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Version of document from 2005-12-06 to 2005-12-19:

Income Tax Regulations

C.R.C., c. 945

INCOME TAX ACT

Income Tax Regulations

Short Title

 These Regulations may be cited as the Income Tax Regulations.

Interpretation

 In these Regulations, Act means the Income Tax Act.

PART ITax Deductions

Interpretation

  •  (1) In this Part and in Schedule I,

    employee

    employee means any person receiving remuneration; (employé)

    employer

    employer means any person paying remuneration; (employeur)

    estimated deductions

    estimated deductions means, in respect of a taxation year, the total of the amounts estimated to be deductible by an employee for the year under any of paragraphs 8(1)(f), (h), (h.1), (i) and (j) of the Act and determined by the employee for the purpose of completing the form referred to in subsection 107(2); (déductions estimatives)

    exemptions

    exemptions[Repealed, SOR/89-508, s. 1]

    pay period

    pay period includes

    • (a) a day,

    • (b) a week,

    • (c) a two week period,

    • (d) a semi-monthly period,

    • (e) a month,

    • (f) a four week period,

    • (g) one tenth of a calendar year, or

    • (h) one twenty-second of a calendar year; (période de paie)

    personal credits

    personal credits means, in respect of a particular taxation year, the greater of

    • (a) the amount referred to in paragraph 118(1)(c) of the Act, and

    • (b) the aggregate of the credits which the employee would be entitled to claim for the year under

      • (i) subsections 118(1), (2) and (3) of the Act if the description of A in those subsections were read as “is equal to one”,

      • (ii) subsections 118.3(1) and (2) of the Act if the description of A in subsection 118.3(1) of the Act were read as “is equal to one” and if subsection 118.3(1) of the Act were read without reference to paragraph (c) thereof,

      • (iii) subsections 118.5(1) and 118.6(2) of the Act if subsection 118.5(1) of the Act were read without reference to “the product obtained when the appropriate percentage for the year is multiplied by” and the description of A in subsection 118.6(2) of the Act were read as “is equal to one”, and after deducting from the aggregate of the amounts determined under those subsections the excess over $3,000 of the aggregate of amounts that the employee claims to expect to receive in the year on account of a scholarship, fellowship or bursary,

      • (iv) section 118.8 of the Act if the formula A + B - C in that section were read as

        (A + B) / C

        where

        A
        is the value of A in that section,
        B
        is the value of B in that section, and
        C
        is the appropriate percentage for the year.
      • (v) section 118.9 of the Act if the formula A - B in section 118.81 of the Act were read as

        A / B

        where

        A
        is the value of A set out in that section, and
        B
        is the appropriate percentage for the year. (crédits d’impôts personnels)
    remuneration

    remuneration includes any payment that is

    • (a) in respect of

      • (i) salary or wages, or

      • (ii) commissions or other similar amounts fixed by reference to the volume of the sales made or the contracts negotiated (referred to as commissions in this Part)

    paid to an officer or employee or former officer or employee,

    • (a.1) in respect of an employee’s gratuities required under provincial legislation to be declared to the employee’s employer,

    • (b) a superannuation or pension benefit (including an annuity payment made pursuant to or under a superannuation or pension fund or plan),

    • (b.1) an amount of a distribution out of or under a retirement compensation arrangement,

    • (c) a retiring allowance,

    • (d) a death benefit,

    • (e) a benefit under a supplementary unemployment benefit plan,

    • (f) a payment under a deferred profit sharing plan or a plan referred to in section 147 of the Act as a revoked plan, reduced, if applicable, by amounts determined under subsections 147(10.1), (11) and (12) of the Act,

    • (g) a benefit under the Employment Insurance Act,

    • (h) an amount that is required by paragraph 56(1)(r) of the Act to be included in computing a taxpayer’s income, except the portion of the amount that relates to child care expenses and tuition costs,

    • (i) a payment made during the lifetime of an annuitant referred to in the definition annuitant in subsection 146(1) of the Act out of or under a registered retirement savings plan of that annuitant, other than

      • (i) a periodic annuity payment, or

      • (ii) a payment made by a person who has reasonable grounds to believe that the payment may be deducted under subsection 146(8.2) of the Act in computing the income of any taxpayer,

    • (j) a payment out of or under a plan referred to in subsection 146(12) of the Act as an amended plan other than

      • (i) a periodic annuity payment, or

      • (ii) where paragraph 146(12)(a) of the Act applied to the plan after May 25, 1976, a payment made in a year subsequent to the year in which that paragraph applied to the plan,

    • (j.1) a payment made during the lifetime of an annuitant referred to in the definition annuitant in subsection 146.3(1) of the Act under a registered retirement income fund of that annuitant, other than a particular payment to the extent that

      • (i) the particular payment is in respect of the minimum amount (in this paragraph having the meaning assigned by subsection 146.3(1) of the Act) under the fund for a year, or

      • (ii) where the fund governs a trust, the particular payment would be in respect of the minimum amount under the fund for a year if each amount that, at the beginning of the year, is scheduled to be paid after the time of the particular payment and in the year to the trust under an annuity contract that is held by the trust both at the beginning of the year and at the time of the particular payment, is paid to the trust in the year,

    • (k) a benefit described in section 5502,

    • (l) an amount as, on account or in lieu of payment of, or in satisfaction of, proceeds of the surrender, cancellation or redemption of an income-averaging annuity contract;

    • (m) in respect of an amount that can reasonably be regarded as having been received, in whole or in part, as consideration or partial consideration for entering into a contract of service, where the service is to be performed in Canada, or for an undertaking not to enter into such a contract with another party; or

    • (n) a payment out of a registered education savings plan other than

      • (i) a refund of payments,

      • (ii) an educational assistance payment, or

      • (iii) an amount, up to $50,000, of an accumulated income payment that is made to a subscriber, as defined in subsection 204.94(1) of the Act, or if there is no subscriber at that time, that is made to a person that has been a spouse or common-law partner of an individual who was a subscriber, if

        • (A) that amount is transferred to an RRSP in which the annuitant is either the recipient of the payment or the recipient’s spouse or common-law partner, and

        • (B) it is reasonable for the person making the payment to believe that that amount is deductible for the year by the recipient of the payment within the limits provided for in subsection 146(5) or (5.1) of the Act; (rémunération)

    total remuneration

    total remuneration means, in respect of a taxation year, the total of all amounts each of which is an amount referred to in paragraph (a) or (a.1) of the definition remuneration. (rémunération totale)

  • (2) Where the amount of any credit referred to in paragraph (a) or (b) of the definition personal credits in subsection (1) is subject to an annual adjustment under section 117.1 of the Act, such amount shall, in a particular taxation year, be subject to that annual adjustment.

  • (3) For the purposes of this Part, where an employer deducts or withholds from a payment of remuneration to an employee one or more amounts each of which is

    • (a) a contribution to or under a registered pension plan, or

    • (b) dues described in subparagraph 8(1)(i)(iv), (v) or (vi) of the Act paid on account of the employee,

    • (b.1) a contribution by the employee under subparagraph 8(1)(m.2) of the Act,

    • (c) a premium under a registered retirement savings plan, to the extent that the employer believes on reasonable grounds that the premium is deductible under paragraph 60(j.1) or subsection 146(5) or (5.1) of the Act in computing the employee’s income for the taxation year in which the payment of remuneration is made, or

    • (d) an amount that is deductible under paragraph 60(b) of the Act,

    the balance remaining after deducting or withholding this amount, as the case may be, shall be deemed to be the amount of that payment of remuneration.

  • (3.1) For the purposes of this Part, where an employee has claimed a deduction for a taxation year under paragraph 110.7(1)(b) of the Act as shown on the return most recently filed by the employee with the employee’s employer pursuant to subsection 227(2) of the Act, the amount of remuneration otherwise determined, including the amount deemed by subsection (3) to be the amount of that payment of remuneration, paid to the employee for a pay period shall be reduced by an amount equal to the amount of the deduction divided by the maximum number of pay periods in the year in respect of the appropriate pay period.

  • (3.2) [Repealed, SOR/2001-209, s. 1]

  • (4) For the purposes of this Part, where an employee is not required to report for work at any establishment of the employer, he shall be deemed to report for work

    • (a) in respect of remuneration that is salary, wages or commissions, at the establishment of the employer from which the remuneration is paid; or

    • (b) in respect of remuneration other than salary, wages or commissions, at the establishment of the employer in the province where the employee resides at the time the remuneration is paid but, if the employer does not have an establishment in that province at that time, he shall, for the purposes of this paragraph, be deemed to have an establishment in that province.

  • (5) For the purposes of this Part, where an employer deducts or withholds from a payment of remuneration to an employee an amount in respect of the acquisition by the employee of an approved share, as defined in subsection 127.4(1) of the Act, there shall be deducted from the amount determined under paragraph 102(1)(e) or (2)(e), as the case may be, in respect of that payment the lesser of

    • (a) $750, and

    • (b) 15% of the amount deducted or withheld in respect of the acquisition of an approved share.

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • SOR/78-2, s. 1
  • SOR/78-331, s. 1
  • SOR/80-382, s. 1
  • SOR/80-502, s. 1
  • SOR/80-683, s. 1
  • SOR/80-901, s. 1
  • SOR/80-941, s. 1
  • SOR/81-471, s. 1
  • SOR/83-349, s. 1
  • SOR/83-692, s. 1
  • SOR/86-629, s. 1
  • SOR/87-471, s. 1
  • SOR/87-638, s. 1
  • SOR/88-312, s. 1
  • SOR/89-147, s. 1
  • SOR/89-508, s. 1
  • SOR/92-51, ss. 1, 8
  • SOR/94-238, s. 1
  • SOR/95-298, s. 1
  • SOR/97-470, s. 1
  • SOR/98-259, s. 1
  • SOR/99-17, s. 1
  • SOR/99-22, s. 1
  • SOR/2000-63, s. 1
  • SOR/2001-188, s. 14
  • SOR/2001-209, s. 1
  • SOR/2001-216, s. 10(F)
  • SOR/2001-221, s. 1
  • SOR/2005-185, s. 1

Deductions and Remittances

 Every person who makes a payment described in subsection 153(1) of the Act in a taxation year shall deduct or withhold therefrom, and remit to the Receiver General, such amount, if any, as is determined in accordance with rules prescribed in this Part.

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • SOR/81-471, s. 2

Periodic Payments

  •  (1) Except as otherwise provided in this Part, the amount to be deducted or withheld by an employer

    • (a) from any payment of remuneration (in this subsection referred to as the payment) made to an employee in his taxation year where he reports for work at an establishment of the employer in a province, in Canada beyond the limits of any province or outside Canada, and

    • (b) for any pay period in which the payment is made by the employer

    shall be determined for each payment in accordance with the following rules:

    • (c) an amount that is a notional remuneration for the year in respect of

      • (i) a payment to the employee, and

      • (ii) the amount, if any, of gratuities referred to in paragraph (a.1) of the definition remuneration in subsection 100(1)

      is deemed to be the amount determined by the formula

      A × B

      where

      A
      is the amount that is deemed for the purpose of this paragraph to be the mid-point of the applicable range of remuneration for the pay period, as provided in Schedule I, in which falls the total of
      • (A) the payment referred to in subparagraph (i) made in the pay period, and

      • (B) the amount of gratuities referred to in subparagraph (ii) declared by the employee for the pay period, and

      B
      is the maximum number of such pay periods in that year;
    • (d) if the employee is not resident in Canada at the time of the payment, no personal credits will be allowed for the purposes of this subsection and, if the employee is resident in Canada at the time of the payment, the employee’s personal credits for the year are deemed to be the mid-point of the range of amounts of personal credits for a taxation year as provided for in section 2 of Schedule I;

    • (e) an amount (in this subsection referred to as the notional tax for the year) shall be computed in respect of that employee by

      • (i) calculating the amount of tax payable for the year, as if that amount were calculated under subsection 117(2) of the Act and adjusted annually pursuant to section 117.1 of the Act, on the amount determined in accordance with paragraph (c) as if that amount represented the employee’s amount taxable for that year,

      and deducting the aggregate of

      • (ii) the amount determined in accordance with paragraph (d) multiplied by the appropriate percentage for the year,

      • (iii) an amount equal to

        • (A) the amount determined in accordance with paragraph (c) multiplied by the employee’s premium rate for the year under the Employment Insurance Act, not exceeding the maximum amount of the premiums payable by the employee for the year under that Act,

        multiplied by

        • (B) the appropriate percentage for the year, and

      • (iv) an amount equal to

        • (A) the product obtained when the difference between the amount determined in accordance with paragraph (c) and the amount determined under section 20 of the Canada Pension Plan for the year is multiplied by the employee’s contribution rate for the year under the Canada Pension Plan or under a provincial pension plan as defined in subsection 3(1) of that Act, not exceeding the maximum amount of such contributions payable by the employee for the year under the plan,

        multiplied by

        • (B) the appropriate percentage for the year;

    • (f) the amount determined in accordance with paragraph (e) shall be increased by, where applicable, the tax as determined under subsection 120(1) of the Act;

    • (g) where the amount of notional remuneration for the year is income earned in the Province of Quebec, the amount determined in accordance with paragraph (e) shall be reduced by an amount that is the aggregate of

      • (i) the amount that is deemed to be paid under subsection 120(2) of the Act as if there were no other source of income or loss for the year, and

      • (ii) the amount by which the amount referred to in subparagraph (i) is increased by virtue of section 27 of the Federal-Provincial Fiscal Arrangements and Federal Post-Secondary Education and Health Contributions Act; and

    • (h) [Repealed, SOR/92-667, s. 1]

    • (i) the amount to be deducted or withheld shall be computed by

      • (i) dividing the amount of the notional tax for the year by the maximum number of pay periods for the year in respect of the appropriate pay period, and

      • (ii) rounding the amount determined under subparagraph (i) to the nearest multiple of five cents or, if such amount is equidistant from two such multiples, to the higher multiple.

  • (2) Where an employee has elected pursuant to subsection 107(2) and has not revoked such election, the amount to be deducted or withheld by the employer from any payment of remuneration (in this subsection referred to as the payment) that is

    • (a) a payment in respect of commissions or is a combined payment of commissions and salary or wages, or

    • (b) a payment in respect of salary or wages where that employee receives a combined payment of commissions and salary or wages,

    made to that employee in his taxation year where he reports for work at an establishment of the employer in a province, in Canada beyond the limits of any province or outside Canada, shall be determined for each payment in accordance with the following rules:

    • (c) an employee’s estimated annual taxable income shall be determined by using the formula

      A - B

      where

      A
      is the amount of that employee’s total remuneration in respect of the year as recorded by the employee on the form referred to in subsection 107(2), and
      B
      is the amount of that employee’s expenses in respect of the year as recorded by that employee on that form;
    • (d) if the employee is not resident in Canada at the time of the payment, no personal credits will be allowed for the purposes of this subsection and if the employee is resident in Canada at the time of the payment, the employee’s personal credits for the year shall be the total claim amount as recorded by that employee on the return for the year referred to in subsection 107(1);

    • (e) an amount (in this subsection referred to as the notional tax for the year) shall be calculated in respect of that employee by using the formula

      C - [(D + E + F) × G] + H - I

      where

      C
      is the amount of tax payable for the year, calculated as if that amount of tax were computed under subsection 117(2) of the Act and adjusted annually pursuant to section 117.1 of the Act, on the amount determined under paragraph (c) as if that amount represented the employee’s amount taxable for that year,
      D
      is the amount determined in accordance with paragraph (d),
      E
      is the amount determined in the description of A in paragraph (c) multiplied by the employee’s premium rate for the year under the Employment Insurance Act, not exceeding the maximum amount of the premiums payable by the employee for the year under that Act,
      F
      is the amount determined in the description of A in paragraph (c) less the amount for the year determined under section 20 of the Canada Pension Plan multiplied by the employee’s contribution rate for the year under that Act or under a provincial pension plan as defined in section 3 of that Act, not exceeding the maximum amount of such contributions payable by the employee for the year under the plan,
      G
      is the appropriate percentage for the year,
      H
      is, where applicable, the tax as determined under subsection 120(1) of the Act,
      I
      is, where the amount of total remuneration for the year is income earned in the Province of Quebec, an amount equal to the aggregate of
      • (i) the amount that would be deemed to have been paid under subsection 120(2) of the Act with respect to the employee if the notional tax for the year for the employee were determined without reference to the elements H, I and J in this formula and if that tax were that employee’s tax payable under Part I of the Act for that year, as if there were no other source of income or loss for the year, and

      • (ii) the amount by which the amount referred to in subparagraph (i) is increased by virtue of section 27 of the Federal-Provincial Fiscal Arrangements Act;

    • (f) the employee’s notional rate of tax for a year is calculated by dividing the amount determined under paragraph (e) by the amount referred to in the description of A in paragraph (c) in respect of that employee and expressed as a decimal fraction rounded to the nearest hundredth, or where the third digit is equidistant from two consecutive one-thousandths, to the higher thereof;

    • (g) the amount to be deducted or withheld in respect of any payment made to that employee shall be determined by multiplying the payment by the appropriate decimal fraction determined pursuant to paragraph (f).

    • (h) [Repealed, SOR/2001-221, s. 2]

  • (3) [Repealed, SOR/89-508, s. 2]

  • (4) [Repealed, SOR/81-471, s. 3]

  • (5) Notwithstanding subsections (1) and (2), no amount shall be deducted or withheld in the year by an employer from a payment of remuneration to an employee in respect of commissions earned by the employee in the immediately preceding year where those commissions were previously reported by the employer as remuneration of the employee in respect of that year on an information return.

Canadian Forces and Police — exception
  • (6) Despite subsection (1), no amount shall be deducted or withheld in the year by an employer from an amount determined in accordance with subparagraph 110(1)(f)(v) of the Act.

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • SOR/78-331, s. 2
  • SOR/78-449, s. 1
  • SOR/78-625, s. 1
  • SOR/79-359, s. 1
  • SOR/79-694, s. 1
  • SOR/80-187, s. 1
  • SOR/80-683, s. 2
  • SOR/80-941, s. 2
  • SOR/81-471, s. 3
  • SOR/83-349, s. 2
  • SOR/83-692, ss. 2 to 4
  • SOR/84-913, s. 1
  • SOR/84-966, s. 1
  • SOR/85-453, ss. 1, 2
  • SOR/86-629, s. 2
  • SOR/87-471, s. 2
  • SOR/88-310, s. 1
  • SOR/89-508, s. 2
  • SOR/90-161, s. 1
  • SOR/91-150, s. 1
  • SOR/91-279, s. 1
  • SOR/91-536, s. 1
  • SOR/92-138, s. 1
  • SOR/92-667, s. 1
  • SOR/94-238, s. 2
  • SOR/94-569, s. 1
  • SOR/98-259, s. 2
  • SOR/99-17, s. 2
  • SOR/2001-221, s. 2
  • SOR/2005-185, s. 2

Non-Periodic Payments

  •  (1) Where a payment in respect of a bonus or retroactive increase in remuneration is made by an employer to an employee whose total remuneration from the employer (including the bonus or retroactive increase) may reasonably be expected not to exceed $5,000 in the taxation year of the employee in which the payment is made, the employer shall deduct or withhold, in the case of an employee who reports for work at an establishment of the employer

    • (a) in any province, 10 per cent, or

    • (b) in Canada beyond the limits of any province or outside Canada, 15 per cent,

    • (c) to (n) [Repealed, SOR/2001-221, s. 3]

    of such payment in lieu of the amount determined under section 102.

  • (2) Where a payment in respect of a bonus is made by an employer to an employee whose total remuneration from the employer (including the bonus) may reasonably be expected to exceed $5,000 in the taxation year of the employee in which the payment is made, the amount to be deducted or withheld therefrom by the employer is

    • (a) the amount determined under section 102 in respect of an assumed remuneration equal to the aggregate of

      • (i) the amount of regular remuneration paid by the employer to the employee in the pay period in which the remuneration is paid, and

      • (ii) an amount equal to the bonus payment divided by the number of pay periods in the taxation year of the employee in which the payment is made

    minus

    • (b) the amount determined under section 102 in respect of the amount of regular remuneration paid by the employer to the employee in the pay period

    multiplied by

    • (c) the number of pay periods in the taxation year of the employee in which the payment is made.

  • (3) Where a payment in respect of a retroactive increase in remuneration is made by an employer to an employee whose total remuneration from the employer (including the retroactive increase) may reasonably be expected to exceed $5,000 in the taxation year of the employee in which the payment is made, the amount to be deducted or withheld therefrom by the employer is

    • (a) the amount determined under section 102 in respect of the new rate of remuneration

    minus

    • (b) the amount determined under section 102 in respect of the previous rate of remuneration

    multiplied by

    • (c) the number of pay periods in respect of which the increase in remuneration is retroactive.

  • (4) Subject to subsection (5), where a lump sum payment is made by an employer to an employee who is a resident of Canada,

    • (a) if the payment does not exceed $5,000, the employer shall deduct or withhold therefrom, in the case of an employee who reports for work at an establishment of the employer

      • (i) in Quebec, 5 per cent,

      • (ii) in any other province, 7 per cent, or

      • (iii) in Canada beyond the limits of any province or outside Canada, 10 per cent,

      • (iv) to (xiv) [Repealed, SOR/2001-221, s. 3]

      of such payment in lieu of the amount determined under section 102;

    • (b) if the payment exceeds $5,000 but does not exceed $15,000, the employer shall deduct or withhold therefrom, in the case of an employee who reports for work at an establishment of the employer

      • (i) in Quebec, 10 per cent,

      • (ii) in any other province, 13 per cent, or

      • (iii) in Canada beyond the limits of any province or outside Canada, 20 per cent,

      • (iv) to (xiv) [Repealed, SOR/2001-221, s. 3]

      of such payment in lieu of the amount determined under section 102; and

    • (c) if the payment exceeds $15,000, the employer shall deduct or withhold therefrom, in the case of an employee who reports for work at an establishment of the employer

      • (i) in Quebec, 15 per cent,

      • (ii) in any other province, 20 per cent, or

      • (iii) in Canada beyond the limits of any province or outside Canada, 30 per cent,

      • (iv) to (xiv) [Repealed, SOR/2001-221, s. 3]

      of such payment in lieu of the amount determined under section 102.

  • (5) Where the payment referred to in subsection (4) would be pension income or qualified pension income of the employee in respect of which subsection 118(3) of the Act would apply if the definition pension income in subsection 118(7) of the Act were read without reference to subparagraphs (a)(ii) and (iii) thereof, the payment shall be deemed to be the amount of the payment minus

    • (a) where the payment does not exceed the amount taxable referred to in paragraph 117(2)(a) of the Act, as adjusted annually pursuant to section 117.1 of the Act, the lesser of $1,000 and the amount of the payment;

    • (b) where the payment exceeds the amount referred to in paragraph (a) but does not exceed $61,509, $727;

    • (c) where the payment exceeds $61,509 but does not exceed $100,000, $615; and

    • (d) where the payment exceeds $100,000, $552.

  • (6) For the purposes of subsection (4), a lump sum payment means a payment that is

    • (a) a payment described in subparagraph 40(1)(a)(i) or (iii) or paragraph 40(1)(c) of the Income Tax Application Rules,

    • (b) a payment under a deferred profit sharing plan or a plan referred to in section 147 of the Act as a revoked plan, except a payment referred to in subparagraph 147(2)(k)(v) of the Act,

    • (c) a payment made during the lifetime of an annuitant referred to in the definition annuitant in subsection 146(1) of the Act out of or under a registered retirement savings plan of that annuitant, other than

      • (i) a periodic annuity payment, or

      • (ii) a payment made by a person who has reasonable grounds to believe that the payment may be deducted under subsection 146(8.2) of the Act in computing the income of any taxpayer,

    • (d) a payment out of or under a plan referred to in subsection 146(12) of the Act as an amended plan other than

      • (i) a periodic annuity payment, or

      • (ii) where paragraph 146(12)(a) of the Act applied to the plan after May 25, 1976, a payment made in a year subsequent to the year in which that paragraph applied to the plan,

    • (d.1) a payment made during the lifetime of an annuitant referred to in the definition annuitant in subsection 146.3(1) of the Act under a registered retirement income fund of that annuitant, other than a payment to the extent that it is in respect of the minimum amount (within the meaning assigned by subsection 146.3(1) of the Act) under the fund for a year,

    • (e) a retiring allowance,

    • (f) a payment of an amount as, on account or in lieu of payment of, or in satisfaction of, proceeds of the surrender, cancellation or redemption of an income-averaging annuity contract, or

    • (g) a payment described in paragraph (n) of the definition remuneration in subsection 100(1).

  • (7) For the purposes of subsection 153(1) of the Act, the amount to be deducted or withheld by a person shall be 50 per cent

    • (a) of the contribution made by the person under a retirement compensation arrangement, other than

      • (i) a contribution made by the person as an employee,

      • (ii) a contribution made to a plan or arrangement that is a prescribed plan or arrangement for the purposes of subsection 207.6(6) of the Act, or

      • (iii) a contribution made by way of a transfer from another retirement compensation arrangement under circumstances in which subsection 207.6(7) of the Act applies; or

    • (b) of the payment by the person to a resident of Canada of an amount on account of the purchase price of an interest in a retirement compensation arrangement.

  • (8) Every employer making a payment described in paragraph (n) of the definition remuneration in subsection 100(1) shall withhold — in addition to any other amount required to be withheld under Part I of these Regulations — on account of the tax payable under Part X.5 of the Act, an amount equal to

    • (a) where the amount is paid in the province of Quebec, 12 per cent of the payment, and

    • (b) in any other case, 20 per cent of the payment.

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • SOR/78-2, s. 2
  • SOR/78-331, s. 3
  • SOR/78-449, s. 2
  • SOR/78-625, s. 2
  • SOR/79-359, s. 2
  • SOR/79-694, s. 2
  • SOR/80-382, s. 2
  • SOR/80-502, s. 2
  • SOR/80-683, s. 3
  • SOR/80-901, s. 2
  • SOR/80-941, s. 3
  • SOR/81-471, s. 4
  • SOR/83-349, s. 3
  • SOR/83-360, s. 1
  • SOR/83-692, s. 5
  • SOR/84-223, s. 1
  • SOR/84-913, s. 2
  • SOR/85-979, s. 1
  • SOR/86-629, s. 3
  • SOR/87-256, s. 1
  • SOR/87-471, s. 3
  • SOR/87-638, s. 2
  • SOR/88-153, s. 1
  • SOR/88-310, s. 2
  • SOR/89-147, s. 2
  • SOR/89-508, s. 3
  • SOR/90-161, s. 2
  • SOR/91-150, s. 2
  • SOR/91-279, s. 2
  • SOR/91-536, s. 2
  • SOR/92-51, s. 2
  • SOR/92-138, s. 2
  • SOR/92-667, s. 2
  • SOR/93-399, s. 1
  • SOR/94-238, s. 3
  • SOR/94-569, s. 2
  • SOR/94-686, s. 48
  • SOR/96-205, s. 1
  • SOR/96-464, s. 1
  • SOR/97-137, s. 1
  • SOR/97-531, s. 1
  • SOR/99-17, s. 3
  • SOR/99-18, s. 1
  • SOR/99-22, s. 2
  • SOR/2000-10, s. 1
  • SOR/2000-12, s. 1
  • SOR/2000-329, s. 1
  • SOR/2001-216, s. 10(F)
  • SOR/2001-221, s. 3

Deductions not Required

  •  (1) [Repealed, SOR/2001-221, s. 4]

  • (2) No amount shall be deducted or withheld from a payment in accordance with section 102 or 103 in respect of an employee who was neither employed nor resident in Canada at the time of payment except in respect of

    • (a) remuneration described in subparagraph 115(2)(e)(i) of the Act that is paid to a non-resident person who has in the year, or had in any previous year, ceased to be resident in Canada; or

    • (b) remuneration reasonably attributable to the duties of any office or employment performed or to be performed in Canada by the non-resident person.

  • (3) No amount shall be deducted or withheld from a payment made by a person during the lifetime of an annuitant referred to in paragraph (a) of the definition annuitant in subsection 146(1) of the Act out of or under a registered retirement savings plan of the annuitant where, at the time of the payment, the annuitant has certified in prescribed form to the person that

    • (a) a written agreement has been entered into to acquire a home by either

      • (i) the annuitant, or

      • (ii) a disabled person who is related to the annuitant and who is entitled to the credit for mental or physical impairment under subsection 118.3(1) of the Act;

    • (b) the annuitant intends that the home be used as a principal place of residence in Canada for the annuitant or the disabled person, as the case may be, within one year after its acquisition;

    • (c) the home has not been previously owned by the annuitant, the annuitant’s spouse or common-law partner, the disabled person or the spouse or common-law partner of that person;

    • (d) the annuitant was resident in Canada;

    • (e) the total amount of the payment and all other such payments received by the annuitant in respect of the home at or before the time of payment does not exceed $20,000;

    • (f) except where the annuitant certifies that he or she is a disabled person entitled to the credit for mental or physical impairment under subsection 118.3(1) of the Act or certifies that the payment is being withdrawn for the benefit of such a disabled person, the annuitant is a qualifying homebuyer at the time of the certification; and

    • (g) where the annuitant has withdrawn an eligible amount, within the meaning assigned by subsection 146.01(1) of the Act, before the calendar year of the certification, the total of all eligible amounts received by the annuitant before that calendar year does not exceed the total of all amounts previously designated under subsection 146.01(3) of the Act or included in computing the annuitant’s income under subsection 146.01(4) or (5) of the Act.

  • (3.01) For the purpose of subsection (3), the annuitant is a qualifying homebuyer at a particular time unless

    • (a) the annuitant had an owner-occupied home in the period beginning on January 1 of the fourth calendar year preceding the particular time, and ending on the thirty-first day before the particular time; or

    • (b) the annuitant’s spouse or common-law partner, in the period referred to in paragraph (a), had an owner-occupied home that was inhabited by the annuitant at any time during the annuitant’s marriage to the spouse or the annuitant’s common-law partnership with the common-law partner.

  • (3.1) For the purpose of subsection (3.01), an individual shall be considered to have had an owner-occupied home at any time where the home was owned, whether jointly with another person or otherwise, by the individual at that time and inhabited by the individual as the individual’s principal place of residence at that time.

  • (4) For the purposes of subsections (3), (3.01) and (3.1), home means

    • (a) a housing unit;

    • (b) a share of the capital stock of a cooperative housing corporation, where the holder of the share is entitled to possession of a housing unit; and

    • (c) where the context so requires, the housing unit to which a share described in paragraph (b) relates.

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • SOR/78-449, s. 3
  • SOR/78-754, s. 1
  • SOR/89-508, s. 4
  • SOR/92-176, s. 1
  • SOR/92-667, s. 3
  • SOR/93-81, s. 1
  • SOR/94-238, s. 4
  • SOR/94-246, s. 1
  • SOR/94-686, ss. 49(F), 79(F)
  • SOR/97-470, s. 2
  • SOR/99-19, s. 1
  • SOR/2001-188, ss. 1, 14
  • SOR/2001-221, s. 4

Lifelong Learning Plan

  •  (1) No amount shall be deducted or withheld from a payment made by a person during the lifetime of an annuitant referred to in paragraph (a) of the definition annuitant in subsection 146(1) of the Act out of or under a registered retirement savings plan of the annuitant where, at the time of the payment, the annuitant has certified in prescribed form to the person that

    • (a) at the time of certification, the annuitant or the annuitant’s spouse or common-law partner

      • (i) is a full-time student in a qualifying educational program,

      • (ii) is a part-time student in a qualifying educational program and is entitled to the credit for mental or physical impairment under subsection 118.3(1) of the Act, or

      • (iii) has received notification in writing of his or her entitlement, either absolutely or conditionally, to enrol before March of the year that follows the year of certification as

        • (A) a full-time student in a qualifying educational program, or

        • (B) a part-time student in a qualifying educational program where the annuitant or the annuitant’s spouse or common-law partner is entitled to the credit for mental or physical impairment under subsection 118.3(1) of the Act;

    • (b) the annuitant is resident in Canada;

    • (c) the total amount of the payment and all other such payments received by the annuitant for a year at or before that time does not exceed $10,000; and

    • (d) the total payments received by the annuitant do not exceed $20,000 throughout the period in which the annuitant participates in the Lifelong Learning Plan.

  • (2) For the purpose of subsection (1), a qualifying educational program means a qualifying educational program at a designated educational institution (as those expressions are defined in subsection 118.6(1) of the Act), except that a reference to a qualifying educational program shall be read

    • (a) without reference to paragraphs (a) and (b) of that definition; and

    • (b) as if the reference to “3 consecutive weeks” in that definition were a reference to “3 consecutive months”.

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • SOR/99-19, s. 2
  • SOR/2001-188, s. 14

Non-Residents

  •  (1) Every person paying to a non-resident person a fee, commission or other amount in respect of services rendered in Canada, of any nature whatever, shall deduct or withhold 15 per cent of such payment.

  • (2) Subsection (1) does not apply to a payment described in the definition remuneration in subsection 100(1).

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • SOR/94-686, s. 49(F)

Fishermen’s Election

  •  (1) Notwithstanding section 100, in this section,

    amount of remuneration

    amount of remuneration paid to a fisherman means

    • (a) where a boat crewed by one or more fishermen engaged in making a catch is owned, together with the gear, by a person, other than a member of the crew, to whom the catch is to be delivered for subsequent sale or other disposition, such portion of the proceeds from the disposition of the catch that is payable to the fisherman in accordance with an arrangement under which the proceeds of disposition of the catch are to be distributed (in this section referred to as a “share arrangement”),

    • (b) where the boat or gear used in making a catch is owned or leased by a fisherman who alone or with another individual engaged under a contract of service makes the catch, such portion of the proceeds from the disposition of the catch that remains after deducting therefrom

      • (i) the amount in respect of any portion of the catch not caught by the fisherman or the other individual,

      • (ii) the amount payable to the other individual under the contract of service, and

      • (iii) the amount of such proportionate share of the catch as is attributable to the expenses of the operation of the boat or its gear pursuant to their share arrangement,

    • (c) where a crew includes the owner of the boat or gear (in this paragraph referred to as the owner) and any other fisherman engaged in making a catch, such portion of the proceeds from the disposition of the catch that remains after deducting therefrom

      • (i) in the case of an owner,

        • (A) the amount in respect of that portion of the catch not caught by the crew or an owner,

        • (B) the aggregate of all amounts each of which is an amount payable to a crew member (other than the owner) pursuant to their share arrangement or to an individual engaged under a contract of service, and

        • (C) the amount of such proportionate share of the catch as is attributable to the expenses of the owner’s operation of the boat or its gear pursuant to their share arrangement, or

      • (ii) in the case of any other crew member, such proceeds from the disposition of the catch as is payable to him in accordance with their share arrangement, or

    • (d) in any other case, the proceeds of disposition of the catch payable to the fisherman; (montant de rémunération)

    catch

    catch means a catch of shell fish, crustaceans, aquatic animals or marine plants caught or taken from any body of water; (pêche)

    crew

    crew means one or more fishermen engaged in making a catch; (équipe)

    fisherman

    fisherman means an individual engaged in making a catch other than under a contract of service. (pêcheur)

  • (2) Every person paying at any time in a taxation year an amount of remuneration to a fisherman who, pursuant to paragraph 153(1)(n) of the Act, has elected for the year in prescribed form in respect of all such amounts shall deduct or withhold 20% of each such amount paid to the fisherman while the election is in force.

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • SOR/83-692, s. 6
  • SOR/88-165, s. 31(F)

Variations in Deductions

  •  (1) Where an employer makes a payment of remuneration to an employee in his taxation year

    • (a) for a period for which no provision is made in Schedule I, or

    • (b) for a pay period referred to in Schedule I in an amount that is greater than any amount provided for therein,

    • (c) and (d) [Repealed, SOR/2001-221, s. 5]

    the amount to be deducted or withheld by the employer from any such payment is that proportion of the payment that the tax that may reasonably be expected to be payable under the Act by the employee with respect to the aggregate of all remuneration that may reasonably be expected to be paid by the employer to the employee in respect of that taxation year is of such aggregate.

  • (2) and (3) [Repealed, SOR/84-913, s. 3]

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • SOR/80-941, s. 4
  • SOR/81-471, s. 5
  • SOR/83-349, s. 4
  • SOR/83-692, s. 7
  • SOR/84-913, s. 3
  • SOR/85-453, s. 3
  • SOR/89-508, s. 5
  • SOR/2001-221, s. 5

Employee’s Returns

  •  (1) The return required to be filed by an employee under subsection 227(2) of the Act shall be filed by the employee with the employer when the employee commences employment with that employer and a new return shall be filed thereunder within 7 days after the date on which a change occurs that may reasonably be expected to result in a change in the employee’s personal credits for the year.

