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

Full Document:  

Act current to 2022-05-16 and last amended on 2021-12-17. Previous Versions

PART IIncome Tax (continued)

DIVISION DTaxable Income Earned in Canada by Non-Residents (continued)

Marginal note:Competent authority agreements

  •  (1) Notwithstanding any other provision of this Act, where the Minister and another person have, under a provision contained in a tax convention or agreement with another country that has the force of law in Canada, entered into an agreement with respect to the taxation of the other person, all determinations made in accordance with the terms and conditions of the agreement shall be deemed to be in accordance with this Act.

  • Marginal note:Transfer of rights and obligations

    (2) Where rights and obligations under an agreement described in subsection 115.1(1) have been transferred to another person with the concurrence of the Minister, that other person shall be deemed, for the purpose of subsection 115.1(1), to have entered into the agreement with the Minister.

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • R.S., 1985, c. 1 (5th Supp.), s. 115.1
  • 1994, c. 7, Sch. VIII, s. 51

Non-Residents with Canadian Investment Service Providers

Marginal note:Definitions

  •  (1) The definitions in this subsection apply in this section.

    Canadian investor

    Canadian investor, at any time in respect of a non-resident person, means a person that the non-resident person knows, or ought to know after reasonable inquiry, is at that time resident in Canada. (investisseur canadien)

    Canadian service provider

    Canadian service provider means a corporation resident in Canada, a trust resident in Canada or a Canadian partnership. (fournisseur de services canadien)

    designated investment services

    designated investment services provided to a person or partnership means any one or more of the services described in the following paragraphs:

    • (a) investment management and advice with respect to qualified investments, regardless of whether the manager has discretionary authority to buy or sell;

    • (b) purchasing and selling qualified investments, exercising rights incidental to the ownership of qualified investments such as voting, conversion and exchange, and entering into and executing agreements with respect to such purchasing and selling and the exercising of such rights;

    • (c) investment administration services, such as receiving, delivering and having custody of investments, calculating and reporting investment values, receiving subscription amounts from, and paying distributions and proceeds of disposition to, investors in and beneficiaries of the person or partnership, record keeping, accounting and reporting to the person or partnership and its investors and beneficiaries; and

    • (d) in the case of a corporation, trust or partnership the only undertaking of which is the investing of its funds in qualified investments, marketing investments in the corporation, trust or partnership to non-resident investors. (services de placement déterminés)

    promoter

    promoter of a corporation, trust or partnership means a particular person or partnership that initiates or directs the founding, organization or substantial reorganization of the corporation, trust or partnership, and a person or partnership that is affiliated with the particular person or partnership. (promoteur)

    qualified investment

    qualified investment of a person or partnership means

    • (a) a share of the capital stock of a corporation, or an interest in a partnership, trust, entity, fund or organization, other than a share or an interest

      • (i) that is either

        • (A) not listed on a designated stock exchange, or

        • (B) listed on a designated stock exchange, if the person or partnership, together with all persons with whom the person or partnership does not deal at arm’s length, owns 25% or more of the issued shares of any class of the capital stock of the corporation or of the total value of interests in the partnership, entity, trust, fund or organization, as the case may be, and

      • (ii) of which more than 50% of the fair market value is derived from one or more of

        • (A) real or immovable property situated in Canada,

        • (B) Canadian resource property, and

        • (C) timber resource property;

    • (b) indebtedness;

    • (c) annuities;

    • (d) commodities or commodities futures purchased or sold, directly or indirectly in any manner whatever, on a commodities or commodities futures exchange;

    • (e) currency; and

    • (f) options, interests, rights and forward and futures agreements in respect of property described in any of paragraphs (a) to (e) or this paragraph, and agreements under which obligations are derived from interest rates, from the price of property described in any of those paragraphs, from payments made in respect of such a property by its issuer to holders of the property, or from an index reflecting a composite measure of such rates, prices or payments, whether or not the agreement creates any rights in or obligations regarding the referenced property itself. (placement admissible)

    qualified non-resident

    qualified non-resident[Repealed, 2002, c. 9, s. 35]

  • Marginal note:Not carrying on business in Canada

    (2) For the purposes of subsections 115(1) and 150(1) and Part XIV, a non-resident person is not considered to be carrying on business in Canada at any particular time solely because of the provision to the person, or to a partnership of which the person is a member, at the particular time of designated investment services by a Canadian service provider if

    • (a) in the case of services provided to a non-resident individual other than a trust, the individual is not affiliated at the particular time with the Canadian service provider;

    • (b) in the case of services provided to a non-resident person that is a corporation or trust,

      • (i) the person has not, before the particular time, directly or through its agents,

        • (A) directed any promotion of investments in itself principally at Canadian investors, or

        • (B) sold an investment in itself that is outstanding at the particular time to a person who was a Canadian investor at the time of the sale and who is a Canadian investor at the particular time,

