in the case of a life insurance corporation that was resident in Canada at any time in the year, the total of

    • (i) that proportion of the amount, if any, by which the total of

      • (A) its taxable capital for the year, and

      • (B) the amount prescribed for the year in respect of the corporation

      exceeds

      • (C) the amount prescribed for the year in respect of the corporation

      that its Canadian reserve liabilities as at the end of the year is of the total of

      • (D) its total reserve liabilities as at the end of the year, and

      • (E) the amount prescribed for the year in respect of the corporation; and

    • (ii) [Repealed, 2009, c. 2, s. 63]

  • (c) in the case of a life insurance corporation that was non-resident throughout the year, its taxable capital for the 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. 190.11
  • 1994, c. 7, Sch. II, s. 158, c. 21, s. 88
  • 2009, c. 2, s. 63

Marginal note:Taxable capital

 For the purposes of this Part, the taxable capital of a corporation for a taxation year is the amount, if any, by which its capital for the year exceeds the total determined under section 190.14 in respect of its investments for the year in financial institutions related to it.

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • 1986, c. 6, s. 100
  • 1990, c. 39, s. 50

Marginal note:Capital

 For the purposes of this Part, the capital of a financial institution for a taxation year is,

  • (a) in the case of a financial institution, other than an authorized foreign bank or a life insurance corporation, the amount, if any, by which the total at the end of the year of

    • (i) the amount of its long-term debt,

    • (ii) the amount of its capital stock (or, in the case of an institution incorporated without share capital, the amount of its members’ contributions), retained earnings, contributed surplus and any other surpluses, and

    • (iii) the amount of its reserves, except to the extent that they were deducted in computing its income under Part I for the year,

    exceeds the total at the end of the year of

    • (iv) the amount of its deferred tax debit balance, and

    • (v) the amount of any deficit deducted in computing its shareholders’ equity (including, for this purpose, the amount of any provision for the redemption of preferred shares);

  • (b) in the case of a life insurance corporation that was resident in Canada at any time in the year, the amount, if any, by which the total at the end of the year of

    • (i) the amount of its long-term debt, and

    • (ii) the amount of its capital stock (or, in the case of an insurance corporation incorporated without share capital, the amount of its members’ contributions), retained earnings, contributed surplus and any other surpluses

    exceeds the total at the end of the year of

    • (iii) the amount of its deferred tax debit balance, and

    • (iv) the amount of any deficit deducted in computing its shareholders’ equity (including, for this purpose, the amount of any provision for the redemption of preferred shares);

  • (c) in the case of a life insurance corporation that was non-resident throughout the year, the total at the end of the year of

    • (i) the amount that is the greater of

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

        • (I) its surplus funds derived from operations (as defined in subsection 138(12)) as of the end of the year, computed as if no tax were payable under Part I.3 or this Part for the year

        exceeds the total of all amounts each of which is

        • (II) an amount on which it was required to pay, or would but for subsection 219(5.2) have been required to pay, tax under Part XIV for a preceding taxation year, except the portion, if any, of the amount on which tax was payable, or would have been payable, because of subparagraph 219(4)(a)(i.1), and

        • (III) an amount on which it was required to pay, or would but for subsection 219(5.2) have been required to pay, tax under subsection 219(5.1) for the year because of the transfer of an insurance business to which subsection 138(11.5) or 138(11.92) has applied, and

      • (B) its attributed surplus for the year,

    • (ii) any other surpluses relating to its insurance businesses carried on in Canada,

    • (iii) the amount of its long-term debt that can reasonably be regarded as relating to its insurance businesses carried on in Canada; and

    • (iv) [Repealed, 2009, c. 2, s. 64]

  • (d) in the case of an authorized foreign bank, the total of

    • (i) 10% of the total of all amounts, each of which is the risk-weighted amount at the end of the year of an on-balance sheet asset or an off-balance sheet exposure of the bank in respect of its Canadian banking business that the bank would be required to report under the OSFI risk-weighting guidelines if those guidelines applied and required a report at that time, and

    • (ii) the total of all amounts, each of which is an amount at the end of the year in respect of the bank’s Canadian banking business that

      • (A) if the bank were a bank listed in Schedule II to the Bank Act, would be required under the risk-based capital adequacy guidelines issued by the Superintendent of Financial Institutions and applicable at that time to be deducted from the bank’s capital in determining the amount of capital available to satisfy the Superintendent’s requirement that capital equal a particular proportion of risk-weighted assets and exposures, and

      • (B) is not an amount in respect of a loss protection facility required to be deducted from capital under the Superintendent’s guidelines respecting asset securitization applicable at that time.

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • R.S., 1985, c. 1 (5th Supp.), s. 190.13
  • 1994, c. 7, Sch. II, s. 159, c. 21, s. 89
  • 1998, c. 19, s. 203
  • 2001, c. 17, s. 166
  • 2009, c. 2, s. 64
  • 2013, c. 34, s. 330

Marginal note:Investment in related institutions

  •  (1) A corporation’s investment for a taxation year in a financial institution related to it is

    • (a) in the case of a corporation that was resident in Canada at any time in the year, the total of all amounts each of which is the carrying value (or in the case of contributed surplus, the amount) at the end of the year of an eligible investment of the corporation in the financial institution;

    • (b) in the case of a life insurance corporation that was non-resident throughout the year, the total of all amounts each of which is the carrying value (or is, in the case of contributed surplus, the amount) at the end of the year of an eligible investment of the corporation in the financial institution that was used or held by the corporation in the year in the course of carrying on an insurance business in Canada (or that, in the case of contributed surplus, was contributed by the corporation in the course of carrying on that business); and

    • (c) in the case of a corporation that is an authorized foreign bank, the total of all amounts each of which is the amount at the end of the year, before the application of risk weights, that would be required to be reported under the OSFI risk-weighting guidelines if those guidelines applied and required a report at that time, of an eligible investment of the corporation in the financial institution that was used or held by the corporation in the year in the course of carrying on its Canadian banking business or, in the case of an eligible investment that is contributed surplus of the financial institution at the end of the year, the amount of the surplus contributed by the corporation in the course of carrying on that business.