  • (2) Notwithstanding subsection (1), where, in a year, an employee receives payments in respect of commissions or in respect of commissions and salary or wages, and the employee elects to file a prescribed form for the year in addition to the return referred to in that subsection, that form shall be filed with the employee’s continuing employer on or before January 31 of that year and, where applicable, within one month after the employee commences employment with a new employer or within one month after the date on which a change occurs that may reasonably be expected to result in a substantial change in the employee’s estimated total remuneration for the year or estimated deductions for the year.

  • (3) Where, in a taxation year, an employee has elected to file the prescribed form referred to in subsection (2) and has filed such form with his employer, the employee may at any time thereafter in the year revoke that election and such revocation is effective from the date that he notifies his employer in writing of his intention.

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • SOR/80-941, s. 5
  • SOR/81-471, s. 6
  • SOR/89-508, s. 6
  • SOR/2001-221, s. 6

Remittances to Receiver General

  •  (1) Subject to subsections (1.1), (1.11) and (1.12), amounts deducted or withheld in a month under subsection 153(1) of the Act shall be remitted to the Receiver General on or before the 15th day of the following month.

  • (1.1) Subject to subsection (1.11), where the average monthly withholding amount of an employer for the second calendar year preceding a particular calendar year is

    • (a) equal to or greater than $15,000 and less than $50,000, all amounts deducted or withheld from payments described in the definition remuneration in subsection 100(1) that are made in a month in the particular calendar year by the employer shall be remitted to the Receiver General

      • (i) in respect of payments made before the 16th day of the month, on or before the 25th day of the month, and

      • (ii) in respect of payments made after the 15th day of the month, on or before the 10th day of the following month; or

    • (b) equal to or greater than $50,000, all amounts deducted or withheld from payments described in the definition remuneration in subsection 100(1) that are made in a month in the particular calendar year by the employer shall be remitted to the Receiver General on or before the third day, not including a Saturday or holiday, after the end of the following periods in which the payments were made,

      • (i) the period beginning on the first day and ending on the 7th day of the month,

      • (ii) the period beginning on the 8th day and ending on the 14th day of the month,

      • (iii) the period beginning on the 15th day and ending on the 21st day of the month, and

      • (iv) the period beginning on the 22nd day and ending on the last day of the month.

  • (1.11) Where an employer referred to in paragraph (1.1)(a) or (b) would otherwise be required to remit in accordance with that paragraph the amounts withheld or deducted under subsection 153(1) of the Act in respect of a particular calendar year, the employer may elect to remit those amounts

    • (a) in accordance with subsection (1), if the average monthly withholding amount of the employer for the calendar year preceding the particular calendar year is less than $15,000 and the employer has advised the Minister that the employer has so elected; or

    • (b) if the average monthly withholding amount of the employer for the calendar year preceding the particular calendar year is equal to or greater than $15,000 and less than $50,000 and the employer has advised the Minister that the employer has so elected,

      • (i) in respect of payments made before the 16th day of a month in the particular calendar year, on or before the 25th day of the month, and

      • (ii) in respect of payments made after the 15th day of a month in particular calendar year, on or before the 10th day of the following month.

  • (1.12) If at any time

    • (a) the average monthly withholding amount in respect of an employer for either the first or the second calendar year before the particular calendar year that includes that time is less than $1,000,

    • (b) throughout the 12-month period before that time, the employer has remitted, on or before the day on or before which the amounts were required to be remitted, all amounts each of which was required to be

      • (i) deducted or withheld under subsection 153(1) of the Act, or

      • (ii) remitted under Part IX of the Excise Tax Act, and

    • (c) throughout the 12-month period before that time, the employer has filed all returns each of which was required to be filed under this Act or Part IX of the Excise Tax Act on or before the day on or before which those returns were required to be filed under those Acts,

    all amounts deducted or withheld from payments described in the definition remuneration in subsection 100(1) that are made by the employer in a month that ends after that time and that is in the particular calendar year may be remitted to the Receiver General

    • (d) in respect of such payments made in January, February and March of the particular calendar year, on or before the 15th day of April of the particular year,

    • (e) in respect of such payments made in April, May and June of the particular calendar year, on or before the 15th day of July of the particular year,

    • (f) in respect of such payments made in July, August and September of the particular calendar year, on or before the 15th day of October of the particular year, and

    • (g) in respect of such payments made in October, November and December of the particular calendar year, on or before the 15th day of January of the year following the particular year.

  • (1.2) For the purposes of this section, average monthly withholding amount, in respect of an employer for a particular calendar year, is the quotient obtained when

    • (a) the aggregate of all amounts each of which is an amount required to be remitted with respect to the particular year under

      • (i) subsection 153(1) of the Act and a similar provision of a law of a province which imposes a tax upon the income of individuals, where the province has entered into an agreement with the Minister of Finance for the collection of taxes payable to the province, in respect of payments described in the definition remuneration in subsection 100(1),

      • (ii) subsection 21(1) of the Canada Pension Plan, or

      • (iii) subsection 82(1) of the Employment Insurance Act or subsection 53(1) of the Unemployment Insurance Act,

      by the employer or, where the employer is a corporation, by each corporation associated with the corporation in a taxation year of the employer ending in the second calendar year following the particular year

    is divided by

    • (b) the number of months in the particular year, not exceeding twelve, for which such amounts were required to be remitted by the employer and, where the employer is a corporation, by each corporation associated with it in a taxation year of the employer ending in the second calendar year following the particular year.

  • (1.3) For the purposes of subsection (1.2), where a particular employer that is a corporation has acquired in a taxation year of the corporation ending in a particular calendar year all or substantially all of the property of another employer used by the other employer in a business

    • (a) in a transaction in respect of which an election was made under subsection 85(1) or (2) of the Act,

    • (b) by virtue of an amalgamation within the meaning assigned to that term by section 87 of the Act, or

    • (c) as the result of a winding-up in respect of which subsection 88(1) of the Act is applicable,

    the other employer shall be deemed to be a corporation associated with the particular employer in the taxation year and each taxation year ending at any time in the next two following calendar years.

  • (2) Where an employer has ceased to carry on business, any amount deducted or withheld under subsection 153(1) of the Act that has not been remitted to the Receiver General shall be paid within 7 days of the day when the employer ceased to carry on business.

  • (3) Remittances made to the Receiver General under subsection 153(1) of the Act shall be accompanied by a return in prescribed form.

  • (4) Amounts deducted or withheld under subsection 153(4) of the Act shall be remitted to the Receiver General within 60 days after the end of the taxation year subsequent to the 12-month period referred to in that subsection.

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • SOR/87-718, s. 1
  • SOR/88-165, s. 31(F)
  • SOR/89-579, s. 1
  • SOR/91-536, s. 3
  • SOR/93-93, s. 1
  • SOR/94-686, s. 79(F)
  • SOR/97-472, s. 3
  • SOR/99-17, s. 4

Elections To Increase Deductions

  •  (1) Any election under subsection 153(1.2) of the Act shall be made by filing with the person making the payment or class of payments referred to therein (in this section referred to as the payer) the form prescribed by the Minister for that purpose.

  • (2) A taxpayer who has made an election in the manner prescribed by subsection (1) may require that the amount deducted or withheld pursuant to that election be varied by filing with the payer the form prescribed by the Minister for that purpose.

  • (3) An election made in the manner prescribed by subsection (1) or a variation made pursuant to subsection (2) need not be taken into account by the payer in respect of the first payment to be made to the taxpayer after the election or variation, as the case may be, unless the election or variation, as the case may be, is made within such time, in advance of the payment, as may reasonably be required by the payer.

Prescribed Persons

  •  (1) The following are prescribed persons for the purposes of subsection 153(1) of the Act:

    • (a) an employer who is required, under subsection 153(1) of the Act and in accordance with paragraph 108(1.1)(b), to remit amounts deducted or withheld; and

    • (b) a person or partnership who, acting on behalf of one or more employers, remits the following amounts in a particular calendar year and whose average monthly remittance, in respect of those amounts, for the second calendar year preceding the particular calendar year, is equal to or greater than $50,000,

      • (i) amounts required to be remitted under subsection 153(1) of the Act and a similar provision of a law of a province that imposes a tax on the income of individuals, where the province has entered into an agreement with the Minister of Finance for the collection of taxes payable to the province, in respect of payments described in the definition remuneration in subsection 100(1),

      • (ii) amounts required to be remitted under subsection 21(1) of the Canada Pension Plan, and

      • (iii) amounts required to be remitted under subsection 82(1) of the Employment Insurance Act or subsection 53(1) of the Unemployment Insurance Act.

  • (2) For the purposes of paragraph (1)(b), the average monthly remittance made by a person or partnership on behalf of all the employers for whom that person or partnership is acting, for the second calendar year preceding the particular calendar year, is the quotient obtained when the aggregate, for that preceding year, of all amounts referred to in subparagraphs (1)(b)(i) to (iii) remitted by the person or partnership on behalf of those employers is divided by the number of months, in that preceding year, for which the person or partnership remitted those amounts.

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • SOR/93-535, s. 1
  • SOR/99-17, s. 5

PART IIInformation Returns

Remuneration and Benefits

  •  (1) Every person who makes a payment described in subsection 153(1) of the Act (other than an annuity payment in respect of an interest in an annuity contract to which subsection 201(5) applies) shall make an information return in prescribed form in respect of the payment unless an information return in respect of the payment has been made under sections 202, 214, 237 or 238.

  • (2) Every person who makes a payment as or on account of, or who confers a benefit or allocates an amount that is,

    • (a) a scholarship, fellowship or bursary, or a prize for achievement in a field of endeavour ordinarily carried on by the recipient thereof (other than a prize prescribed by section 7700),

    • (b) a grant to enable the recipient thereof to carry on research or any similar work,

    • (c) an amount that is required by paragraph 56(1)(r) of the Act to be included in computing a taxpayer’s income,

    • (d) a benefit under regulations made under an appropriation Act providing for a scheme of transitional assistance benefits to persons employed in the production of products to which the Canada-United States Agreement on Automotive Products, signed on January 16, 1965, applies,

    • (e) a benefit described in section 5502,

    • (f) an amount payable to a taxpayer on a periodic basis in respect of the loss of all or any part of his income from an office or employment, pursuant to

      • (i) a sickness or accident insurance plan,

      • (ii) a disability insurance plan, or

      • (iii) an income maintenance insurance plan,

      to or under which his employer has made a contribution,

    • (g) an amount or benefit the value of which is required by paragraph 6(1)(a), (e) or (h) or subsection 6(9) of the Act to be included in computing a taxpayer’s income from an office or employment, other than a payment referred to in subsection (1),

    • (h) a benefit the amount of which is required by virtue of subsection 15(5) of the Act to be included in computing a shareholder’s income,

    • (i) a benefit deemed by subsection 15(9) of the Act to be a benefit conferred on a shareholder by a corporation, or

    • (j) a payment out of a registered education savings plan, other than a refund of payments,

    shall make an information return in prescribed form in respect of such payment or benefit except where subsection (3) or (4) applies with respect to the payment or benefit.

  • (3) Where a benefit is included in computing a taxpayer’s income from an office or employment pursuant to paragraph 6(1)(a) or (e) of the Act in respect of an automobile made available to the taxpayer or to a person related to the taxpayer by a person related to the taxpayer’s employer, the employer shall make an information return in prescribed form in respect of the benefit.

  • (4) Where a benefit is included in computing the income of a shareholder of a corporation by virtue of subsection 15(5) of the Act in respect of an automobile made available to the shareholder or to a person related to the shareholder by a person related to the corporation, the corporation shall make an information return in prescribed form in respect of the benefit.

  • (5) Where a particular qualifying person (within the meaning assigned by subsection 7(7) of the Act) has agreed to sell or issue a security (within the meaning assigned by that subsection) of the particular qualifying person (or of a qualifying person with which it does not deal at arm’s length) to a taxpayer who is an employee of the particular qualifying person (or of a qualifying person with which it does not deal at arm’s length) and the taxpayer has acquired the security under the agreement in circumstances to which subsection 7(8) of the Act applied, each of the particular qualifying person, the qualifying person of which the security is acquired and the qualifying person which is the taxpayer’s employer shall, for the particular taxation year in which the security is acquired, make an information return in the prescribed form in respect of the benefit from employment that the taxpayer would be deemed to have received in the particular taxation year in respect of the acquisition of the security if the Act were read without reference to subsection 7(8) and, for this purpose, an information return made by one of the qualifying persons in respect of the taxpayer’s acquisition of the security is deemed to have been made by each of the qualifying persons.

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • SOR/78-909, s. 1
  • SOR/79-939, s. 1
  • SOR/81-936, s. 1
  • SOR/83-866, s. 1
  • SOR/83-867, s. 1
  • SOR/88-165, s. 31(F)
  • SOR/89-473, s. 1
  • SOR/94-686, s. 79(F)
  • SOR/95-298, s. 2
  • SOR/99-17, s. 6
  • SOR/99-22, s. 3
  • SOR/2003-5, s. 1
  • SOR/2003-328, s. 1

Investment Income

  •  (1) Every person who makes a payment to a resident of Canada as or on account of

    • (a) a dividend or an amount deemed by the Act to be a dividend (other than a dividend deemed to have been paid to a person under any of subsections 84(1) to (4) of the Act where, pursuant to subsection 84(8) of the Act, those subsections do not apply to deem the dividend to have been received by the person),

    • (b) interest (other than the portion of the interest to which any of subsections (4) to (4.2) applies)

      • (i) on a fully registered bond or debenture,

      • (ii) in respect of

        • (A) money on loan to,

        • (B) money on deposit with, or

        • (C) property of any kind deposited or placed with,

        a corporation, association, organization or institution,

      • (iii) in respect of an account with an investment dealer or broker,

      • (iv) paid by an insurer in connection with an insurance policy or an annuity contract, or

      • (v) on an amount owing in respect of compensation for property expropriated,

    • (c) a royalty payment in respect of the use of a work or invention or a right to take natural resources,

    • (d) a payment referred to in subsection 16(1) of the Act that can reasonably be regarded as being in part a payment of interest or other payment of an income nature and in part a payment of a capital nature, where the payment is made by a corporation, association, organization or institution,

    • (e) an amount paid from a person’s NISA Fund No. 2, or

    • (f) an amount that is required by subsection 148.1(3) of the Act to be added in computing a person’s income for a taxation year

    shall make an information return in prescribed form in respect of the portion of such payment for which an information return has not previously been made under this section.

  • (2) Every person who receives as nominee or agent for a person resident in Canada a payment to which subsection (1) applies shall make an information return in prescribed form in respect of such payment.

  • (3) Where a person negotiates a bearer coupon, warrant or cheque representing interest or dividends referred to in subsection 234(1) of the Act for another person resident in Canada and the name of the beneficial owner of the interest or dividends is not disclosed on an ownership certificate completed pursuant to that subsection, the person negotiating the coupon, warrant or cheque, as the case may be, shall make an information return in prescribed form in respect of the payment received.

  • (4) A person or partnership that is indebted in a calendar year under a debt obligation in respect of which subsection 12(4) of the Act and paragraph (1)(b) apply with respect to a taxpayer shall make an information return in prescribed form in respect of the amount that would, if the year were a taxation year of the taxpayer, be included as interest in respect of the debt obligation in computing the taxpayer’s income for the year.

  • (4.1) A person or partnership that is indebted in a calendar year under an indexed debt obligation in respect of which paragraph (1)(b) applies shall, for each taxpayer who holds an interest in the debt obligation at any time in the year, make an information return in prescribed form in respect of the amount that would, if the year were a taxation year of the taxpayer, be included as interest in respect of the debt obligation in computing the taxpayer’s income for the year.

  • (4.2) Where, at any time in a calendar year, a person or partnership holds, as nominee or agent for a taxpayer resident in Canada, an interest in a debt obligation referred to in paragraph (1)(b) that is

    • (a) an obligation in respect of which subsection 12(4) of the Act applies with respect to the taxpayer, or

    • (b) an indexed debt obligation,

    that person or partnership shall make an information return in prescribed form in respect of the amount that would, if the year were a taxation year of the taxpayer, be included as interest in respect of the debt obligation in computing the taxpayer’s income for the year.

  • (5) Every insurer (within the meaning assigned by paragraph 148(10)(a) of the Act) who is a party to a life insurance policy (within the meaning assigned by paragraph 138(12)(f) of the Act) in respect of which an amount is to be included in computing a taxpayer’s income pursuant to subsection 12.2(1), (3) or (5) or paragraph 56(1)(d.1) of the Act shall make an information return in prescribed form in respect of that amount.

  • (6) Every person who makes a payment to, or acts as a nominee or agent for, an individual resident in Canada in respect of the disposition or redemption of a debt obligation in bearer form shall make an information return in prescribed form in respect of the transaction indicating the proceeds of disposition or the redemption amount and such other information as may be required by the prescribed form.

  • (7) For the purposes of subsection (6), debt obligation in bearer form means any debt obligation in bearer form other than

    • (a) a debt obligation that is redeemed for the amount for which the debt obligation was issued;

    • (b) a debt obligation described in paragraph 7000(1)(b); and

    • (c) a coupon, warrant or cheque referred to in subsection 207(1).

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • SOR/79-939, s. 2
  • SOR/83-866, s. 2
  • SOR/83-867, s. 2
  • SOR/86-426, s. 1
  • SOR/86-1092, s. 1(F)
  • SOR/88-165, s. 31(F)
  • SOR/88-554, s. 1
  • SOR/91-123, s. 1
  • SOR/93-527, s. 1
  • SOR/94-686, ss. 1(F), 78(F), 79(F)
  • SOR/96-283, s. 1
  • SOR/96-435, s. 1

Payments to Non-Residents

  •  (1) Every person resident in Canada who pays or credits, or is deemed by Part I or Part XIII of the Act to pay or credit, to a non-resident person an amount as, on account or in lieu of payment of, or in satisfaction of,

    • (a) a management or administration fee or charge,

    • (b) interest,

    • (c) income of or from an estate or trust,

    • (d) rent, royalty or a similar payment referred to in paragraph 212(1)(d) of the Act, including any payment described in any of subparagraphs 212(1)(d)(i) to (viii) of the Act,

    • (e) a timber royalty as described in paragraph 212(1)(e) of the Act,

    • (f) [Repealed, SOR/2003-5, s. 2]

    • (g) a dividend, including a patronage dividend as described in paragraph 212(1) (g) of the Act, or

    • (h) a payment for a right in or to the use of

      • (i) a motion picture film, or

      • (ii) a film or video tape for use in connection with television,

    • (i) [Repealed, SOR/88-165, s. 1]

    shall, in addition to any other return required by the Act or these Regulations, make an information return in prescribed form in respect of such amount.

  • (1.1) Every person who pays or credits an amount, or provides a benefit to or on behalf of a person who is either a non-resident individual who is an actor or that is a corporation related to such an individual, for the provision in Canada of acting services of the actor in a film or video production, shall, in addition to any other return required by the Act or these Regulations, make an information return in prescribed form in respect of such payment, credit or benefit.

  • (2) Every person resident in Canada who pays or credits, or is deemed by Part I or Part XIII of the Act to pay or credit, to a non-resident person an amount as, on account or in lieu of payment of, or in satisfaction of,

    • (a) a payment of a superannuation or pension benefit,

    • (b) a payment of any allowance or benefit described in any of subparagraphs 56(1)(a)(ii) to (vi) of the Act,

    • (c) a payment by a trustee under a registered supplementary unemployment benefit plan,

    • (d) a payment out of or under a registered retirement savings plan or a plan referred to in subsection 146(12) of the Act as an amended plan,

    • (e) a payment under a deferred profit sharing plan or a plan referred to in subsection 147(15) of the Act as a revoked plan,

    • (f) a payment under an income-averaging annuity contract, any proceeds of the surrender, cancellation, redemption, sale or other disposition of an income-averaging annuity contract, or any amount deemed by subsection 61.1(1) of the Act to have been received by the non-resident person as proceeds of the disposition of an income-averaging annuity contract,

    • (g) an annuity payment not described in any other paragraph of this subsection or subsection (1),

    • (h) a payment or a portion thereof, to which paragraph 212(1)(p) of the Act applies, out of or under a fund, plan, or trust that was on December 31, 1985 a registered home ownership savings plan (within the meaning assigned by paragraph 146.2(1)(h) of the Act as it read in its application to the 1985 taxation year),

    • (i) a payment out of or under a registered retirement income fund,

    • (j) a payment that is or that would be, if paragraph 212(1)(r) of the Act were read without reference to subparagraph 212(1)(r)(ii), a payment described in that paragraph in respect of a registered education savings plan,

    • (k) a grant under a program prescribed for the purposes of paragraph 212(1)(s) of the Act,

    • (l) a payment described in paragraph 212(1)(j) of the Act in respect of a retirement compensation arrangement, or

    • (m) a payment described in paragraph 212(1)(v) of the Act,

    shall, in addition to any other return required by the Act or these Regulations, make an information return in prescribed form in respect of such amount.

  • (2.1) Every person resident in Canada who pays an amount to a non-resident person from a NISA Fund No. 2 shall, in addition to any other return required by the Act or these Regulations, make an information return in prescribed form in respect of the amount.

  • (3) Every person who is paid or credited with an amount referred to in subsection (1), (2) or (2.1) for or on behalf of a non-resident person shall make an information return in prescribed form in respect of the amount.

  • (4) A non-resident person who is deemed, under subsection 212(13) of the Act, to be a person resident in Canada for the purposes of section 212 of the Act shall be deemed, in the same circumstances, to be a person resident in Canada for the purposes of subsections (1) and (2).

  • (5) A partnership that is deemed, under paragraph 212(13.1)(a) of the Act, to be a person resident in Canada for the purposes of Part XIII of the Act shall be deemed, in the same circumstances, to be a person resident in Canada for the purposes of subsections (1) and (2).

  • (6) A non-resident person who is deemed, under subsection 212(13.2) of the Act, to be a person resident in Canada for the purposes of Part XIII of the Act shall be deemed, in the same circumstances, to be a person resident in Canada for the purposes of subsections (1) and (2).

  • (7) Subject to subsection (8), an information return required under this section shall be filed on or before March 31 and shall be in respect of the preceding calendar year.

  • (8) Where an amount referred to in subsection (1) or (2) is income of or from an estate or trust, the information return required under this section in respect thereof shall be filed within 90 days from the end of the taxation year of the estate or trust in which the amount was paid or credited and shall be in respect of that taxation year.

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • SOR/79-487, s. 1
  • SOR/80-382, ss. 3, 4
  • SOR/81-936, s. 2
  • SOR/83-866, s. 3
  • SOR/86-522, s. 1
  • SOR/88-165, ss. 1, 31(F)
  • SOR/88-395, s. 1
  • SOR/93-527, s. 2
  • SOR/94-686, ss. 50(F), 78(F)
  • SOR/99-22, s. 4
  • SOR/2000-13, s. 1
  • SOR/2001-216, s. 10(F)
  • SOR/2003-5, s. 2
  • SOR/2005-123, s. 1

 [Repealed, SOR/2003-5, s. 3]

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • SOR/2003-5, s. 3

Estates and Trusts

  •  (1) Every person having the control of, or receiving income, gains or profits in a fiduciary capacity, or in a capacity analogous to a fiduciary capacity, shall make a return in prescribed form in respect thereof.

  • (2) The return required under this section shall be filed within 90 days from the end of the taxation year and shall be in respect of the taxation year.

  • (3) Subsection (1) does not require a trust to make a return for a taxation year at the end of which it is

    • (a) governed by a deferred profit sharing plan or by a plan referred to in subsection 147(15) of the Act as a revoked plan;

    • (b) governed by an employees profit sharing plan;

    • (c) a registered charity;

    • (d) governed by an eligible funeral arrangement;

    • (d.1) a cemetery care trust; or

    • (e) governed by a registered education savings plan.

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • SOR/88-165, s. 31(F)
  • SOR/94-686, s. 51(F)
  • SOR/96-283, s. 2
  • SOR/99-22, s. 5
  • SOR/2000-13, s. 2
  • SOR/2001-216, s. 10(F)

Date Returns To Be Filed

  •  (1) All returns required under this Part shall be filed with the Minister without notice or demand and, unless otherwise specifically provided, on or before the last day of February in each year and shall be in respect of the preceding calendar year.

  • (2) Where a person who is required to make a return under this Part discontinues his business or activity, the return shall be filed within 30 days of the day of the discontinuance of the business or activity and shall be in respect of any calendar year or a portion thereof prior to the discontinuance of the business or activity for which a return has not previously been filed.

Electronic Filing

 A person who is required to make an information return under this Part, or who files an information return on behalf of a person who is required to make an information return under this Part, shall file the information return with the Minister in an electronic format if more than 500 such returns are to be filed for the calendar year.

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • SOR/99-20, s. 1

Legal Representatives and Others

  •  (1) Where a person, who is required to make a return under this Part, has died, such return shall be filed by his legal representative within 90 days of the date of death and shall be in respect of any calendar year or a portion thereof prior to the date of death for which a return has not previously been filed.

  • (2) Every trustee in bankruptcy, assignee, liquidator, curator, receiver, trustee or committee and every agent or other person administering, managing, winding-up, controlling or otherwise dealing with the property, business, estate or income of a person who has not filed a return as required by this Part shall file such return.

Ownership Certificates

  •  (1) An ownership certificate completed pursuant to section 234 of the Act shall be delivered to the debtor or encashing agent at the time the coupon, warrant or cheque referred to in that section is negotiated.

  • (2) The debtor or encashing agent to whom an ownership certificate has been delivered pursuant to subsection (1) shall forward it to the Minister on or before the 15th day of the month following the month the coupon, warrant or cheque, as the case may be, was negotiated.

  • (3) The operation of section 234 of the Act is extended to a bearer coupon or warrant negotiated by or on behalf of a non-resident person who is subject to tax under Part XIII of the Act in respect of such a coupon or warrant.

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • SOR/94-686, s. 50(F)

Dispositions of Income-Averaging Annuity Contracts

 Every person who carries on a business referred to in paragraph 61(4)(b) of the Act shall make an information return in prescribed form in respect of

  • (a) any amount paid by that person to a resident of Canada as, on account or in lieu of payment of, or in satisfaction of, proceeds of the surrender, cancellation, redemption, sale or other disposition of an income-averaging annuity contract; or

  • (b) any amount deemed by subsection 61.1(1) of the Act to have been received by an individual resident in Canada as proceeds of the disposition of an income-averaging annuity contract that was made with that person.

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • SOR/83-866, s. 4
  • SOR/88-165, s. 31(F)

Distribution of Taxpayers Portions of Returns

  •  (1) Every person who is required by section 200, 201, 202, 204, 208, 212, 214, 215, 217, 218, 223, 226, 227, 228, 229, 230, 232, 233 or 234 to make an information return shall forward to each taxpayer to whom the return relates two copies of the portion of the return that relates to that taxpayer.

  • (2) The copies referred to in subsection (1) shall be sent to the taxpayer at his last known address or delivered to him in person, on or before the date the return is required to be filed with the Minister.

  • (3) A person may send a document, as required under subsection (1), in an electronic format if the person has received the express consent of the taxpayer, and in that case, the person shall send a single copy to the taxpayer, on or before the date on which the return referred to in subsection (1) is to be filed with the Minister.

  • (4) In subsection (3), express consent means consent given in writing or in an electronic format.

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • SOR/85-160, s. 1
  • SOR/87-512, s. 1
  • SOR/89-519, s. 1
  • SOR/92-455, s. 1
  • SOR/93-527, s. 3
  • SOR/2003-5, s. 4

Tax Deduction Information

 Every person who makes or has at any time made a payment described in section 153 of the Act and every person who pays or credits or has at any time paid or credited, or is deemed by Part I or Part XIII of the Act to pay or credit or to have at any time paid or credited, an amount described in Part XIII of the Act shall, on demand by registered letter from the Minister make an information return in prescribed form containing the information required therein and shall file the return with the Minister within such reasonable time as may be stipulated in the registered letter.

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • SOR/88-165, s. 31(F)

Accrued Bond Interest

  •  (1) Every financial company making a payment in respect of accrued interest by virtue of redemption, assignment or other transfer of a bond, debenture or similar security (other than an income bond, an income debenture or an investment contract in respect of which subsection 201(4) applies) shall make an information return in prescribed form.

  • (2) The return referred to in subsection (1) shall be forwarded to the Minister on or before the 15th day of the month following the month in which the payment referred to in subsection (1) is made.

  • (3) For the purposes of this section, a financial company includes a bank, an investment dealer, a stockbroker, a trust company and an insurance company.

  • (4) The provisions of subsection (1) do not apply to a payment made by one financial company to another financial company.

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • SOR/88-165, s. 31(F)
  • SOR/91-123, s. 2
  • SOR/94-686, s. 52(F)

Employees Profit Sharing Plans

  •  (1) Every trustee of an employees profit sharing plan shall make an information return in prescribed form.

  • (2) Notwithstanding subsection (1), the return required under this section may be filed by the employer instead of by the trustee.

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • SOR/88-165, s. 31(F)

Electric, Gas or Steam Corporations

[[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] ]
  •  (1) Every corporation engaged in the distribution or generation of electrical energy, gas or steam shall make an information return in prescribed form in respect of each taxation year of the corporation.

  • (2) The return required under this section shall be filed within six months from the end of the taxation year in respect of which the return is made.

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • SOR/88-165, s. 31(F)
  • SOR/94-686, s. 79(F)

Registered Retirement Savings Plans

  •  (1) Every person who pays an amount that is required by subsection 146(8) of the Act to be included in computing the income of a taxpayer for a taxation year shall make an information return in prescribed form.

  • (2) Where, in a taxation year, subsection 146(6), (7), (9), or (10) of the Act is applicable in respect of a trust governed by a registered retirement savings plan, the trustee of such a plan shall make an information return in prescribed form.

  • (3) Where, in respect of an amended plan referred to in subsection 146(12) of the Act, an amount is required to be included in computing the income of a taxpayer for a taxation year, the issuer of the plan shall make an information return in prescribed form.

  • (4) Where subsection 146(8.8) of the Act deems an amount to be received by an annuitant as a benefit out of or under a registered retirement savings plan and such amount is required by subsection 146(8) of the Act to be included in computing the income of that annuitant for a taxation year, the issuer of the plan shall make an information return in prescribed form.

  • (5) If a payment or transfer of property to which paragraph 146(16)(b) of the Act applies is made from a plan, the issuer of the plan shall make an information return in prescribed form in respect of the payment or transfer.

  • (6) [Repealed, SOR/2003-5, s. 5]

  • (7) In this section, annuitant and issuer have the meanings assigned by subsection 146(1) of the Act.

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • SOR/80-502, s. 3
  • SOR/83-866, s. 5
  • SOR/88-165, s. 31(F)
  • SOR/92-51, s. 3
  • SOR/2001-188, s. 2
  • SOR/2003-5, s. 5
  • SOR/2005-264, s. 1
  •  (1) The issuer of a registered retirement savings plan shall make an information return in prescribed form in respect of the amounts that have been paid by the annuitant, or by the spouse or common-law partner of the annuitant, under the plan in a contribution year

    • (a) as consideration for any contract referred to in paragraph (a) of the definition retirement savings plan in subsection 146(1) of the Act to pay a retirement income; or

    • (b) as a contribution or deposit referred to in paragraph (b) of that definition for the purpose stated in that paragraph.

  • (2) For greater certainty and for the purposes of subsection (1), amounts that have been paid do not include amounts that have been paid or transferred under the plan in accordance with subsection 146(16) of the Act, or those that have been transferred under the plan in accordance with any of subsections 146(21), 146.3(14), 147(19) or 147.3(1), (4) or (5) to (7) of the Act.

  • (3) The return shall be filed with the Minister on or before the 1st day of May of the year in which the contribution year ends and shall be in respect of the contribution year.

  • (4) The following definitions apply in this section.

    contribution year

    contribution year means the period beginning on the 61st day of one year and ending on the 60th day of the following year. (année de contribution)

    issuer

    issuer has the same meaning as in subsection 146(1) of the Act, with any modifications that the circumstances require. (émetteur)

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • SOR/2005-123, s. 2

Registered Retirement Income Funds

  •  (1) In this section, annuitant and carrier have the meanings assigned by subsection 146.3(1) of the Act.

  • (2) Every carrier of a registered retirement income fund who pays out of or under it an amount any portion of which is required under subsection 146.3(5) of the Act to be included in computing the income of a taxpayer shall make an information return in prescribed form in respect of the amount.

  • (3) Where subsection 146.3(4), (7), (8) or (10) of the Act applies in respect of any transaction or event with respect to property of a registered retirement income fund, the carrier of the fund shall make an information return in prescribed form in respect of the transaction or event.

  • (4) Where an amount is deemed under subsection 146.3(6) or (12) of the Act to be received by an annuitant out of or under a registered retirement income fund, the carrier of the fund shall make an information return in prescribed form in respect of the amount.

  • (5) If a transfer of an amount to which subsection 146.3(14) of the Act applies is made from a fund, the carrier of the fund shall make an information return in prescribed form in respect of the transfer.

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • SOR/84-948, s. 1
  • SOR/84-967, s. 1
  • SOR/88-165, s. 31(F)
  • SOR/2003-5, s. 6
  • SOR/2005-264, s. 2

Registered Canadian Amateur Athletic Associations

  •  (1) Every registered Canadian amateur athletic association shall make an information return in prescribed form for each fiscal period of the association within six months after the end of the fiscal period.

  • (2) For the purposes of this section, fiscal period means the period for which the accounts of the registered Canadian amateur athletic association have been ordinarily made up and, in the absence of an established practice, the fiscal period is that adopted by the association but no such fiscal period shall exceed 12 months.

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • SOR/81-936, s. 3(F)
  • SOR/86-1092, s. 2
  • SOR/94-686, s. 81(F)

Dispositon of Interest in Annuities and Life Insurance Policies

  •  (1) In this section,

    disposition

    disposition has the meaning assigned by subsection 148(9) of the Act and includes anything deemed to be a disposition of a life insurance policy under subsection 148(2) of the Act; (disposition)

    insurer

    insurer has the meaning assigned by paragraph 148(10)(a) of the Act; (assureur)

    life insurance policy

    life insurance policy has the meaning assigned by subsection 138(12) of the Act. (police d’assurance-vie)

  • (2) Where by reason of a disposition of an interest in a life insurance policy an amount is required, pursuant to paragraph 56(1)(j) of the Act, to be included in computing the income of a taxpayer and the insurer that is the issuer of the policy is a party to, or is notified in writing of, the disposition, the insurer shall make an information return in prescribed form in respect of the amount.

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • SOR/78-449, s. 4
  • SOR/84-967, s. 2
  • SOR/88-165, s. 31(F)
  • SOR/2003-5, s. 7

Patronage Payments

  •  (1) Every person who, within the meaning of section 135 of the Act, makes payments to residents of Canada pursuant to an allocation in proportion to patronage shall make an information return in prescribed form in respect of payments so made.

  • (2) Every person who receives a payment referred to in subsection (1) as nominee or agent for another person resident in Canada shall make an information return in prescribed form in respect of the payment so received.

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • SOR/88-165, s. 31(F)

 [Repealed, SOR/2003-5, s. 8]

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • SOR/2003-5, s. 8

Cash Bonus Payments on Canada Savings Bonds

  •  (1) Every person authorized to redeem Canada Savings Bonds (in this section referred to as the “redemption agent”) who pays an amount in respect of a Canada Savings Bond as a cash bonus that the Government of Canada has undertaken to pay (other than an amount of interest, bonus or principal agreed to be paid at the time of the issue of the bond under the terms of the bond) shall make an information return in prescribed form in respect of such payment.

  • (2) Every redemption agent required by subsection (1) to make an information return shall

    • (a) issue to the payee, at the time the cash bonus is paid, two copies of the portion of the return relating to him; and

    • (b) file the return with the Minister on or before the 15th day of the month following the month in which the cash bonus was paid.

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • SOR/88-165, s. 31(F)

Qualified Investments

[[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] ]
  •  (1) In this section, reporting person means

    • (a) a mutual fund corporation;

    • (b) an investment corporation;

    • (c) a mutual fund trust;

    • (d) and (e) [Repealed, SOR/2005-264, s. 4]

    • (f) a trust that would be a mutual fund trust if Part XLVIII were read without reference to paragraph 4801(b); or

    • (g) [Repealed, SOR/2005-264, s. 4]

    • (h) a small business investment trust (within the meaning assigned by subsection 5103(1)).

    • (i) [Repealed, SOR/2005-264, s. 4]

  • (2) Where in any taxation year a reporting person (other than a registered investment) claims that a share of its capital stock issued by it, or an interest as a beneficiary under it, is a qualified investment under section 146, 146.1, 146.3 or 204 of the Act, the reporting person shall, in respect of the year and within 90 days after the end of the year, make an information return in prescribed form.