      • (ii) the person has not, before the particular time, directly or through its agents, filed any document with a public authority in Canada in accordance with the securities legislation of Canada or of any province in order to permit the distribution of interests in the person to persons resident in Canada, and

      • (iii) when the particular time is more than one year after the time at which the person was created, the total of the fair market value, at the particular time, of investments in the person that are beneficially owned by persons and partnerships (other than a designated entity in respect of the Canadian service provider) that are affiliated with the Canadian service provider does not exceed 25% of the fair market value, at the particular time, of all investments in the person; and

    • (c) in the case of services provided to a partnership of which the non-resident person is a member,

      • (i) the particular time is not more than one year after the partnership was formed,

      • (ii) where the non-resident person is, or is affiliated with, a person or partnership described in clause (A) or (B), the total of the fair market value of all investments in the partnership at the particular time is not less than four times the total of the fair market value of each investment in the partnership beneficially owned at the particular time by

        • (A) a person or partnership (other than a designated entity in respect of the Canadian service provider), more than 25% of the total of the fair market value, at the particular time, of investments in which are beneficially owned by persons and partnerships (other than a designated entity in respect of the Canadian service provider) that are affiliated with the Canadian service provider, or

        • (B) a person or partnership (other than a designated entity in respect of the Canadian service provider) that is affiliated with the Canadian service provider, or

      • (iii) at the particular time, the non-resident person is not affiliated with the Canadian service provider and is not affiliated with any person or partnership (other than the partnership to which the services are provided) described in clause (ii)(A) or (B).

  • Marginal note:Interpretation

    (3) For the purposes of this subsection and subparagraphs (2)(b)(iii) and (c)(ii),

    • (a) the fair market value of an investment in a corporation, trust or partnership shall be determined without regard to any voting rights attaching to that investment; and

    • (b) a person or partnership is, at a particular time, a designated entity in respect of a Canadian service provider if the total of the fair market value at the particular time, of investments in the entity that are beneficially owned by persons and partnerships (other than another designated entity in respect of the Canadian service provider) that are affiliated with the Canadian service provider does not exceed 25% of the fair market value, at the particular time, of all investments in the entity.

  • Marginal note:Transfer pricing

    (4) For the purpose of section 247, where subsection (2) applies in respect of services provided to a person that is a corporation or trust or to a partnership, if the Canadian service provider referred to in that subsection does not deal at arm’s length with the promoter of the person or of the partnership, the service provider is deemed not to deal at arm’s length with the person or partnership.

  • (5) [Repealed, 2013, c. 34, s. 244]

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • 2000, c. 19, s. 21
  • 2002, c. 9, s. 35
  • 2007, c. 35, s. 68
  • 2013, c. 34, ss. 124, 244

Marginal note:Disposition by non-resident person of certain property

  •  (1) If a non-resident person proposes to dispose of any taxable Canadian property (other than property described in subsection (5.2) and excluded property) the non-resident person may, at any time before the disposition, send to the Minister a notice setting out

    • (a) the name and address of the person to whom he proposes to dispose of the property (in this section referred to as the “proposed purchaser”);

    • (b) a description of the property sufficient to identify it;

    • (c) the estimated amount of the proceeds of disposition to be received by the non-resident person for the property; and

    • (d) the amount of the adjusted cost base to the non-resident person of the property at the time of the sending of the notice.

  • Marginal note:Certificate in respect of proposed disposition

    (2) Where a non-resident person who has sent to the Minister a notice under subsection 116(1) in respect of a proposed disposition of any property has

    • (a) paid to the Receiver General, as or on account of tax under this Part payable by the non-resident person for the year, 25% of the amount, if any, by which the estimated amount set out in the notice in accordance with paragraph 116(1)(c) exceeds the amount set out in the notice in accordance with paragraph 116(1)(d), or

    • (b) furnished the Minister with security acceptable to the Minister in respect of the proposed disposition of the property,

    the Minister shall forthwith issue to the non-resident person and the proposed purchaser a certificate in prescribed form in respect of the proposed disposition, fixing therein an amount (in this section referred to as the “certificate limit”) equal to the estimated amount set out in the notice in accordance with paragraph 116(1)(c).

  • Marginal note:Notice to Minister

    (3) Every non-resident person who in a taxation year disposes of any taxable Canadian property of that person (other than property described in subsection 116(5.2) and excluded property) shall, not later than 10 days after the disposition, send to the Minister, by registered mail, a notice setting out

    • (a) the name and address of the person to whom the non-resident person disposed of the property (in this section referred to as the “purchaser”),

    • (b) a description of the property sufficient to identify it, and

    • (c) a statement of the proceeds of disposition of the property and the amount of its adjusted cost base to the non-resident person immediately before the disposition,

    unless the non-resident person has, at any time before the disposition, sent to the Minister a notice under subsection 116(1) in respect of any proposed disposition of that property and

    • (d) the purchaser was the proposed purchaser referred to in that notice,

    • (e) the estimated amount set out in that notice in accordance with paragraph 116(1)(c) is equal to or greater than the proceeds of disposition of the property, and

    • (f) the amount set out in that notice in accordance with paragraph 116(1)(d) does not exceed the adjusted cost base to the non-resident person of the property immediately before the disposition.

