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

Full Document:  

Act current to 2024-05-14 and last amended on 2024-01-22. Previous Versions

PART XVIIInterpretation (continued)

Marginal note:Person deemed resident

  •  (1) For the purposes of this Act, a person shall, subject to subsection 250(2), be deemed to have been resident in Canada throughout a taxation year if the person

    • (a) sojourned in Canada in the year for a period of, or periods the total of which is, 183 days or more;

    • (b) was, at any time in the year, a member of the Canadian Forces;

    • (c) was, at any time in the year,

      • (i) an ambassador, minister, high commissioner, officer or servant of Canada, or

      • (ii) an agent-general, officer or servant of a province,

      and was resident in Canada immediately prior to appointment or employment by Canada or the province or received representation allowances in respect of the year;

    • (d) performed services, at any time in the year, in a country other than Canada under a prescribed international development assistance program of the Government of Canada and was resident in Canada at any time in the 3 month period preceding the day on which those services commenced;

    • (d.1) was, at any time in the year, a member of the overseas Canadian Forces school staff who filed his or her return for the year on the basis that the person was resident in Canada throughout the period during which the person was such a member;

    • (e) [Repealed, 1999, c. 22, s. 82(1)]

    • (f) was at any time in the year a child of, and dependent for support on, an individual to whom paragraph (b), (c), (d) or (d.1) applies and the person’s income for the year did not exceed the amount determined for F in subsection 118(1.1) for the year; or

    • (g) was at any time in the year, under an agreement or a convention with one or more other countries that has the force of law in Canada, entitled to an exemption from an income tax otherwise payable in any of those countries in respect of income from any source (unless all or substantially all of the person’s income from all sources was not so exempt), because at that time the person was related to or a member of the family of an individual (other than a trust) who was resident in Canada.

  • Marginal note:Idem

    (2) Where at any time in a taxation year a person described in paragraph (1)b), (c) or (d) ceases to be a person so described, or a person described in paragraph (1)(d.1) ceases to be a member of the overseas Canadian Forces school staff, that person shall be deemed to have been resident in Canada throughout the part of the year preceding that time and the spouse or common-law partner and child of that person who by reason of paragraph (1)(e) or (f) would, but for this subsection, be deemed to have been resident in Canada throughout the year shall be deemed to have been resident in Canada throughout that part of the year.

  • Marginal note:Ordinarily resident

    (3) In this Act, a reference to a person resident in Canada includes a person who was at the relevant time ordinarily resident in Canada.

  • Marginal note:Corporation deemed resident

    (4) For the purposes of this Act, a corporation shall be deemed to have been resident in Canada throughout a taxation year if

    • (a) in the case of a corporation incorporated after April 26, 1965, it was incorporated in Canada;

    • (b) in the case of a corporation that

      • (i) was incorporated before April 9, 1959,

      • (ii) was, on June 18, 1971, a foreign business corporation (within the meaning of section 71 of the Income Tax Act, chapter 148 of the Revised Statutes of Canada, 1952, as it read in its application to the 1971 taxation year) that was controlled by a corporation resident in Canada,

      • (iii) throughout the 10 year period ending on June 18, 1971, carried on business in any one particular country other than Canada, and

      • (iv) during the period referred to in subparagraph 250(4)(b)(iii), paid dividends to its shareholders resident in Canada on which its shareholders paid tax to the government of the country referred to in that subparagraph,

      it was incorporated in Canada and, at any time in the taxation year or at any time in any preceding taxation year commencing after 1971, it was resident in Canada or carried on business in Canada; and

    • (c) in the case of a corporation incorporated before April 27, 1965 (other than a corporation to which subparagraphs 250(4)(b)(i) to 250(4)(b)(iv) apply), it was incorporated in Canada and, at any time in the taxation year or at any time in any preceding taxation year of the corporation ending after April 26, 1965, it was resident in Canada or carried on business in Canada.

  • Marginal note:Deemed non-resident

    (5) Notwithstanding any other provision of this Act (other than paragraph 126(1.1)(a)), a person is deemed not to be resident in Canada at a time if, at that time, the person would, but for this subsection and any tax treaty, be resident in Canada for the purposes of this Act but is, under a tax treaty with another country, resident in the other country and not resident in Canada.