  • (3) [Repealed, SOR/2005-264, s. 4]

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • SOR/85-160, s. 2
  • SOR/88-165, s. 31(F)
  • SOR/94-686, s. 79(F)
  • SOR/2000-62, s. 1
  • SOR/2001-216, s. 1
  • SOR/2005-264, s. 4

 [Repealed, SOR/2000-62, s. 1]

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • SOR/2000-62, s. 1

Registered Home Ownership Savings Plans

  •  (1) Every person who, before May 23, 1985, pays an amount out of or under a registered home ownership savings plan to a resident of Canada as a beneficiary under the plan shall make an information return in prescribed form.

  • (2) Every trustee or depositary that is party to a registered home ownership savings plan the registration of which is revoked during a taxation year pursuant to subsection 146.2(7) or (7.1) of the Act shall make an information return in prescribed form with respect to any amount that is deemed by subsection 146.2(8) of the Act to have been received by the beneficiary of that plan.

  • (3) Every trustee or depositary that is party to a registered home ownership savings plan, the beneficiary of which is a resident of Canada and has been deemed by subsection 146.2(9) of the Act to have received an amount during a taxation year and before May 23, 1985, shall make an information return in prescribed form.

  • (3.1) Every trustee or depositary that, after May 22, 1985 and before 1986, was a party to a registered home ownership savings plan, any of the income of which is required by subsection 146.2(22) of the Act to be included in computing the income of a taxpayer for the 1985 taxation year, shall make an information return in prescribed form.

  • (4) Every trustee of a trust governed by a registered home ownership savings plan shall make an information return in prescribed form, where in a taxation year a taxpayer who is a beneficiary under the plan

    • (a) is required pursuant to subsection 146.2(12) or (15) of the Act to include an amount in computing his income; or

    • (b) is allowed pursuant to subsection 146.2(13) or (16) of the Act to deduct an amount in computing his income.

  • (5) In this section,

    beneficiary

    beneficiary has the meaning assigned by paragraph 146.2(1)(a) of the Act as it read in its application to the 1985 taxation year; (bénéficiaire)

    depositary

    depositary has the meaning assigned by subparagraph 146.2(1)(d)(ii) of the Act as it read in its application to the 1985 taxation year; (dépositaire)

    registered home ownership savings plan

    registered home ownership savings plan has the meaning assigned by paragraph 146.2(1)(h) of the Act as it read in its application to the 1985 taxation year. (régime enregistré d’épargne-logement)

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • SOR/83-866, s. 6
  • SOR/86-522, s. 2
  • SOR/88-165, s. 31(F)

Canadian Home Insulation Program and Canada Oil Substitution Program

 Where an amount has been paid to a person pursuant to a program prescribed for the purposes of paragraphs 12(1)(u), 56(1)(s) and 212(1)(s) of the Act, the payor shall

  • (a) make an information return in prescribed form in respect of such payment; and

  • (b) forward to the person at his latest known address on or before the date the return is required to be filed with the Minister two copies of the portion of the return relating to that person.

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • SOR/78-348, s. 1
  • SOR/81-936, s. 4
  • SOR/88-165, s. 31(F)

Certified Films and Video Tapes

  •  (1) Where principal photography or taping of a film or tape (within the meanings assigned by subsection 1100(21)) has occurred during a year or has been completed within 60 days after the end of the year, the producer of the film or tape or production company that produced the film or tape, or an agent of the producer or production company, shall

    • (a) make an information return in prescribed form in respect of any person who owns an interest in the film or tape at the end of the year; and

    • (b) forward to the person referred to in paragraph (a) at his latest known address on or before the date the return is required to be filed with the Minister two copies of the portion of the return relating to that person.

  • (2) The return required under this section shall be filed on or before March 31st and shall be in respect of the preceding calendar year.

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • SOR/82-182, s. 1
  • SOR/88-165, s. 31(F)

Scientific Research Tax Credits

  •  (1) In this section,

    administrator

    administrator has the meaning assigned by paragraph 47.1(1)(a) of the Act; (administrateur)

    designated security

    designated security means a security issued or granted by a corporation in respect of which the corporation has designated an amount pursuant to subsection 194(4) of the Act; (titre désigné)

    first purchaser

    first purchaser in relation to a designated security, means the first person (other than a trader or dealer in securities) to be the registered holder of the designated security; (premier acheteur)

    security

    security means

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

    • (b) a debt obligation issued by a corporation, or

    • (c) a right granted by a corporation under a scientific research financing contract; (titre)

    trader or dealer in securities

    trader or dealer in securities has the meaning assigned by paragraph 47.1(1)(l) of the Act. (négociant ou courtier en valeurs)

  • (2) Each corporation that has designated an amount under subsection 194(4) of the Act in respect of a security issued or granted by it shall make an information return in prescribed form in respect of each such security.

  • (3) Each trader or dealer in securities who has acquired and disposed of a designated security during the course of the primary distribution thereof pursuant to a public offering shall make an information return in prescribed form in respect of each such designated security.

  • (4) Each bank, credit union and trust company that, as agent, acquired a designated security for the first purchaser thereof shall make an information return in prescribed form in respect of each such designated security.

  • (5) Each trader or dealer in securities who, as administrator of an indexed security investment plan, acquired a designated security for the first purchaser thereof shall make an information return in prescribed form in respect of each such designated security.

  • (6) Notwithstanting subsection 205(1), any return required to be made

    • (a) under subsection (2), in respect of a security issued by a corporation before March 1, 1984,

    • (b) under subsection (3), in respect of a designated security disposed of as described in subsection (3) before March 1, 1984, or

    • (c) under subsection (4) or (5), in respect of a designated security acquired as described in subsection (4) or (5), as the case may be, before March 1, 1984,

    shall be filed on or before March 31, 1984.

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • SOR/85-160, s. 3
  • SOR/88-165, s. 31(F)
  • SOR/94-686, ss. 52(F), 79(F)

Share Purchase Tax Credits

  •  (1) In this section,

    administrator

    administrator has the meaning assigned by paragraph 47.1(1)(a) of the Act; (administrateur)

    designated share

    designated share means a share of the capital stock of a corporation in respect of which the corporation has designated an amount pursuant to subsection 192(4) of the Act; (action désignée)

    first purchaser

    first purchaser, in relation to a designated share, means the first person (other than a trader or dealer in securities) to be the registered holder of the share; (premier acheteur)

    trader or dealer in securities

    trader or dealer in securities has the meaning assigned by paragraph 47.1(1)(l) of the Act. (négociant ou courtier en valeurs)

  • (2) Each corporation that has designated an amount under subsection 192(4) of the Act in respect of a share issued by it shall make an information return in prescribed form in respect of each such share.

  • (3) Each trader or dealer in securities who has acquired and disposed of a designated share during the course of the primary distribution thereof pursuant to a public offering shall make an information return in prescribed form in respect of each such designated share.

  • (4) Each bank, credit union and trust company that, as agent, acquired a designated share for the first purchaser thereof shall make an information return in prescribed form in respect of each such designated share.

  • (5) Each trader or dealer in securities who, as administrator of an indexed security investment plan, acquired a designated share for the first purchaser thereof shall make an information return in prescribed form in respect of each such designated share.

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • SOR/85-160, s. 3
  • SOR/88-165, s. 31(F)
  • SOR/94-686, ss. 52(F), 79(F)

Resource Flow-Through Shares

  •  (1) Each corporation that has renounced an amount under subsection 66(12.6), (12.601), (12.62) or (12.64) of the Act to a person shall make an information return in prescribed form in respect of the amount renounced.

  • (2) The return required under subsection (1) shall be filed with the Minister together with the prescribed form required to be filed under subsection 66(12.7) of the Act in respect of the amount renounced.

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • SOR/87-512, s. 2
  • SOR/94-686, s. 79(F)
  • SOR/96-199, s. 1

Partnership Return

[[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] ]
  •  (1) Every member of a partnership that carries on a business in Canada, or that is a Canadian partnership, at any time in a fiscal period of the partnership shall make for that period an information return in prescribed form containing the following information:

    • (a) the income or loss of the partnership for the fiscal period;

    • (b) the name, address and, in the case of an individual, the social insurance number of each member of the partnership who is entitled to a share referred to in paragraph (c) or (d) for the fiscal period;

    • (c) the share of each member of the income or loss of the partnership for the fiscal period;

    • (d) the share of each member for the fiscal period of each deduction, credit or other amount in respect of the partnership that is relevant in determining the member’s income, taxable income, tax payable or other amount under the Act;

    • (e) the prescribed information contained in the form prescribed for the purposes of subsection 37(1) of the Act, where the partnership has made an expenditure in respect of scientific research and experimental development in the fiscal period; and

    • (f) such other information as may be required by the prescribed form.

  • (2) For the purposes of subsection (1), an information return made by any member of a partnership shall be deemed to have been made by each member of the partnership.

  • (3) Every person who holds an interest in a partnership as nominee or agent for another person shall make an information return in prescribed form in respect of that interest.

  • (4) [Repealed, SOR/93-443, s. 1]

  • (5) Subject to subsection (6), a return required by this section shall be filed with the Minister without notice or demand

    • (a) in the case of a fiscal period of a partnership all the members of which are corporations throughout the fiscal period, within five months after the end of the fiscal period;

    • (b) in the case of a fiscal period of a partnership all the members of which are individuals throughout the fiscal period, on or before the last day of March in the calendar year immediately following the calendar year in which the fiscal period ended or with which the fiscal period ended coincidentally; and

    • (c) in the case of any other fiscal period of a partnership, on or before the earlier of

      • (i) the day that is five months after the end of the fiscal period, and

      • (ii) the last day of March in the calendar year immediately following the calendar year in which the fiscal period ended or with which the fiscal period ended coincidentally.

  • (6) Where a partnership discontinues its business or activity, the return required under this section shall be filed, in respect of any fiscal period or portion thereof prior to the discontinuance of the business or activity for which a return has not previously been filed under this section, on or before the earlier of

    • (a) the day that is 90 days after the discontinuance of the business or activity, and

    • (b) the day the return is required to be filed under subsection (5).

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • SOR/89-519, s. 2
  • SOR/93-443, s. 1
  • SOR/94-686, ss. 53(F), 78(F), 79(F), 81(F)

Security Transactions

  •  (1) In this section,

    publicly traded

    publicly traded means, with respect to any security,

    • (a) a security that is listed or posted for trading on a stock exchange, commodity exchange, futures exchange or any other exchange, or

    • (b) a security in respect of the sale and distribution of which a prospectus, registration statement or similar document has been filed with a public authority; (négocié sur le marché)

    sale

    sale includes the granting of an option and a short sale; (vente)

    security

    security means

    • (a) a publicly traded share of the capital stock of a corporation,

    • (b) a publicly traded debt obligation,

    • (c) a debt obligation of or guaranteed by

      • (i) the Government of Canada,

      • (ii) the government of a province or an agent thereof,

      • (iii) a municipality in Canada,

      • (iv) a municipal or public body performing a function of government in Canada, or

      • (v) the government of a foreign country or of a political subdivision of a foreign country or a local authority of such a government,

    • (d) a publicly traded interest in a trust,

    • (e) a publicly traded interest in a partnership,

    • (f) an option or contract in respect of any property described in any of paragraphs (a) to (e), or

    • (g) a publicly traded option or contract in respect of any property including any commodity, financial futures, foreign currency or precious metal or in respect of any index relating to any property; (titre)

    trader or dealer in securities

    trader or dealer in securities means

    • (a) a person who is registered or licensed under the laws of a province to trade in securities, or

    • (b) a person who in the ordinary course of business makes sales of securities as agent on behalf of others. (négociant ou courtier en valeurs)

  • (2) Every trader or dealer in securities who, in a calendar year, purchases a security as principal or sells a security as agent for any vendor shall make an information return for the year in prescribed form in respect of the purchase or sale.

  • (3) Every person (other than an individual who is not a trust) who in a calendar year redeems, acquires or cancels in any manner whatever any securities issued by that person shall make an information return for the year in prescribed form in respect of each such transaction, other than a transaction to which section 51, 51.1, 86 (if there is no consideration receivable other than new shares) or 87 or subsection 98(3) or (6) of the Act applies.

  • (4) Subsection (3) applies to

    • (a) Her Majesty in right of Canada or a province;

    • (b) a municipal or public body performing a function of government in Canada; and

    • (c) an agent of a person referred to in paragraph (a) or (b).

  • (5) Every person who, in the ordinary course of a business of buying and selling precious metals in the form of certificates, bullion or coins, makes a payment in a calendar year to another person in respect of a sale by that other person of any such property shall make an information return for that year in prescribed form in respect of each such sale.

  • (6) Every person who, while acting as nominee or agent for another person in respect of a sale or other transaction to which subsection (2), (3) or (5) applies, receives the proceeds of the sale or other transaction shall, where the transaction is carried out in the name of the nominee or agent, make an information return in prescribed form in respect of the sale or other transaction.

  • (7) This section does not apply in respect of

    • (a) a purchase of a security by a trader or dealer in securities from another trader or dealer in securities other than a non-resident trader or dealer in securities;

    • (b) a sale of currencies or precious metals in the form of jewellery, works of art or numismatic coins;

    • (c) a sale of precious metals by a person who, in the ordinary course of business, produces or sells precious metals in bulk or in commercial quantities;

    • (d) a sale of securities by a trader or dealer in securities on behalf of a person who is exempt from tax under Part I of the Act; or

    • (e) a redemption by the issuer or an agent of the issuer of a debt obligation where

      • (i) the debt obligation was issued for its principal amount,

      • (ii) the redemption satisfies all of the issuer’s obligations in respect of the debt obligation,

      • (iii) each person with an interest in the debt obligation is entitled in respect thereof to a proportion of all payments of principal equal to the proportion to which the person is entitled of all payments other than principal, and

      • (iv) an information return is required under another section of this Part to be made as a result of the redemption in respect of each person with an interest in the debt obligation.

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • SOR/89-519, s. 2
  • SOR/94-686, ss. 54(F), 78(F), 79(F)
  • SOR/2003-5, s. 9

Information Respecting Tax Shelters

  •  (1) In this section, promoter in respect of a tax shelter and tax shelter have the meanings assigned by subsection 237.1(1) of the Act.

  • (2) and (3) [Repealed, SOR/2003-5, s. 10]

  • (4) and (5) [Repealed, SOR/2000-248, s. 1]

  • (6) For the purposes of paragraph (b) of the definition tax shelter in subsection 237.1(1) of the Act, prescribed benefit in respect of an interest in a property means any amount that may reasonably be expected, having regard to statements or representations made in respect of the interest, to be received or enjoyed by a person (in this subsection referred to as “the purchaser”) who acquires the interest, or a person with whom the purchaser does not deal at arm’s length, which receipt or enjoyment would have the effect of reducing the impact of any loss that the purchaser may sustain in respect of the interest, and includes such an amount

    • (a) that is, either immediately or in the future, owed to any other person by the purchaser or a person with whom the purchaser does not deal at arm’s length, to the extent that

      • (i) liability to pay that amount is contingent,

      • (ii) payment of that amount is or will be guaranteed by, security is or will be provided by, or an agreement to indemnify the other person to whom the amount is owed is or will be entered into by

        • (A) a promoter in respect of the interest,

        • (B) a person with whom the promoter does not deal at arm’s length, or

        • (C) a person who is to receive a payment (other than a payment made by the purchaser) in respect of the guarantee, security or agreement to indemnify,

      • (iii) the rights of that other person against the purchaser, or against a person with whom the purchaser does not deal at arm’s length, in respect of the collection of all or part of the purchase price are limited to a maximum amount, are enforceable only against certain property, or are otherwise limited by agreement, or

      • (iv) payment of that amount is to be made in a foreign currency or is to be determined by reference to its value in a foreign currency and it may reasonably be considered, having regard to the history of the exchange rate between the foreign currency and Canadian currency, that the aggregate of all such payments, when converted to Canadian currency at the exchange rate expected to prevail at the date on which each such payment would be required to be made, will be substantially less than that aggregate would be if each such payment was converted to Canadian currency at the time that each such payment became owing,

    • (b) that the purchaser or a person with whom the purchaser does not deal at arm’s length is entitled at any time to, directly or indirectly, receive or have available

      • (i) as a form of assistance from a government, municipality or other public authority, whether as a grant, subsidy, forgiveable loan, deduction from tax or investment allowance, or as any other form of assistance, or

      • (ii) by reason of a revenue guarantee or other agreement in respect of which revenue may be earned by the purchaser or a person with whom the purchaser does not deal at arm’s length, to the extent that the revenue guarantee or other agreement may reasonably be considered to ensure that the purchaser or person will receive a return of all or a portion of the purchaser’s outlays in respect of the interest,

    • (c) that is the proceeds of disposition to which the purchaser may be entitled by way of an agreement or other arrangement under which the purchaser has a right, either absolutely or contingently, to dispose of the interest (otherwise than as a consequence of the purchaser’s death), including the fair market value of any property that the agreement or arrangement provides for the acquisition of in exchange for all or any part of the interest, and

    • (d) that is owed to a promoter, or a person with whom the promoter does not deal at arm’s length, by the purchaser or a person with whom the purchaser does not deal at arm’s length in respect of the interest,

    but, except as otherwise provided in subparagraph (b)(ii), does not include profits earned in respect of the interest.

  • (6.1) For the purpose of paragraph (b) of the definition tax shelter in subsection 237.1(1) of the Act, prescribed benefit in respect of an interest in a property includes an amount that is a limited-recourse amount because of subsection 143.2(1), (7) or (13) of the Act, but does not include an amount of indebtedness that is a limited-recourse amount

    • (a) solely because it is not required to be repaid within 10 years from the time the indebtedness arose where the debtor would, if the interest were acquired by the debtor immediately after that time, be

      • (i) a partnership

        • (A) at least 90% of the fair market value of the property of which is attributable to the partnership’s tangible capital property located in Canada, and

        • (B) at least 90% of the value of all interests in which are held by limited partners (within the meaning assigned by subsection 96(2.4) of the Act) of the partnership,

        except where it is reasonable to conclude that one of the main reasons for the acquisition of one or more properties by the partnership, or for the acquisition of one or more interests in the partnership by limited partners, is to avoid the application of this subsection, or

      • (ii) a member of a partnership having fewer than six members, except where

        • (A) the partnership is a member of another partnership,

        • (B) there is a limited partner (within the meaning assigned by subsection 96(2.4) of the Act) of the partnership,

        • (C) less than 90% of the fair market value of the partnership’s property is attributable to the partnership’s tangible capital property located in Canada, or

        • (D) it is reasonable to conclude that one of the main reasons for the existence of one of two or more partnerships, one of which is the partnership, or the acquisition of one or more properties by the partnership, is to avoid the application of this section to the member’s indebtedness,

    • (b) of a partnership

      • (i) where

        • (A) the indebtedness is secured by and used to acquire the partnership’s tangible capital property located in Canada (other than rental property, within the meaning assigned by subsection 1100(14), leasing property, within the meaning assigned by subsection 1100(17), or specified energy property, within the meaning assigned by subsection 1100(25)), and

        • (B) the person to whom the indebtedness is repayable is a member of the Canadian Payments Association, and

      • (ii) throughout the period during which any amount is outstanding in respect of the indebtedness,

        • (A) at least 90% of the fair market value of the property of which is attributable to tangible capital property located in Canada of the partnership,

        • (B) at least 90% of the value of all interests in which are held by limited partners (within the meaning assigned by subsection 96(2.4) of the Act) that are corporations, and

        • (C) the principal business of each such limited partner is related to the principal business of the partnership,

        except where it is reasonable to conclude that one of the main reasons for the acquisition of one or more properties by the partnership, or for the acquisition of one or more interests in the partnership by limited partners, is to avoid the application of this subsection, or

    • (c) of a corporation where the amount is a bona fide business loan made to the corporation for the purpose of financing a business that the corporation operates and the loan is made pursuant to a loan program of the Government of Canada or of a province the purpose of which is to extend financing to small- and medium-sized Canadian businesses.

  • (7) For the purposes of the definition tax shelter in subsection 237.1(1) of the Act, prescribed property in relation to a tax shelter means property that is a registered pension plan, a registered retirement savings plan, a deferred profit sharing plan, a registered retirement income fund, a registered education savings plan or a property in respect of which paragraph 40(2)(i) of the Act is applicable.

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • SOR/89-519, s. 2
  • SOR/92-51, s. 8
  • SOR/2000-248, s. 1
  • SOR/2001-295, s. 1(E)
  • SOR/2003-5, s. 10

Worker’s Compensation

  •  (1) Every person who pays an amount in respect of compensation described in subparagraph 110(1)(f)(ii) of the Act shall make an information return in prescribed form in respect of that payment.

  • (2) Where a worker’s compensation board, or a similar body, adjudicates a claim for compensation described in subparagraph 110(1)(f)(ii) of the Act and stipulates the amount of the award, that board or body shall make an information return in prescribed form in respect of the amount of the award.

  • (3) A return required under this section must be filed on or before the last day of February of each year and shall be in respect of

    • (a) the preceding calendar year, if the return is required under subsection (1); and

    • (b) the amount of the award that pertains to the preceding calendar year, if the return is required under subsection (2).

  • (4) Subsections (1) and (2) are not applicable in respect of a payment or an award in respect of

    • (a) medical expenses incurred by or on behalf of the employee;

    • (b) funeral expenses in respect of the employee;

    • (c) legal expenses in respect of the employee;

    • (d) job training or counselling of the employee; or

    • (e) the death of the employee, other than periodic payments made after the death of the employee.

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • SOR/92-455, s. 2

Social Assistance

  •  (1) Every person who makes a payment described in paragraph 56(1)(u) of the Act shall make an information return in prescribed form in respect of the payment.

  • (2) Subsection (1) is not applicable in respect of a payment that

    • (a) is in respect of medical expenses incurred by or on behalf of the payee;

    • (b) is in respect of child care expenses, within the meaning assigned by paragraph 63(3)(a) of the Act, incurred by or on behalf of the payee or a person related to the payee;

    • (c) is in respect of funeral expenses in respect of a person related to the payee;

    • (d) is in respect of legal expenses incurred by or on behalf of the payee or a person related to the payee;

    • (e) is in respect of job training or counselling of the payee or a person related to the payee;

    • (f) is paid in a particular year as a part of a series of payments, the total of which in the particular year does not exceed $500; or

    • (g) is not a part of a series of payments.

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • SOR/92-455, s. 2

Farm Support Payments

  •  (1) Every government, municipality or municipal or other public body (in sections 235 and 236 referred to as the “government payer”) or producer organization or association that makes a payment of an amount that is a farm support payment (other than an amount paid out of a net income stabilization account) to a person or partnership shall make an information return in prescribed form in respect of the amount.

  • (2) For the purposes of subsection (1) farm support payment includes

    • (a) a payment that is computed with respect to an area of farm land;

    • (b) a payment that is made in respect of a unit of farm commodity grown or disposed of or a farm animal raised or disposed of; and

    • (c) a rebate of, or compensation for, all or a portion of

      • (i) a cost or capital cost incurred in respect of farming, or

      • (ii) unsowed or unplanted land or crops, or destroyed crops, farm animals or other farm output.

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • SOR/93-527, s. 4
  • SOR/94-686, s. 78(F)

Identifier Information

 Every corporation or trust for which an information return is required to be made under these Regulations by a government payer or by a producer organization or association shall provide its legal name, address and income tax identification number to the government payer or the producer organization or association, as the case may be.

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • SOR/93-527, s. 4
  • SOR/94-686, s. 79(F)

 Every person who is a member of a partnership for which an information return is required to be made under these Regulations by a government payer or by a producer organization or association shall provide the government payer or the producer organization or association, as the case may be, with the following information:

  • (a) the person’s legal name, address and Social Insurance Number, or, where the person is a trust or is not an individual, the person’s income tax identification number; and

  • (b) the partnership’s name and business address.

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • SOR/93-527, s. 4
  • SOR/94-686, s. 78(F)

Contract for Goods and Services

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

    federal body

    federal body means a department or a Crown corporation, within the meaning of section 2 of the Financial Administration Act. (organisme fédéral)

    payee

    payee means a person or partnership to whom an amount is paid or credited in respect of goods for sale or lease, or services rendered, by or on behalf of the person or the partnership. (bénéficiaire)

  • (2) A federal body that pays or credits an amount to a payee shall file an information return in prescribed form in respect of the amount on or before March 31 in each year in respect of the preceding calendar year.

  • (3) Subsection (2) does not apply in respect of an amount

    • (a) all or substantially all of which is paid or credited in the year in respect of goods for sale or lease by the payee;

    • (b) to which section 212 of the Act applies;

    • (c) that is not required to be included in computing the income of the payee, if the payee is an employee of the federal body;

    • (d) that is paid or credited in respect of services rendered outside Canada by a payee who was not resident in Canada during the period in which the services were rendered; or

    • (e) that is paid or credited in respect of a program administered under the Witness Protection Program Act or any other similar program.

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • SOR/99-21, s. 1
  • SOR/2003-5, s. 11

Reporting of Payments in Respect of Construction Activities

  •  (1) In this section, construction activities includes the erection, excavation, installation, alteration, modification, repair, improvement, demolition, destruction, dismantling or removal of all or any part of a building, structure, surface or sub-surface construction, or any similar property.

  • (2) Every person or partnership that pays or credits, in a reporting period, an amount in respect of goods or services rendered on their behalf in the course of construction activities shall make an information return in the prescribed form in respect of that amount, if the person’s or partnership’s business income for that reporting period is derived primarily from those activities.

  • (3) The reporting period may be either on a calendar year basis or a fiscal period basis. Once a period is chosen, it cannot be changed for subsequent years, unless the Minister authorizes it.

  • (4) The return shall be filed within six months after the end of the reporting period to which it pertains.

  • (5) Subsection (2) does not apply in respect of an amount

    • (a) all of which is paid or credited in the reporting period in respect of goods for sale or lease by the person or partnership;

    • (b) to which section 212 of the Act applies; or

    • (c) that is paid or credited in respect of services rendered outside Canada by a person or partnership who was not resident in Canada during the period in which the services were rendered.

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • SOR/2000-9, s. 1
  • SOR/2003-5, s. 11

PART IIIAnnuities and Life Insurance Policies

Capital Element of Annuity Payments

  •  (1) For the purposes of paragraphs 32.1(3)(b) and 60(a) of the Act, where an annuity is paid under a contract (other than an income-averaging annuity contract or an annuity contract purchased pursuant to a deferred profit sharing plan or pursuant to a plan referred to in subsection 147(15) of the Act as a “revoked plan”) at a particular time, that part of the annuity payment determined in prescribed manner to be a return of capital is that proportion of a taxpayer’s interest in the annuity payment that the adjusted purchase price of the taxpayer’s interest in the contract at that particular time is of his interest, immediately before the commencement under the contract of payments to which paragraph 56(1)(d) of the Act applies, in the total of the payments

    • (a) to be made under the contract, in the case of a contract for a term of years certain; or

    • (b) expected to be made under the contract, in the case of a contract under which the continuation of the payments depends in whole or in part on the survival of an individual.

  • (1.1) For the purposes of subsections (1) and (2), “annuity payment” does not include any portion of a payment under a contract the amount of which cannot be reasonably determined immediately before the commencement of payments under the contract except where the payment of such portion cannot be so determined because the continuation of the annuity payments under the contract depends in whole or in part on the survival of an individual.

  • (2) For the purposes of this section and section 305,

    • (a) where the continuance of the annuity payments under any contract depends in whole or in part on the survival of an individual, the total of the payments expected to be made under the contract

      • (i) shall, in the case of a contract that provides for equal payments and does not provide for a guaranteed period of payment, be equal to the product obtained by multiplying the aggregate of the annuity payments expected to be received throughout a year under the contract by the complete expectations of life using the table of mortality known as the 1971 Individual Annuity Mortality Table as published in Volume XXIII of the Transactions of the Society of Actuaries, or

      • (ii) shall, in any other case, be calculated in accordance with subparagraph (i) with such modifications as the circumstances may require;

    • (b) except as provided in subsections (3) and (4), adjusted purchase price of a taxpayer’s interest in an annuity contract at a particular time means the amount that would be determined at that time in respect of that interest under paragraph 148(9)(a) of the Act if that paragraph were read without reference to subparagraph (viii) thereof;

    • (c) where the continuance of the annual payments under any contract depends on the survival of a person, the age of that person on any date as of which a calculation is being made shall be determined by subtracting the calendar year of his birth from the calendar year in which such date occurs; and

    • (d) where the continuance of the annual payments under any contract depends on the survival of a person, and where, in the event of the death of that person before the annual payments aggregate a stated sum, the contract provides that the unpaid balance of the stated sum shall be paid, either in a lump sum or instalments, then, for the purpose of determining the expected term of the contract, the contract shall be deemed to provide for the continuance of the payments thereunder for a minimum term certain equal to the nearest integral number of years required to complete the payment of the stated sum.

    • (e) [Repealed, SOR/83-865, s. 1]

  • (3) Where

    • (a) an annuity contract is a life annuity contract entered into before November 17, 1978 under which the annuity payments commence on the death of an individual,

    • (a.1) [Repealed, SOR/83-865, s. 1]

    • (b) an annuity contract (other than an annuity contract described in paragraph (a)) is

      • (i) a life annuity contract entered into before October 23, 1968, or

      • (ii) any other annuity contract entered into before January 4, 1968,

      under which the annuity payments commence

      • (iii) on the expiration of a term of years, and

      • (iv) before the later of January 1, 1970 and the tax anniversary date of the annuity contract,

    the adjusted purchase price of a taxpayer’s interest in the annuity contract shall be

    • (c) the lump sum, if any, that the person entitled to the annuity payments might have accepted in lieu thereof, at the date the annuity payments commence;

    • (d) if no lump sum described in paragraph (c) is provided for in the contract, the sum ascertainable from the contract as the present value of the annuity at the date the annuity payments commence; and

    • (e) if no lump sum described in paragraph (c) is provided for in the contract and no sum is ascertainable under paragraph (d),

      • (i) in the case of a contract issued under the Government Annuities Act, the premiums paid, accumulated with interest at the rate of four per cent per annum to the date the annuity payments commence, and

      • (ii) in the case of any other contract, the present value of the annuity payments at the date on which payments under the contract commence, computed by applying

        • (A) a rate of interest of four per cent per annum where the payments commence before 1972 and 5 1/2 per cent per annum where the payments commence after 1971, and

        • (B) the provisions of subsection (2) where the payments depend on the survival of a person.

  • (4) Where an annuity contract would be described in paragraph (3)(b) if the reference in subparagraph (iv) thereof to “before the later of” were read as a reference to “on or after the later of”, the adjusted purchase price of a taxpayer’s interest in the annuity contract at a particular time shall be the greater of

    • (a) the aggregate of

      • (i) the amount that would be determined in respect of that interest under paragraph (3)(c), (d) or (e), as the case may be, if the date referred to therein was the tax anniversary date of the contract and not the date the annuity payments commence, and

      • (ii) the adjusted purchase price that would be determined in respect of that interest if the words “and after the tax anniversary date” were inserted in each of subparagraphs 148(9)(a)(i) to (iii.1) and (vi) of the Act immediately following the words “before that time” in each of those subparagraphs; and

    • (b) the amount determined under paragraph (2)(b) in respect of that interest.

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • SOR/82-499, s. 1
  • SOR/82-874, s. 1(E)
  • SOR/83-865, s. 1
  • SOR/2001-216, s. 10(F)

Life Annuity Contracts

  •  (1) For the purposes of this Part and section 148 of the Act, life annuity contract means any contract under which a person authorized under the laws of Canada or a province to carry on in Canada an annuities business agrees to make annuity payments to an individual (in this section referred to as “the annuitant”) or jointly to two or more individuals (each of whom is referred to as “the annuitant” in this section), which payments are, by the terms of the contract,

    • (a) to be paid annually or at more frequent periodic intervals;

    • (b) to commence on a specified day; and

    • (c) to continue throughout the lifetime of the annuitant or one or more of the annuitants.

    • (d) [Repealed, SOR/82-499, s. 2]

  • (2) For the purposes of subsection (1), a contract shall not fail to be a life annuity contract by reason that

    • (a) the contract provides that the annuity payments may be assigned by the annuitant or owner;

    • (b) the contract provides for annuity payments to be made for a period ending upon the death of the annuitant or for a specified period of not less than 10 years, whichever is the lesser;

    • (c) the contract provides for annuity payments to be made for a specified period or throughout the lifetime of the annuitant, whichever is longer, to the annuitant and thereafter, if the specified period is the longer, to a specified person;

    • (d) the contract provides, in addition to the annuity payments to be made throughout the lifetime of the annuitant, for a payment to be made upon the annuitant’s death;

    • (e) the contract provides that the date

      • (i) on which the annuity payments commence, or

      • (ii) on which the contract holder becomes entitled to proceeds of the disposition,

      may be changed with respect to the whole contract or any portion thereof at the option of the annuitant or owner; or

    • (f) the contract provides that all or a portion of the proceeds payable at any particular time under the contract may be received in the form of an annuity contract other than a life annuity contract.

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • SOR/80-341, s. 1
  • SOR/82-499, s. 2
  • SOR/83-865, s. 2

 [Repealed, SOR/83-865, s. 3]

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • SOR/83-865, s. 3
  •  (1) Where in a taxation year the rights of a holder under an annuity contract cease upon termination or cancellation of the contract and

    • (a) the aggregate of all amounts, each of which is an amount in respect of the contract that was included in computing the income of the holder for the year or any previous taxation year by virtue of subsection 12(3) of the Act

    exceeds the aggregate of

    • (b) such proportion of the amount determined under paragraph (a) that the annuity payments made under the contract before the rights of the holder have ceased is of the total of the payments expected to be made under the contract, and

    • (c) the aggregate of all amounts, each of which is an amount in respect of the contract that was deductible in computing the income of the holder for the year or any previous year by virtue of subsection (2),

    the amount of such excess may be deducted by the holder under subsection 20(19) of the Act in computing his income for the year.

  • (2) For the purposes of subsection 20(19) of the Act, where an annuity contract was acquired after December 19, 1980 and annuity payments under the contract commenced before 1982, the amount that may be deducted by a holder under that subsection in respect of an annuity contract for a taxation year is that proportion of

    • (a) the aggregate of all amounts, each of which is an amount that was included in computing the income of the holder for any previous taxation year by virtue of subsection 12(3) of the Act in respect of the contract

    that

    • (b) the aggregate of all annuity payments received by the holder in the year in respect of the contract

    is of

    • (c) the total of the payments determined under paragraph 300(1)(a) or (b) in respect of the holder’s interest in the contract.

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • SOR/82-499, s. 3
  • SOR/83-865, s. 4

Prescribed Annuity Contracts

  •  (1) For the purposes of this Part and subsections 12.2(1), (3) and (4) and paragraph 148(2)(b) of the Act, prescribed annuity contract for a taxation year means

    • (a) an annuity contract purchased pursuant to a registered pension plan, a registered retirement savings plan, a deferred profit sharing plan or a plan referred to in subsection 147(15) of the Act as a revoked plan;

    • (b) an annuity contract described in paragraph 148(1)(c) or (e) of the Act; and

    • (c) an annuity contract

      • (i) under which annuity payments have commenced in the taxation year or a preceding taxation year,

      • (ii) issued by a corporation described in any of paragraphs 39(5)(b) to (d) or clause 146(1)(j)(ii)(B) of the Act, a life insurance corporation, a registered charity or a corporation (other than a mutual fund corporation or a mortgage investment corporation) the principal business of which is the making of loans (which corporation or charity is in this section referred to as an “issuer”),

      • (iii) each holder of which

        • (A) is an individual, other than a trust that is neither a testamentary trust nor a trust described in paragraph 104(4)(a) of the Act (in this paragraph referred to as a “specified trust”),

        • (B) is an annuitant under the contract, and

        • (C) throughout the taxation year, dealt at arm’s length with the issuer,

      • (iv) the terms and conditions of which require that, from the time the contract meets the requirements of this paragraph,

        • (A) all payments made out of the contract be equal annuity payments made at regular intervals but not less frequently than annually, subject to the holder’s right to vary the frequency and quantum of payments to be made out of the contract in any taxation year without altering the present value at the beginning of the year of the total payments to be made in that year out of the contract,

        • (B) the annuity payments thereunder continue for a fixed term or

          • (I) if the holder is an individual (other than a trust), for the life of the first holder or until the later of the death of the first holder and the death of any one of the spouse, common-law partner, former spouse, former common-law partner, brothers and sisters (in this subparagraph referred to as “the survivor”) of the first holder, or

          • (II) if the holder is a specified trust, for the life of the spouse or common-law partner who is entitled to receive the income of the trust,

        • (C) where the annuity payments are to be made over a term that is guaranteed or fixed, the guaranteed or fixed term not extend beyond the time at which

          • (I) in the case of a joint and last survivor annuity, the younger of the first holder and the survivor,

          • (II) if the holder is a specified trust, the spouse or common-law partner who is entitled to receive the income of the trust,

          • (III) if the holder is a testamentary trust other than a specified trust, the youngest beneficiary under the trust,

          • (IV) where the contract is held jointly, the younger of the first holders, or

          • (V) in any other case, the first holder,

          would, if he survived, attain the age of 91 years,

        • (D) no loans exist under the contract and the holder’s rights under the contract not be disposed of otherwise than on the holder’s death or, if the holder is a specified trust, on the death of the spouse or common-law partner who is entitled to receive the income of the trust, and

        • (E) no payments be made out of the contract other than as permitted by this section,

      • (v) none of the terms and conditions of which provide for any recourse against the issuer for failure to make any payment under the contract, and

      • (vi) where annuity payments under the contract have commenced

        • (A) before 1987, in respect of which a holder thereof has notified the issuer in writing, before the end of the taxation year, that the contract is to be treated as a prescribed annuity contract,

        • (B) after 1986, in respect of which a holder thereof has not notified the issuer in writing, before the end of the taxation year in which the annuity payments under the contract commenced, that the contract is not to be treated as a prescribed annuity contract, or

        • (C) after 1986, in respect of which a holder thereof has notified the issuer in writing, before the end of the taxation year in which the annuity payments under the contract commenced, that the contract is not to be treated as a prescribed annuity contract and a holder thereof has rescinded the notification by so notifying the issuer in writing before the end of the taxation year.

