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

Marginal note:Distribution deemed disposition

200 For the purposes of this Part, a distribution by a trust of a non-qualified investment to a beneficiary of the trust shall be deemed to be a disposition of that non-qualified investment and the proceeds of disposition of that non-qualified investment shall be deemed to be its fair market value at the time of the distribution.

Marginal note:Tax where inadequate consideration on purchase or sale

201 Every trust governed by a deferred profit sharing plan or a revoked plan shall, for each calendar year after 1990, pay a tax equal to 50% of the total of all amounts each of which is, by reason of subsection 147(18), an amount taxable under this section for the year.

Marginal note:Returns and payment of estimated tax

• 202 (1) Within 90 days from the end of each year after 1965, a trustee of every trust governed by a deferred profit sharing plan or revoked plan shall

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

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

  • (c) estimate in the return the amount of any refund to which the trust is entitled under this Part for the year; and

  • (d) pay to the Receiver General the unpaid balance of the trust’s tax for the year minus any refund to which it is entitled under this Part, or apply in the return for any amount owing to it.

• Marginal note:Consideration of application for refund

  (2) Where a trustee of a trust has made application for an amount owing to it pursuant to subsection 202(1), the Minister shall

  • (a) consider the application;

  • (b) determine the amount of any refund; and

  • (c) send to the trustee a notice of refund and any amount owing to the trust, or a notice that no refund is payable.

• Marginal note:Provisions applicable to Part

  (3) Subsection 150(2), sections 152 and 158, subsections 161(1) and 161(11), sections 162 to 167 and Division J of Part I are applicable to this Part with such modifications as the circumstances require and, for the purposes of the application of those provisions to this Part, a notice of refund under this section shall be deemed to be a notice of assessment.

• Marginal note:Provisions applicable to refunds

  (4) Subsections 164(3) to 164(4) are applicable, with such modifications as the circumstances require, to refunds of tax under subsection 198(4) or 198(5) or 199(2).

• Marginal note:Interest

  (5) In addition to the interest payable under subsection 161(1), where a taxpayer is required by section 198 to pay a tax and has failed to pay all or any part thereof on or before the day on or before which the tax was required to be paid, the taxpayer shall pay to the Receiver General interest at the prescribed rate on the amount that the taxpayer failed to pay computed from the day on or before which the amount was required to be paid to the day of payment or to the beginning of the period in respect of which the taxpayer is required by subsection 161(1) to pay interest thereon, whichever is earlier.

• Marginal note:Deemed payment of tax

  (6) For the purposes of subsections 161(1) and 202(5), where a trust is liable to pay tax under this Part on the acquisition by it of a non-qualified investment or on the use of its property as security for a loan, it shall, except to the extent that the tax has previously been paid, be deemed to have paid tax on the date on which the property is disposed ofor on which the loan ceases to be extant, as the case may be, in an amount equal to the refund referred to in subsection 198(4) in respect of that property or subsection 198(5) in respect of the loan, as the case may be.

Marginal note:Application to other taxes

203 Instead of making a refund to which a trust is entitled under subsection 198(4) or 198(5) or 199(2), the Minister may, where the trust is liable or about to become liable to make another payment under this Act, apply the amount of the refund or any part thereof to that other liability and notify a trustee of the trust of that action.

Marginal note:Definitions

204 In this Part,

debt obligation

debt obligation means a bond, debenture, note or similar obligation; (titre de créance)

equity share

equity share means

• (a) a share, other than an excluded share or a non-participating share, the owner of which has, as owner thereof, a right

  • (i) to a dividend, and

  • (ii) to a part of the surplus of the corporation after repayment of capital and payment of dividend arrears on the redemption of the share, a reduction of the capital of the corporation or the winding-up of the corporation,

  at least as great, in any event, as the right of the owner of any other share, other than a non-participating share, of the corporation, when the magnitude of the right in each case is expressed as a rate based on the paid-up capital value of the share to which the right relates, or

• (b) a share, other than an excluded share or a non-participating share, the owner of which has, as owner thereof, a right