  • Marginal note:Continued corporation

    (5.1) Where a corporation is at any time (in this subsection referred to as the “time of continuation”) granted articles of continuance (or similar constitutional documents) in a particular jurisdiction, the corporation shall

    • (a) for the purposes of applying this Act (other than subsection 250(4)) in respect of all times from the time of continuation until the time, if any, of continuation in a different jurisdiction, be deemed to have been incorporated in the particular jurisdiction and not to have been incorporated in any other jurisdiction; and

    • (b) for the purpose of applying subsection 250(4) in respect of all times from the time of continuation until the time, if any, of continuation in a different jurisdiction, be deemed to have been incorporated in the particular jurisdiction at the time of continuation and not to have been incorporated in any other jurisdiction.

  • Marginal note:Residence of international shipping corporation

    (6) For the purposes of this Act, a corporation that was incorporated or otherwise formed under the laws of a country other than Canada or of a state, province or other political subdivision of such a country is deemed to be resident in that country throughout a taxation year and not to be resident in Canada at any time in the year, if

    • (a) the corporation

      • (i) has international shipping as its principal business in the year, or

      • (ii) holds eligible interests in one or more eligible entities throughout the year and at no time in the year is the total of the cost amounts to it of all those eligible interests and of all debts owing to it by an eligible entity in which an eligible interest is held by it, by a person related to it or by a partnership affiliated with it less than 50% of the total of the cost amounts to it of all its property;

    • (b) all or substantially all the corporation’s gross revenue for the year consists of any one or more of

      • (i) gross revenue from international shipping,

      • (ii) gross revenue from an eligible interest held by it in an eligible entity, and

      • (iii) interest on a debt owing by an eligible entity in which an eligible interest is held by it, by a person related to it or by a partnership affiliated with it; and

    • (c) the corporation was not granted articles of continuance in Canada before the end of the year.

  • Marginal note:Partner’s gross revenue

    (6.01) For the purposes of paragraph (6)(b), an amount of profit allocated from a partnership to a member of the partnership for a taxation year is deemed to be gross revenue of the member from member’s interest in the partnership for the year.

  • Marginal note:Service providers

    (6.02) Subsection (6.03) applies to a corporation, trust or partnership (in this subsection and subsection (6.03) referred to as the “relevant entity”) for a taxation year if

    • (a) the relevant entity does not satisfy the condition in subparagraph (6)(a)(i), determined without reference to subsection (6.03);

    • (b) all or substantially all the gross revenue of the relevant entity for the year consists of any one or more of

      • (i) gross revenue from the provision of services to one or more eligible entities, other than services described in any of paragraphs (a) to (h) of the definition international shipping in subsection 248(1),

      • (ii) gross revenue from international shipping,

      • (iii) gross revenue from an eligible interest held by it in an eligible entity, and

      • (iv) interest on a debt owing by an eligible entity in which an eligible interest is held by it or a person related to it;

    • (c) either the relevant entity is a subsidiary wholly-owned corporation (as defined in subsection 87(1.4)) of the eligible entity referred to in paragraph (b) or an eligible interest in each eligible entity referred to in paragraph (b) is held throughout the year by

      • (i) the relevant entity,

      • (ii) one or more persons related to the relevant entity (if the relevant entity and each such person is a corporation), or persons or partnerships affiliated with the relevant entity (in any other case), or

      • (iii) any combination of the relevant entity and persons or partnerships described in subparagraph (ii); and

    • (d) all or substantially all the shares of the capital stock of, or interests in, the relevant entity are held, directly or indirectly through one or more subsidiary wholly-owned corporations (as defined in subsection 87(1.4)), throughout the year by one or more corporations, trusts or partnerships that would be eligible entities if they did not own shares of, or interests in, the relevant entity.

  • Marginal note:Service providers

    (6.03) If this subsection applies for a taxation year, then for the purposes of subsection (6) and paragraph 81(1)(c),

    • (a) the relevant entity is deemed to have international shipping as its principal business in the year; and

    • (b) the gross revenue described in subparagraph (6.02)(b)(i) is deemed to be gross revenue from international shipping.