  • (2) Notwithstanding subsection (1), an annuity contract shall not fail to be a prescribed annuity contract by reason that

    • (a) where the contract provides for a joint and last survivor annuity or is held jointly, the terms and conditions thereof provide that there will be a decrease in the amount of the annuity payments to be made under the contract from the time of death of one of the annuitants thereunder;

    • (b) the terms and conditions thereof provide that where the holder thereof dies at or before the time he attains the age of 91 years, the contract will terminate and an amount will be paid out of the contract not exceeding the amount, if any, by which the total premiums paid under the contract exceeds the total annuity payments made under the contract;

    • (c) where the annuity payments are to be made over a term that is guaranteed or fixed, the terms and conditions thereof provide that as a consequence of the death of the holder thereof during the guaranteed or fixed term any payments that, but for the death of the holder, would be made during the term may be commuted into a single payment; or

    • (d) the terms and conditions thereof, as they read on December 1, 1982 and at all subsequent times, provide that the holder participates in the investment earnings of the issuer and that the amount of such participation is to be paid within 60 days after the end of the year in respect of which it is determined.

  • (3) For the purposes of this section, the annuitant under an annuity contract is deemed to be the holder of the contract where

    • (a) the contract is held by another person in trust for the annuitant; or

    • (b) the contract was acquired by the annuitant under a group term life insurance policy under which life insurance was effected on the life of another person in respect of, in the course of, or by virtue of the office or employment or former office or employment of that other person.

  • (4) In this section,

    annuitant

    annuitant under an annuity contract, at any time, means a person who, at that time, is entitled to receive annuity payments under the contract; (rentier)

    spouse

    spouse of a particular individual includes another individual of the opposite sex who is a party to a void or voidable marriage with the particular individual. (époux)

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • SOR/82-499, s. 3
  • SOR/83-865, s. 5
  • SOR/86-488, s. 1
  • SOR/88-165, s. 2
  • SOR/88-319, s. 1
  • SOR/94-415, s. 1
  • SOR/94-686, s. 2(F)
  • SOR/2001-188, s. 3
  • SOR/2001-216, s. 10(F)

Unallocated Income Accrued Before 1982

  •  (1) For the purposes of section 12.2 and paragraph 56(1)(d.1) of the Act, the amount at any time of “unallocated income accrued in respect of the interest before 1982, as determined in prescribed manner”, in respect of a taxpayer’s interest in an annuity contract (other than an interest last acquired after December 1, 1982) or in a life insurance policy referred to in subsection (3), means the amount, if any, by which

    • (a) the accumulating fund at December 31, 1981 in respect of the interest

    exceeds the aggregate of

    • (b) his adjusted cost basis (within the meaning assigned by paragraph 148(9)(a) of the Act) at December 31, 1981 in respect of the interest; and

    • (c) that proportion of the amount, if any, by which the amount determined under paragraph (a) exceeds the amount determined under paragraph (b) that

      • (i) the aggregate of all amounts each of which is the amount of an annuity payment received before that time in respect of the interest

      is of

      • (ii) the taxpayer’s interest, immediately before the commencement of payments under the contract, in the total of the annuity payments

        • (A) to be made under the contract, in the case of a contract for a term of years certain, or

        • (B) expected to be made under the contract, in the case of a contract under which the continuation of the payments depends in whole or in part on the survival of an individual.

  • (2) For the purposes of paragraph (1)(c), “annuity payment” does not include any portion of a payment under a contract the amount of which cannot be reasonably determined immediately before the commencement of payments under the contract except where such portion cannot be so determined because the continuation of the annuity payments under the contract depends in whole or in part on the survival of an individual.

  • (3) For the purposes of this section, an interest in an annuity contract to which subsection 12.2(9) of the Act applies shall be deemed to be a continuation of the interest in the life insurance policy in respect of which it was issued.

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • SOR/83-865, s. 5

Exempt Policies

  •  (1) For the purposes of this Part and subsection 12.2(11) of the Act, exempt policy at any time means a life insurance policy (other than an annuity contract or a deposit administration fund policy) in respect of which the following conditions are met at that time:

    • (a) if that time is a policy anniversary of the policy, the accumulating fund of the policy at that time (determined without regard to any policy loan) does not exceed the total of the accumulating funds at that time of the exemption test policies issued at or before that time in respect of the policy;

    • (b) assuming that the terms and conditions of the policy do not change from those in effect on the last policy anniversary of the policy at or before that time and, where necessary, making reasonable assumptions about all other factors (including, in the case of a participating life insurance policy within the meaning assigned by subsection 138(12) of the Act, the assumption that the amounts of dividends paid will be as shown in the dividend scale), it is reasonable to expect that the condition in paragraph (a) will be met on each policy anniversary of the policy on which the policy could remain in force after that time and before the date determined under subparagraph (3)(d)(ii) with respect to the exemption test policies issued in respect of the policy;

    • (c) the condition in paragraph (a) was met on all policy anniversaries of the policy before that time; and

    • (d) the condition in paragraph (b) was met at all times on and after the first policy anniversary of the policy and before that time.

  • (2) For the purposes of subsection (1), a life insurance policy that is an exempt policy on its first policy anniversary shall be deemed to have been an exempt policy from the time of its issue until that anniversary.

  • (3) For the purposes of this section and section 307, a separate exemption test policy shall be deemed to have been issued to a policyholder in respect of a life insurance policy

    • (a) on the date of issue of the life insurance policy, and

    • (b) on each policy anniversary of the life insurance policy where the amount of the benefit on death thereunder exceeds 108 per cent of the amount of the benefit on death thereunder on the later of the date of its issue and the date of its preceding anniversary, if any,

    and, for the purpose of determining whether the accumulating fund of the life insurance policy on any particular policy anniversary meets the condition in paragraph (1)(a), each such exemption test policy shall be deemed

    • (c) to have a benefit on death that is uniform throughout the term of the exemption test policy and equal to

      • (i) where the exemption test policy is the first such policy issued in respect of the life insurance policy, the amount on that policy anniversary of the benefit on death of the life insurance policy less the total of all amounts each of which is the amount on that policy anniversary of the benefit on death of another exemption test policy issued on or before that policy anniversary in respect of the life insurance policy, and

      • (ii) in any other case, the amount by which the benefit on death of the life insurance policy on the date the exemption test policy was issued exceeds 108 per cent of the amount of the benefit on death of the life insurance policy on the later of the date of issue of the life insurance policy and the date of its preceding policy anniversary, if any;

    • (d) to pay the amount of its benefit on death on the earlier of

      • (i) the date of death of the person whose life is insured under the life insurance policy, and

      • (ii) the later of

        • (A) ten years after the date of issue of the life insurance policy, and

        • (B) the date that the person whose life is insured would, if he survived, attain the age of 85 years; and

    • (e) to be a life insurance policy in Canada issued by a life insurer that carried on its life insurance business in Canada.

  • (4) Notwithstanding subsections (1) to (3),

    • (a) where at any particular time the amount of the benefit on death of a life insurance policy is reduced, an amount equal to such reduction (such amount is in this paragraph referred to as “the reduction”) shall be applied at that time to reduce the amount of the benefit on death of exemption test policies issued before that time in respect of the life insurance policy (other than the exemption test policy issued in respect thereof pursuant to paragraph (3)(a)), in the order in which the dates of their issuance are proximate to the particular time, by an amount equal to the lesser of

      • (i) the portion, if any, of the reduction not applied to reduce the benefit on death of one or more other such exemption test policies, and

      • (ii) the amount, immediately before that time, of the benefit on death of the relevant exemption test policy;

    • (b) where on the tenth or on any subsequent policy anniversary of a life insurance policy, the accumulating fund thereof (computed without regard to any policy loan then outstanding in respect of the policy) exceeds 250 per cent of the accumulating fund thereof on its third preceding policy anniversary (computed without regard to any policy loan then outstanding in respect of the policy), each exemption test policy deemed by subsection (3) to have been issued before that time in respect of the life insurance policy shall be deemed to have been issued on the later of the date of that third preceding policy anniversary and the date on which it was deemed by subsection (3) to have been issued; and

    • (c) where at one or more times after December 1, 1982

      • (i) a prescribed premium has been paid by a taxpayer in respect of an interest in a life insurance policy (other than an annuity contract or a deposit administration fund policy) last acquired on or before that date, or

      • (ii) an interest in a life insurance policy (other than an annuity contract or a deposit administration fund policy) issued on or before that date has been acquired by a taxpayer from the person who held the interest continuously since that date,

      the policy shall be deemed to have been an exempt policy from the date of its issue until the earliest of those times that occurred after December 1, 1982; and

    • (d) a life insurance policy that ceases to be an exempt policy (other than by reason of its conversion into an annuity contract) on a policy anniversary shall be deemed to be an exempt policy on that anniversary

      • (i) if, had that anniversary occurred 60 days after the date on which it did in fact occur, the policy would have been an exempt policy on that later date, or

      • (ii) if the person whose life is insured under the policy dies on that anniversary or within 60 days thereafter.

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • SOR/83-865, s. 5
  • SOR/94-415, s. 2
  • SOR/94-686, ss. 55(F), 56(F)

Accumulating Funds

  •  (1) For the purposes of this Part and section 12.2, paragraph 56(1)(d.1) and section 148 of the Act, accumulating fund at any particular time means,

    • (a) in respect of a taxpayer’s interest in an annuity contract (other than a contract issued by a life insurer), the amount that is the greater of

      • (i) the amount, if any, by which the cash surrender value of his interest at that time exceeds the amount payable, if any, in respect of a loan outstanding at that time made under the contract in respect of the interest, and

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

        • (A) the present value at that time of future payments to be made out of the contract in respect of his interest

        exceeds the aggregate of

        • (B) the present value at that time of future premiums to be paid under the contract in respect of his interest, and

        • (C) the amount payable, if any, in respect of a loan outstanding at that time, made under the contract in respect of his interest;

    • (b) in respect of a taxpayer’s interest in a life insurance policy (other than an exemption test policy or an annuity contract to which paragraph (1)(a) applies), the product obtained when,

      • (i) where the policy is not a deposit administration fund policy and the particular time is immediately after the death of any person on whose life the life insurance policy is issued or effected, the aggregate of the maximum amounts that could be determined by the life insurer immediately before the death in respect of the policy under paragraph 1401(1)(c) and subparagraph 1401(1)(d)(i) if the mortality rates used were adjusted to reflect the assumption that the death would occur at the time and in the manner that it did occur, and

      • (ii) in any other case, the maximum amount that could be determined at that particular time by the life insurer under paragraph 1401(1)(a), computed as though there were only one deposit administration fund policy, or under paragraph 1401(1)(c), as the case may be, in respect of the policy

      is multiplied by

      • (iii) the taxpayer’s proportionate interest in the policy,

      assuming for the purposes of this paragraph that the life insurer carried on its life insurance business in Canada, its taxation year ended at the particular time and the policy was a life insurance policy in Canada; and

    • (c) in respect of an exemption test policy,

      • (i) where the policy was issued at least 20 years before the particular time, the amount that would be determined at that particular time by the life insurer under clause 1401(1)(c)(ii)(A) in respect of the policy if the insurer’s taxation year ended at that particular time, and

      • (ii) in any other case, the product obtained when the amount that would be determined under subparagraph (i) in respect of the policy on its twentieth policy anniversary is multiplied by the quotient obtained when the number of years since the policy was issued is divided by 20.

  • (2) For the purposes of subsection (1), when computing the accumulating fund of an interest described in

    • (a) paragraph (1)(a), the amounts determined under clauses (1)(a)(ii)(A) and (B) shall be computed using,

      • (i) where an interest rate for a period used by the issuer when the contract was issued in determining the terms of the contract was less than any rate so used for a subsequent period, the single rate that would, if it applied for each period, have produced the same terms, and

      • (ii) in any other case, the rates used by the issuer when the contract was issued in determining the terms of the contract;

    • (b) paragraph (1)(b), where an interest rate used for a period by a life insurer in computing the relevant amounts in paragraph 1403(1)(a) or (b) is determined under paragraph 1403(1)(c), (d) or (e), as the case may be, and that rate is less than an interest rate so determined for a subsequent period, the single rate that could, if it applied for each period, have been used in determining the premiums for the policy shall be used; and

    • (c) paragraph (1)(c),

      • (i) the rates of interest and mortality used and the age of the person whose life is insured shall be the same as those used in computing the amounts described in paragraph 1403(1)(a) or (b) in respect of the life insurance policy in respect of which the exemption test policy was issued except that

        • (A) where the life insurance policy is one to which paragraph 1403(1)(e) applies and the amount determined under subparagraph 1401(1)(c)(i) in respect of that policy is greater than the amount determined under subparagraph 1401(1)(c)(ii) in respect thereof, the rates of interest and mortality used may be those used in computing the cash surrender values of that policy, and

        • (B) where an interest rate for a period otherwise determined under this subparagraph in respect of that interest is less than an interest rate so determined for a subsequent period, the single rate that could, if it applied for each period, have been used in determining the premiums for the life insurance policy shall be used, and

      • (ii) notwithstanding subparagraph (i),

        • (A) where the rates referred to in subparagraph (i) do not exist, the minimum guaranteed rates of interest used under the life insurance policy to determine cash surrender values and the rates of mortality under the Commissioners 1958 Standard Ordinary Mortality Table, as published in Volume X of the Transactions of the Society of Actuaries, relevant to the person whose life is insured under the life insurance policy shall be used, or

        • (B) where, in respect of the life insurance policy in respect of which the exemption test policy was issued, the period over which the amount determined under clause 1401(1)(c)(ii)(A) does not extend to the date determined under subparagraph 306(3)(d)(ii), the weighted arithmetic mean of the interest rates used to determine such amount shall be used for the period that is after that period and before that date.

  • (3) Notwithstanding paragraph (2)(c),

    • (a) in the case of a life insurance policy issued after April 30, 1985, no rate of interest used for the purpose of determining the accumulating fund in respect of an exemption test policy issued in respect thereof shall be less than 4 per cent per annum; and

    • (b) in the case of a life insurance policy issued before May 1, 1985, no rate of interest used for the purpose of determining the accumulating fund in respect of an exemption test policy issued in respect thereof shall be less than 3 per cent per annum.

  • (4) For the purposes of paragraph (1)(c),

    • (a) where on the date of issue of an exemption test policy the person whose life is insured has attained the age of 75 years, the references in paragraph (1)(c) to “20” and “twentieth” shall be read as references to “10” and “tenth” respectively; and

    • (b) where on the date of issue of an exemption test policy the person whose life is insured has attained the age of 66 years but not the age of 75 years, the references in paragraph (1)(c) to “20” and “twentieth” shall be read as references to

      • (i) the number obtained when the number of years by which the age of the person whose life is insured exceeds 65 years is subtracted from 20, and

      • (ii) the adjectival form of the number obtained by performing the computation described in subparagraph (i), respectively.

  • (5) In this section, any amount determined by reference to section 1401 shall be determined

    • (a) without regard to section 1402;

    • (b) as if each reference therein to the term “policy loan” were read as if that term had the meaning assigned by paragraph 148(9)(e) of the Act; and

    • (c) as if clauses 1401(1)(c)(i)(B) and 1401(1)(c)(ii)(C) were read without reference to the expression “or the interest thereon that has accrued to the insurer at the end of the year”.

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • SOR/83-865, s. 5
  • SOR/84-948, s. 2
  • SOR/91-290, s. 1
  • SOR/94-686, ss. 3(F), 55(F)

Net Cost of Pure Insurance and Mortality Gains and Losses

  •  (1) For the purposes of subparagraph 20(1)(e.2)(ii) and paragraph (a) of the description of L in the definition adjusted cost basis in subsection 148(9) of the Act, the net cost of pure insurance for a year in respect of a taxpayer’s interest in a life insurance policy is the product obtained when the probability, computed on the basis of the rates of mortality under the 1969-75 mortality tables of the Canadian Institute of Actuaries published in Volume XVI of the Proceedings of the Canadian Institute of Actuaries or on the basis described in subsection (1.1), that a person who has the same relevant characteristics as the person whose life is insured will die in the year is multiplied by the amount by which

    • (a) the benefit on death in respect of the taxpayer’s interest at the end of the year

    exceeds

    • (b) the accumulating fund (determined without regard to any policy loan outstanding) in respect of the taxpayer’s interest in the policy at the end of the year or the cash surrender value of such interest at the end of the year, depending on the method regularly followed by the life insurer in computing net cost of pure insurance.

  • (1.1) Where premiums for a particular class of life insurance policy offered by a life insurer do not depend directly on smoking or sex classification, the probability referred to in subsection (1) may be determined using rates of mortality otherwise determined provided that for each age for such class of life insurance policy, the expected value of the aggregate net cost of pure insurance, calculated using such rates of mortality, is equal to the expected value of the aggregate net cost of pure insurance, calculated using the rates of mortality under the 1969-75 mortality tables of the Canadian Institute of Actuaries published in Volume XVI of the Proceedings of the Canadian Institute of Actuaries.

  • (2) Subject to subsection (4), for the purposes of this section and subparagraph 148(9)(a)(v.1) of the Act, a mortality gain immediately before the end of any calendar year after 1982 in respect of a taxpayer’s interest in a life annuity contract means such reasonable amount in respect of his interest therein at that time that the life insurer determines to be the increase to the accumulating fund in respect of the interest that occurred during that year as a consequence of the survival to the end of the year of one or more of the annuitants thereunder.

  • (3) Subject to subsection (4), for the purposes of this section and subparagraph 148(9)(a)(xi) of the Act, a mortality loss immediately before a particular time after 1982 in respect of an interest in a life annuity contract disposed of immediately after that particular time as a consequence of the death of an annuitant thereunder means such reasonable amount that the life insurer determines to be the decrease, as a consequence of the death, in the accumulating fund in respect of the interest assuming that, in determining such decrease, the accumulating fund immediately after the death is determined in the manner described in subparagraph 307(1)(b)(i).

  • (4) In determining an amount for a year in respect of an interest in a life annuity contract under subsection (2) or (3), the expected value of the mortality gains in respect of the interest for the year shall be equal to the expected value of the mortality losses in respect of the interest for the year and the mortality rates for the year used in computing those expected values shall be those that would be relevant to the interest and that are specified under such of paragraphs 1403(1)(c), (d) and (e) as are applicable.

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • SOR/83-865, s. 5
  • SOR/91-290, s. 2
  • SOR/94-415, s. 3
  • SOR/94-686, s. 55(F)

Prescribed Premiums and Prescribed Increases

  •  (1) For the purposes of subsections 12.2(9) and 89(2) of the Act, section 306 and this section, a premium at any time under a life insurance policy is a “prescribed premium” if the total amount of one or more premiums paid at that time under the policy exceeds the amount of premium that, under the policy, was scheduled to be paid at that time and that was fixed and determined on or before December 1, 1982, adjusted for such of the following transactions and events that have occurred after that date in respect of the policy:

    • (a) a change in underwriting class;

    • (b) a change in premium due to a change in frequency of premium payments within a year that does not alter the present value, at the beginning of the year, of the total premiums to be paid under the policy in the year;

    • (c) an addition or deletion of accidental death or guaranteed purchase option benefits or disability benefits that provide for annuity payments or waiver of premiums;

    • (d) a premium adjustment as a result of interest, mortality or expense considerations, or of a change in the benefit on death under the policy relating to an increase in the Consumer Price Index (as published by Statistics Canada under the authority of the Statistics Act) where such adjustment

      • (i) is made by the life insurer on a class basis pursuant to the policy’s terms as they read on December 1, 1982, and

      • (ii) is not made as a result of the exercise of a conversion privilege under the policy;

    • (e) a change arising from the provision of an additional benefit on death under a participating life insurance policy (within the meaning assigned by paragraph 138(12)(k) of the Act) as, on account or in lieu of payment of, or in satisfaction of

      • (i) policy dividends or other distributions of the life insurer’s income from its participating life insurance business as determined under section 2402, or

      • (ii) interest earned on policy dividends that are held on deposit by the life insurer;

    • (f) redating lapsed policies within the reinstatement period referred to in subparagraph 148(9)(c)(vi) of the Act or redating for policy loan indebtedness;

    • (g) a change in premium due to a correction of erroneous information contained in the application for the policy;

    • (h) payment of a premium after its due date, or payment of a premium no more than 30 days before its due date, as established on or before December 1, 1982; and

    • (i) the payment of an amount described in subparagraph 148(9)(e.1)(i) of the Act.

  • (2) For the purposes of subsections 12.2(9) and 89(2) of the Act, a “prescribed increase” in a benefit on death under a life insurance policy has occurred at any time where the amount of the benefit on death under the policy at that time exceeds the amount of the benefit on death at that time under the policy that was fixed and determined on or before December 1, 1982, adjusted for such of the following transactions and events that have occurred after that date in respect of the policy:

    • (a) an increase resulting from a change described in paragraph (1)(e);

    • (b) a change as a result of interest, mortality or expense considerations, or an increase in the Consumer Price Index (as published by Statistics Canada under the authority of the Statistics Act) where such change is made by the life insurer on a class basis pursuant to the policy’s terms as they read on December 1, 1982;

    • (c) an increase in consequence of the prepayment of premiums (other than prescribed premiums) under the policy where such increase does not exceed the aggregate of the premiums that would otherwise have been paid;

    • (d) an increase in respect of a policy for which

      • (i) the benefit on death was, at December 1, 1982, a specific mathematical function of the policy’s cash surrender value or factors including the policy’s cash surrender value, and

      • (ii) that function has not changed since that date,

      unless any part of such increase is attributable to a prescribed premium paid in respect of a policy or to income earned on such a premium; and

    • (e) an increase that is granted by the life insurer on a class basis without consideration and not pursuant to any term of the contract.

  • (3) For the purposes of subsections (1) and (2), a life insurance policy that is issued as a result of the exercise of a renewal privilege provided under the terms of another policy as they read on December 1, 1982 shall be deemed to be a continuation of that other policy.

  • (4) For the purposes of subsection (2), a life insurance policy that is issued as a result of the exercise of a conversion privilege provided under the terms of another policy as they read on December 1, 1982 shall be deemed to be a continuation of that other policy except that any portion of the policy relating to the portion of the benefit on death, immediately before the conversion, that arose as a consequence of an event occurring after December 1, 1982 and described in paragraph (1)(e) shall be deemed to be a separate life insurance policy issued at the time of the conversion.

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • SOR/83-865, s. 5
  • SOR/88-165, s. 30(F)
  • SOR/94-686, s. 55(F)

Interpretation

 For the purposes of sections 300, 301 and 304 to 309 and this section,

amount payable

amount payable has the meaning assigned by paragraph 138(12)(b.1) of the Act; (montant payable)

benefit on death

benefit on death does not include policy dividends or any interest thereon held on deposit by an insurer or any additional amount payable as a result of accidental death; (prestation de décès)

cash surrender value

cash surrender value has the meaning assigned by paragraph 148(9)(b) of the Act; (valeur de rachat)

life insurance policy

life insurance policy has the meaning assigned by paragraph 138(12)(f) of the Act; (police d’assurance-vie)

life insurance policy in Canada

life insurance policy in Canada has the meaning assigned by paragraph 138(12)(g) of the Act; (police d’assurance-vie au Canada)

policy anniversary

policy anniversary includes, where a life insurance policy was in existence throughout a calendar year and there would not otherwise be a policy anniversary in the year in respect of the policy, the end of the calendar year; (anniversaire de la police)

policy loan

policy loan has the meaning assigned by paragraph 148(9)(e) of the Act; (avance sur police)

proceeds of the disposition

proceeds of the disposition has the meaning assigned by paragraph 148(9)(e.2) of the Act; (produit de la disposition)

tax anniversary date

tax anniversary date in relation to an annuity contract means the second anniversary date of the contract to occur after October 22, 1968. (date anniversaire d’imposition)

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • SOR/83-865, s. 5
  • SOR/94-686, s. 55(F)

PART IVTaxable Income Earned in a Province by a Corporation

[[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] ]

Interpretation

  •  (1) For the purposes of paragraph 124(4)(a) of the Act, a corporation’s taxable income earned in the year in a province means the aggregate of the taxable incomes of the corporation earned in the year in each of the provinces.

  • (2) For the purposes of this Part, permanent establishment in respect of a corporation means a fixed place of business of the corporation, including an office, a branch, a mine, an oil well, a farm, a timberland, a factory, a workshop or a warehouse, and

    • (a) where the corporation does not have any fixed place of business it means the principal place in which the corporation’s business is conducted;

    • (b) where a corporation carries on business through an employee or agent, established in a particular place, who has general authority to contract for his employer or principal or who has a stock of merchandise owned by his employer or principal from which he regularly fills orders which he receives, the corporation shall be deemed to have a permanent establishment in that place;

    • (c) an insurance corporation is deemed to have a permanent establishment in each province and country in which the corporation is registered or licensed to do business;

    • (d) where a corporation, otherwise having a permanent establishment in Canada, owns land in a province, such land shall be deemed to be a permanent establishment;

    • (e) where a corporation uses substantial machinery or equipment in a particular place at any time in a taxation year it shall be deemed to have a permanent establishment in that place;

    • (f) the fact that a corporation has business dealings through a commission agent, broker or other independent agent or maintains an office solely for the purchase of merchandise shall not of itself be held to mean that the corporation has a permanent establishment; and

    • (g) the fact that a corporation has a subsidiary controlled corporation in a place or a subsidiary controlled corporation engaged in trade or business in a place shall not of itself be held to mean that the corporation is operating a permanent establishment in that place.

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • SOR/78-772, s. 1
  • SOR/81-267, s. 1
  • SOR/86-390, s. 1
  • SOR/94-140, s. 1
  • SOR/94-686, ss. 4(F), 57(F), 79(F)

Computation of Taxable Income

 The amount of taxable income of a corporation earned in a year in a particular province shall be determined in accordance with the provisions of this Part.

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • SOR/94-686, s. 79(F)

General Rules

  •  (1) Where, in a taxation year, a corporation had a permanent establishment in a particular province and had no permanent establishment outside that province, the whole of its taxable income for the year shall be deemed to have been earned therein.

  • (2) Where, in a taxation year, a corporation had no permanent establishment in a particular province, no part of its taxable income for the year shall be deemed to have been earned therein.

  • (3) Except as otherwise provided, where, in a taxation year, a corporation had a permanent establishment in a province and a permanent establishment outside that province, the amount of its taxable income that shall be deemed to have been earned in the year in the province is

    • (a) in any case other than a case specified in paragraph (b) or (c), 1/2 the aggregate of

      • (i) that proportion of its taxable income for the year that the gross revenue for the year reasonably attributable to the permanent establishment in the province is of its total gross revenue for the year, and

      • (ii) that proportion of its taxable income for the year that the aggregate of the salaries and wages paid in the year by the corporation to employees of the permanent establishment in the province is of the aggregate of all salaries and wages paid in the year by the corporation;

    • (b) in any case where the gross revenue for the year of the corporation is nil, that proportion of its taxable income for the year that the aggregate of the salaries and wages paid in the year by the corporation to employees of the permanent establishment in the province is of the aggregate of all salaries and wages paid in the year by the corporation; and

    • (c) in any case where the aggregate of the salaries and wages paid in the year by the corporation is nil, that proportion of its taxable income for the year that the gross revenue for the year reasonably attributable to the permanent establishment in the province is of its total gross revenue for the year.

  • (4) For the purpose of determining the gross revenue for the year reasonably attributable to a permanent establishment in a province or country other than Canada, within the meaning of subsection (3), the following rules shall apply:

    • (a) where the destination of a shipment of merchandise to a customer to whom the merchandise is sold is in the particular province or country, the gross revenue derived therefrom shall be attributable to the permanent establishment in the province or country;

    • (b) except as provided in paragraph (c), where the destination of a shipment of merchandise to a customer to whom the merchandise is sold is in a province or country other than Canada in which the taxpayer has no permanent establishment, if the person negotiating the sale may reasonably be regarded as being attached to the permanent establishment in the particular province or country, the gross revenue derived therefrom shall be attributable to that permanent establishment;

    • (c) where the destination of a shipment of merchandise to a customer to whom the merchandise is sold is in a country other than Canada in which the taxpayer has no permanent establishment,

      • (i) if the merchandise was produced or manufactured or produced and manufactured, entirely in the particular province by the taxpayer, the gross revenue derived therefrom shall be attributable to the permanent establishment in the province, or

      • (ii) if the merchandise was produced or manufactured, or produced and manufactured, partly in the particular province and partly in another place by the taxpayer, the gross revenue derived therefrom attributable to the permanent establishment in the province shall be that proportion thereof that the salaries and wages paid in the year to employees of the permanent establishment in the province where the merchandise was partly produced or manufactured (or partly produced and manufactured) is of the aggregate of the salaries and wages paid in the year to employees of the permanent establishments where the merchandise was produced or manufactured (or produced and manufactured);

    • (d) where a customer to whom merchandise is sold instructs that shipment be made to some other person and the customer’s office with which the sale was negotiated is located in the particular province or country, the gross revenue derived therefrom shall be attributable to the permanent establishment in the province or country;

    • (e) except as provided in paragraph (f), where a customer to whom merchandise is sold instructs that shipment be made to some other person and the customer’s office with which the sale was negotiated is located in a province or country other than Canada in which the taxpayer has no permanent establishment, if the person negotiating the sale may reasonably be regarded as being attached to the permanent establishment in the particular province or country, the gross revenue derived therefrom shall be attributable to that permanent establishment;

    • (f) where a customer to whom merchandise is sold instructs that shipment be made to some other person and the customer’s office with which the sale was negotiated is located in a country other than Canada in which the taxpayer has no permanent establishment,

      • (i) if the merchandise was produced or manufactured, or produced and manufactured, entirely in the particular province by the taxpayer, the gross revenue derived therefrom shall be attributable to the permanent establishment in the province, or

      • (ii) if the merchandise was produced or manufactured, or produced and manufactured, partly in the particular province and partly in another place by the taxpayer, the gross revenue derived therefrom attributable to the permanent establishment in the province shall be that proportion thereof that the salaries and wages paid in the year to employees of the permanent establishment in the province where the merchandise was partly produced or manufactured (or partly produced and manufactured) is of the aggregate of the salaries and wages paid in the year to employees of the permanent establishments where the merchandise was produced or manufactured (or produced and manufactured);

    • (g) where gross revenue is derived from services rendered in the particular province or country, the gross revenue shall be attributable to the permanent establishment in the province or country;

    • (h) where gross revenue is derived from services rendered in a province or country other than Canada in which the taxpayer has no permanent establishment, if the person negotiating the contract may reasonably be regarded as being attached to the permanent establishment of the taxpayer in the particular province or country, the gross revenue shall be attributable to that permanent establishment;

    • (i) where standing timber or the right to cut standing timber is sold and the timber limit on which the timber is standing is in the particular province or country, the gross revenue from such sale shall be attributable to the permanent establishment of the taxpayer in the province or country; and

    • (j) gross revenue which arises from leasing land owned by the taxpayer in a province and which is included in computing its income under Part I of the Act shall be attributable to the permanent establishment, if any, of the taxpayer in the province where the land is situated.

  • (4.1) For the purposes of subsections (3) and (4), where, in a taxation year,

    • (a) the destination of a shipment of merchandise to a customer to whom the merchandise is sold by a corporation is in a country other than Canada or the customer to whom merchandise is sold by a corporation instructs that the shipment of merchandise be made by the corporation to another person and the customer’s office with which the sale was negotiated is located in a country other than Canada,

    • (b) the corporation has a permanent establishment in the other country, and

    • (c) the corporation is not subject to taxation on its income under the laws of the other country, or its gross revenue derived from the sale is not included in computing the income or profit or other base for income or profits taxation by the other country, because of

      • (i) the provisions of any taxing statute of the other country, or

      • (ii) the operation of any tax treaty or convention between Canada and the other country,

    the following rules apply:

    • (d) with respect to the gross revenue derived from the sale,

      • (i) paragraphs (4)(a) and (d) do not apply,

      • (ii) that portion of paragraph (4)(c) preceding subparagraph (i) thereof shall be read as follows:

        • “(c) where the destination of a shipment of merchandise to a customer to whom the merchandise is sold is in a country other than Canada,” and

      • (iii) that portion of paragraph (4)(f) preceding subparagraph (i) thereof shall be read as follows:

        • “(f) where a customer to whom the merchandise is sold instructs that shipment be made to some other person and the customer’s office with which the sale was negotiated is located in a country other than Canada,”; and

    • (e) for the purposes of subparagraph (3)(a)(ii), paragraph (3)(b) and subparagraphs (4)(c)(ii) and (f)(ii), salaries and wages paid in the year to employees of any permanent establishment of the corporation located in that other country” shall be deemed to be nil.

  • (5) For the purposes of subsection (3), “gross revenue” does not include interest on bonds, debentures or mortgages, dividends on shares of capital stock, or rentals or royalties from property that is not used in connection with the principal business operations of the corporation.

  • (6) For the purposes of subsection (3), where part of the corporation’s operations were conducted in partnership with one or more other persons

    • (a) the corporation’s gross revenue for the year, and

    • (b) the salaries and wages paid in the year by the corporation,

    shall include, in respect of those operations, only that proportion of

    • (c) the total gross revenue of the partnership for its fiscal period ending in or coinciding with the year, and

    • (d) the total salaries and wages paid by the partnership in its fiscal period ending in or coinciding with the year,

    respectively, that

    • (e) the corporation’s share of the income or loss of the partnership for the fiscal period ending in or coinciding with the year,

    is of

    • (f) the total income or loss of the partnership for the fiscal period ending in or coinciding with the year.

  • (7) Where a corporation pays a fee to another person under an agreement pursuant to which that other person or employees of that other person perform services for the corporation that would normally be performed by employees of the corporation, the fee so paid shall be deemed to be salary paid in the year by the corporation and that part of the fee that may reasonably be regarded as payment in respect of services rendered at a particular permanent establishment of the corporation shall be deemed to be salary paid to an employee of that permanent establishment.

  • (8) For the purposes of subsection (7), a fee does not include a commission paid to a person who is not an employee of the corporation.

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • SOR/80-949, s. 1
  • SOR/94-327, s. 1
  • SOR/94-686, ss. 78(F), 79(F), 81(F)

Transitional — Taxable Income Earned in the 1978 Taxation Year in the Northwest Territories

 Where in its 1978 taxation year a corporation had a permanent establishment in the Northwest Territories, its taxable income earned in the year in the Northwest Territories is that proportion of the amount thereof otherwise determined in accordance with this Part that the number of days in that portion of the 1978 taxation year of the corporation that is in 1978 is of the number of days in the whole of that taxation year.

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • SOR/78-772, s. 2
  • SOR/94-686, s. 79(F)

Transitional — Taxable Income Earned in the 1980 Taxation Year in the Yukon Territory

 Where in its 1980 taxation year a corporation had a permanent establishment in the Yukon Territory, its taxable income earned in the year in the Yukon Territory is that proportion of the amount thereof otherwise determined in accordance with this Part that the number of days in that portion of the 1980 taxation year of the corporation that is in 1980 is of the number of days in the whole of that taxation year.