  • (i) to a dividend, after a dividend at a rate not in excess of 12% per annum of the paid-up capital value of each share has been paid to the owners of shares of a class other than the class to which that share belongs, and

  • (ii) to a part of the surplus of the corporation after repayment of capital and payment of dividend arrears on the redemption of the share, a reduction of the capital of the corporation or the winding-up of the corporation, after a payment of a part of the surplus at a rate not in excess of 10% of the paid-up capital value of each share has been made to the owners of shares of a class other than the class to which that share belongs,

  at least as great, in any event, as the right of the owner of any other share, other than a non-participating share, of the corporation, when the magnitude of the right in each case is expressed as a rate based on the paid-up capital value of the share to which the right relates; (action à revenu variable)

excluded property

excluded property, in relation to a trust governed by a deferred profit sharing plan or revoked plan, means a debt obligation or bankers’ acceptance issued by

• (a) an employer by whom payments are made in trust to a trustee under the plan for the benefit of beneficiaries under the plan, or

• (b) a corporation with whom that employer does not deal at arm’s length; (bien exclu)

excluded share

excluded share means each share of the capital stock of a private corporation where

• (a) the paid-up capital of the corporation that is represented by all its issued and outstanding shares that would, but for this definition, be equity shares is less than 50% of the paid-up capital of the corporation that is represented by all its issued and outstanding shares other than non-participating shares, or

• (b) a non-participating share of the corporation is issued and outstanding and the owner of which has, as owner thereof, a right to a dividend

  • (i) at a fixed annual rate in excess of 12%, or

  • (ii) at an annual rate not in excess of a fixed maximum annual rate, if the fixed maximum annual rate is in excess of 12%,

  when the right to the dividend is expressed as a rate based on the paid-up capital value of the share to which the right relates; (action exclue)

initial base

initial base of a trust means the total of the values of all initial non-qualified investments held by the trust on December 21, 1966 when each such investment is valued at the lower of

• (a) its cost to the trust, and

• (b) its fair market value on December 21, 1966; (base initiale)

initial non-qualified investment

initial non-qualified investment of a trust means an investment held by the trust on December 21, 1966 that was, on that date, a non-qualified investment but does not include

• (a) any interest in a life insurance policy, or

• (b) an equity share that would be a qualified investment if the date of acquisition of the share were December 21, 1966; (placement initial non admissible)

non-participating share

non-participating share means

• (a) in the case of a private corporation, a share the owner of which is not entitled to receive, as owner thereof, any dividend, other than a dividend, whether cumulative or not,

  • (i) at a fixed annual rate or amount, or

  • (ii) at an annual rate or amount not in excess of a fixed annual rate or amount, and

• (b) in the case of a corporation other than a private corporation, any share other than a common share; (action non participante)

non-qualified investment

non-qualified investment means property that is not a qualified investment for a trust governed by a deferred profit sharing plan or revoked plan within the meaning of the definition qualified investment in this subsection; (placement non admissible)

paid-up capital value

paid-up capital value of a share means the amount determined by the formula

A/B

where

A

is the paid-up capital of the corporation that is represented by the shares of the class to which that share belongs, and

B

is the number of shares of that class that are in fact issued and outstanding; (valeur en capital versé)

qualified investment

qualified investment for a trust governed by a deferred profit sharing plan or revoked plan means, with the exception of excluded property in relation to the trust,

• (a) money (other than money the fair market value of which exceeds its stated value as legal tender in the country of issuance or money that is held for its numismatic value) and deposits (within the meaning assigned by the Canada Deposit Insurance Corporation Act or with a branch in Canada of a bank) of such money standing to the credit of the trust,

• (b) debt obligations described in paragraph (a) of the definition fully exempt interest in subsection 212(3),

• (c) debt obligations issued by

  • (i) a corporation, mutual fund trust or limited partnership the shares or units of which are listed on a designated stock exchange in Canada,

  • (ii) a corporation the shares of which are listed on a designated stock exchange outside Canada, or

  • (iii) an authorized foreign bank and payable at a branch in Canada of the bank,