  • Marginal note:Definitions

    (6.04) The following definitions apply in this subsection and subsections (6) to (6.03).

    eligible entity

    eligible entity, for a taxation year, means

    • (a) a corporation that is deemed by subsection (6) to be resident in a country other than Canada for the year; or

    • (b) a partnership or trust, if

      • (i) it satisfies the conditions in subparagraph (6)(a)(i) or (ii), and

      • (ii) all or substantially all its gross revenue for the year consists of any combination of amounts described in any of subparagraphs (6)(b)(i) to (iii). (entité admissible)

    eligible interest

    eligible interest means

    • (a) in respect of a corporation, shares of the capital stock of the corporation that

      • (i) give the holders of those shares not less than 25% of the votes that could be cast at an annual meeting of the shareholders of the corporation, and

      • (ii) have a fair market value that is not less than 25% of the fair market value of all the issued and outstanding shares of the capital stock of the corporation;

    • (b) in respect of a trust, an interest as a beneficiary (as defined in subsection 108(1)) under the trust with a fair market value that is not less than 25% of the fair market value of all the interests of all beneficiaries under the trust; and

    • (c) in respect of a partnership, an interest as a member of the partnership with a fair market value that is not less than 25% of the fair market value of all the membership interests in the partnership. (participation admissible)

  • Marginal note:Holdings in eligible entities

    (6.05) For the purpose of determining whether a person or partnership (in this subsection referred to as the “holder”) holds an eligible interest in an eligible entity in subsections (6) to (6.04), the holder is deemed to hold all of the shares or interests, as the case may be, in the eligible entity held by

    • (a) the holder;

    • (b) if the holder is a corporation,

      • (i) each corporation related to the holder, and

      • (ii) each person, other than a corporation, or partnership that is affiliated with the holder; and

    • (c) if the holder is not a corporation, each person or partnership affiliated with the holder.

  • Marginal note:Residence of inter vivos trusts

    (6.1) For the purposes of provisions of this Act that apply to a trust for a taxation year only where the trust has been resident in Canada throughout the year, where a particular trust ceases at any time to exist and the particular trust was resident in Canada immediately before that time, the particular trust is deemed to be resident in Canada throughout the period that begins at that time and ends at the end of the year.

  • (7) [Repealed, 2011, c. 24, s. 74]

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • R.S., 1985, c. 1 (5th Supp.), s. 250
  • 1994, c. 7, Sch. II, s. 194, Sch. VII, s. 22, c. 21, s. 111
  • 1995, c. 3, s. 54
  • 1998, c. 19, ss. 67, 241
  • 1999, c. 22, s. 82
  • 2000, c. 12, s. 142, c. 19, s. 68
  • 2001, c. 17, s. 190
  • 2011, c. 24, s. 74
  • 2014, c. 39, s. 74
  • 2021, c. 23, s. 62

Marginal note:Non-resident person’s taxation year and income

 For greater certainty, unless the context requires otherwise

  • (a) a taxation year of a non-resident person shall be determined, except as otherwise permitted by the Minister, in the same manner as the taxation year of a person resident in Canada; and

  • (b) a person for whom income for a taxation year is determined in accordance with this Act includes a non-resident person.

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • 2001, c. 17, s. 191

Marginal note:Arm’s length

  •  (1) For the purposes of this Act,

    • (a) related persons shall be deemed not to deal with each other at arm’s length;

    • (b) a taxpayer and a personal trust (other than a trust described in any of paragraphs (a) to (e.1) of the definition trust in subsection 108(1)) are deemed not to deal with each other at arm’s length if the taxpayer, or any person not dealing at arm’s length with the taxpayer, would be beneficially interested in the trust if subsection 248(25) were read without reference to subclauses 248(25)(b)(iii)(A)(II) to (IV); and

    • (c) in any other case, it is a question of fact whether persons not related to each other are, at a particular time, dealing with each other at arm’s length.

  • Definition of related persons

    (2) For the purpose of this Act, related persons, or persons related to each other, are

    • (a) individuals connected by blood relationship, marriage or common-law partnership or adoption;

    • (b) a corporation and

      • (i) a person who controls the corporation, if it is controlled by one person,

      • (ii) a person who is a member of a related group that controls the corporation, or

      • (iii) any person related to a person described in subparagraph 251(2)(b)(i) or 251(2)(b)(ii); and

    • (c) any two corporations

      • (i) if they are controlled by the same person or group of persons,

      • (ii) if each of the corporations is controlled by one person and the person who controls one of the corporations is related to the person who controls the other corporation,

      • (iii) if one of the corporations is controlled by one person and that person is related to any member of a related group that controls the other corporation,

      • (iv) if one of the corporations is controlled by one person and that person is related to each member of an unrelated group that controls the other corporation,

      • (v) if any member of a related group that controls one of the corporations is related to each member of an unrelated group that controls the other corporation, or

      • (vi) if each member of an unrelated group that controls one of the corporations is related to at least one member of an unrelated group that controls the other corporation.