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • SOR/81-267, s. 2
  • SOR/94-686, s. 79(F)

Insurance Corporations

  •  (1) Notwithstanding subsections 402(3) and (4), the amount of taxable income that shall be deemed to have been earned in a taxation year in a particular province by an insurance corporation is that proportion of its taxable income for the year that the aggregate of

    • (a) its net premiums for the year in respect of insurance on property situated in the province, and

    • (b) its net premiums for the year in respect of insurance, other than on property, from contracts with persons resident in the province,

    is of the total of such of its net premiums for the year as are included in computing its income for the purposes of Part I of the Act.

  • (2) In this section, net premiums of a corporation for a taxation year means the aggregate of the gross premiums received by the corporation in the year (other than consideration received for annuities), minus the aggregate for the year of

    • (a) premiums paid for reinsurance,

    • (b) dividends or rebates paid or credited to policyholders, and

    • (c) rebates or returned premiums paid in respect of the cancellation of policies,

    by the corporation.

  • (3) For the purposes of subsection (1), where an insurance corporation had no permanent establishment in a taxation year in a particular province,

    • (a) each net premium for that year in respect of insurance on property situated in the particular province shall be deemed to be a net premium in respect of insurance on property situated in the province in which the permanent establishment of the corporation to which the net premium is reasonably attributable is situated; and

    • (b) each net premium for that year in respect of insurance, other than on property, from contracts with persons resident in the particular province shall be deemed to be a net premium in respect of insurance, other than on property, from contracts with persons resident in the province in which the permanent establishment of the corporation to which the net premium is reasonably attributable is situated.

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • SOR/94-686, ss. 5(F), 57(F)

Chartered Banks

  •  (1) Notwithstanding subsections 402(3) and (4), the amount of taxable income that shall be deemed to have been earned by a chartered bank in a taxation year in a province in which it had a permanent establishment is 1/3 of the aggregate of

    • (a) that proportion of its taxable income for the year that the aggregate of the salaries and wages paid in the year by the bank to employees of its permanent establishment in the province is of the aggregate of all salaries and wages paid in the year by the bank; and

    • (b) twice that proportion of its taxable income for the year that the aggregate amount of loans and deposits of its permanent establishment in the province for the year is of the aggregate amount of all loans and deposits of the bank for the year.

  • (2) For the purposes of subsection (1), the amount of loans for a taxation year is 1/12 of the aggregate of the amounts outstanding, on the loans made by the bank, at the close of business on the last day of each month in the year.

  • (3) For the purposes of subsection (1), the amount of deposits for a taxation year is 1/12 of the aggregate of the amounts on deposit with the bank at the close of business on the last day of each month in the year.

  • (4) For the purposes of subsections (2) and (3), loans and deposits do not include bonds, stocks, debentures, items in transit and deposits in favour of Her Majesty in right of Canada.

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • SOR/80-949, s. 2

Trust and Loan Corporations

[[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] ]
  •  (1) Notwithstanding subsections 402(3) and (4), the amount of taxable income that shall be deemed to have been earned in a taxation year by a trust and loan corporation, trust corporation or loan corporation in a province in which it had a permanent establishment is that proportion of its taxable income for the year that the gross revenue for the year of its permanent establishment in the province is of the total gross revenue for the year of the corporation.

  • (2) In subsection (1), gross revenue for the year of its permanent establishment in the province means the aggregate of the gross revenue of the corporation for the year arising from

    • (a) loans secured by lands situated in the province;

    • (b) loans, not secured by land, to persons residing in the province;

    • (c) loans

      • (i) to persons residing in a province or country other than Canada in which the corporation has no permanent establishment, and

      • (ii) administered by a permanent establishment in the province,

      except loans secured by land situated in a province or country other than Canada in which the corporation has a permanent establishment; and

    • (d) business conducted at the permanent establishment in the province, other than revenue in respect of loans.

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • SOR/80-949, s. 3
  • SOR/94-686, s. 79(F)

Railway Corporations

[[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] ]
  •  (1) Notwithstanding subsections 402(3) and (4), the amount of taxable income that shall be deemed to have been earned by a railway corporation in a taxation year in a province in which it had a permanent establishment is, unless subsection (2) applies, 1/2 the aggregate of

    • (a) that proportion of the taxable income of the corporation for the year that the equated track miles of the corporation in the province is of the equated track miles of the corporation in Canada; and

    • (b) that proportion of the taxable income of the corporation for the year that the gross ton miles of the corporation for the year in the province is of the gross ton miles of the corporation for the year in Canada.

  • (2) Where a corporation to which subsection (1) would apply, if this subsection did not apply thereto, operates an airline service, ships or hotels or receives substantial revenues that are petroleum or natural gas royalties, or does a combination of two or more of those things, the amount of its taxable income that shall be deemed to have been earned in a taxation year in a province in which it had a permanent establishment is the aggregate of the amounts computed

    • (a) by applying the provisions of section 407 to that part of its taxable income for the year that may reasonably be considered to have arisen from the operation of the airline service;

    • (b) by applying the provisions of section 410 to that part of its taxable income for the year that may reasonably be considered to have arisen from the operation of the ships;

    • (c) by applying the provisions of section 402 to that part of its taxable income for the year that may reasonably be considered to have arisen from the operation of the hotels;

    • (d) by applying the provisions of section 402 to that part of its taxable income for the year that may reasonably be considered to have arisen from the ownership by the taxpayer of petroleum or natural gas rights or any interest therein; and

    • (e) by applying the provisions of subsection (1) to the remaining portion of its taxable income for the year.

  • (3) In this section, equated track miles in a specified place means the aggregate of

    • (a) the number of miles of first main track,

    • (b) 80 per cent of the number of miles of other main tracks, and

    • (c) 50 per cent of the number of miles of yard tracks and sidings,

    in that place.

  • (4) For the purpose of making an allocation under paragraph (2)(b), a reference in section 410 to “salaries and wages paid in the year by the corporation to employees” shall be read as a reference to salaries and wages paid by the corporation to employees employed in the operation of permanent establishments (other than ships) maintained for the shipping business.

  • (5) For the purpose of making an allocation under paragraph (2)(c),

    • (a) a reference in section 402 to “gross revenue for the year reasonably attributable to the permanent establishment in the province” shall be read as a reference to the gross revenue of the taxpayer from operating hotels therein;

    • (b) a reference in section 402 to “total gross revenue for the year” shall be read as a reference to the total gross revenue of the taxpayer for the year from operating hotels; and

    • (c) a reference in section 402 to “salaries and wages paid in the year by the corporation to employees” shall be read as a reference to salaries and wages paid to employees engaged in the operations of its hotels.

  • (6) Notwithstanding subsection 402(5), for the purpose of making an allocation under paragraph (2)(d),

    • (a) a reference in section 402 to “gross revenue for the year reasonably attributable to the permanent establishment in the province” shall be read as a reference to the gross revenue of the taxpayer from the ownership by the taxpayer of petroleum and natural gas rights in lands in the province and any interest therein;

    • (b) a reference in section 402 to “total gross revenue for the year” shall be read as a reference to the total gross revenue of the taxpayer from ownership by the taxpayer of petroleum and natural gas rights and any interest therein; and

    • (c) a reference in section 402 to “salaries and wages paid in the year by the corporation to employees” shall be read as a reference to salaries and wages paid to employees employed in connection with the corporation’s petroleum and natural gas rights and interests therein.

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • SOR/80-949, s. 4
  • SOR/94-686, ss. 57(F), 79(F)

Airline Corporations

  •  (1) Notwithstanding subsections 402(3) and (4), the amount of taxable income that shall be deemed to have been earned in a taxation year by an airline corporation in a province in which it had a permanent establishment is the amount that is equal to 1/4 of the aggregate of

    • (a) that proportion of its taxable income for the year that the capital cost of all the corporation’s fixed assets, except aircraft, in the province at the end of the year is of the capital cost of all its fixed assets, except aircraft, in Canada at the end of the year; and

    • (b) that proportion of its taxable income for the year that three times the number of revenue plane miles flown by its aircraft in the province during the year is of the total number of revenue plane miles flown by its aircraft in Canada during the year other than miles flown in a province in which the corporation had no permanent establishment.

  • (2) For the purposes of this section, “revenue plane miles flown” shall be weighted according to take-off weight of the aircraft operated.

  • (3) For the purposes of this section, take-off weight of an aircraft means

    • (a) for an aircraft in respect of which an application form for a Certificate of Airworthiness has been submitted to and accepted by the Department of Transport, the maximum permissible take-off weight, in pounds, shown on the form; and

    • (b) for any other aircraft, the weight, in pounds, that may reasonably be considered to be the equivalent of the weight referred to in paragraph (a).

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • SOR/78-326, s. 1
  • SOR/80-949, s. 5
  • SOR/94-327, s. 2
  • SOR/94-686, s. 6(F)

Grain Elevator Operators

 Notwithstanding subsections 402(3) and (4), the amount of taxable income of a corporation whose chief business is the operation of grain elevators that shall be deemed to have been earned by that corporation in a taxation year in a province in which it had a permanent establishment is 1/2 of the aggregate of

  • (a) that proportion of its taxable income for the year that the number of bushels of grain received in the year in the elevators operated by the corporation in the province is of the total number of bushels of grain received in the year in all the elevators operated by the corporation; and

  • (b) that proportion of its taxable income for the year that the aggregate of salaries and wages paid in the year by the corporation to employees of its permanent establishment in the province is of the aggregate of all salaries and wages paid in the year by the corporation.

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • SOR/80-949, s. 6
  • SOR/94-686, s. 79(F)

Bus and Truck Operators

 Notwithstanding subsections 402(3) and (4), the amount of taxable income of a corporation whose chief business is the transportation of goods or passengers (other than by the operation of a railway, ship or airline service) that shall be deemed to have been earned by that corporation in a taxation year in a province in which it had a permanent establishment is 1/2 of the aggregate of

  • (a) that proportion of its taxable income for the year that the number of kilometres driven by the corporation’s vehicles, whether owned or leased, on roads in the province in the year is of the total number of kilometres driven by those vehicles in the year on roads other than roads in provinces or countries in which the corporation had no permanent establishment; and

  • (b) that proportion of its taxable income for the year that the aggregate of salaries and wages paid in the year by the corporation to employees of its permanent establishment in the province is of the aggregate of all salaries and wages paid in the year by the corporation.

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • SOR/80-949, s. 7
  • SOR/86-585, s. 1
  • SOR/94-686, s. 79(F)

Ship Operators

  •  (1) Notwithstanding subsections 402(3) and (4), the amount of taxable income of a corporation whose chief business is the operation of ships that shall be deemed to have been earned by the corporation in a taxation year in a province in which it had a permanent establishment is the aggregate of,

    • (a) that proportion of its allocable income for the year that its port-call-tonnage in the province is of its total port-call-tonnage in all the provinces in which it had a permanent establishment; and

    • (b) if its taxable income for the year exceeds its allocable income for the year, that proportion of the excess that the aggregate of the salaries and wages paid in the year by the corporation to employees of the permanent establishment (other than a ship) in the province is of the aggregate of salaries and wages paid in the year by the corporation to employees of its permanent establishments (other than ships) in Canada.

  • (2) In this section,

    • (a) allocable income for the year means that proportion of the taxable income of the corporation for the year that its total port-call-tonnage in Canada is of its total port-call-tonnage in all countries; and

    • (b) port-call-tonnage in a province or country means the aggregate of the products obtained by multiplying, for each ship operated by the corporation, the number of calls made in the year by that ship at ports in that province or country by the number of tons of the registered net tonnage of that ship.

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • SOR/80-949, s. 7
  • SOR/94-686, s. 79(F)

Pipeline Operators

 Notwithstanding subsections 402(3) and (4), the amount of taxable income of a corporation whose chief business is the operation of a pipeline that shall be deemed to have been earned by that corporation in a taxation year in a province in which it had a permanent establishment is 1/2 of the aggregate of

  • (a) that proportion of its taxable income for the year that the number of miles of pipeline of the corporation in the province is of the number of miles of pipeline of the corporation in all the provinces in which it had a permanent establishment; and

  • (b) that proportion of its taxable income for the year that the aggregate of the salaries and wages paid in the year by the corporation to employees of its permanent establishment in the province is of the aggregate of salaries and wages paid in the year by the corporation to employees of its permanent establishments in Canada.

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • SOR/80-949, s. 7
  • SOR/94-686, s. 79(F)

Divided Businesses

 Where part of the business of a corporation for a taxation year, other than a corporation described in section 403, 404, 405, 406, 407, 408, 409, 410 or 411, consisted of operations normally conducted by a corporation described in one of those sections, the corporation and the Minister may agree to determine the amount of taxable income deemed to have been earned in the year in a particular province to be the aggregate of the amounts computed

  • (a) by applying the provisions of such of those sections as would have been applicable if it had been a corporation described therein to the portion of its taxable income for the year that might reasonably be considered to have arisen from that part of the business; and

  • (b) by applying the provisions of section 402 to the remaining portion of its taxable income for the year.

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • SOR/94-686, s. 79(F)

Non-Resident Corporations

[[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] ]
  •  (1) For the purposes of this Part, where a corporation is not resident in Canada, “salaries and wages paid in the year” by the corporation does not include salaries and wages paid to employees of a permanent establishment outside Canada and “taxable income” shall be deemed to refer to taxable income earned in Canada as determined under section 115 of the Act.

  • (2) For the purposes of paragraph 402(3)(a), where a corporation is not resident in Canada, “total gross revenue for the year” of the corporation does not include gross revenue reasonably attributable to a permanent establishment outside Canada.

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • SOR/94-686, s. 79(F)

Nova Scotia Offshore Area

 For the purpose of subsection 123(2) of the Act, the amount taxable earned by the corporation in the year in the Nova Scotia offshore area, in respect of a corporation for a taxation year, means the amount of taxable income of the corporation earned in the year that would be allocated under this Part to the Nova Scotia offshore area if the reference to the word “province” in this Part were read as “Nova Scotia offshore area”.

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • SOR/85-741, s. 1
  • SOR/94-686, s. 79(F)

 For the purposes of this Part and subsection 123(2) of the Act, Nova Scotia offshore area has the meaning assigned to the expression “offshore area” by subsection 63(1) of the Canada-Nova Scotia Oil and Gas Agreement Act.

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • SOR/85-741, s. 1

PART VNon-Resident-Owned Investment Corporations

[[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] ]

Elections

 Any election by a corporation to be taxed under section 133 of the Act shall be made by forwarding by registered mail to the Director — Taxation at the District Office of the Department of National Revenue, Taxation that serves the area in which the head office of the corporation is located the following documents:

  • (a) a letter stating that the corporation elects to be taxed under the said section 133;

  • (b) a certified copy of the resolution of the directors of the corporation authorizing the election to be made; and

  • (c) a certified list showing

    • (i) the names and addresses of the registered shareholders and the number of shares of each class held by each,

    • (ii) the names and addresses of the holders of the corporation’s bonds, debentures, or other funded indebtedness, if any, and

    • (iii) the names and addresses of the beneficial owners of shares, bonds, debentures, or other funded indebtedness in cases where the registered shareholders or holders, as the case may be, are not the beneficial owners.

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • SOR/83-268, s. 1
  • SOR/94-686, ss. 7(F), 79(F)

Elections Revoked

 Any election to be taxed under section 133 of the Act shall be revoked by a corporation by forwarding by registered mail to the Deputy Minister of National Revenue for Taxation at Ottawa the following documents in duplicate:

  • (a) a letter stating that the corporation revokes its election; and

  • (b) a certified copy of the resolution of the directors of the corporation authorizing the election to be revoked.

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • SOR/94-686, s. 79(F)

Certificates of Changes of Ownership

 A corporation which is taxable under section 133 of the Act shall attach to its return of income required to be filed under subsection 150(1) of the Act, a certified statement showing any changes during the taxation year in the information referred to in paragraph 500(c).

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • SOR/94-686, s. 79(F)

 [Repealed, SOR/80-140, s. 1]

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • SOR/80-140, s. 1

PART VIElections

 For the purposes of paragraphs 220(3.2)(a) and (b) of the Act, the following are prescribed provisions:

  • (a) section 21 of the Act;

  • (b) subsections 7(10), 13(4), (7.4) and (29), 14(6), 44(1) and (6), 45(2) and (3), 50(1), 53(2.1), 70(6.2), (9), (9.1), (9.2) and (9.3), 72(2), 73(1), 80.1(1), 82(3), 83(2), 104(5.3) and (14), 143(2), 146.01(7), 164(6) and (6.1), 184(3) and 256(9) of the Act;

  • (c) paragraphs 12(2.2)(b), 66.7(7)(c), (d) and (e) and (8)(c), (d) and (e), 80.01(4)(c), 86.1(2)(f) and 128.1(4)(d) of the Act;

  • (d) subsections 1103(1), (2) and (2d) and 5907(2.1) of these Regulations.

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • SOR/92-265, s. 1
  • SOR/93-530, s. 1
  • SOR/95-367, s. 1
  • SOR/96-128, s. 1
  • SOR/97-471, s. 1
  • SOR/99-17, s. 7
  • SOR/2001-216, s. 2
  • SOR/2002-144, s. 1
  • SOR/2005-123, s. 3
  • SOR/2005-185, s. 3

PART VIILogging Taxes on Income

[[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] ]

Logging

  •  (1) Except as provided in subsection (2), for the purposes of paragraph 127(2)(a) of the Act income for the year from logging operations in the province means the aggregate of

    • (a) where standing timber is cut in the province by the taxpayer or logs cut from standing timber in the province are acquired by the taxpayer and the logs so obtained are sold by the taxpayer in the province before or on delivery to a sawmill, pulp or paper plant or other place for processing logs, the taxpayer’s income for the year from the sale, other than any portion thereof that was included in computing the taxpayer’s income from logging operations in the province for a previous year;

    • (b) where standing timber in the province or the right to cut standing timber in the province is sold by the taxpayer, the taxpayer’s income for the year from the sale, other than any portion thereof that was included in computing the taxpayer’s income from logging operations in the province for a previous year;

    • (c) where standing timber is cut in the province by the taxpayer or logs cut from standing timber in the province are acquired by the taxpayer, if the logs so obtained are

      • (i) exported from the province and are sold by him prior to or on delivery to a sawmill, pulp or paper plant or other place for processing logs, or

      • (ii) exported from Canada,

      the amount computed by deducting from the value, as determined by the province, of the logs so exported in the year, the aggregate of the costs of acquiring, cutting, transporting and selling the logs; and

    • (d) where standing timber is cut in the province by the taxpayer or logs cut from standing timber in the province are acquired by the taxpayer, if the logs are processed by the taxpayer or by a person on his behalf in a sawmill, pulp or paper plant or other place for processing logs in Canada, the income of the taxpayer for the year from all sources minus the aggregate of

      • (i) his income from sources other than logging operations carried on in Canada and other than the processing in Canada by him or on his behalf and sale by him of logs, timber and products produced therefrom,

      • (ii) each amount included in the aggregate determined under this subsection by virtue of paragraph (a), (b) or (c), and

      • (iii) an amount equal to eight per cent of the original cost to him of properties described in Schedule II used by him in the year in the processing of logs or products derived therefrom or, if the amount so determined is greater than 65 per cent of the income remaining after making the deductions under subparagraphs (i) and (ii), 65 per cent of the income so remaining or, if the amount so determined is less than 35 per cent of the income so remaining, 35 per cent of the income so remaining.

  • (2) Where the taxpayer cuts standing timber or acquires logs cut from standing timber in more than one province, for the purposes of paragraph 127(2)(a) of the Act income for the year from logging operations in the province means the aggregate of

    • (a) the amounts determined in respect of that province in accordance with paragraphs (1)(a), (b) and (c); and

    • (b) where the logs are processed by the taxpayer or by a person on his behalf in a sawmill, pulp or paper plant or other place for processing logs in Canada, an amount equal to the proportion of the income of the taxpayer for the year from all sources minus the aggregate of

      • (i) his income from sources other than logging operations carried on in Canada and other than the processing in Canada by him or on his behalf and sale by him of logs, timber and products produced therefrom,

      • (ii) the aggregate of amounts determined in respect of each province in accordance with paragraphs (1)(a), (b) and (c), and

      • (iii) an amount equal to eight per cent of the original cost to him of properties described in Schedule II used by him in the year in the processing of logs or products derived therefrom or, if the amount so determined is greater than 65 per cent of the income remaining after making the deductions under subparagraphs (i) and (ii), 65 per cent of the income so remaining or, if the amount so determined is less than 35 per cent of the income so remaining, 35 per cent of the income so remaining,

      that

      • (iv) the quantity of standing timber cut in the province in the year by the taxpayer and logs cut from standing timber in the province acquired by the taxpayer in the year,

      is of

      • (v) the total quantity of standing timber cut and logs acquired in the year by the taxpayer.

  • (3) For the purposes of paragraph 127(2)(b) of the Act, the tax imposed by the legislature of

    • (a) the Province of British Columbia under the Logging Tax Act of that province, and

    • (b) [Repealed, SOR/83-20, s. 1]

    • (c) the Province of Quebec under Part VII of the Taxation Act of that province,

    are each declared to be a tax of general application on income from logging operations.

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • SOR/83-20, s. 1
  • SOR/87-668, s. 1
  • SOR/92-516, s. 1

 [Repealed, SOR/78-377, s. 2]

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • SOR/78-377, s. 2

PART VIIINon-Resident Taxes

Registered Non-Resident Insurers

 For the purposes of subsection 215(4) of the Act, subsections 215(1), (2) and (3) of the Act do not apply to amounts paid or credited to a registered non-resident insurer.

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • SOR/79-424, s. 1

Filing of Returns by Non-Resident Insurers

 For the purposes of subsection 215(4) of the Act, where a taxpayer is a registered non-resident insurer in a taxation year, the taxpayer shall file a return in respect thereof in prescribed form with the Minister within the six month period immediately following the end of the year.

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • SOR/79-424, s. 1
  • SOR/88-165, s. 31(F)
  • SOR/90-661, s. 1

Amounts Taxable

 For the purposes of paragraph 214(13)(c) of the Act, the amounts taxable under Part XIII of the Act in a relevant taxation year of a taxpayer are amounts paid or credited to the taxpayer in the relevant taxation year other than amounts included pursuant to Part I of the Act in computing the taxpayer’s income from a business carried on by it in Canada.

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • SOR/79-424, s. 1

Payment of Tax by Non-Resident Insurers

 For the purposes of subsection 215(4) of the Act, a taxpayer shall pay to the Receiver General, on or before the last day on which the return in respect of a relevant taxation year is required to be filed pursuant to section 801, the tax payable by the taxpayer under Part XIII of the Act on amounts referred to in section 802 in respect of the relevant taxation year.

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • SOR/79-424, s. 1

Interpretation

 In this Part, registered non-resident insurer means a non-resident corporation approved to carry on business in Canada under the Insurance Companies Act.

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • SOR/79-424, s. 1
  • SOR/94-686, s. 79(F)
  • SOR/2000-413, s. 1

Other Non-Resident Persons

[[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] ]
  •  (1) Every non-resident person who carries on business in Canada shall be taxable under Part XIII of the Act on all amounts otherwise taxable under that Part except those amounts that

    • (a) may reasonably be attributed to the business carried on by him through a permanent establishment (within the meaning assigned by subsection 400(2) or that would be assigned by that subsection if he were a corporation) in Canada; or

    • (b) are required by subparagraph 115(1)(a)(iii.3) of the Act to be included in computing his taxable income earned in the year in Canada.

  • (2) Where the Minister is satisfied that under subsection (1) an amount is not taxable under Part XIII of the Act, he may permit payment to be made to the non-resident person without any deduction being made under section 215 of the Act.

  • (3) Subsections (1) and (2) do not apply in respect of amounts upon which tax under Part XIII of the Act is payable in a relevant taxation year by a taxpayer required by section 801 to file the return described in that section in respect of that year.

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • SOR/81-656, s. 1
  • SOR/84-948, s. 3
  • SOR/88-165, s. 3
  • SOR/94-686, ss. 50(F), 79(F)

International Organizations and Agencies

 For the purposes of clause 212(1)(b)(ii)(B) of the Act, the following international organizations and agencies are hereby prescribed:

  • (a) Bank for International Settlements;

  • (b) European Fund;

  • (c) International Bank for Reconstruction and Development;

  • (d) International Development Association;

  • (e) International Finance Corporation; and

  • (f) International Monetary Fund.

 For the purposes of subparagraph 212(1)(b)(x) of the Act, the Bank for International Settlements and the European Bank for Reconstruction and Development are prescribed international agencies.

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • SOR/88-165, s. 4
  • SOR/94-188, s. 1

Prescribed Obligation

 For the purpose of paragraph 212(1)(b) of the Act, an obligation is a prescribed obligation if it is an indexed debt obligation and no amount payable in respect of it is

  • (a) contingent or dependent upon the use of, or production from, property in Canada; or

  • (b) computed by reference to

    • (i) revenue, profit, cash flow, commodity price or any other similar criterion, other than a change in the purchasing power of money, or

    • (ii) dividends paid or payable to shareholders of any class of shares.

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • SOR/93-345, s. 1
  • SOR/94-686, s. 79(F)
  • SOR/96-435, s. 2

Identification of Obligations

 For the purposes of subsection 240(2) of the Act, the letters “AX” or the letter “F”, as the case may be, shall be clearly and indelibly printed in gothic or similar style capital letters of seven point or larger size either as a prefix to the coupon number or on the lower right hand corner of each coupon or other writing issued in evidence of a right to interest on an obligation referred to in that subsection.

Allowances in Respect of Investment in Property in Canada

  •  (1) For the purposes of paragraph 219(1)(h) of the Act, a corporation’s allowance for a taxation year in respect of its investment in property in Canada is hereby prescribed to be the amount, if any, by which

    • (a) the corporation’s qualified investment in property in Canada at the end of the year,

    exceeds

    • (b) the aggregate of

      • (i) all allowances computed under this section as it read in its application to each of the taxation years of the corporation that ended before 1972 to the extent that for those taxation years such allowances reduced the amount on which the corporation was taxable under subsection 110B(1) of the Act as it read in its application to those taxation years, and

      • (ii) the capital investment of the corporation in property in Canada at the end of the corporation’s 1960 taxation year, determined under this section as it read in its application to the 1961 taxation year.

  • (2) For the purposes of subsection (1), where, at the end of a taxation year, a corporation is not a member of a partnership that was carrying on business in Canada at any time in the year, the corporation’s “qualified investment in property in Canada at the end of the year” is the amount, if any, by which the aggregate of

    • (a) the cost amount to the corporation, at the end of the year, of land in Canada owned by it at that time for the purpose of gaining or producing income from a business carried on by it in Canada, other than land that is

      • (i) described in the corporation’s inventory,

      • (ii) depreciable property,

      • (iii) a Canadian resource property, or

      • (iv) land the cost of which is or was deductible in computing the corporation’s income,

    • (b) an amount equal to the aggregate of the cost amount to the corporation, immediately after the end of the year, of each depreciable property in Canada owned by it for the purpose of gaining or producing income from a business carried on by it in Canada,

    • (c) an amount equal to 4/3 of the cumulative eligible capital of the corporation immediately after the end of the year in respect of each business carried on by it in Canada,

    • (d) where the corporation is not a principal-business corporation, within the meaning assigned by paragraph 66(15)(h) of the Act, an amount equal to the aggregate of the corporation’s

      • (i) Canadian exploration and development expenses, within the meaning assigned by paragraph 66(15)(b) of the Act, incurred by the corporation before the end of the year except to the extent that such expenses were deducted by the corporation in computing its income for the year or for a previous taxation year, and

      • (ii) cumulative Canadian exploration expense, within the meaning assigned by paragraph 66.1(6)(b) of the Act, at the end of the year minus any deduction under subsection 66.1(3) of the Act in computing the corporation’s income for the year,

    • (d.1) an amount equal to the corporation’s cumulative Canadian development expense, within the meaning assigned by paragraph 66.2(5)(b) of the Act, at the end of the year minus any deduction under subsection 66.2(2) of the Act in computing the corporation’s income for the year,

    • (d.2) an amount equal to the corporation’s cumulative Canadian oil and gas property expense, within the meaning assigned by paragraph 66.4(5)(b) of the Act, at the end of the year minus any deduction under subsection 66.4(2) of the Act in computing the corporation’s income for the year,

    • (e) an amount equal to the aggregate of the cost amount to the corporation at the end of the year of each debt owing to it, or any other right of the corporation to receive an amount, that was outstanding as a result of the disposition by it of property in respect of which an amount would be included, by virtue of paragraph (a), (b), (c) or (h), in its qualified investment in property in Canada at the end of the year if the property had not been disposed of by it before the end of that year,

    • (f) an amount equal to the aggregate of the cost amount to the corporation at the end of the year of each property, other than a Canadian resource property, that was described in the corporation’s inventory in respect of a business carried on by it in Canada,

    • (g) an amount equal to the aggregate of the cost amount to the corporation at the end of the year of each debt (other than a debt referred to in paragraph (e) or a debt the amount of which was deducted under paragraph 20(1)(p) of the Act in computing the corporation’s income for the year) owing to it

      • (i) in respect of any transaction by virtue of which an amount has been included in computing its income for the year or for a previous year from a business carried on by it in Canada, or

      • (ii) where any part of its ordinary business carried on in Canada was the lending of money, in respect of a loan made by the corporation in the ordinary course of that part of its business,

    • (h) where the corporation was resident in Canada at any time in the year, an amount equal to the aggregate of the cost amount to the corporation at the end of the year of any property in Canada owned by it

      • (i) the cost amount of which is not included in its qualified investment in property in Canada at the end of the year by virtue of paragraph (a) or (b) or subparagraph (g)(i), but would be so included if those provisions were read without the phrase “from a business carried on by it in Canada”,

      • (ii) that is a share of the capital stock of a corporation that was not described in the corporation’s inventory in respect of a business carried on by it in Canada, or

      • (iii) that is a bond, debenture, bill, note, mortgage or similar obligation that was not described in the corporation’s inventory in respect of a business carried on by it in Canada (other than an obligation referred to in subparagraph (3)(a)(iii), a debt referred to in paragraph (e) or (g) or a debt the amount of which was deducted under paragraph 20(1)(p) of the Act in computing the corporation’s income for the year), and

    • (i) an amount equal to the allowable liquid assets of the corporation at the end of the year,

    exceeds the aggregate of

    • (j) an amount equal to the aggregate of each amount deducted by the corporation under paragraph 20(1)(l), (l.1) or (n) or subsection 64(1), (1.1) or (1.2) of the Act in computing its income for the year from a business carried on by it in Canada,

    • (k) an amount equal to the aggregate of all amounts each of which is an amount deducted by the corporation in the year under subparagraph 40(1)(a)(iii) or 44(1)(e)(iii) of the Act in respect of a debt referred to in paragraph (e);

    • (l) an amount equal to the aggregate of each amount owing by the corporation at the end of the year on account of

      • (i) the purchase price of property that is referred to in paragraph (a), (b), (f) or (h) or that would be so referred to but for the fact that it has been disposed of before the end of the year,

      • (ii) Canadian exploration and development expenses, Canadian exploration expense, Canadian development expense or Canadian oil and gas property expense, within the meanings assigned by paragraphs 66(15)(b), 66.1(6)(a), 66.2(5)(a) and 66.4(5)(a) of the Act, respectively,

      • (iii) an eligible capital expenditure made or incurred by the corporation before the end of the year in respect of a business carried on by it in Canada, or

      • (iv) any other outlay or expense made or incurred by the corporation to the extent that it was deducted in computing its income for the year or for a previous taxation year from a business carried on by it in Canada;

    • (m) an amount equal to the aggregate of all amounts each of which is an amount equal to that proportion of the amount owing (other than an amount owing on account of an outlay or expense referred to in paragraph (l)) by the corporation at the end of the year on account of an obligation outstanding at any time in the year in respect of which interest is stipulated to be payable by it that

      • (i) the interest paid or payable on the obligation by the corporation in respect of the year that is deductible, or would be deductible but for subsection 18(2), (3.1) or (4) or section 21 of the Act, in computing its income for the year from a business carried on by it in Canada,

      is of

      • (ii) the interest paid or payable on the obligation by the corporation in respect of the year;

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

      • (i) the amount (referred to in this paragraph as “Part I liability”), if any, by which the tax payable for the year by the corporation under Part I of the Act exceeds the amount, if any, paid by the corporation before the end of the year on account thereof,

      exceeds

      • (ii) where the corporation was, throughout the year, not resident in Canada, that proportion of the Part I liability that the amount, if any, determined under paragraph 219(1)(d) of the Act in respect of the corporation for the year is of the corporation’s amount taxable (within the meaning given to that expression in section 123 of the Act) for the year, or

      • (iii) in any other case, nil;

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

      • (i) the amount (referred to in this paragraph as “provincial tax liability”), if any, by which any income taxes payable for the year by the corporation to the government of a province (to the extent that such taxes were not deductible under Part I of the Act in computing the corporation’s income for the year from a business carried on by it in Canada) exceeds the amount, if any, paid by the corporation before the end of the year on account thereof,

      exceeds

      • (ii) where the corporation was, throughout the year, not resident in Canada, that proportion of the provincial tax liability that the amount, if any, determined under paragraph 219(1)(d) of the Act in respect of the corporation for the year is of the corporation’s amount taxable (within the meaning given to that expression in section 123 of the Act) for the year, or

      • (iii) in any other case, nil; and

    • (p) where the corporation was resident in Canada at any time in the year, an amount equal to the aggregate of

      • (i) an amount equal to the aggregate of each amount deducted by the corporation in the year under paragraph 20(1)(l) or (l.1) or subsection 64(1), (1.1) or (1.2) of the Act in computing its income for the year from a source other than

        • (A) a business carried on by it in Canada, or

        • (B) a property situated outside Canada,

      • (ii) an amount equal to the aggregate of each amount owing by the corporation at the end of the year on account of any outlay or expense made or incurred by the corporation to the extent that it was deducted in computing its income for the year or for a previous taxation year from a source other than

        • (A) a business carried on by it in Canada, or

        • (B) a property situated outside Canada, and

      • (iii) an amount equal to the aggregate of all amounts each of which is an amount equal to that proportion of the amount owing (other than an amount owing on account of an outlay or expense referred to in subparagraph (ii) or paragraph (l)) by the corporation at the end of the year on account of an obligation outstanding at any time in the year in respect of which interest is stipulated to be payable by it that

        • (A) the interest paid or payable on the obligation by the corporation in respect of the year that is deductible, or would be deductible but for subsection 18(2), (3.1) or (4) or section 21 of the Act, in computing its income for the year from a source other than

          • (I) a business carried on by it in Canada, or

          • (II) a property situated outside Canada,

        is of

        • (B) the interest paid or payable on the obligation by the corporation in respect of the year.

  • (3) For the purposes of paragraph (2)(i), the “allowable liquid assets of the corporation at the end of the year” is an amount equal to the lesser of

    • (a) the aggregate of

      • (i) the amount of Canadian currency owned by the corporation at the end of that year,

      • (ii) the balance standing to the credit of the corporation at the end of that year as or on account of amounts deposited with a branch or other office in Canada of

        • (A) a bank,

        • (B) a corporation licenced or otherwise authorized under the laws of Canada or a province to carry on in Canada the business of offering to the public its services as trustee, or

        • (C) a credit union, and

      • (iii) an amount equal to the aggregate of the cost amount to the corporation at the end of that year of each bond, debenture, bill, note, mortgage or similar obligation that was not described in the corporation’s inventory in respect of a business carried on by it in Canada (other than a debt referred to in paragraph (2)(e) or (g) or a debt the amount of which was deducted under paragraph 20(1)(p) of the Act in computing the corporation’s income for the year), that was issued by a person resident in Canada with whom the corporation was dealing at arm’s length and that matures within one year after the date on which it was acquired by the corporation,

      to the extent that such amounts are attributable to the profits of the corporation from carrying on a business in Canada, or are used or held by the corporation in the year in the course of carrying on a business in Canada; and

    • (b) an amount equal to 4/3 of the quotient obtained by dividing

      • (i) the aggregate of all amounts that would otherwise be determined under subparagraphs (a)(i), (ii) and (iii) if the references therein to “at the end of that year” were read as references to “at the end of each month in that year”,

      by

      • (ii) the number of months in that year.

  • (4) For the purposes of subsection (1), where, at the end of a taxation year, a corporation is a member of a partnership that was carrying on business in Canada at any time in that year, the corporation’s qualified investment in property in Canada at the end of the year is an amount equal to the aggregate of

    • (a) the amount, if any, that would be determined under subsection (2) if the corporation were not, at the end of the year, a member of a partnership that was carrying on business in Canada at any time in the year; and

    • (b) an amount equal to the portion of the amount of the partnership’s qualified investment in property in Canada at the end of the last fiscal period of the partnership ending in the taxation year of the corporation that may reasonably be attributed to the corporation, having regard to all the circumstances including the rights the corporation would have, if the partnership ceased to exist, to share in the distribution of the property owned by the partnership for the purpose of gaining or producing income from a business carried on by it in Canada.