• (c.1) debt obligations that meet the following criteria, namely,

  • (i) any of

    • (A) the debt obligations had, at the time of acquisition by the trust, an investment grade rating with a prescribed credit rating agency,

    • (B) the debt obligations have an investment grade rating with a prescribed credit rating agency, or

    • (C) the debt obligations were acquired by the trust in exchange for debt obligations that satisfied the condition in clause (A) and as part of a proposal to, or an arrangement with, the creditors of the issuer of the debt obligations that has been approved by a court under the Bankruptcy and Insolvency Act or the Companies’ Creditors Arrangement Act, and

  • (ii) either

    • (A) the debt obligations were issued as part of a single issue of debt of at least $25 million, or

    • (B) in the case of debt obligations that are issued on a continuous basis under a debt issuance program, the issuer of the debt obligations had issued and outstanding debt under the program of at least $25 million,

• (d) securities (other than futures contracts or other derivative instruments in respect of which the holder’s risk of loss may exceed the holder’s cost) that are listed on a designated stock exchange,

• (e) equity shares of a corporation by which, before the date of acquisition by the trust of the shares, payments have been made in trust to a trustee under the plan for the benefit of beneficiaries thereunder, if the shares are of a class in respect of which

  • (i) there is no restriction on their transferability, and

  • (ii) in each of 4 taxation years of the corporation in the period of the corporation’s 5 consecutive taxation years that ended less than 12 months before the date of acquisition of the shares by the trust, and in the corporation’s last taxation year in that period, the corporation

    • (A) paid a dividend on each share of the class of an amount not less than 4% of the cost per share of the shares to the trust, or

    • (B) had earnings attributable to the shares of the class of an amount not less than the amount obtained when 4% of the cost per share to the trust of the shares is multiplied by the total number of shares of the class that were outstanding immediately after the acquisition,

• (f) guaranteed investment certificates issued by a trust company incorporated under the laws of Canada or of a province,

• (g) investment contracts described in subparagraph (b)(ii) of the definition retirement savings plan in subsection 146(1) and issued by a corporation approved by the Governor in Council for the purposes of that subparagraph, and

• (h) prescribed investments;

• (i) [Repealed, 2007, c. 29, s. 26] (placement admissible)

revoked plan

revoked plan means a deferred profit sharing plan the registration of which has been revoked by the Minister pursuant to subsection 147(14) or 147(14.1). (régime dont l’agrément est retiré)

PART X.1Tax in Respect of Over-contributions to Deferred Income Plans

Marginal note:Tax payable by individuals

• 204.1 (1) Where, at the end of any month after May, 1976, an individual has an excess amount for a year in respect of registered retirement savings plans, the individual shall, in respect of that month, pay a tax under this Part equal to 1% of that portion of the total of all those excess amounts that has not been paid by those plans to the individual before the end of that month.

• Marginal note:Amount deemed repaid

  (2) For the purposes of subsection 204.1(1), where an amount in respect of a plan has been included in computing an individual’s income pursuant to paragraph 146(12)(b), that amount shall be deemed to have been paid to the individual by the plan at the time referred to in that paragraph.

• Marginal note:Tax payable by individuals -- contributions after 1990

  (2.1) Where, at the end of any month after December, 1990, an individual has a cumulative excess amount in respect of registered retirement savings plans, the individual shall, in respect of that month, pay a tax under this Part equal to 1% of that cumulative excess amount.

• Marginal note:Tax payable by deferred profit sharing plan

  (3) Where, at the end of any month after May, 1976, a trust governed by a deferred profit sharing plan has an excess amount, the trust shall, in respect of that month, pay a tax under this Part equal to 1% of the excess amount.

• Marginal note:Waiver of tax

  (4) Where an individual would, but for this subsection, be required to pay a tax under subsection 204.1(1) or 204.1(2.1) in respect of a month and the individual establishes to the satisfaction of the Minister that

  • (a) the excess amount or cumulative excess amount on which the tax is based arose as a consequence of reasonable error, and

  • (b) reasonable steps are being taken to eliminate the excess,

  the Minister may waive the tax.