  • Marginal note:Certificate in respect of property disposed of

    (4) Where a non-resident person who has sent to the Minister a notice under subsection 116(3) in respect of a disposition of any property has

    • (a) paid to the Receiver General, as or on account of tax under this Part payable by the non-resident person for the year, 25% of the amount, if any, by which the proceeds of disposition of the property exceed the adjusted cost base to the non-resident person of the property immediately before the disposition, or

    • (b) furnished the Minister with security acceptable to the Minister in respect of the disposition of the property,

    the Minister shall forthwith issue to the non-resident person and the purchaser a certificate in prescribed form in respect of the disposition.

  • Marginal note:Liability of purchaser

    (5) Where in a taxation year a purchaser has acquired from a non-resident person any taxable Canadian property (other than depreciable property or excluded property) of the non-resident person, the purchaser, unless

    • (a) after reasonable inquiry the purchaser had no reason to believe that the non-resident person was not resident in Canada,

    • (a.1) subsection (5.01) applies to the acquisition, or

    • (b) a certificate under subsection 116(4) has been issued to the purchaser by the Minister in respect of the property,

    is liable to pay, and shall remit to the Receiver General within 30 days after the end of the month in which the purchaser acquired the property, as tax under this Part for the year on behalf of the non-resident person, 25% of the amount, if any, by which

    • (c) the cost to the purchaser of the property so acquired

    exceeds

    • (d) the certificate limit fixed by the certificate, if any, issued under subsection 116(2) in respect of the disposition of the property by the non-resident person to the purchaser,

    and is entitled to deduct or withhold from any amount paid or credited by the purchaser to the non-resident person or otherwise recover from the non-resident person any amount paid by the purchaser as such a tax.

  • Marginal note:Treaty-protected property

    (5.01) This subsection applies to the acquisition of a property by a person (referred to in this subsection as the “purchaser”) from a non-resident person if

    • (a) the purchaser concludes after reasonable inquiry that the non-resident person is, under a tax treaty that Canada has with a particular country, resident in the particular country;

    • (b) the property would be treaty-protected property of the non-resident person if the non-resident person were, under the tax treaty referred to in paragraph (a), resident in the particular country; and

    • (c) the purchaser provides notice under subsection (5.02) in respect of the acquisition.

  • Marginal note:Notice by purchaser in respect of an acquisition of property

    (5.02) A person (referred to in this subsection as the “purchaser”) who acquires property from a non-resident person provides notice under this subsection in respect of the acquisition if the purchaser sends to the Minister, on or before the day that is 30 days after the date of the acquisition, a notice setting out

    • (a) the date of the acquisition;

    • (b) the name and address of the non-resident person;

    • (c) a description of the property sufficient to identify it;

    • (d) the amount paid or payable, as the case may be, by the purchaser for the property; and

    • (e) the name of the country with which Canada has concluded a tax treaty under which the property is a treaty-protected property for the purposes of subsection (5.01) or (6.1), as the case may be.

  • Marginal note:Gifts, etc.

    (5.1) If a non-resident person has disposed of or proposes to dispose of a life insurance policy in Canada, a Canadian resource property or a taxable Canadian property other than

    • (a) excluded property, or

    • (b) property that has been transferred or distributed on or after the non-resident person’s death and as a consequence thereof

    to any person by way of gift inter vivos or to a person with whom the non-resident person was not dealing at arm’s length for no proceeds of disposition or for proceeds of disposition less than the fair market value of the property at the time the non-resident person so disposed of it or proposes to dispose of it, as the case may be, the following rules apply:

    • (c) the reference in paragraph 116(1)(c) to “the proceeds of disposition to be received by the non-resident person for the property” shall be read as a reference to “the fair market value of the property at the time the non-resident person proposes to dispose of it”,

    • (d) the references in subsections 116(3) and (4) to “the proceeds of disposition of the property” shall be read as references to “the fair market value of the property immediately before the disposition”,

    • (e) the references in subsection 116(5) to “the cost to the purchaser of the property so acquired” shall be read as references to “the fair market value of the property at the time it was so acquired”, and

    • (f) the reference in subsection 116(5.3) to “the amount payable by the taxpayer for the property so acquired” shall be read as a reference to “the fair market value of the property at the time it was so acquired”.