  • (5) For the purposes of subsection (4), a partnership’s “qualified investment in property in Canada” at the end of a fiscal period is the amount, if any, by which the aggregate of

    • (a) the cost amount to the partnership, at the end of the fiscal period, of land in Canada owned by it at that time for the purpose of gaining or producing income from a business carried on by it in Canada, other than land that is

      • (i) described in the inventory of the partnership,

      • (ii) depreciable property,

      • (iii) a Canadian resource property, or

      • (iv) land the cost of which is or was deductible in computing the income of the partnership or the income of a member of the partnership,

    • (b) an amount equal to the aggregate of the cost amount to the partnership, immediately after the end of the fiscal period, of each depreciable property in Canada owned by it for the purpose of gaining or producing income from a business carried on by it in Canada,

    • (c) an amount equal to 4/3 of the cumulative eligible capital of the partnership immediately after the end of the fiscal period in respect of each business carried on by it in Canada,

    • (d) an amount equal to the aggregate of the cost amount to the partnership at the end of the fiscal period of each debt owing to it, or any other right of the partnership to receive an amount, that was outstanding as a result of the disposition by it of property in respect of which an amount would be included, by virtue of paragraph (a), (b) or (c), in its qualified investment in property in Canada at the end of the fiscal period if the property had not been disposed of by it before the end of that fiscal period,

    • (e) an amount equal to the aggregate of the cost amount to the partnership at the end of the fiscal period of each property, other than a Canadian resource property, that was described in the partnership’s inventory in respect of a business carried on by it in Canada,

    • (f) an amount equal to the aggregate of the cost amount to the partnership at the end of the fiscal period of each debt (other than a debt referred to in paragraph (d) or a debt the amount of which was deducted under paragraph 20(1)(p) of the Act in computing the partnership’s income for the fiscal period) owing to it

      • (i) in respect of any transaction by virtue of which an amount has been included in computing its income for the fiscal period or for a previous fiscal period or in computing the income of a member of the partnership for a previous taxation year from a business carried on in Canada by the partnership, or

      • (ii) where any part of its ordinary business carried on in Canada was the lending of money, in respect of a loan made by the partnership in the ordinary course of that part of its business, and

    • (g) an amount equal to the allowable liquid assets of the partnership at the end of the fiscal period,

    exceeds the aggregate of

    • (h) an amount equal to the aggregate of each amount deducted by the partnership under paragraph 20(1)(l), (l.1) or (n) or subsection 64(1), (1.1) or (1.2) of the Act in computing its income for the fiscal period from a business carried on by it in Canada;

    • (i) an amount equal to the aggregate of all amounts each of which is an amount deducted by the partnership in the fiscal period under subparagraph 40(1)(a)(iii) or 44(1)(e)(iii) of the Act in respect of a debt referred to in paragraph (d);

    • (j) an amount equal to the aggregate of each amount owing by the partnership at the end of the fiscal period on account of

      • (i) the purchase price of property that is referred to in paragraph (a), (b) or (e) or that would be so referred to but for the fact that it has been disposed of before the end of the fiscal period,

      • (ii) Canadian exploration and development expenses, Canadian exploration expense, Canadian development expense or Canadian oil and gas property expense, within the meanings assigned by paragraphs 66(15)(b), 66.1(6)(a), 66.2(5)(a) and 66.4(5)(a) of the Act, respectively,

      • (iii) an eligible capital expenditure made or incurred by the partnership before the end of the fiscal period in respect of a business carried on by it in Canada, or

      • (iv) any other outlay or expense made or incurred by the partnership to the extent that it was deducted in computing its income for the fiscal period or for a previous fiscal period, or in computing the income of a member of the partnership for a previous taxation year, from a business carried on in Canada by the partnership; and

    • (k) an amount equal to the aggregate of all amounts each of which is an amount equal to that proportion of the amount owing (other than an amount owing on account of an outlay or expense referred to in paragraph (j)) by the partnership at the end of the fiscal period on account of an obligation outstanding at any time in the period in respect of which interest is stipulated to be payable by it that

      • (i) the interest paid or payable on the obligation by the partnership in respect of the fiscal period that is deductible, or would be deductible but for subsection 18(2) or (3.1) or section 21 of the Act, in computing its income for the fiscal period from a business carried on by it in Canada,

      is of

      • (ii) the interest paid or payable on the obligation by the partnership in respect of the fiscal period.

  • (6) For the purposes of paragraph (5)(g), the “allowable liquid assets of the partnership at the end of the fiscal period” is an amount equal to the lesser of

    • (a) the aggregate of

      • (i) the amount of Canadian currency owned by the partnership at the end of that fiscal period,

      • (ii) the balance standing to the credit of the partnership at the end of that fiscal period as or on account of amounts deposited with a branch or other office in Canada of

        • (A) a bank,

        • (B) a corporation licensed or otherwise authorized under the laws of Canada or a province to carry on in Canada the business of offering to the public its services as trustee, or

        • (C) a credit union, and

      • (iii) an amount equal to the aggregate of the cost amount to the partnership at the end of that fiscal period of each bond, debenture, bill, note, mortgage, hypothec or similar obligation that was not described in the partnership’s inventory in respect of a business carried on by it in Canada (other than a debt referred to in paragraph (5)(d) or (f) or a debt the amount of which was deducted under paragraph 20(1)(p) of the Act in computing the partnership’s income for the fiscal period), that was issued by a person resident in Canada with whom all the members of the partnership were dealing at arm’s length and that matures within one year after the date on which it was acquired by the partnership; and

    • (b) an amount equal to 4/3 of the quotient obtained by dividing

      • (i) the aggregate of all amounts that would otherwise be determined under subparagraphs (a)(i), (ii) and (iii) if the references therein to “at the end of that fiscal period” were read as references to “at the end of each month in that fiscal period”,

      by

      • (ii) the number of months in that fiscal period.

  • (7) Subsections (4) to (6) shall be read and construed as if each of the assumptions in paragraphs 96(1)(a) to (g) of the Act were made.

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • SOR/81-656, s. 2
  • SOR/84-948, s. 4
  • SOR/90-258, s. 1
  • SOR/91-78, s. 2
  • SOR/93-395, s. 1
  • SOR/94-686, ss. 8(F), 47, 58(F) to 61(F), 62, 63(F) to 65(F), 78(F), 79(F), 81(F)

Reduction of Certain Amounts To Be Deducted or Withheld

  •  (1) Subject to subsection (2), where a non-resident person (in this section referred to as the “payee”) has filed with the Minister the payee’s required statement for the year, the amount otherwise required by subsections 215(1) to (3) of the Act to be deducted or withheld from any qualifying payment paid or credited by a person resident in Canada (in this section referred to as the “payer”) to the payee in the year and after the required statement for the year was so filed is hereby reduced by the amount determined in accordance with the following rules:

    • (a) determine the amount by which

      • (i) the amount that would, if the payee does not make an election in respect of the year under section 217 of the Act, be the tax payable by the payee under Part XIII of the Act on the aggregate of the amounts estimated by him in his required statement for the year pursuant to paragraph (a) of the definition required statement in subsection (4),

      exceeds

      • (ii) the amount that would, if the payee makes the election referred to in subparagraph (i), be the tax payable (on the assumption that no portion of the payee’s income for the year was income earned in the year in a province) by the payee under Part I of the Act on his estimated taxable income calculated by him in his required statement for the year pursuant to paragraph (b) of the definition required statement in subsection (4),

    • (b) determine the percentage that the amount determined under paragraph (a) is of the aggregate of the amounts estimated by him in his required statement for the year pursuant to paragraph (a) of the definition required statement in subsection (4),

    • (c) where the determination of a percentage under paragraph (b) results in a fraction, disregard the fraction for the purposes of paragraph (d),

    • (d) multiply the percentage determined under paragraph (b) by the amount of the qualifying payment,

    and the product obtained under paragraph (d) is the amount by which the amount required to be deducted or withheld is reduced.

  • (2) Subsection (1) does not apply to reduce the amount to be deducted or withheld from a qualifying payment if, after the qualifying payment has been paid or credited by the payer, the aggregate of all qualifying payments that the payer has paid or credited to the payee in the year would exceed the amount estimated, in respect of that payer, by the payee in his required statement for the year pursuant to paragraph (a) of the definition required statement in subsection (4).

  • (3) Where a payee has filed with the Minister a written notice indicating that certain information or estimates in the payee’s required statement for the year are incorrect and setting out the correct information or estimates that should be substituted therefor or where the Minister is satisfied that certain information or estimates in a payee’s required statement for the year are incorrect and that the Minister has the correct information or estimates that should be substituted therefor, for the purposes of making the calculations in subsection (1) with respect to any qualifying payment paid or credited to the payee after the time when he has filed that notice or after the time when the Minister is so satisfied, as the case may be, the incorrect information or estimates shall be disregarded and the required statement for the year shall be deemed to contain only the correct information or estimates.

  • (4) In this section,

    qualifying payment

    qualifying payment in relation to a non-resident person means any amount

    • (a) paid or credited, or to be paid or credited, to him as, on account or in lieu of payment of, or in satisfaction of, any amount described in paragraph 212(1)(f) or (h) or in any of paragraphs 212(1)(j), (k), (l), (m) or (q) of the Act, and

    • (b) on which tax under Part XIII of the Act is, or would be, but for an election by him under section 217 of the Act, payable by him; (paiement admissible)

    required statement

    required statement of a payee for a taxation year means a written statement signed by him that contains, in respect of the payee,

    • (a) the name and address of each payer of a qualifying payment in the year and, in respect of each such payer, an estimate by the payee of the aggregate of such qualifying payments, and

    • (b) a calculation by him of his estimated taxable income earned in Canada for the year, on the assumption that he makes the election in respect of the year under section 217 of the Act, and such information as may be necessary for the purpose of estimating such income. (état exigé)

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • SOR/81-656, s. 3
  • SOR/94-686, s. 50(F)

Excluded Property of Non-Resident Persons

[[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] ]
  •  (1) For the purposes of paragraph 116(6)(e) of the Act, any property that is

    • (a) property of a non-resident insurer that is a qualified insurance corporation,

    • (b) an option in respect of property referred to in any of paragraphs 116(6)(a) to (d) of the Act and paragraph (a) whether or not such property is in existence, or

    • (c) an interest in property referred to in paragraph 116(6)(a), (c) or (d) of the Act or paragraph (a) or (b),

    is prescribed to be excluded property.

  • (2) For the purposes of this section, a non-resident insurer is a “qualified insurance corporation” throughout the period during which it

    • (a) was licenced or otherwise authorized under the laws of Canada or a province to carry on an insurance business in Canada; and

    • (b) carried on an insurance business, within the meaning of subsection 138(1) of the Act, in Canada.

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • SOR/94-686, s. 57(F)

PART IX

[[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] ]

PART XElections in Respect of Deceased Taxpayers

Property Dispositions

  •  (1) Any election under subsection 164(6) of the Act shall be made by the legal representative of a deceased taxpayer by filing with the Minister the following documents:

    • (a) a letter from the legal representative specifying

      • (i) the part of the one or more capital losses from the disposition of properties, if any, under paragraph 164(6)(c) of the Act, and

      • (ii) the part of the amount, if any, under paragraph 164(6)(d) of the Act

      in respect of which the election is made;

    • (b) where an amount is specified under subparagraph (a)(i), a schedule of the capital losses and capital gains referred to in paragraph 164(6)(a) of the Act;

    • (c) where an amount is specified under subparagraph (a)(ii),

      • (i) a schedule of the amounts of undepreciated capital cost described in paragraph 164(6)(b) of the Act,

      • (ii) a statement of the amount that, but for subsection 164(6) of the Act, would be the non-capital loss of the estate for its first taxation year, and

      • (iii) a statement of the amount that, but for subsection 164(6) of the Act, would be the farm loss of the estate for its first taxation year.

    • (d) and (e) [Repealed, SOR/88-165, s. 5]

  • (2) The documents referred to in subsection (1) shall be filed not later than the day that is the later of

    • (a) the last day provided by the Act for the filing of a return that the legal representative of a deceased taxpayer is required or has elected to file under the Act in respect of the income of that deceased taxpayer for the taxation year in which he died; and

    • (b) the day the return of the income for the first taxation year of the deceased taxpayer’s estate is required to be filed under paragraph 150(1)(c) of the Act.

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • SOR/85-696, s. 1
  • SOR/88-165, s. 5

Realization of Options

  •  (1) An election under subsection 164(6.1) of the Act shall be made by the legal representative of a deceased taxpayer by filing with the Minister a letter from the legal representative setting out the following:

    • (a) the amount of the benefit referred to in subparagraph 164(6.1)(a)(i) of the Act;

    • (b) the value of the right, and the amount paid for the right, referred to in subparagraph 164(6.1)(a)(ii) of the Act;

    • (c) the deducted amount, referred to in subparagraph 164(6.1)(a)(iii) of the Act; and

    • (d) the amount of the loss referred to in paragraph 164(6.1)(b) of the Act.

  • (2) The letter shall be filed not later than the day that is the later of

    • (a) the last day provided by the Act for the filing of a return that the legal representative of a deceased taxpayer is required or has elected to file under the Act in respect of the income of that deceased taxpayer for the taxation year in which he or she died, and

    • (b) the day the return of the income for the first taxation year of the deceased taxpayer’s estate is required to be filed under paragraph 150(1)(c) of the Act.

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • SOR/2005-123, s. 4

Annual Instalments

 Any election by a deceased taxpayer’s legal representative under subsection 159(5) of the Act shall be made by filing with the Minister the prescribed form on or before the day on or before which payment of the first of the “equal consecutive annual instalments” referred to in that subsection is required to be made.

PART XICapital Cost Allowances

DIVISION IDeductions Allowed

  •  (1) For the purposes of paragraphs 8(1)(j) and (p) and 20(1)(a) of the Act, the following deductions are allowed in computing a taxpayer’s income for each taxation year:

    Rates
    • (a) subject to subsection (2), such amount as he may claim in respect of property of each of the following classes in Schedule II not exceeding in respect of property

      • (i) of Class 1, 4 per cent,

      • (ii) of Class 2, 6 per cent,

      • (iii) of Class 3, 5 per cent,

      • (iv) of Class 4, 6 per cent,

      • (v) of Class 5, 10 per cent,

      • (vi) of Class 6, 10 per cent,

      • (vii) of Class 7, 15 per cent,

      • (viii) of Class 8, 20 per cent,

      • (ix) of Class 9, 25 per cent,

      • (x) of Class 10, 30 per cent,

      • (x.1) of Class 10.1, 30 per cent,

      • (xi) of Class 11, 35 per cent,

      • (xii) of Class 12, 100 per cent,

      • (xiii) of Class 16, 40 per cent,

      • (xiv) of Class 17, 8 per cent,

      • (xv) of Class 18, 60 per cent,

      • (xvi) of Class 22, 50 per cent,

      • (xvii) of Class 23, 100 per cent,

      • (xviii) of Class 25, 100 per cent,

      • (xix) of Class 26, 5 per cent,

      • (xx) of Class 28, 30 per cent,

      • (xxi) of Class 30, 40 per cent,

      • (xxii) of Class 31, 5 per cent,

      • (xxiii) of Class 32, 10 per cent,

      • (xxiv) of Class 33, 15 per cent,

      • (xxv) of Class 35, 7 per cent,

      • (xxvi) of Class 37, 15 per cent,

      • (xxvii) of Class 41, 25 per cent,

      • (xxviii) of Class 42, 12 per cent,

      • (xxix) of Class 43, 30 per cent,

      • (xxix.1) of Class 43.1, 30 per cent,

      • (xxx) of Class 44, 25 per cent,

      • (xxxi) of Class 45, 45 per cent, and

      • (xxxii) of Class 46, 30 per cent,

      of the undepreciated capital cost to him as of the end of the taxation year (before making any deduction under this subsection for the taxation year) of property of the class;

    Class 13
    • (b) such amount as the taxpayer may claim in respect of the capital cost to the taxpayer of property of Class 13 in Schedule II, not exceeding

      • (i) where the capital cost of the property, other than property described in subparagraph (2)(a)(v), (vi) or (vii), was incurred in the taxation year and after November 12, 1981, 50 per cent of the amount for the year calculated in accordance with Schedule III, and

      • (ii) in any other case, the amount for the year calculated in accordance with Schedule III,

      and, for the purposes of this paragraph and Schedule III, the capital cost to a taxpayer of a property shall be deemed to have been incurred at the time at which the property became available for use by the taxpayer;

    Class 14
    • (c) such amount as he may claim in respect of property of Class 14 in Schedule II not exceeding the lesser of

      • (i) the aggregate of the amounts for the year obtained by apportioning the capital cost to him of each property over the life of the property remaining at the time the cost was incurred, and

      • (ii) the undepreciated capital cost to him as of the end of the taxation year (before making any deduction under this subsection for the taxation year) of property of the class;

    In Lieu of Double Depreciation
    • (d) such additional amount as he may claim not exceeding in the case of property described in each of the classes in Schedule II, the lesser of

      • (i) one-half the amount that would have been allowed to him in respect of property of that class under subparagraph 6(n)(ii) of the Income War Tax Act if that act were applicable to the taxation year, and

      • (ii) the undepreciated capital cost to him as of the end of the taxation year (before making any deduction under this paragraph for the taxation year) of property of the class;

    Timber Limits and Cutting Rights
    • (e) such amount as he may claim not exceeding the amount calculated in accordance with Schedule VI in respect of the capital cost to him of a property, other than a timber resource property, that is a timber limit or a right to cut timber from a limit;

    Class 15
    • (f) such amount as he may claim not exceeding the amount calculated in accordance with Schedule IV in respect of the capital cost to him of property of Class 15 in Schedule II;

    Industrial Mineral Mines
    • (g) such amount as he may claim not exceeding the amount calculated in accordance with Schedule V in respect of the capital cost to him of a property that is an industrial mineral mine or a right to remove industrial minerals from an industrial mineral mine;

    • (h) [Repealed, SOR/78-377, s. 3]

    Additional Allowances — Fishing Vessels
    • (i) such additional amount as he may claim in the case of property of a separate class prescribed by subsection 1101(2) not exceeding the lesser of

      • (i) the amount by which the depreciation that could have been taken on the property, if the Orders in Council referred to in that subsection were applicable to the taxation year, exceeds the amount allowed under paragraph (a) in respect of the property, and

      • (ii) the undepreciated capital cost to him as of the end of the taxation year (before making any deduction under this paragraph for the taxation year) of property of the class;

    Additional Allowances — Classes 1, 2, 3, and 6
    Additional Allowances — Certified Productions
    • (l) such additional amount as he may claim in respect of property for which a separate class is prescribed by subsection 1101(5k) not exceeding the lesser of

      • (i) the aggregate of his income for the year from that property and from property described in paragraph (n) of Class 12 in Schedule II, determined before making any deduction under this paragraph, and

      • (ii) the undepreciated capital cost to him of property of that separate class as of the end of the year before making any deduction under this paragraph for the year;

    Additional Allowance — Canadian Film or Video Production
    • (m) such additional amount as the taxpayer claims in respect of property for which a separate class is prescribed by subsection 1101(5k.1) not exceeding the lesser of

      • (i) the taxpayer’s income for the year from the property, determined before making any deduction under this paragraph, and

      • (ii) the undepreciated capital cost to the taxpayer of the property of that separate class at the end of the year (before making any deduction under this paragraph for the year and computed without reference to subsection (2));

    Class 19
    • (n) where the taxpayer is a corporation that had a degree of Canadian ownership in the taxation year, or is an individual who was resident in Canada in the taxation year for not less than 183 days, such amount as he may claim in respect of property of Class 19 in Schedule II that was acquired in a particular taxation year not exceeding the lesser of

      • (i) 50 per cent of the capital cost thereof to him, and

      • (ii) the amount by which the capital cost thereof to him exceeds the aggregate of the amounts deducted in respect thereof in computing his income for previous taxation years,

      but the aggregate of amounts deductible for a taxation year in respect of property acquired in each of the particular taxation years, under this paragraph, shall not exceed the undepreciated capital cost to him as of the end of the taxation year (before making any deduction under this subsection for the taxation year) of property of the class;

    • (o) where the taxpayer is not entitled to make a deduction under paragraph (n) in computing his income for a taxation year, such amount as he may claim in respect of property of Class 19 in Schedule II not exceeding 20 per cent of the undepreciated capital cost to him as of the end of the taxation year (before making any deduction under this subsection for the taxation year) of property of the class;

    Class 20
    • (p) such amount as he may claim in respect of property of Class 20 in Schedule II that was acquired in a particular taxation year not exceeding the lesser of

      • (i) 20 per cent of the capital cost thereof to him, and

      • (ii) the amount by which the capital cost thereof to him exceeds the aggregate of the amounts deducted in respect thereof in computing his income for previous taxation years,

      but the aggregate of amounts deductible for a taxation year in respect of property acquired in each of the particular taxation years, under this paragraph, shall not exceed the undepreciated capital cost to him as of the end of the taxation year (before making any deduction under this subsection for the taxation year) of property of the class;

    Class 21
    • (q) such amount as he may claim in respect of property of Class 21 in Schedule II that was acquired in a particular taxation year not exceeding the lesser of

      • (i) 50 per cent of the capital cost thereof to him, and

      • (ii) the amount by which the capital cost thereof to him exceeds the aggregate of the amounts deducted in respect thereof in computing his income for previous taxation years,

      but the aggregate of amounts deductible for a taxation year in respect of property acquired in each of the particular taxation years, under this paragraph, shall not exceed the undepreciated capital cost to him as of the end of the taxation year (before making any deduction under this subsection for the taxation year) of property of the class;

    • (r) to (sa) [Repealed, SOR/78-377, s. 3]

    Additional Allowances — Grain Storage Facilities
    • (sb) such additional amount as he may claim in respect of property included in Class 3, 6 or 8 in Schedule II

      • (i) that is

        • (A) a grain elevator situated in that part of Canada that is defined in section 2 of the Canada Grain Act as the “Eastern Division” the principal use of which

          • (I) is the receiving of grain directly from producers for storage or forwarding or both,

          • (II) is the receiving and storing of grain for direct manufacture or processing into other products, or

          • (III) has been certified by the Minister of Agriculture to be the receiving of grain that has not been officially inspected or weighed,

        • (B) an addition to a grain elevator described in clause (A),

        • (C) fixed machinery installed in a grain elevator in respect of which, or in respect of an addition to which, an additional amount has been or may be claimed under this paragraph,

        • (D) fixed machinery, designed for the purpose of drying grain, installed in a grain elevator described in clause (A),

        • (E) machinery designed for the purpose of drying grain on a farm, or

        • (F) a building or other structure designed for the purpose of storing grain on a farm,

      • (ii) that was acquired by the taxpayer in the taxation year or in one of the three immediately preceding taxation years, at a time that was after April 1, 1972 but before August 1, 1974, and

      • (iii) that was not used for any purpose whatever before it was acquired by the taxpayer,

      not exceeding the lesser of

      • (iv) where the property is included in Class 3, 22 per cent of the capital cost thereof, where the property is included in Class 6, 20 per cent of the capital cost thereof or where the property is included in Class 8,

        • (A) 14 per cent of the capital cost thereof in the case of property referred to in clause (i)(C), (D) or (F), and

        • (B) 14 per cent of the lesser of $15,000 and the capital cost thereof in the case of property described in clause (i)(E), and

      • (v) the undepreciated capital cost to him as of the end of the taxation year (before making any deduction under this paragraph for the taxation year) of property of the class;

    Classes 24, 27, 29 and 34
    • (t) for the taxation year that includes November 12, 1981, such amount as he may claim in respect of property of each of Classes 24, 27, 29 and 34 in Schedule II not exceeding the aggregate of

      • (i) 50 per cent of the lesser of

        • (A) the capital cost to him of all designated property of the class acquired by him in the year, and

        • (B) the undepreciated capital cost to him of property of the class as of the end of the year (computed as if no amount were included in respect of property, other than designated property of the class, acquired after November 12, 1981 and before making any deduction under this paragraph for the year),

      • (ii) the amount, if any, by which the amount determined under clause (i)(B) in respect of the class exceeds the amount determined under clause (i)(A) in respect of the class, and

      • (iii) the lesser of

        • (A) 25 per cent of the capital cost to him of all property, other than designated property, of the class acquired by him in the year, and

        • (B) the undepreciated capital cost to him of property of the class as of the end of the year (before making any deduction under this paragraph for the year);

    • (ta) for taxation years commencing after November 12, 1981, such amount as he may claim in respect of property of each of Classes 24, 27, 29 and 34 in Schedule II not exceeding the aggregate of

      • (i) the aggregate of

        • (A) the lesser of

          • (I) 50 per cent of the capital cost to him of all designated property of the class acquired by him in the year, and

          • (II) the undepreciated capital cost to him of property of the class as of the end of the year (before making any deduction under this paragraph for the year and, where any of the property referred to in subclause (I) was acquired by virtue of a specified transaction, computed as if no amount were included in respect of property, other than designated property of the class acquired by him in the year), and

        • (B) 25 per cent of the lesser of

          • (I) the undepreciated capital cost to him of property of the class as of the end of the year (computed as if no amount were included in respect of designated property of the class acquired by him in the year and before making any deduction under this paragraph for the year), and

          • (II) the capital cost to him of all property, other than designated property, of the class acquired by him in the year, and

      • (ii) the lesser of

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

          • (I) the undepreciated capital cost to him of property of the class as of the end of the year (before making any deduction under this paragraph for the year)

          exceeds

          • (II) the capital cost to him of all property of the class acquired by him in the year, and

        • (B) an amount equal to the aggregate of

          • (I) 50 per cent of the capital cost to him of all property of the class acquired by him in the immediately preceding taxation year, other than designated property of the class acquired in a specified transaction, and

          • (II) the amount, if any, by which the amount determined under clause (A) for the year with respect to the class exceeds the aggregate of 75 per cent of the capital cost to him of all property, other than designated property, of the class acquired by him in the immediately preceding taxation year and 50 per cent of the capital cost to him of designated property of the class acquired by him in the immediately preceding taxation year, other than designated property of the class acquired in a specified transaction,

      and for the purposes of this paragraph and paragraph (t), designated property of a class means

      • (iii) property of the class acquired by him before November 13, 1981,

      • (iv) property deemed to be designated property of the class by virtue of paragraph (2.1)(g) or (2.2)(j), and

      • (v) property described in subparagraph (2)(a)(v), (vi) or (vii),

      and, for the purposes of this paragraph,

      • (vi) specified transaction means a transaction to which subsection 85(5), 87(1), 88(1), 97(4) or 98(3) or (5) of the Act applies, and

      • (vii) subject to paragraph (2.2)(j), a property shall be deemed to have been acquired by a taxpayer at the time at which the property became available for use by the taxpayer;

    • (u) [Repealed, SOR/78-377, s. 3]

    Canadian Vessels
    • (v) such amount as the taxpayer may claim in respect of property that is

      • (i) a vessel described in subsection 1101(2a),

      • (ii) included in a separate prescribed class because of subsection 13(14) of the Act, or

      • (iii) a property that has been constituted a prescribed class by subsection 24(2) of Chapter 91 of the Statutes of Canada, 1966-67,

      not exceeding the lesser of

      • (iv) where the property, other than property described in subparagraph (2)(a)(v), (vi) or (vii), was acquired in the taxation year and after November 12, 1981, 16 2/3 per cent of the capital cost thereof to the taxpayer and, in any other case, 33 1/3 per cent of the capital cost thereof to the taxpayer, and

      • (v) the undepreciated capital cost to the taxpayer as of the end of the taxation year (before making any deduction under this paragraph for the taxation year) of property of the class,

      and, for the purposes of subparagraph (iv), a property shall be deemed to have been acquired by a taxpayer at the time at which the property became available for use by the taxpayer for the purposes of the Act;

    Additional Allowances — Offshore Drilling Vessels
    • (va) such additional amount as he may claim in respect of property for which a separate class is prescribed by subsection 1101(2b) not exceeding 15 per cent of the undepreciated capital cost to him of property of that class as of the end of the taxation year (before making any deduction under this subsection for the taxation year);

    Additional Allowances — Class 28
    • (w) subject to section 1100A, such additional amount as he may claim in respect of property described in Class 28 acquired for the purpose of gaining or producing income from a mine or in respect of property acquired for the purpose of gaining or producing income from a mine and for which a separate class is prescribed by subsection 1101 (4a), not exceeding the lesser of

      • (i) the taxpayer’s income for the year from the mine, determined without reference to paragraph 12(1)(z.5) of the Act and before making any deduction under this paragraph, paragraph (x), (y) or (ya), paragraph 20(1)(v.1) of the Act, section 65, 66, 66.1, 66.2 or 66.7 of the Act or section 29 of the Income Tax Application Rules, and

      • (ii) the undepreciated capital cost to the taxpayer of property of that class as of the end of the taxation year (computed without reference to subsection (2) and before making any deduction under this paragraph for the taxation year);

    • (x) subject to section 1100A, such additional amount as he may claim in respect of property acquired for the purpose of gaining or producing income from more than one mine and for which a separate class is prescribed by subsection 1101(4b), not exceeding the lesser of

      • (i) the taxpayer’s income for the year from the mines, determined without reference to paragraph 12(1)(z.5) of the Act and before making any deduction under this paragraph, paragraph (ya), paragraph 20(1)(v.1) of the Act, section 65, 66, 66.1, 66.2 or 66.7 of the Act or section 29 of the Income Tax Application Rules, and

      • (ii) the undepreciated capital cost to him of property of that class as of the end of the taxation year (before making any deduction under this paragraph for the taxation year);

    Additional Allowances — Class 41
    • (y) such additional amount as the taxpayer may claim in respect of property acquired for the purpose of gaining or producing income from a mine and for which a separate class is prescribed by subsection 1101(4c), not exceeding the lesser of

      • (i) the taxpayer’s income for the year from the mine, determined without reference to paragraph 12(1)(z.5) of the Act and before making any deduction under this paragraph, paragraph (x) or (ya), paragraph 20(1)(v.1) of the Act, section 65, 66, 66.1, 66.2 or 66.7 of the Act or section 29 of the Income Tax Application Rules, and

      • (ii) the undepreciated capital cost to the taxpayer of property of that class as of the end of a taxation year (computed without reference to subsection (2) and before making any deduction under this paragraph for the taxation year);

    • (ya) such additional amount as the taxpayer may claim in respect of property acquired for the purpose of gaining or producing income from more than one mine and for which a separate class is prescribed by subsection 1101(4d), not exceeding the lesser of

      • (i) the taxpayer’s income for the year from the mines, determined without reference to paragraph 12(1)(z.5) of the Act and before making any deduction under this paragraph, paragraph 20(1)(v.1) of the Act, section 65, 66, 66.1, 66.2 or 66.7 of the Act or section 29 of the Income Tax Application Rules, and

      • (ii) the undepreciated capital cost to the taxpayer of property of that class as of the end of the taxation year (computed without reference to subsection (2) and before making any deduction under this paragraph for the taxation year);

    Additional Allowances — Railway Cars
    • (z) such additional amount as the taxpayer may claim in respect of property for which a separate class is prescribed by paragraph 1101(5d)(c) not exceeding eight per cent of the undepreciated capital cost to the taxpayer of property of that class as of the end of the taxation year (before making any deduction under this subsection for the taxation year);

    • (z.1a) such additional amount as the taxpayer may claim in respect of property for which a separate class is prescribed by paragraph 1101(5d)(d), (e) or (f), not exceeding six per cent of the undepreciated capital cost to the taxpayer of property of that class as of the end of the taxation year (before making any deduction under this subsection for the taxation year);

    • (z.1b) where throughout the taxation year the taxpayer was a common carrier that owned and operated a railway, such additional amount as the taxpayer may claim in respect of property for which a separate class is prescribed by subsection 1101(5d.1), not exceeding three per cent of the undepreciated capital cost to the taxpayer of property of that class as of the end of the year (before making any deduction under this subsection for the year);

    • (z.1c) where throughout the taxation year the taxpayer was a common carrier that owned and operated a railway, such additional amount as the taxpayer may claim in respect of property for which a separate class is prescribed by subsection 1101(5d.2), not exceeding six percent of the undepreciated capital cost to the taxpayer of property of that class as of the end of the year (before making any deduction under this subsection for the year);

    Additional Allowances — Railway Track and Related Property
    • (za) such additional amount as he may claim in respect of property for which a separate class is prescribed by subsection 1101(5e) not exceeding 4% of the undepreciated capital cost to him of property of that class as of the end of the taxation year (before making any deduction under this subsection for the taxation year);

    • (za.1) where throughout the taxation year the taxpayer was a common carrier that owned and operated a railway, such additional amount as the taxpayer may claim in respect of property for which a separate class is prescribed by subsection 1101(5e.1), not exceeding six per cent of the undepreciated capital cost to the taxpayer of property of that class as of the end of the year (before making any deduction under this subsection for the year);

    • (za.2) where throughout the taxation year the taxpayer was a common carrier that owned and operated a railway, such additional amount as the taxpayer may claim in respect of property for which a separate class is prescribed by subsection 1101(5e.2), not exceeding five per cent of the undepreciated capital cost to the taxpayer of property of that class as of the end of the year (before making any deduction under this subsection for the year);

    • (zb) such additional amount as he may claim in respect of property for which a separate class is prescribed by subsection 1101(5f) not exceeding 3% of the undepreciated capital cost to him of property of that class as of the end of the taxation year (before making any deduction under this subsection for the taxation year);

    Additional Allowances — Railway Expansion and Modernization Property
    • (zc) where the taxpayer owns and operates a railway as a common carrier, such additional amount as he may claim in respect of property of a class in Schedule II (in this paragraph referred to as “designated property” of the class)

      • (i) that is

        • (A) included in Class 1 in Schedule II by virtue of paragraph (h) or (i) of that Class,

        • (B) a bridge, culvert, subway or tunnel included in Class 1 in Schedule II that is ancillary to railway track and grading,

        • (C) a trestle included in Class 3 in Schedule II that is ancillary to railway track and grading,

        • (D) included in Class 6 in Schedule II by virtue of paragraph (j) of that Class,

        • (E) machinery or equipment included in Class 8 in Schedule II that is ancillary to

          • (I) railway track and grading, or

          • (II) railway traffic control or signalling equipment, including switching, block signalling, interlocking, crossing protection, detection, speed control or retarding equipment, but not including property that is principally electronic equipment or systems software therefor,

        • (F) machinery or equipment included in Class 8 in Schedule II that

          • (I) was acquired principally for the purpose of maintaining or servicing, or

          • (II) is ancillary to and used as part of,

          a railway locomotive or railway car,

        • (G) included in Class 10 in Schedule II by virtue of subparagraph (m)(i), (ii) or (iii) of that Class,

        • (H) included in Class 28 in Schedule II by virtue of subparagraph (d)(ii) of that Class (other than property referred to in subparagraph (m)(iv) of Class 10), or

        • (I) included in Class 35 in Schedule II,

      • (ii) that was acquired by him principally for use in or is situated in Canada,

      • (iii) that was acquired by him in respect of the railway in the taxation year or in one of the four immediately preceding taxation years, at a time that was after April 10, 1978 but before 1988, and

      • (iv) that was not used for any purpose whatever before it was acquired by him,

      not exceeding the lesser of

      • (v) six per cent of the aggregate of the capital cost to him of the designated property of the class, and

      • (vi) the undepreciated capital cost to him as of the end of the taxation year (after making all deductions claimed by him under other provisions of this subsection for the taxation year but before making any deduction under this paragraph for the taxation year) of property of the class.