  • Marginal note:Corporations related through a third corporation

    (3) Where two corporations are related to the same corporation within the meaning of subsection 251(2), they shall, for the purposes of subsections 251(1) and 251(2), be deemed to be related to each other.

  • Marginal note:Relation where amalgamation or merger

    (3.1) Where there has been an amalgamation or merger of two or more corporations and the new corporation formed as a result of the amalgamation or merger and any predecessor corporation would have been related immediately before the amalgamation or merger if the new corporation were in existence at that time, and if the persons who were the shareholders of the new corporation immediately after the amalgamation or merger were the shareholders of the new corporation at that time, the new corporation and any such predecessor corporation shall be deemed to have been related persons.

  • Marginal note:Amalgamation of related corporations

    (3.2) Where there has been an amalgamation or merger of 2 or more corporations each of which was related (otherwise than because of a right referred to in paragraph 251(5)(b)) to each other immediately before the amalgamation or merger, the new corporation formed as a result of the amalgamation or merger and each of the predecessor corporations is deemed to have been related to each other.

  • Marginal note:Definitions concerning groups

    (4) In this Act,

    related group

    related group means a group of persons each member of which is related to every other member of the group; (groupe lié)

    unrelated group

    unrelated group means a group of persons that is not a related group. (groupe non lié)

  • Marginal note:Control by related groups, options, etc.

    (5) For the purposes of subsection 251(2) and the definition Canadian-controlled private corporation in subsection 125(7),

    • (a) where a related group is in a position to control a corporation, it shall be deemed to be a related group that controls the corporation whether or not it is part of a larger group by which the corporation is in fact controlled;

    • (b) where at any time a person has a right under a contract, in equity or otherwise, either immediately or in the future and either absolutely or contingently,

      • (i) to, or to acquire, shares of the capital stock of a corporation or to control the voting rights of such shares, the person shall, except where the right is not exercisable at that time because the exercise thereof is contingent on the death, bankruptcy or permanent disability of an individual, be deemed to have the same position in relation to the control of the corporation as if the person owned the shares at that time,

      • (ii) to cause a corporation to redeem, acquire or cancel any shares of its capital stock owned by other shareholders of the corporation, the person shall, except where the right is not exercisable at that time because the exercise thereof is contingent on the death, bankruptcy or permanent disability of an individual, be deemed to have the same position in relation to the control of the corporation as if the shares were so redeemed, acquired or cancelled by the corporation at that time;

      • (iii) to, or to acquire or control, voting rights in respect of shares of the capital stock of a corporation, the person is, except where the right is not exercisable at that time because its exercise is contingent on the death, bankruptcy or permanent disability of an individual, deemed to have the same position in relation to the control of the corporation as if the person could exercise the voting rights at that time, or

      • (iv) to cause the reduction of voting rights in respect of shares, owned by other shareholders, of the capital stock of a corporation, the person is, except where the right is not exercisable at that time because its exercise is contingent on the death, bankruptcy or permanent disability of an individual, deemed to have the same position in relation to the control of the corporation as if the voting rights were so reduced at that time; and

    • (c) where a person owns shares in two or more corporations, the person shall as shareholder of one of the corporations be deemed to be related to himself, herself or itself as shareholder of each of the other corporations.

  • Marginal note:Blood relationship, etc.

    (6) For the purposes of this Act, persons are connected by

    • (a) blood relationship if one is the child or other descendant of the other or one is the brother or sister of the other;

    • (b) marriage if one is married to the other or to a person who is so connected by blood relationship to the other;

    • (b.1) common-law partnership if one is in a common-law partnership with the other or with a person who is connected by blood relationship to the other; and

    • (c) adoption if one has been adopted, either legally or in fact, as the child of the other or as the child of a person who is so connected by blood relationship (otherwise than as a brother or sister) to the other.

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • R.S., 1985, c. 1 (5th Supp.), s. 251
  • 1994, c. 7, Sch. II, s. 195
  • 1998, c. 19, s. 242
  • 2000, c. 12, ss. 140, 142
  • 2001, c. 17, s. 192
  • 2013, c. 34, s. 361
 

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