  • Marginal note:Interpretation

    (2) For the purpose of subsection (1), an eligible investment of a corporation in a financial institution is a share of the capital stock or long-term debt (and, where the corporation is an insurance corporation, is non-segregated property within the meaning assigned by subsection 138(12)) of the financial institution or any surplus of the financial institution contributed by the corporation (other than an amount otherwise included as a share or debt) if the financial institution at the end of the year is

    • (a) related to the corporation; and

    • (b) resident in Canada or can reasonably be regarded as using the surplus or the proceeds of the share or debt in a business carried on by the financial institution through a permanent establishment (as defined by regulation) in Canada.

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • R.S., 1985, c. 1 (5th Supp.), s. 190.14
  • 1994, c. 7, Sch. II, s. 159, c. 21, s. 90
  • 2001, c. 17, s. 167

Marginal note:Capital deduction

  •  (1) For the purposes of this Part, the capital deduction of a corporation for a taxation year during which it was at any time a financial institution is $1 billion unless the corporation was related to another financial institution at the end of the year, in which case, subject to subsection (4), its capital deduction for the year is nil.

  • Marginal note:Related financial institution

    (2) A corporation that is a financial institution at any time during a taxation year and that was related to another financial institution at the end of the year may file with the Minister an agreement in prescribed form on behalf of the related group of which the corporation is a member under which an amount that does not exceed $1 billion is allocated among the members of the related group for the taxation year.

  • Marginal note:Allocation by Minister

    (3) The Minister may request a corporation that is a financial institution at any time during a taxation year and that was related to any other financial institution at the end of the year to file with the Minister an agreement referred to in subsection (2) and, if the corporation does not file such an agreement within 30 days after receiving the request, the Minister may allocate an amount among the members of the related group of which the corporation is a member for the year not exceeding $1 billion.

  • Marginal note:Idem

    (4) For the purposes of this Part, the least amount allocated for a taxation year to each member of a related group under an agreement described in subsection 190.15(2) or by the Minister pursuant to subsection 190.15(3) is the capital deduction for the taxation year of that member, but, if no such allocation is made, the capital deduction of each member of the related group for that year is nil.

  • Marginal note:Idem

    (5) Where a corporation (in this subsection referred to as the “first corporation”) has more than one taxation year ending in the same calendar year and is related in 2 or more of those taxation years to another corporation that has a taxation year ending in that calendar year, the capital deduction of the first corporation for each such taxation year at the end of which it is related to the other corporation is, for the purposes of this Part, an amount equal to its capital deduction for the first such taxation year.

  • Marginal note:Idem

    (6) Two corporations that would, but for this subsection, be related to each other solely because of

    • (a) the control of any corporation by Her Majesty in right of Canada or a province, or

    • (b) a right referred to in paragraph 251(5)(b),

    are, for the purposes of this section and section 190.14, deemed not to be related to each other except that, where at any time a taxpayer has a right referred to in paragraph 251(5)(b) with respect to shares and it can reasonably be considered that one of the main purposes for the acquisition of the right was to avoid any limitation on the amount of a corporation’s capital deduction for a taxation year, for the purpose of determining whether a corporation is related to any other corporation, the corporations are, for the purpose of this section, deemed to be in the same position in relation to each other as if the right were immediate and absolute and as if the taxpayer had exercised the right at that time.

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • R.S., 1985, c. 1 (5th Supp.), s. 190.15
  • 1994, c. 7, Sch. II, s. 160, Sch. VIII, s. 112
  • 1998, c. 19, s. 204
  • 2007, c. 2, s. 41

 [Repealed, 2013, c. 34, s. 331]

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • 1994, c. 21, s. 91
  • 2007, c. 2, s. 42
  • 2013, c. 34, s. 331

 [Repealed, 2007, c. 2, s. 42]

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • 1996, c. 21, s. 50
  • 2007, c. 2, s. 42

Administrative Provisions

Marginal note:Return

 A corporation that is or would, but for subsection 190.1(3), be liable to pay tax under this Part for a taxation year shall file with the Minister, not later than the day on or before which the corporation is required by section 150 to file its return of income for the year under Part I, a return of capital for the year in prescribed form containing an estimate of the tax payable under this Part by it for the 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. 190.2
  • 1994, c. 7, Sch. VIII, s. 113

Marginal note:Provisions applicable to Part

 Sections 152, 158 and 159, subsection 161(11), sections 162 to 167 and Division J of Part I apply to this Part with such modifications as the circumstances require and, for the purpose of this section, paragraph 152(6)(a) shall be read as follows:

  • “(a) a deduction under subsection 190.1(3) in respect of any unused surtax credit or unused Part I tax credit (within the meanings assigned by subsection 190.1(5)) for a subsequent taxation 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. 190.21
  • 1994, c. 7, Sch. II, s. 161, Sch. VIII, s. 114

Marginal note:Provisions applicable -- Crown corporations

 Section 27 applies to this Part with any modifications that the circumstances require.

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • 1998, c. 19, s. 205

 [Repealed, 1994, c. 7, s. 114(1)]

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • R.S., 1985, c. 1 (5th Supp.), s. 190.22
  • 1994, c. 7, Sch. VIII, s. 114
 
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