    Class 38
    • (zd) such amount as the taxpayer may claim in respect of property of Class 38 in Schedule II not exceeding that percentage which is the aggregate of

      • (i) that proportion of 40 per cent that the number of days in the taxation year that are in 1988 is of the number of days in the taxation year that are after 1987,

      • (ii) that proportion of 35 per cent that the number of days in the taxation year that are in 1989 is of the number of days in the taxation year, and

      • (iii) that proportion of 30 per cent that the number of days in the taxation year that are after 1989 is of the number of days in the taxation year

      of the undepreciated capital cost to the taxpayer of property of that class as of the end of the taxation year (before making any deduction under this paragraph for the taxation year);

    Class 39
    • (ze) such amount as the taxpayer may claim in respect of property of Class 39 in Schedule II not exceeding that percentage which is the aggregate of

      • (i) that proportion of 40 per cent that the number of days in the taxation year that are in 1988 is of the number of days in the taxation year that are after 1987,

      • (ii) that proportion of 35 per cent that the number of days in the taxation year that are in 1989 is of the number of days in the taxation year,

      • (iii) that proportion of 30 per cent that the number of days in the taxation year that are in 1990 is of the number of days in the taxation year, and

      • (iv) that proportion of 25 per cent that the number of days in the taxation year that are after 1990 is of the number of days in the taxation year

      of the undepreciated capital cost to the taxpayer of property of that class as of the end of the taxation year (before making any deduction under this paragraph for the taxation year);

    Class 40
    • (zf) such amount as the taxpayer may claim in respect of property of Class 40 in Schedule II not exceeding that percentage which is the aggregate of

      • (i) that proportion of 40 per cent that the number of days in the taxation year that are in 1988 is of the number of days in the taxation year that are after 1987,

      • (ii) that proportion of 35 per cent that the number of days in the taxation year that are in 1989 is of the number of days in the taxation year, and

      • (iii) that proportion of 30 per cent that the number of days in the taxation year that are in 1990 is of the number of days in the taxation year

      of the undepreciated capital cost to the taxpayer of property of that class as of the end of the taxation year (before making any deduction under this paragraph for the taxation year);

    Additional Allowance — Year 2000 Computer Hardware and Systems Software
    • (zg) where the taxpayer

      • (i) has elected for the year in prescribed manner,

      • (ii) was not in the year a large corporation, as defined in subsection 225.1(8) of the Act, or a partnership any member of which was such a corporation in a taxation year that included any time that is in the partnership’s year, and

      • (iii) acquired property included in paragraph (f) of Class 10 in Schedule II

        • (A) in the year,

        • (B) after 1997 and before November 1999, and

        • (C) for the purpose of replacing property that was acquired before 1998 that has a material risk of malfunctioning because of the change of the calendar year to 2000 and that is described in paragraph (f) of Class 10, or paragraph (o) of Class 12, in Schedule II,

      such additional amount as the taxpayer claims in respect of all property described in subparagraph (iii) not exceeding the least of

      • (iv) the amount, if any, by which $50,000 exceeds the total of

        • (A) the total of all amounts each of which is an amount claimed by the taxpayer under this paragraph for a preceding taxation year,

        • (B) the total of all amounts each of which is an amount claimed by the taxpayer for the year or a preceding taxation year under paragraph (zh), and

        • (C) the total of all amounts each of which is an amount claimed under this paragraph or paragraph (zh) by a corporation for a taxation year in which it was associated with the taxpayer,

      • (v) 85% of the capital cost to the taxpayer of all property described in subparagraph (iii), and

      • (vi) the undepreciated capital cost to the taxpayer as of the end of the year (computed without reference to subsection (2) and after making all deductions claimed under other provisions of this subsection for the year but before making any deduction under this paragraph for the year) of property included in Class 10 in Schedule II; and

    Additional Allowance — Year 2000 Computer Software
    • (zh) where the taxpayer

      • (i) has elected for the year in prescribed manner,

      • (ii) was not in the year a large corporation, as defined in subsection 225.1(8) of the Act, or a partnership any member of which was such a corporation in a taxation year that included any time that is in the partnership’s year, and

      • (iii) acquired property included in paragraph (o) of Class 12 in Schedule II

        • (A) in the year,

        • (B) after 1997 and before November 1999, and

        • (C) for the purpose of replacing property that was acquired before 1998 that has a material risk of malfunctioning because of the change of the calendar year to 2000 and that is described in paragraph (f) of Class 10, or paragraph (o) of Class 12, in Schedule II,

      such additional amount as the taxpayer claims in respect of all property described in subparagraph (iii) not exceeding the least of

      • (iv) the amount, if any, by which $50,000 exceeds the total of

        • (A) the total of all amounts each of which is an amount claimed by the taxpayer under this paragraph for a preceding taxation year,

        • (B) the total of all amounts each of which is an amount claimed by the taxpayer for the year or a preceding taxation year under paragraph (zg), and

        • (C) the total of all amounts each of which is an amount claimed under this paragraph or paragraph (zg) by a corporation for a taxation year in which it was associated with the taxpayer,

      • (v) 50% of the capital cost to the taxpayer of all property described in subparagraph (iii), and

      • (vi) the undepreciated capital cost to the taxpayer as of the end of the year (computed without reference to subsection (2) and after making all deductions claimed under other provisions of this subsection for the year but before making any deduction under this paragraph for the year) of property included in Class 12 in Schedule II.

  • (1.1) Notwithstanding subsections (1) and (3), the amount deductible by a taxpayer for a taxation year in respect of a property that is a specified leasing property at the end of the year is the lesser of

    • (a) the amount, if any, by which the aggregate of

      • (i) all amounts that would be considered to be repayments in the year or a preceding year on account of the principal amount of a loan made by the taxpayer if

        • (A) the taxpayer had made the loan at the time that the property last became a specified leasing property and in a principal amount equal to the fair market value of the property at that time,

        • (B) interest had been charged on the principal amount of the loan outstanding from time to time at the rate, determined in accordance with section 4302, in effect at the earlier of

          • (I) the time, if any, before the time referred to in subclause (II), at which the taxpayer last entered into an agreement to lease the property, and

          • (II) the time that the property last became a specified leasing property

          (or, where a particular lease provides that the amount paid or payable by the lessee of the property for the use of, or the right to use, the property varies according to prevailing interest rates in effect from time to time, and the taxpayer so elects, in respect of all of the property that is the subject of the particular lease, in the taxpayer’s return of income under Part I of the Act for the taxation year of the taxpayer in which the particular lease was entered into, the rate determined in accordance with section 4302 that is in effect at the beginning of the period for which the interest is being calculated), compounded semi-annually not in advance, and

        • (C) the amounts that were received or receivable by the taxpayer before the end of the year for the use of, or the right to use, the property before the end of the year and after the time it last became a specified leasing property were blended payments of principal and interest, calculated in accordance with clause (B), on the loan applied firstly on account of interest on principal, secondly on account of interest on unpaid interest, and thirdly on account of principal, and

      • (ii) the amount that would have been deductible under this section for the taxation year (in this subparagraph referred to as the “particular year”) that includes the time (in this subparagraph referred to as the “particular time”) at which the property last became a specified leasing property of the taxpayer, if

        • (A) the property had been transferred to a separate prescribed class at the later of

          • (I) the beginning of the particular year, and

          • (II) the time at which the property was acquired by the taxpayer,

        • (B) the particular year had ended immediately before the particular time, and

        • (C) where the property was not a specified leasing property immediately before the particular time, subsection (3) had applied,

      exceeds

      • (iii) the aggregate of all amounts deducted by the taxpayer in respect of the property by reason of this subsection before the commencement of the year and after the time at which it last became a specified leasing property; and

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

      • (i) the aggregate of all amounts that would have been deducted by the taxpayer under this Part in respect of the property under paragraph 20(1)(a) of the Act in computing the income of the taxpayer for the year and all preceding taxation years had this subsection and subsections (11) and (15) not applied, and had the taxpayer, in each such year, deducted under paragraph 20(1)(a) of the Act the maximum amount allowed under this Part, read without reference to this subsection and subsections (11) and (15), in respect of the property,

      exceeds

      • (ii) the total depreciation allowed to the taxpayer before the commencement of the year in respect of the property.

  • (1.11) In this section and subsection 1101(5n), specified leasing property of a taxpayer at any time means depreciable property (other than exempt property) that is

    • (a) used at that time by the taxpayer or a person with whom the taxpayer does not deal at arm’s length principally for the purpose of gaining or producing gross revenue that is rent or leasing revenue,

    • (b) the subject of a lease at that time to a person with whom the taxpayer deals at arm’s length and that, at the time the lease was entered into, was a lease for a term of more than one year, and

    • (c) the subject of a lease of property where the tangible property, other than exempt property, that was the subject of the lease had, at the time the lease was entered into, an aggregate fair market value in excess of $25,000,

    but, for greater certainty, does not include intangible property (including systems software and property referred to in paragraph (w) of Class 10 or paragraph (n) or (o) of Class 12 in Schedule II).

  • (1.12) Notwithstanding subsections (1) and (1.1), where, in a taxation year, a taxpayer has acquired a property that was not used by the taxpayer for any purpose in that year and the first use of the property by the taxpayer is a lease of the property in respect of which subsection (1.1) applies, the amount allowed to the taxpayer under subsection (1) in respect of the property for the year shall be deemed to be nil.

  • (1.13) For the purposes of this section,

    • (a) exempt property means

      • (i) general purpose office furniture or office equipment included in Class 8 in Schedule II (including, for greater certainty, mobile office equipment such as cellular telephones and pagers) or general purpose electronic data processing equipment and ancillary data processing equipment, included in paragraph (f) of Class 10 in Schedule II, other than any individual piece thereof having a capital cost to the taxpayer in excess of $1,000,000,

      • (i.1) general-purpose electronic data processing equipment and ancillary data processing equipment, included in Class 45 in Schedule II, other than any individual item of that type of equipment having a capital cost to the taxpayer in excess of $1,000,000,

      • (ii) furniture, appliances, television receivers, radio receivers, telephones, furnaces, hot-water heaters and other similar properties, designed for residential use,

      • (iii) a property that is a motor vehicle that is designed or adapted primarily to carry individuals on highways and streets and that has a seating capacity for not more than the driver and eight passengers, or a motor vehicle of a type commonly called a van or pick-up truck, or a similar vehicle,

      • (iv) a truck or tractor that is designed for hauling freight on highways,

      • (v) a trailer that is designed for hauling freight and to be hauled under normal operating conditions by a truck or tractor described in subparagraph (iv),

      • (vi) a building or part thereof included in Class 1, 3, 6, 20, 31 or 32 in Schedule II (including component parts such as electric wiring, plumbing, sprinkler systems, air-conditioning equipment, heating equipment, lighting fixtures, elevators and escalators) other than a building or part thereof leased primarily to a lessee that is

        • (A) a person who is exempt from tax by reason of section 149 of the Act,

        • (B) a person who uses the building in the course of carrying on a business the income from which is exempt from tax under Part I of the Act by reason of any provision of the Act, or

        • (C) a Canadian government, municipality or other Canadian public authority,

        who owned the building or part thereof at any time before the commencement of the lease (other than at any time during a period ending not later than one year after the later of the date the construction of the building or part thereof was completed and the date the building or part thereof was acquired by the lessee),

      • (vii) vessel mooring space, and

      • (viii) property that is included in Class 35 in Schedule II,

      and for the purposes of subparagraph (i), where a property is owned by two or more persons or partnerships, or any combination thereof, the capital cost of the property to each such person or partnership shall be deemed to be the total of all amounts each of which is the capital cost of the property to such a person or partnership;

    • (b) property shall be deemed to be the subject of a lease for a term of more than one year at any time where, at that time

      • (i) the property had been leased by the lessee thereunder, a person with whom the lessee does not deal at arm’s length, or any combination thereof, for a period of more than one year ending at that time, or

      • (ii) it is reasonable, having regard to all the circumstances, to conclude that the lessor thereunder knew or ought to have known that the lessee thereunder, a person with whom the lessee does not deal at arm’s length, or any combination thereof, would lease the property for more than one year; and

    • (c) for the purposes of paragraph (1.11)(c), where it is reasonable, having regard to all the circumstances, to conclude that one of the main reasons for the existence of two or more leases was to avoid the application of subsection (1.1) by reason of each such lease being a lease of property where the tangible property, other than exempt property, that was the subject of the lease had an aggregate fair market value, at the time the lease was entered into, not in excess of $25,000, each such lease shall be deemed to be a lease of tangible property that had, at the time the lease was entered into, an aggregate fair market value in excess of $25,000.

  • (1.14) For the purposes of subsection (1.11) and notwithstanding subsection (1.13), where a taxpayer referred to in subsection (16) so elects in the taxpayer’s return of income under Part I of the Act for a taxation year in respect of the year and all subsequent taxation years, all of the property of the taxpayer that is the subject of leases entered into in those years shall be deemed not to be exempt property for those years and the aggregate fair market value of all of the tangible property that is the subject of each such lease shall be deemed to have been, at the time the lease was entered into, in excess of $25,000.

  • (1.15) Subject to subsection (1.16) and for the purposes of subsection (1.11), where at any time a taxpayer acquires property that is the subject of a lease with a remaining term at that time of more than one year from a person with whom the taxpayer was dealing at arm’s length, the taxpayer shall be deemed to have entered into a lease of the property at that time for a term of more than one year.

  • (1.16) Where, at any time, a taxpayer acquires from a person with whom the taxpayer is not dealing at arm’s length, or by virtue of an amalgamation (within the meaning assigned by subsection 87(1) of the Act), property that was specified leasing property of the person from whom, the taxpayer acquired it, the taxpayer shall, for the purposes of paragraph (1.1)(a) and for the purpose of computing the income of the taxpayer in respect of the lease for any period after the particular time, be deemed to be the same person as, and a continuation of, that person.

  • (1.17) For the purposes of subsections (1.1) and (1.11), where at any particular time a property (in this subsection referred to as a “replacement property”) is provided by a taxpayer to a lessee for the remaining term of a lease as a replacement for a similar property of the taxpayer (in this subsection referred to as the “original property”) that was leased by the taxpayer to the lessee, and the amount payable by the lessee for the use of, or the right to use, the replacement property is the same as the amount that was so payable in respect of the original property, the following rules apply:

    • (a) the replacement property shall be deemed to have been leased by the taxpayer to the lessee at the same time and for the same term as the original property;

    • (b) the amount of the loan referred to in clause (1.1)(a)(i)(A) shall be deemed to be equal to the amount of that loan determined in respect of the original property;

    • (c) the amount determined under subparagraph (1.1)(a)(ii) in respect of the replacement property shall be deemed to be equal to the amount so determined in respect of the original property;

    • (d) all amounts received or receivable by the taxpayer for the use of, or the right to use, the original property before the particular time shall be deemed to have been received or receivable, as the case may be, by the taxpayer for the use of, or the right to use, the replacement property; and

    • (e) the original property shall be deemed to have ceased to be subject to the lease at the particular time.

  • (1.18) For the purposes of subsection (1.1), where for any period of time any amount that would have been received or receivable by a taxpayer during that period in respect of the use of, or the right to use, a property of the taxpayer during that period is not received or receivable by the taxpayer as a consequence of a breakdown of the property during that period and before the lease of that property is terminated, that amount shall be deemed to have been received or receivable, as the case may be, by the taxpayer.

  • (1.19) For the purposes of subsections (1.1) and (1.11), where at any particular time

    • (a) an addition or alteration (in this subsection referred to as “additional property”) is made by a taxpayer to a property (in this subsection referred to as the “original property”) of the taxpayer that is a specified leasing property at the particular time, and

    • (b) as a consequence of the addition or alteration, the aggregate amount receivable by the taxpayer after the particular time for the use of, or the right to use, the original property and the additional property exceeds the amount so receivable in respect of the original property,

    the following rules apply:

    • (c) the taxpayer shall be deemed to have leased the additional property to the lessee at the particular time,

    • (d) the term of the lease of the additional property shall be deemed to be greater than one year,

    • (e) the prescribed rate in effect at the particular time in respect of the additional property shall be deemed to be equal to the prescribed rate in effect in respect of the lease of the original property at the particular time,

    • (f) subsection (1.11) shall be read without reference to paragraph (c) thereof in respect of the additional property, and

    • (g) the excess described in paragraph (b) shall be deemed to be an amount receivable by the taxpayer for the use of, or the right to use, the additional property.

  • (1.2) For the purposes of subsections (1.1) and (1.11), where at any time

    • (a) a lease (in this subsection referred to as the “original lease”) of property is renegotiated in the course of a bona fide renegotiation, and

    • (b) as a result of the renegotiation, the amount paid or payable by the lessee of the property for the use of, or the right to use, the property is altered in respect of a period after that time (otherwise than by reason of an addition or alteration to which subsection (1.19) applies),

    the following rules apply:

    • (c) the original lease shall be deemed to have expired and the renegotiated lease shall be deemed to be a new lease of the property entered into at that time, and

    • (d) paragraph (1.13)(b) shall not apply in respect of any period before that time during which the property was leased by the lessee or a person with whom the lessee did not deal at arm’s length.

  • (1.3) For the purposes of subsections (1.1) and (1.11), where a taxpayer leases to another person a building or part thereof that is not exempt property, the references to “one year” in paragraphs (1.11)(b) and (1.13)(b), subsection (1.15) and paragraph (1.19)(d) shall in respect of that building or part thereof be read as references to “three years”.

Property Acquired in the Year
  • (2) Where at the end of a taxation year of a taxpayer

    • (a) the aggregate of all amounts, each of which is an amount added

      • (i) by reason of subparagraph 13(21)(f)(i) of the Act in respect of a property acquired in the year or that became available for use by the taxpayer in the year, or

      • (ii) by reason of subparagraph 13(21)(f)(ii.1) or (ii.2) of the Act in respect of an amount repaid in the year

      to the undepreciated capital cost to the taxpayer of property of a class in Schedule II, other than

      • (iii) property included in paragraph (1)(v), paragraph (w) of Class 10 or any of paragraphs (a) to (c), (e) to (i), (k), (l) and (p) to (s) of Class 12,

      • (iv) property included in any of Classes 13, 14, 15, 23, 24, 27, 29 and 34,

      • (v) where the taxpayer was a corporation described in subsection (16) throughout the year, property that was specified leasing property of the taxpayer at that time,

      • (vi) property that was deemed to have been acquired by the taxpayer in a preceding taxation year by reason of the application of paragraph 16.1(1)(b) of the Act in respect of a lease to which the property was subject immediately before the time at which the taxpayer last acquired the property, and

      • (vii) property considered to have become available for use by the taxpayer in the year by reason of paragraph 13(27)(b) or (28)(c) of the Act

    exceeds

    • (b) the aggregate of all amounts, each of which is an amount deducted

      • (i) by virtue of subparagraph 13(21)(f)(iv) or (v) of the Act in respect of property disposed of in the year, or

      • (ii) by virtue of subparagraph 13(21)(f)(viii) of the Act in respect of an amount the taxpayer received or was entitled to receive in the year

      from the undepreciated capital cost to him of property of the class,

    the amount that the taxpayer may deduct for the year under subsection (1) in respect of property of the class shall be determined as if the undepreciated capital cost to him as of the end of the year (before making any deduction under subsection (1) for the year) of property of the class were reduced by an amount equal to 50 per cent of the amount by which the aggregate determined under paragraph (a) exceeds the aggregate determined under paragraph (b).

  • (2.1) Where a taxpayer has, after November 12, 1981 and before 1983, acquired or incurred a capital cost in respect of a property of a class in Schedule II and

    • (a) he was obligated to acquire the property under the terms of an agreement in writing entered into before November 13, 1981 (or, where the property is a property described in Class 31 in Schedule II, before 1982),

    • (b) he or a person with whom he was not dealing at arm’s length commenced the construction, manufacture or production of the property before November 13, 1981 (or, where the property is a property described in Class 31 in Schedule II, before 1982),

    • (c) he or a person with whom he was not dealing at arm’s length had made arrangements, evidenced in writing for the construction, manufacture or production of the property that were substantially advanced before November 13, 1981 and the construction, manufacture or production commenced before June 1, 1982, or

    • (d) he was obligated to acquire the property under the terms of an agreement in writing entered into before June 1, 1982 where arrangements, evidenced in writing, for the acquisition or leasing of the property were substantially advanced before November 13, 1981,

    the following rules apply:

    • (e) no amount shall be included under paragraph (2)(a) in respect of the property;

    • (f) where the property is a property to which paragraph (1)(b) applies, that paragraph shall be read, in respect of the property, as “such amount, not exceeding the amount for the year calculated in accordance with Schedule III, as he may claim in respect of the capital cost to him of property of Class 13 in Schedule II”;

    • (g) where the property is a property of a class to which paragraph (1)(t) or (ta) applies, the property shall be deemed to be designated property of the class; and

    • (h) where the property is a property described in paragraph (1)(v), subparagraph (iv) thereof shall be read, in respect of the property, as “33 1/3 per cent of the capital cost thereof to him, and”.

  • (2.2) Where a property of a class in Schedule II is acquired by a taxpayer

    • (a) in the course of a reorganization in respect of which, if a dividend were received by a corporation in the course of the reorganization, subsection 55(2) of the Act would not be applicable to the dividend by reason of the application of paragraph 55(3)(b) of the Act, or

    • (b) to (d) [Repealed, SOR/90-22, s. 1]

    • (e) from a person with whom the taxpayer was not dealing at arm’s length (otherwise than by virtue of a right referred to in paragraph 251(5)(b) of the Act) at the time the property was acquired,

    and where

    • (f) the property was depreciable property of the person from whom it was acquired and was owned continuously by that person for the period from

      • (i) a day that was at least 364 days before the end of the taxation year of the taxpayer during which he acquired the property, or

      • (ii) November 12, 1981

      to the day it was acquired by the taxpayer, or

    • (g) the rules provided in subsection (2.1) or this subsection applied in respect of the property for the purpose of determining the allowance under subsection (1) to which the person from whom the taxpayer acquired the property was entitled,

    the following rules apply:

    • (h) no amount shall be included under paragraph (2)(a) in respect of the property;

    • (i) where the property is a property to which paragraph (1)(b) applies, that paragraph shall be read, in respect of the property, as “such amount, not exceeding the amount for the year calculated in accordance with Schedule III, as he may claim in respect of the capital cost to him of property of Class 13 in Schedule II”;

    • (j) where the property is a property of a class to which paragraph (1)(ta) applies,

      • (i) the property shall be deemed to be designated property of the class,

      • (ii) for the purposes of computing the amount determined under paragraph (1)(ta) for any taxation year of the taxpayer ending after the time the property was actually acquired by the taxpayer, the property shall be deemed, other than for the purposes of paragraph (f), to have been acquired by the taxpayer immediately after the commencement of the taxpayer’s first taxation year that commenced after the time that is the earlier of

        • (A) the time the property was last acquired by the transferor of the property, and

        • (B) where the property was transferred in a series of transfers to which this subsection applies, the time the property was last acquired by the first transferor in that series,

        unless

        • (C) where clause (A) applies, the property was acquired by the taxpayer before the end of the taxation year of the transferor of the property that includes the time at which that transferor acquired the property, or

        • (D) where clause (B) applies, the property was acquired by the taxpayer before the end of the taxation year of the first transferor that includes the time at which that transferor acquired the property,

      • (iii) where the taxpayer is a corporation that was incorporated or otherwise formed after the end of the transferor’s, or where applicable, the first transferor’s, taxation year in which the transferor last acquired the property, the taxpayer shall be deemed, for the purposes of subparagraph (ii),

        • (A) to have been in existence throughout the period commencing immediately before the end of that year and ending immediately after the taxpayer was incorporated or otherwise formed, and

        • (B) to have had, throughout the period referred to in clause (A), fiscal periods ending on the day of the year on which the taxpayer’s first fiscal period ended, and

      • (iv) the property shall be deemed to have become available for use by the taxpayer at the earlier of

        • (A) the time it became available for use by the taxpayer, and

        • (B) if applicable,

          • (I) the time it became available for use by the person from whom the taxpayer acquired the property, determined without reference to paragraphs 13(27)(c) and (28)(d) of the Act, or

          • (II) the time it became available for use by the first transferor in a series of transfers of the same property to which this subsection applies, determined without reference to paragraphs 13(27)(c) and (28)(d) of the Act; and

    • (k) where the property is a property described in paragraph (1)(v), subparagraph (iv) thereof shall be read, in respect of the property, as “33 1/3 per cent of the capital cost thereof to him, and”.

  • (2.21) Where a taxpayer is deemed by a provision of the Act to have disposed of and acquired or reacquired a property,

    • (a) for the purposes of paragraph (2.2)(e) and subsections (19), 1101(lad) and 1102(14) and (14.1), the acquisition or reacquisition shall be deemed to have been from a person with whom the taxpayer was not dealing at arm’s length at the time of the acquisition or reacquisition; and

    • (b) for the purposes of paragraphs (2.2)(f) and (g), the taxpayer shall be deemed to be the person from whom the taxpayer acquired or reacquired the property.

  • (2.3) Where a taxpayer has disposed of a property and, by virtue of paragraph (2.2)(h), no amount is required to be included under paragraph (2)(a) in respect of the property by the person that acquired the property, no amount shall be included by the taxpayer under paragraph (2)(b) in respect of the disposition of the property.

  • (2.4) For the purposes of subsection (2), where a taxpayer has disposed of property described in Class 10 of Schedule II that would qualify as property described in paragraph (e) of Class 16 of Schedule II if the property had been acquired by the taxpayer after November 12, 1981, the proceeds of disposition of the property shall be deemed to be proceeds of disposition of property described in Class 16 of Schedule II and not of property described in Class 10 of Schedule II.

  • (2.5) Where in a particular taxation year a taxpayer disposes of a property included in Class 10.1 in Schedule II that was owned by the taxpayer at the end of the immediately preceding taxation year,

    • (a) the deduction allowed under subsection (1) in respect of the property in computing the taxpayer’s income for the year shall be determined as if the property had not been disposed of in the particular year and the number of days in the particular year were one-half of the number of days in the particular year otherwise determined; and

    • (b) no amount shall be deducted under subsection (1) in respect of the property in computing the taxpayer’s income for any subsequent taxation year.

Taxation Years Less Than 12 Months
  • (3) Where a taxation year is less than 12 months, the amount allowed as a deduction under this section, other than under any of paragraphs (1)(c), (e), (f), (g), (l), (m), (w), (x), (y), (ya), (zg) and (zh), shall not exceed that proportion of the maximum amount otherwise allowable that the number of days in the taxation year is of 365.

  • (4) Reserved.

  • (5) [Repealed, SOR/78-377, s. 6]

Employee’s Automobile or Aircraft
  • (6) [Repealed, SOR/91-673, s. 1]

  • (7) Reserved.

Railway Sidings
  • (8) Where a taxpayer, other than an operator of a railway system, has made a capital expenditure pursuant to a contract or arrangement with an operator of a railway system under which a railway siding that does not become the taxpayer’s property is constructed to provide service to the taxpayer’s place of business or to a property acquired by the taxpayer for the purpose of gaining or producing income, there is hereby allowed to the taxpayer, in computing income for the taxation year from the business or property, as the case may be, a deduction equal to such amount as he may claim not exceeding four per cent of the amount remaining, if any, after deducting from the capital expenditure the aggregate of all amounts previously allowed as deductions in respect of the expenditure.

Patents
  • (9) Where a part or all of the cost of a patent is determined by reference to the use of the patent, in lieu of the deduction allowed under paragraph (1)(c), a taxpayer, in computing his income for a taxation year from a business or property, as the case may be, may deduct such amount as he may claim in respect of property of Class 14 in Schedule II not exceeding the lesser of

    • (a) the aggregate of

      • (i) that part of the capital cost determined by reference to the use of the patent in the year, and

      • (ii) the amount that would be computed under subparagraph (1)(c)(i) if the capital cost of the patent did not include the amounts determined by reference to the use of the patent in that year and previous years; and

    • (b) the undepreciated capital cost to him as of the end of the taxation year (before making any deduction under this subsection for the taxation year) of property of the class.

  • (9.1) Where a part or all of the capital cost to a taxpayer of property that is a patent, or a right to use patented information, is determined by reference to the use of the property and that property is included in Class 44 in Schedule II, in lieu of the deduction allowed under paragraph (1)(a), there may be deducted in computing the taxpayer’s income for a taxation year from a business or property such amount as the taxpayer may claim in respect of property of the class not exceeding the lesser of

    • (a) the total of

      • (i) that part of the capital cost that is determined by reference to the use of the property in the year, and

      • (ii) the amount that would be deductible for the year by reason of paragraph (1)(a) in respect of property of the class if the capital cost of property of the class did not include the amounts determined under subparagraph (i) for the year and preceding taxation years; and

    • (b) the undepreciated capital cost to the taxpayer as of the end of the taxation year (before making any deduction under this subsection for the taxation year) of property of the class.

  • (10) Reserved.

Rental Properties
  • (11) Notwithstanding subsection (1), in no case shall the aggregate of deductions, each of which is a deduction in respect of property of a prescribed class owned by a taxpayer that includes rental property owned by him, otherwise allowed to the taxpayer by virtue of subsection (1) in computing his income for a taxation year, exceed the amount, if any, by which

    • (a) the aggregate of amounts each of which is

      • (i) his income for the year from renting or leasing a rental property owned by him, computed without regard to paragraph 20(1)(a) of the Act, or

      • (ii) the income of a partnership for the year from renting or leasing a rental property of the partnership, to the extent of the taxpayer’s share of such income,

    exceeds

    • (b) the aggregate of amounts each of which is

      • (i) his loss for the year from renting or leasing a rental property owned by him, computed without regard to paragraph 20(1)(a) of the Act, or

      • (ii) the loss of a partnership for the year from renting or leasing a rental property of the partnership, to the extent of the taxpayer’s share of such loss.

  • (12) Subject to subsection (13), subsection (11) does not apply in respect of a taxation year of a taxpayer that was, throughout the year,

    • (a) a life insurance corporation, or a corporation whose principal business was the leasing, rental, development or sale, or any combination thereof, of real property owned by it; or

    • (b) a partnership each member of which was a corporation described in paragraph (a).

  • (13) For the purposes of subsection (11), where a taxpayer or partnership has a leasehold interest in a property that is property of Class 1, 3 or 6 in Schedule II by virtue of subsection 1102(5) and the property is leased by the taxpayer or partnership to a person who owns the land, an interest therein or an option in respect thereof, on which the property is situated, this section shall be read without reference to subsection (12) with respect to that property.

  • (14) In this section and section 1101, rental property of a taxpayer or a partnership means

    • (a) a building owned by the taxpayer or the partnership, whether owned jointly with another person or otherwise, or

    • (b) a leasehold interest in real property, if the leasehold interest is property of Class 1, 3, 6 or 13 in Schedule II and is owned by the taxpayer or the partnership,

    if, in the taxation year in respect of which the expression is being applied, the property was used by the taxpayer or the partnership principally for the purpose of gaining or producing gross revenue that is rent, but, for greater certainty, does not include a property leased by the taxpayer or the partnership to a lessee, in the ordinary course of the taxpayer’s or partnership’s business of selling goods or rendering services, under an agreement by which the lessee undertakes to use the property to carry on the business of selling, or promoting the sale of, the taxpayer’s or partnership’s goods or services.

  • (14.1) For the purposes of subsection (14), gross revenue derived in a taxation year from

    • (a) the right of a person or partnership, other than the owner of a property, to use or occupy the property or a part thereof, and

    • (b) services offered to a person or partnership that are ancillary to the use or occupation by the person or partnership of the property or the part thereof

    shall be considered to be rent derived in that year from the property.

  • (14.2) Subsection (14.1) does not apply in any particular taxation year to property owned by

    • (a) a corporation, where the property is used in a business carried on in the year by the corporation;

    • (b) an individual, where the property is used in a business carried on in the year by the individual in which he is personally active on a continuous basis throughout that portion of the year during which the business is ordinarily carried on; or

    • (c) a partnership, where the property is used in a business carried on in the year by the partnership if at least 2/3 of the income or loss, as the case may be, of the partnership for the year is included in the determination of the income of

      • (i) members of the partnership who are individuals that are personally active in the business of the partnership on a continuous basis throughout that portion of the year during which the business is ordinarily carried on, and

      • (ii) members of the partnership that are corporations.

Leasing Properties
  • (15) Notwithstanding subsection (1), in no case shall the aggregate of deductions, each of which is a deduction in respect of property of a prescribed class that is leasing property owned by a taxpayer, otherwise allowed to the taxpayer under subsection (1) in computing his income for a taxation year, exceed the amount, if any, by which

    • (a) the aggregate of amounts each of which is

      • (i) his income for the year from renting, leasing or earning royalties from, a leasing property or a property that would be a leasing property but for subsection (18), (19) or (20) where such property is owned by him, computed without regard to paragraph 20(1)(a) of the Act, or

      • (ii) the income of a partnership for the year from renting, leasing or earning royalties from, a leasing property or a property that would be a leasing property but for subsection (18), (19) or (20) where such property is owned by the partnership, to the extent of the taxpayer’s share of such income,

    exceeds

    • (b) the aggregate of amounts each of which is

      • (i) his loss for the year from renting, leasing or earning royalties from, a property referred to in subparagraph (a)(i), computed without regard to paragraph 20(1)(a) of the Act, or

      • (ii) the loss of a partnership for the year from renting, leasing or earning royalties from, a property referred to in subparagraph (a)(ii), to the extent of the taxpayer’s share of such loss.

  • (16) Subsection (15) does not apply in respect of a taxation year of a taxpayer that was, throughout the year,

    • (a) a corporation whose principal business was

      • (i) renting or leasing of leasing property or property that would be leasing property but for subsection (18), (19) or (20), or

      • (ii) renting or leasing of property referred to in subparagraph (i) combined with selling and servicing of property of the same general type and description,

      if the gross revenue of the corporation for the year from such principal business was not less than 90 per cent of the gross revenue of the corporation for the year from all sources; or

    • (b) a partnership each member of which was a corporation described in paragraph (a).

  • (17) Subject to subsection (18), in this section and section 1101, leasing property of a taxpayer or a partnership means depreciable property other than

    • (a) rental property,

    • (b) computer software tax shelter property, or

    • (c) property referred to in paragraph (w) of Class 10 or in paragraph (n) of Class 12 in Schedule II,

    where such property is owned by the taxpayer or the partnership, whether jointly with another person or otherwise, if, in the taxation year in respect of which the expression is being applied, the property was used by the taxpayer or the partnership principally for the purpose of gaining or producing gross revenue that is rent, royalty or leasing revenue, but for greater certainty, does not include a property leased by the taxpayer or the partnership to a lessee, in the ordinary course of the taxpayer’s or partnership’s business of selling goods or rendering services, under an agreement by which the lessee undertakes to use the property to carry on the business of selling, or promoting the sale of, the taxpayer’s or partnership’s goods or services.

  • (17.1) For the purposes of subsection (17), where, in a taxation year, a taxpayer or a partnership has acquired a property

    • (a) that was not used for any purpose in that year, and

    • (b) the first use of the property by the taxpayer or the partnership was principally for the purpose of gaining or producing gross revenue that is rent, royalty or leasing revenue,

    the property shall be deemed to have been used in the taxation year in which it was acquired principally for the purpose of gaining or producing gross revenue that is rent, royalty or leasing revenue.

  • (17.2) For the purposes of subsections (1.11) and (17), gross revenue derived in a taxation year from

    • (a) the right of a person or partnership, other than the owner of a property, to use or occupy the property or a part thereof, and

    • (b) services offered to a person or partnership that are ancillary to the use or occupation by the person or partnership of the property or the part thereof

    shall be considered to be rent derived in the year from the property.

  • (17.3) Subsection (17.2) does not apply in any particular taxation year to property owned by

    • (a) a corporation, where the property is used in a business carried on in the year by the corporation;

    • (b) an individual, where the property is used in a business carried on in the year by the individual in which he is personally active on a continuous basis throughout that portion of the year during which the business is ordinarily carried on; or

    • (c) a partnership, where the property is used in a business carried on in the year by the partnership if at least 2/3 of the income or loss, as the case may be, of the partnership for the year is included in the determination of the income of

      • (i) members of the partnership who are individuals that are personally active in the business of the partnership on a continuous basis throughout that portion of the year during which the business is ordinarily carried on, and

      • (ii) members of the partnership that are corporations.

  • (18) Leasing property of a taxpayer or a partnership referred to in subsection (17) does not include

    • (a) property that the taxpayer or the partnership acquired before May 26, 1976 or was obligated to acquire under the terms of an agreement in writing entered into before May 26, 1976;

    • (b) property the construction, manufacture or production of which was commenced by the taxpayer or the partnership before May 26, 1976 or was commenced under an agreement in writing entered into by the taxpayer or the partnership before May 26, 1976; or

    • (c) property that the taxpayer or the partnership acquired on or before December 31, 1976 or was obligated to acquire under the terms of an agreement in writing entered into on or before December 31, 1976, if

      • (i) arrangements, evidenced by writing, respecting the acquisition, construction, manufacture or production of the property had been substantially advanced before May 26, 1976, and

      • (ii) the taxpayer or the partnership had before May 26, 1976 demonstrated a bona fide intention to acquire the property for the purpose of gaining or producing gross revenue that is rent, royalty or leasing revenue.

  • (19) Notwithstanding subsection (17), a property acquired by a taxpayer

    • (a) in the course of a reorganization in respect of which, if a dividend were received by a corporation in the course of the reorganization, subsection 55(2) of the Act would not be applicable to the dividend by reason of the application of paragraph 55(3)(b) of the Act, or

    • (a.1) [Repealed, SOR/90-22, s. 1]

    • (b) from a person with whom the taxpayer was not dealing at arm’s length (otherwise than by virtue of a right referred to in paragraph 251(5)(b) of the Act) at the time the property was acquired,

    • (c) [Repealed, SOR/90-22, s. 1]

    that would otherwise be leasing property of the taxpayer, shall be deemed not to be leasing property of the taxpayer if immediately before it was so acquired by the taxpayer, it was, by virtue of subsection (18) or (20) or this subsection, not a leasing property of the person from whom the property was so acquired.

