Income Tax Act

Marginal note:Corporate emigration

• 219.1 (1) If a taxation year of a corporation (in this subsection and subsection (2) referred to as the “emigrating corporation”) is deemed by paragraph 128.1(4)(a) to have ended at any time, the emigrating corporation shall, on or before its filing-due date for the year, pay a tax under this Part for the year equal to the amount determined by the formula

  25% × (A – B)

  where

  A

  is the fair market value of all the property owned by the emigrating corporation immediately before that time; and

  B

  is the total of

  • (a) the paid-up capital in respect of all the shares of the capital stock of the emigrating corporation immediately before that time,

  • (b) all amounts (other than amounts payable by the emigrating corporation in respect of dividends and amounts payable under this section) each of which is a debt owing by the emigrating corporation, or an obligation of the emigrating corporation to pay an amount, that is outstanding at that time, and

  • (c) if a tax was payable by the emigrating corporation under subsection 219(1) or this section for a preceding taxation year that began before 1996 and after the emigrating corporation last became resident in Canada, four times the total of all amounts that would, but for sections 219.2 and 219.3 and any tax treaty, have been so payable.

• Marginal note:Foreign affiliate dumping — emigrating corporation

  (2) The paid-up capital referred to in paragraph (a) of the description of B in subsection (1) is deemed to be nil if

  • (a) one or more shares of the emigrating corporation are, at the time the emigrating corporation ceases to be resident in Canada, owned by another corporation resident in Canada;

  • (b) the other corporation is controlled, at that time, by a non-resident person or a group of non-resident persons not dealing with each other at arm’s length; and

  • (c) the emigrating corporation is, immediately after that time — or becomes, as part of a transaction or event or series of transactions or events that includes the emigrating corporation ceasing to be resident in Canada — a foreign affiliate of the other corporation.

• Marginal note:Application of subsection (4)

  (3) Subsection (4) applies if

  • (a) a corporation ceases to be resident in Canada at any time (referred to in subsection (4) as the “emigration time”);

  • (b) an amount is required by paragraph 212.3(2)(b) or subsection 212.3(7) to be deducted in computing the paid-up capital in respect of a class of shares of the capital stock of the corporation because of an investment in a subject corporation made by a CRIC that is described in any of paragraphs 212.3(10)(a) to (f);

  • (c) subsection 212.3(9) has not applied in respect of any reduction of the paid-up capital in respect of a class of shares of the capital stock of the corporation or a specified predecessor corporation (as defined in subsection 95(1)) of the corporation; and

  • (d) subsection (2) does not apply in respect of the cessation of residence.

• Marginal note:Paid-up capital reinstatement

  (4) If this subsection applies, the paid-up capital referred to in paragraph (a) of the description of B in subsection (1) is to be increased, immediately before the time that is immediately before the emigration time, by the lesser of

  • (a) the total of all amounts each of which is an amount by which the paid-up capital of a class of shares of the capital stock of the corporation was required by paragraph 212.3(2)(b) or subsection 212.3(7) to be reduced in respect of an investment in a subject corporation made by the CRIC that is described in any of paragraphs 212.3(10)(a) to (f); and

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

    • (i) the fair market value of a share of the capital stock of a subject corporation that is owned by the corporation immediately before the emigration time,

    • (ii) the portion of the fair market value of a particular share of the capital stock of a foreign affiliate of the corporation owned by the corporation immediately before the emigration time that may reasonably be considered to relate to a share of the capital stock of a subject corporation that was previously owned by the corporation and for which the particular share was substituted, or

    • (iii) the fair market value of a debt obligation, other than a pertinent loan or indebtedness (as defined in subsection 212.3(11)), of a subject corporation that is owned by the corporation immediately before the emigration time.

• Marginal note:Assigned meanings from section 212.3

  (5) For the purposes of subsections (3) and (4), CRIC and subject corporation have the meaning assigned to those terms by subsection 212.3(1) and investment has the same meaning as in subsection 212.3(10).