  • Marginal note:Certificates for dispositions

    (5.2) If a non-resident person has, in respect of a disposition, or a proposed disposition, in a taxation year to a taxpayer of property (other than excluded property) that is a life insurance policy in Canada, a Canadian resource property, a property (other than capital property) that is real property, or an immovable, situated in Canada, a timber resource property, depreciable property that is a taxable Canadian property or any interest in, or for civil law any right in, or any option in respect of, a property to which this subsection applies (whether or not that property exists),

    • (a) paid to the Receiver General, as or on account of tax under this Part payable by the non-resident person for the year, such amount as is acceptable to the Minister in respect of the disposition or proposed disposition of the property, or

    • (b) furnished the Minister with security acceptable to the Minister in respect of the disposition or proposed disposition of the property,

    the Minister shall forthwith issue to the non-resident person and to the taxpayer a certificate in prescribed form in respect of the disposition or proposed disposition fixing therein an amount equal to the proceeds of disposition, proposed proceeds of disposition or such other amount as is reasonable in the circumstances.

  • Marginal note:Liability of purchaser in certain cases

    (5.3) Where in a taxation year a taxpayer has acquired from a non-resident person property referred to in subsection 116(5.2),

    • (a) the taxpayer, unless subsection (5.01) applies to the acquisition or unless after reasonable inquiry the taxpayer had no reason to believe that the non-resident person was not resident in Canada, is liable to pay, as tax under this Part for the year on behalf of the non-resident person, 50% of the amount, if any, by which

      • (i) the amount payable by the taxpayer for the property so acquired

      exceeds

      • (ii) the amount fixed in the certificate, if any, issued under subsection 116(5.2) in respect of the disposition of the property by the non-resident person to the taxpayer

      and is entitled to deduct or withhold from any amount paid or credited by the taxpayer to the non-resident person or to otherwise recover from the non-resident person any amount paid by the taxpayer as such a tax; and

    • (b) the taxpayer shall, within 30 days after the end of the month in which the taxpayer acquired the property, remit to the Receiver General the tax for which the taxpayer is liable under paragraph 116(5.3)(a).

  • Marginal note:Presumption

    (5.4) Where there has been a disposition by a non-resident of a life insurance policy in Canada by virtue of subsection 148(2) or any of paragraphs (a) to (c) and (e) of the definition disposition in subsection 148(9), the insurer under the policy shall, for the purposes of subsections 116(5.2) and (5.3) be deemed to be the taxpayer who acquired the property for an amount equal to the proceeds of disposition as determined under section 148.

  • Definition of excluded property

    (6) For the purposes of this section, excluded property of a non-resident person means

    • (a) a property that is a taxable Canadian property solely because a provision of this Act deems it to be a taxable Canadian property;

    • (a.1) a property (other than real or immovable property situated in Canada, a Canadian resource property or a timber resource property) that is described in an inventory of a business carried on in Canada by the person;

    • (b) a security that is

      • (i) listed on a recognized stock exchange, and

      • (ii) either

        • (A) a share of the capital stock of a corporation, or

        • (B) SIFT wind-up entity equity;

    • (c) a unit of a mutual fund trust;

    • (d) a bond, debenture, bill, note, mortgage, hypothecary claim or similar obligation;

    • (e) property of a non-resident insurer that

      • (i) is licensed or otherwise authorized under the laws of Canada or a province to carry on an insurance business in Canada, and

      • (ii) carries on an insurance business, within the meaning of subsection 138(1) of the Act, in Canada;

    • (f) property of an authorized foreign bank that carries on a Canadian banking business;

    • (g) an option in respect of property referred to in any of paragraphs (a) to (f) whether or not such property is in existence;

    • (h) an interest, or for civil law a right, in property referred to in any of paragraphs (a) to (g); and

    • (i) a property that is, at the time of its disposition, a treaty-exempt property of the person.

  • Marginal note:Treaty-exempt property

    (6.1) For the purpose of subsection (6), a property is a treaty-exempt property of a non-resident person, at the time of the non-resident person’s disposition of the property to another person (referred to in this subsection as the “purchaser”), if

    • (a) it is, at that time, a treaty-protected property of the non-resident person; and

    • (b) where the purchaser and the non-resident person are related at that time, the purchaser provides notice under subsection (5.02) in respect of the disposition.

  • Marginal note:Application of s. 138(12)

    (7) The definitions in subsection 138(12) apply to this section.

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • R.S., 1985, c. 1 (5th Supp.), s. 116
  • 1994, c.7, Sch. II, s. 87
  • 1998, c. 19, s. 133
  • 2001, c. 17, ss. 91, 212
  • 2007, c. 35, s. 33
  • 2008, c. 28, s. 14
  • 2009, c. 2, s. 32
  • 2013, c. 34, ss. 125, 245
  • 2016, c. 12, s. 41
 
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