  • (20) Notwithstanding subsection (17), a property acquired by a taxpayer or partnership that is a replacement property (within the meaning assigned by subsection 13(4) of the Act), that would otherwise be a leasing property of the taxpayer or partnership, shall be deemed not to be a leasing property of the taxpayer or partnership if the property replaced, referred to in paragraph 13(4)(a) or (b) of the Act, was, by reason of subsection (18) or (19) or this subsection, not a leasing property of the taxpayer or partnership immediately before it was disposed of by the taxpayer or partnership.

Computer Software Tax Shelter Property
  • (20.1) The total of all amounts each of which is a deduction in respect of computer software tax shelter property allowed to the taxpayer under subsection (1) in computing a taxpayer’s income for a taxation year shall not exceed the amount, if any, by which

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

      • (i) the taxpayer’s income for the year from a business in which computer software tax shelter property owned by the taxpayer is used, computed without reference to any deduction under subsection (1) in respect of such property, or

      • (ii) the income of a partnership from a business in which computer software tax shelter property owned by the partnership is used, to the extent of the taxpayer’s share of such income that is included in computing the taxpayer’s income for the year,

    exceeds

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

      • (i) a loss of the taxpayer from a business in which computer software tax shelter property is used, computed without reference to any deduction under subsection (1) in respect of such property, or

      • (ii) a loss of a partnership from a business in which computer software tax shelter property is used, to the extent of the taxpayer’s share of such loss that is included in computing the taxpayer’s income for the year.

  • (20.2) For the purpose of this Part, computer software tax shelter property is computer software that is depreciable property of a prescribed class of a person or partnership where

    • (a) the person’s or partnership’s interest in the property is a tax shelter investment (as defined by subsection 143.2(1) of the Act) determined without reference to subsection (20.1); or

    • (b) an interest in the person or partnership is a tax shelter investment (as defined by subsection 143.2(1) of the Act) determined without reference to subsection (20.1).

Certified Films and Video Tapes
  • (21) Notwithstanding subsection (1), where a taxpayer (in this subsection and subsection (22) referred to as the “investor”) has acquired property of Class 10 or 12 in Schedule II that is a certified feature film or certified production (in this subsection and subsection (22) referred to as the “film or tape”), in no case shall the deduction in respect of property of that class otherwise allowed to the investor by virtue of subsection (1) in computing the investor’s income for a particular taxation year exceed the amount that it would be if the capital cost to the investor of the film or tape were reduced by the aggregate of amounts, each of which is

    • (a) where the principal photography or taping of the film or tape is not completed before the end of the particular taxation year, the amount, if any, by which

      • (i) the capital cost to the investor of the film or tape as of the end of the year

      exceeds the aggregate of

      • (ii) where the principal photography or taping of the film or tape is completed within 60 days after the end of the year, the amount that may reasonably be considered to be the investor’s proportionate share of the production costs incurred in respect of the film or tape before the end of the year,

      • (iii) where the principal photography or taping of the film or tape is not completed within 60 days after the end of the year, the amount that may reasonably be considered to be the investor’s proportionate share of the lesser of

        • (A) the production costs incurred in respect of the film or tape before the end of the year, and

        • (B) the proportion of the production costs incurred to the date the principal photography or taping is completed that the percentage of the principal photography or taping completed as of the end of the year, as certified by the Minister of Communications, is of 100 per cent, and

      • (iv) the total of amounts determined under paragraphs (b) to (e) in respect of the film or tape as of the end of the year;

    • (b) where, at any time before the later of

      • (i) the date the principal photography or taping of the film or tape is completed, and

      • (ii) the date the investor acquired the film or tape,

      a revenue guarantee (other than a revenue guarantee that is certified by the Minister of Communications to be a guarantee under which the person who agrees to provide the revenue is a licensed broadcaster or bona fide film or tape distributor) is entered into in respect of the film or tape whereby it may reasonably be considered certain, having regard to all the circumstances, that the investor will receive revenue under the terms of the revenue guarantee, the amount, if any, that may reasonably be considered to be the portion of the revenue that has not been included in the investor’s income in the particular taxation year or a previous taxation year;

    • (c) where, at any time, a revenue guarantee, other than

      • (i) a revenue guarantee in respect of which paragraph (b) applies, or

      • (ii) a revenue guarantee under which the person (in this subsection referred to as the “guarantor”) who agrees to provide the revenue under the terms of the guarantee is a person who does not deal at arm’s length with either the investor or the person from whom the investor acquired the film or tape (in this subsection referred to as the “vendor”) and in respect of which the Minister of Communications certifies that

        • (A) the guarantor is a licenced broadcaster or bona fide film or tape distributor, and

        • (B) the cost of the film or tape does not include any amount for or in respect of the guarantee,

      is entered into in respect of the film or tape, the amount, if any, that may reasonably be considered to be the portion of the revenue that is to be received by the investor under the terms of the revenue guarantee that has not been included in the investor’s income in the particular taxation year or a preceding taxation year, if

      • (iii) the guarantor and the investor are not dealing at arm’s length,

      • (iv) the vendor and the guarantor are not dealing at arm’s length, or

      • (v) the vendor or a person not dealing at arm’s length with the vendor undertakes in any way, directly or indirectly, to fulfill all or any part of the guarantor’s obligations under the terms of the revenue guarantee;

    • (d) where, at any time, a revenue guarantee, other than a revenue guarantee in respect of which paragraph (b) or (c) applies, is entered into in respect of the film or tape, the amount, if any, that may reasonably be considered to be the portion of the revenue that is to be received by the investor under the terms of the revenue guarantee that

      • (i) is not due to the investor until a time that is more than four years after the first day on which the guarantor has the right to the use of the film or tape, and

      • (ii) has not been included in the investor’s income in the particular taxation year or a previous taxation year; and

    • (e) the portion of any debt obligation of the investor outstanding at the end of the particular year that is convertible into an interest in the film or tape or in the investor.

  • (21.1) Notwithstanding subsection (1), where a taxpayer has acquired property described in paragraph (s) of Class 10 in Schedule II, or in paragraph (m) of Class 12 of Schedule II, the deduction in respect of the property otherwise allowed to the taxpayer under subsection (1) in computing the taxpayer’s income for a taxation year shall not exceed the amount that it would be if the capital cost to the taxpayer of the property were reduced by the portion of any debt obligation of the taxpayer outstanding at the end of the year that is convertible into an interest in the property or in the taxpayer.

  • (22) Notwithstanding subsection (1), where an investor has acquired a film or tape after his 1977 taxation year and before 1979 and the principal photography or taping in respect of the film or tape is completed after a particular taxation year and not later than March 1, 1979, in no case shall the deduction in respect of property of Class 12 in Schedule II otherwise allowed to the investor by virtue of subsection (1) in computing his income for the particular taxation year exceed the amount, otherwise determined, if the capital cost to the investor of the film or tape were reduced by the amount, if any, by which

    • (a) the capital cost to the investor of the film or tape as of the end of the year

    exceeds

    • (b) the amount that may reasonably be considered to be the investor’s proportionate share of the production costs incurred in respect of the film or tape to March 1, 1979.

  • (23) For the purposes of paragraph (21)(a),

    • (a) in respect of a film or tape acquired in 1987, other than a film or tape in respect of which paragraph (b) applies, the references in paragraph (21)(a) to “within 60 days after the end of the year” shall be read as references to “before July, 1988”; and

    • (b) in respect of a film or tape acquired in 1987 or 1988 that is included in paragraph (n) of Class 12 in Schedule II and that is part of a series of films or tapes that includes another property included in that paragraph, the references in paragraph (21)(a) to “within 60 days after the end of the year” shall be read as references to “before 1989”.

Specified Energy Property
  • (24) Notwithstanding subsection (1), in no case shall the total of deductions, each of which is a deduction in respect of property of Class 34 or 43.1 in Schedule II that is specified energy property owned by a taxpayer, otherwise allowed to the taxpayer under subsection (1) in computing the taxpayer’s income for a taxation year, exceed the amount, if any, by which

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

      • (i) the total of

        • (A) the amount that would be the income of the taxpayer for the year from property described in Class 34 or 43.1 in Schedule II (other than specified energy property), or from the business of selling the product of that property, if that income were calculated after deducting the maximum amount allowable in respect of the property for the year under paragraph 20(1)(a) of the Act, and

        • (B) the taxpayer’s income for the year from specified energy property or from the business of selling the product of that property, computed without regard to paragraph 20(1)(a) of the Act, or

      • (ii) the total of

        • (A) the taxpayer’s share of the amount that would be the income of a partnership for the year from property described in Class 34 or 43.1 in Schedule II (other than specified energy property), or from the business of selling the product of that property, if that income were calculated after deducting the maximum amount allowable in respect of the property for the year under paragraph 20(1)(a) of the Act, and

        • (B) the income of a partnership for the year from specified energy property or from the business of selling the product of that property of the partnership, to the extent of the taxpayer’s share of that income,

    exceeds

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

      • (i) the taxpayer’s loss for the year from specified energy property or from the business of selling the product of that property, computed without regard to paragraph 20(1)(a) of the Act, or

      • (ii) the loss of a partnership for the year from specified energy property or from the business of selling the product of that property of the partnership, to the extent of the taxpayer’s share of that loss.

  • (25) Subject to subsections (27) to (29), in this section and section 1101, specified energy property of a taxpayer or partnership (in this subsection referred to as “the owner”) for a taxation year means property of Class 34 or 43.1 in Schedule II that was acquired by the owner after February 9, 1988 other than a particular property

    • (a) acquired to be used by the owner primarily for the purpose of gaining or producing income from a business carried on in Canada (other than the business of selling the product of the particular property) or from another property situated in Canada, or

    • (b) leased in the year, in the ordinary course of carrying on a business of the owner in Canada, to

      • (i) a person who can reasonably be expected to use the property primarily for the purpose of gaining or producing income from a business carried on in Canada (other than the business of selling the product of the particular property) or from another property situated in Canada, or

      • (ii) a corporation or partnership described in subsection (26),

      where the owner was

      • (iii) a corporation whose principal business was, throughout the year,

        • (A) the renting or leasing of leasing property or property that would be leasing property but for subsection (18), (19) or (20),

        • (B) the renting or leasing of property referred to in clause (A) combined with the selling and servicing of property of the same general type and description, or

        • (C) the manufacturing of property described in Class 34 or 43.1 in Schedule II that it sells or leases,

        and the gross revenue of the corporation for the year from that principal business was not less than 90 per cent of the gross revenue of the corporation for the year from all sources, or

      • (iv) a partnership each member of which was a corporation described in subparagraph (iii) or paragraph (26)(a).

  • (26) Subsection (24) does not apply to a taxation year of a taxpayer that was, throughout the year,

    • (a) a corporation whose principal business throughout the year was

      • (i) manufacturing or processing,

      • (ii) mining operations, or

      • (iii) the sale, distribution or production of electricity, natural gas, oil, steam, heat or any other form of energy or potential energy; or

    • (b) a partnership each member of which was a corporation described in paragraph (a).

  • (27) Specified energy property of a person or partnership does not include property acquired by the person or partnership after February 9, 1988 and before 1990

    • (a) pursuant to an obligation in writing entered into by the person or partnership before February 10, 1988;

    • (b) pursuant to the terms of a prospectus, preliminary prospectus, registration statement or offering memorandum filed before February 10, 1988 with a public authority in Canada pursuant to and in accordance with the securities legislation of any province;

    • (c) pursuant to the terms of an offering memorandum distributed as part of an offering of securities where

      • (i) the offering memorandum contained a complete or substantially complete description of the securities contemplated in the offering as well as the terms and conditions of the offering of the securities,

      • (ii) the offering memorandum was distributed before February 10, 1988,

      • (iii) solicitations in respect of the sale of the securities contemplated by the offering memorandum were made before February 10, 1988, and

      • (iv) the sale of the securities was substantially in accordance with the offering memorandum; or

    • (d) as part of a project where, before February 10, 1988,

      • (i) some of the machinery or equipment to be used in the project had been acquired, or agreements in writing for the acquisition of that machinery or equipment had been entered into, by or on behalf of the person or partnership, and

      • (ii) an approval had been received by or on behalf of the person or partnership from a government environmental authority in respect of the location of the project.

  • (28) A property acquired by a taxpayer

    • (a) in the course of a reorganization in respect of which, if a dividend were received by a corporation in the course of the reorganization, subsection 55(2) of the Act would not be applicable to the dividend by reason of the application of paragraph 55(3)(b) of the Act, or

    • (b) from a person with whom the taxpayer was not dealing at arm’s length (otherwise than by virtue of a right referred to in paragraph 251(5)(b) of the Act) at the time the property was acquired

    that would otherwise be specified energy property of the taxpayer shall be deemed not to be specified energy property of the taxpayer if, immediately before it was so acquired by the taxpayer, it was not, by virtue of subsection (27), this subsection or subsection (29), specified energy property of the person from whom the property was so acquired.

  • (29) A property acquired by a taxpayer or partnership that is a replacement property (within the meaning assigned by subsection 13(4) of the Act), that would otherwise be specified energy property of the taxpayer or partnership, shall be deemed not to be specified energy property of the taxpayer or partnership if the property replaced, referred to in paragraph 13(4)(a) or (b) of the Act, was, by virtue of subsection (27), (28) or this subsection, not specified energy property of the taxpayer or partnership immediately before it was disposed of by the taxpayer or partnership.

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • SOR/78-137, s. 1
  • SOR/78-377, ss. 3 to 6
  • SOR/78-948, s. 1
  • SOR/79-427, s. 1
  • SOR/80-942, s. 1
  • SOR/81-470, s. 1
  • SOR/82-265, s. 1
  • SOR/83-340, s. 1
  • SOR/83-432, s. 1
  • SOR/84-454, s. 1
  • SOR/84-948, s. 5
  • SOR/85-13, s. 1
  • SOR/85-174, s. 1
  • SOR/86-254, s. 1
  • SOR/86-1092, ss. 3(F), 4(F)
  • SOR/86-1136, s. 1
  • SOR/88-392, s. 1
  • SOR/89-27, s. 1
  • SOR/90-22, s. 1
  • SOR/90-257, s. 1
  • SOR/90-670, s. 1
  • SOR/91-196, s. 1
  • SOR/91-673, s. 1
  • SOR/92-681, s. 3
  • SOR/94-128, s. 1
  • SOR/94-140, s. 2
  • SOR/94-169, s. 1
  • SOR/94-170, s. 1
  • SOR/94-686, ss. 9(F), 48, 58(F), 78(F), 79(F), 81(F)
  • SOR/95-244, s. 1
  • SOR/97-377, s. 1
  • SOR/99-179, s. 1
  • SOR/2000-248, s. 2
  • SOR/2005-126, s. 1
  • SOR/2005-371, s. 1
  • SOR/2005-414, s. 1

Exempt Mining Income

  •  (1) [Repealed, SOR/88-165, s. 6]

  • (2) Any election under subparagraph 13(21)(f)(vi) of the Act in respect of property of a prescribed class acquired by a corporation for the purpose of gaining or producing income from a mine shall be made by filing with the Minister, not later than the day on or before which the corporation is required to file a return of income pursuant to section 150 of the Act for its taxation year in which the exempt period in respect of the mine ended, one of the following documents in duplicate:

    • (a) where the directors of the corporation are legally entitled to administer the affairs of the corporation, a certified copy of their resolution authorizing the election to be made in respect of that class; and

    • (b) where the directors of the corporation are not legally entitled to administer the affairs of the corporation, a certified copy of the authorization of the making of the election in respect of that class by the person or persons legally entitled to administer the affairs of the corporation.

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • SOR/78-377, s. 7
  • SOR/78-493, s. 1(F)
  • SOR/79-426, s. 1
  • SOR/88-165, s. 6
  • SOR/94-686, s. 79(F)

DIVISION IISeparate Classes

Businesses and Properties

  •  (1) Where more than one property of a taxpayer is described in the same class in Schedule II and where

    • (a) one of the properties was acquired for the purpose of gaining or producing income from a business, and

    • (b) one of the properties was acquired for the purpose of gaining or producing income from another business or from the property,

    a separate class is hereby prescribed for the properties that

    • (c) were acquired for the purpose of gaining or producing income from each business; and

    • (d) would otherwise be included in the class.

  • (1a) For the purposes of subsection (1),

    • (a) a life insurance business, and

    • (b) an insurance business other than a life insurance business,

    shall each be regarded as a separate business.

  • (1ab) Where, at the end of 1971, more than one property of a taxpayer who was a member of a partnership at that time is described in the same class in Schedule II and where

    • (a) one of the properties can reasonably be regarded to be the interest of the taxpayer in a depreciable property that is partnership property of the partnership, and

    • (b) one of the properties is property other than property referred to in paragraph (a),

    a separate class is hereby prescribed for all properties each of which

    • (c) is a property referred to in paragraph (a); and

    • (d) would otherwise be included in the class.

  • (1ac) Subject to subsection (5h), where more than one property of a taxpayer is described in the same class in Schedule II, and one or more of the properties is a rental property of the taxpayer the capital cost of which to the taxpayer was not less than $50,000, a separate class is hereby prescribed for each such rental property of the taxpayer that would otherwise be included in the same class, other than a rental property that was acquired by the taxpayer before 1972 or that is

    • (a) a building or an interest therein, or

    • (b) a leasehold interest acquired by the taxpayer by reason of the fact that the taxpayer erected a building on leased land,

    erection of which building was commenced by the taxpayer before 1972 or pursuant to an agreement in writing entered into by the taxpayer before 1972.

  • (1ad) Notwithstanding subsection (1ac), a rental property acquired by a taxpayer

    • (a) in the course of a reorganization in respect of which, if a dividend were received by a corporation in the course of the reorganization, subsection 55(2) of the Act would not be applicable to the dividend by reason of the application of paragraph 55(3)(b) of the Act, or

    • (a.1) [Repealed, SOR/90-22, s. 2]

    • (b) from a person with whom the taxpayer was not dealing at arm’s length (otherwise than by virtue of a right referred to in paragraph 251(5)(b) of the Act) at the time the property was acquired,

    • (c) [Repealed, SOR/90-22, s. 2]

    that would otherwise be rental property of the taxpayer of a separate class prescribed under subsection (1ac), shall be deemed not to be property of a separate class prescribed under that subsection if, immediately before it was so acquired by the taxpayer, it was a rental property of the person from whom the property was so acquired of a prescribed class other than a separate class prescribed under that subsection.

  • (1ae) Except in the case of a corporation or partnership described in subsection 1100(12), where more than one property of a taxpayer is described in the same class in Schedule II and where

    • (a) one of the properties is a rental property other than a property of a separate class prescribed under subsection (1ac), and

    • (b) one of the properties is a property other than rental property,

    a separate class is hereby prescribed for properties that

    • (c) are described in paragraph (a); and

    • (d) would otherwise be included in the class.

  • (1af) A separate class is hereby prescribed for each property included in Class 10.1 in Schedule II.

  • (1b) and (1c) [Repealed, SOR/79-670, s. 1]

Fishing Vessels
  • (2) Where a property of a taxpayer that would otherwise be included in Class 7 in Schedule II is a property in respect of which a depreciation allowance could have been taken under Order in Council

    • (a) P.C. 2798 of April 10, 1942,

    • (b) P.C. 7580 of August 26, 1942, as amended by P.C. 3297 of April 22, 1943, or

    • (c) P.C. 3979 of June 1, 1944,

    if those Orders in Council were applicable to the taxation year, a separate class is hereby prescribed for each property, including the furniture, fittings and equipment attached thereto.

Canadian Vessels
  • (2a) A separate class is hereby prescribed for each vessel of a taxpayer, including the furniture, fittings, radiocommunication equipment and other equipment attached thereto, that

    • (a) was constructed in Canada;

    • (b) is registered in Canada; and

    • (c) had not been used for any purpose whatever before it was acquired by the taxpayer.

Offshore Drilling Vessels
  • (2b) A separate class is hereby prescribed for all vessels described in Class 7 in Schedule II, including the furniture, fittings, radiocommunication equipment and other equipment attached thereto, acquired by a taxpayer

    • (a) after May 25, 1976 and designed principally for the purpose of

      • (i) determining the existence, location, extent or quality of accumulations of petroleum or natural gas (other than mineral resources), or

      • (ii) drilling oil or gas wells; or

    • (b) after May 22, 1979 and designed principally for the purpose of determining the existence, location, extent or quality of mineral resources.

Vessels and a Structured Financing Facility
  • (2c) Subsections (2a) and (2b) do not apply to a vessel, nor to the furniture, fittings, radio communications equipment and other equipment attached to the vessel, if a structured financing facility relating to any such property has been agreed to by the Minister of Industry under the Department of Industry Act.

Timber Limits and Cutting Rights
  • (3) For the purposes of this Part and Schedules IV and VI, each property of a taxpayer that is

    • (a) a timber limit other than a timber resource property, or

    • (b) a right to cut timber from a limit other than a right that is a timber resource property,

    is hereby prescribed to be a separate class of property.

Industrial Mineral Mines
  • (4) For the purposes of this Part and Schedule V, where a taxpayer has

    • (a) more than one industrial mineral mine in respect of which he may claim an allowance under paragraph 1100(1)(g),

    • (b) more than one right to remove industrial minerals from an industrial mineral mine in respect of which he may claim an allowance under that paragraph, or

    • (c) both such a mine and a right,

    each such industrial mineral mine and each such right to remove industrial minerals from an industrial mineral mine is hereby prescribed to be a separate class of property.

New or Expanded Mines Properties
  • (4a) Where more than one property of a taxpayer is described in Class 28 in Schedule II and

    • (a) one of the properties was acquired for the purpose of gaining or producing income from only one mine, and

    • (b) one of the properties was acquired for the purpose of gaining or producing income from another mine,

    a separate class is hereby prescribed for the properties that

    • (c) were acquired for the purpose of gaining or producing income from each mine;

    • (d) would otherwise be included in the class; and

    • (e) are not included in a separate class by virtue of subsection (4b).

  • (4b) Where more than one property of a taxpayer is described in Class 28 in Schedule II and

    • (a) one of the properties was acquired for the purpose of gaining or producing income from particular mines, and

    • (b) one of the properties was acquired for the purpose of gaining or producing income from only one mine or more than one mine other than any of the particular mines,

    a separate class is hereby prescribed for the properties that

    • (c) were acquired for the purpose of gaining or producing income from the particular mines; and

    • (d) would otherwise be included in the class.

  • (4c) Where one or more properties of a taxpayer are described in paragraph (a), (a.1) or (a.2) of Class 41 in Schedule II and

    • (a) where all of the properties were acquired for the purpose of gaining or producing income from only one mine, or

    • (b) where

      • (i) one or more of the properties were acquired for the purpose of gaining or producing income from a particular mine, and

      • (ii) one or more of the properties were acquired for the purpose of gaining or producing income from another mine,

    a separate class is hereby prescribed for the properties that

    • (c) were acquired for the purpose of gaining or producing income from each mine,

    • (d) would otherwise be included in the class, and

    • (e) are not included in a separate class by reason of subsection (4d).

  • (4d) Where more than one property of a taxpayer is described in paragraph (a), (a.1) or (a.2) of Class 41 in Schedule II and

    • (a) one of the properties was acquired for the purpose of gaining or producing income from particular mines, and

    • (b) one of the properties was acquired for the purpose of gaining or producing income from only one mine or more than one mine other than any of the particular mines,

    a separate class is hereby prescribed for the properties that

    • (c) were acquired for the purpose of gaining or producing income from the particular mines, and

    • (d) would otherwise be included in the class.

Lease Option Agreements
  • (5) Where, by virtue of an agreement, contract or arrangement entered into on or after May 31, 1954, a taxpayer is deemed by section 18 of the Income Tax Act, as enacted by the Statutes of Canada, 1958, Chapter 32, subsection 8(1), to have acquired a property, a separate class is hereby prescribed for each such property and if the taxpayer subsequently actually acquires the property it shall be included in the same class.

Telecommunication Spacecraft
  • (5a) For the purposes of this Part, each property of a taxpayer that is an unmanned telecommunication spacecraft described in paragraph (f.2) of Class 10 or in Class 30 in Schedule II is hereby prescribed to be a separate class of property.

Multiple-Unit Residential Buildings
  • (5b) For the purposes of this Part, when any property of a taxpayer is a property of Class 31 or 32 in Schedule II and the capital cost of that property to the taxpayer was not less than $50,000, a separate class is hereby prescribed for each such property of the taxpayer that would otherwise be included in the same class.

Leasing Properties
  • (5c) For the purposes of this Part, except in the case of a corporation or partnership described in subsection 1100(16), where more than one property of a taxpayer is described in the same class in Schedule II and where

    • (a) one of the properties is a leasing property, and

    • (b) one of the properties is a property other than a leasing property,

    a separate class is hereby prescribed for properties that

    • (c) are described in paragraph (a); and

    • (d) would otherwise be included in the class.

Railway Cars
  • (5d) Where more than one property of a taxpayer is a railway car included in Class 35 in Schedule II that was rented, leased or used by the taxpayer in Canada in the taxation year, other than a railway car owned by a corporation, or a partnership any member of which is a corporation, that

    • (a) was at any time in that taxation year a common carrier that owned or operated a railway, or

    • (b) rented or leased the railway cars at any time in that taxation year, by one or more transactions between persons not dealing at arm’s length, to an associated corporation that was, at that time, a common carrier that owned or operated a railway,

    a separate class is prescribed

    • (c) for all such properties acquired by the taxpayer before February 3, 1990 (other than such properties acquired for rent or lease to another person),

    • (d) for all such properties acquired by the taxpayer after February 2, 1990 (other than such properties acquired for rent or lease to another person),

    • (e) for all such properties acquired by the taxpayer before April 27, 1989 for rent or lease to another person, and

    • (f) for all such properties acquired by the taxpayer after April 26, 1989 for rent or lease to another person.

  • (5d.1) A separate class is hereby prescribed for all property included in Class 35 in Schedule II acquired at a time after December 6, 1991 and before February 28, 2000 by a taxpayer that was at that time a common carrier that owned and operated a railway.

  • (5d.2) A separate class is hereby prescribed for all property included in Class 35 in Schedule II acquired at a time after February 27, 2000 by a taxpayer that was at that time a common carrier that owned and operated a railway.

Railway Track and Related Property
  • (5e) A separate class is hereby prescribed for all property included in Class 1 in Schedule II acquired by a taxpayer after March 31, 1977 and before 1988 that is

    • (a) railway track and grading, including components such as rails, ballast, ties and other track material;

    • (b) railway traffic control or signalling equipment, including switching, block signalling, interlocking, crossing protection, detection, speed control or retarding equipment, but not including property that is principally electronic equipment or systems software therefor; or

    • (c) a bridge, culvert, subway or tunnel that is ancillary to railway track and grading.

  • (5e.1) A separate class is hereby prescribed for all property included in Class 1 in Schedule II acquired at a time after December 6, 1991 by a taxpayer that was at that time a common carrier that owned and operated a railway, where the property is

    • (a) railway track and grading, including components such as rails, ballast, ties and other track material;

    • (b) railway traffic control or signalling equipment, including switching, block signalling, interlocking, crossing protection, detection, speed control or retarding equipment, but not including property that is principally electronic equipment or systems software therefor; or

    • (c) a bridge, culvert, subway or tunnel that is ancillary to railway track and grading.

  • (5e.2) A separate class is hereby prescribed for all trestles included in Class 3 in Schedule II acquired at a time after December 6, 1991 by a taxpayer that was at that time a common carrier that owned and operated a railway, where the trestles are ancillary to railway track and grading.

  • (5f) A separate class is hereby prescribed for all trestles included in Class 3 in Schedule II acquired by a taxpayer after March 31, 1977 and before 1988 that are ancillary to railway track and grading.

Deemed Depreciable Property
  • (5g) A separate class is hereby prescribed for each property of a taxpayer described in Class 36 in Schedule II.

Leasehold Interest in Real Properties
  • (5h) For the purposes of this Part, where more than one property of a taxpayer is described in the same class in Schedule II and where

    • (a) one of the properties is a leasehold interest in real property described in subsection 1100(13), and

    • (b) one of the properties is a property other than a leasehold interest in real property described in subsection 1100(13),

    a separate class is hereby prescribed for properties that

    • (c) are described in paragraph (a); and

    • (d) would otherwise be included in the class.

Pipelines
  • (5i) A separate class is hereby prescribed for each property of a taxpayer described in Class 2 in Schedule II that is

    • (a) a pipeline the construction of which was commenced after 1984 and completed after September 1, 1985 and the capital cost of which to the taxpayer is not less than $10,000,000,

    • (b) a pipeline that has been extended or converted where the extension or conversion was completed after September 1, 1985 and the capital cost to the taxpayer of the extension or the cost to him of the conversion, as the case may be, is not less than $10,000,000, or

    • (c) a pipeline that has been extended and converted as part of a single program of extension and conversion of the pipeline where the program was completed after September 1, 1985 and the aggregate of the capital cost to the taxpayer of the extension and the cost to him of the conversion is not less than $10,000,000,

    and in respect of which the taxpayer has, by letter attached to the return of his income filed with the Minister in accordance with section 150 of the Act for the taxation year in which the construction, extension, conversion or program, as the case may be, was completed, elected that this subsection apply.

  • (5j) An election under subsection (5i), (5l) or (5o) shall be effective from the first day of the taxation year in respect of which the election is made and shall continue to be effective for all subsequent taxation years.

Certified Productions
  • (5k) A separate class is hereby prescribed for all property of a taxpayer included in Class 10 of Schedule II by reason of paragraph (w) thereof.

Canadian Film or Video Production
  • (5k.1) A separate class is hereby prescribed for all property of a corporation included in Class 10 in Schedule II because of paragraph (x) of that Class that is property

    • (a) in respect of which the corporation is deemed under subsection 125.4(3) of the Act to have paid an amount on account of its tax payable under Part I of the Act for a taxation year; or

    • (b) acquired by the corporation from another corporation where

      • (i) the other corporation is deemed under subsection 125.4(3) of the Act to have paid an amount on account of its tax payable under Part I of the Act for a taxation year in respect of the property, and

      • (ii) the corporations were related to each other throughout the period that began when the other corporation first incurred a qualified labour expenditure (as defined in subsection 125.4(1) of the Act) in respect of the property and ended when the other corporation disposed of the property to the corporation.

Class 38 — Property and Outdoor Advertising Signs
  • (51) A separate class is hereby prescribed for each property of a taxpayer described in Class 38 in Schedule II or in paragraph (1) of Class 8 in Schedule II in respect of which the taxpayer has, by letter attached to the return of income of the taxpayer filed with the Minister in accordance with section 150 of the Act for the taxation year in which the property was acquired, elected that this subsection apply.

Specified Energy Property
  • (5m) Where, for any taxation year, a property of a taxpayer or partnership is a specified energy property, a separate class is prescribed in respect of that property for that and subsequent taxation years.

  • (5n) Notwithstanding subsection (5c), where at the end of any taxation year a property of a taxpayer is specified leasing property, a separate class is prescribed in respect of that property (including any additions or alterations to that property included in the same class in Schedule II) for that year and all subsequent taxation years.

  • (5o) A separate class is prescribed for one or more properties of a class in Schedule II that are exempt properties, as defined in paragraph 1100(1.13)(a), of a taxpayer referred to in subsection 1100(16) in respect of which the taxpayer has, by letter attached to the return of income of the taxpayer filed with the Minister in accordance with section 150 of the Act for the taxation year in which the property or properties were acquired, elected that this subsection apply.

Rapidly Depreciating Electronic Equipment
  • (5p) Subject to subsection (5q), a separate class is prescribed for one or more properties of a taxpayer acquired in a taxation year and included in the year in Class 8 in Schedule II, where each of the properties has a capital cost to the taxpayer of at least $1,000 and is

    • (a) computer software;

    • (b) a photocopier; or

    • (c) office equipment that is electronic communications equipment, such as a facsimile transmission device or telephone equipment.

  • (5q) Each of subsections (5p) and (5s) apply to a property or properties of a taxpayer only if the taxpayer has (by letter attached to the taxpayer’s return of income filed with the Minister in accordance with section 150 of the Act for the taxation year in which the property or properties were acquired) elected that the subsection apply to the property or properties, as the case may be.

Computer Software Tax Shelter Property
  • (5r) For the purpose of this Part, where

    • (a) more than one property of a taxpayer is described in the same class in Schedule II,

    • (b) one of the properties is computer software tax shelter property, and

    • (c) one of the properties is a property other than computer software tax shelter property,

    for properties that are described in paragraph (b) and that would otherwise be included in the class, a separate class is prescribed.

Manufacturing or Processing Property
  • (5s) Subject to subsection (5q), a separate class is prescribed for one or more properties of a taxpayer

    • (a) that were acquired in a taxation year and included in the year in Class 43 in Schedule II because of paragraph (a) of that Class; and

    • (b) that had a capital cost to the taxpayer of at least $1,000.

Combustion Turbines
  • (5t) A separate class is prescribed for one or more properties of a taxpayer that are a combustion turbine (including associated burners and compressors) included in Class 17 in Schedule II because of subparagraph (a.1)(i) of that Class if the taxpayer has (by letter attached to the taxpayer’s return of income filed with the Minister in accordance with section 150 of the Act for the taxation year in which the property or properties were acquired) elected that this subsection apply to the property or properties.

Reference
  • (6) A reference in this Part to a class in Schedule II includes a reference to the corresponding separate classes prescribed by this section.

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • SOR/78-137, s. 2
  • SOR/79-426, s. 2
  • SOR/79-670, s. 1
  • SOR/80-618, s. 1
  • SOR/81-244, s. 1
  • SOR/82-265, s. 2
  • SOR/84-454, s. 2
  • SOR/84-948, s. 6
  • SOR/86-156, s. 1
  • SOR/88-392, s. 2
  • SOR/89-27, s. 2
  • SOR/90-22, s. 2
  • SOR/90-257, s. 2
  • SOR/91-196, s. 2
  • SOR/91-673, s. 2
  • SOR/94-140, s. 3
  • SOR/94-170, s. 2
  • SOR/94-686, ss. 58(F), 78(F), 79(F)
  • SOR/98-97, s. 1
  • SOR/2000-248, s. 3
  • SOR/2005-126, s. 2
  • SOR/2005-371, s. 2
  • SOR/2005-414, s. 2

DIVISION IIIProperty Rules

Property not Included

  •  (1) The classes of property described in this Part and in Schedule II shall be deemed not to include property

    • (a) the cost of which would be deductible in computing the taxpayer’s income if the Act were read without reference to sections 66 to 66.4 of the Act;

    • (a.1) the cost of which is included in the taxpayer’s Canadian renewable and conservation expense (within the meaning assigned by section 1219);

    • (b) that is described in the taxpayer’s inventory;

    • (c) that was not acquired by the taxpayer for the purpose of gaining or producing income;

    • (d) that was acquired by an expenditure in respect of which the taxpayer is allowed a deduction in computing income under section 37 of the Act;

    • (e) that was acquired by the taxpayer after November 12, 1981, other than property acquired from a person with whom the taxpayer was not dealing at arm’s length (otherwise than by virtue of a right referred to in paragraph 251(5)(b) of the Act) at the time the property was acquired if the property was acquired in the circumstances where subsection (14) applies, and is

      • (i) a print, etching, drawing, painting, sculpture, or other similar work of art, the cost of which to the taxpayer was not less than $200,

      • (ii) a hand-woven tapestry or carpet or a handmade appliqué, the cost of which to the taxpayer was not less than $215 per square metre,

      • (iii) an engraving, etching, lithograph, woodcut, map or chart, made before 1900, or

      • (iv) antique furniture, or any other antique object, produced more than 100 years before the date it was acquired, the cost of which to the taxpayer was not less than $1,000,

      other than any property described in subparagraph (i) or (ii) where the individual who created the property was a Canadian (within the meaning assigned by paragraph 1104(10)(a)) at the time the property was created;

    • (f) that is property referred to in paragraph 18(1)(l) of the Act acquired after December 31, 1974, an outlay or expense for the use or maintenance of which is not deductible by virtue of that paragraph;

    • (g) in respect of which an allowance is claimed and permitted under Part XVII;

    • (h) that is a passenger automobile acquired after June 13, 1963 and before January 1, 1966, the cost to the taxpayer of which, minus the initial transportation charges and retail sales tax in respect thereof, exceeded $5,000, unless the automobile was acquired by a person before June 14, 1963 and has by one or more transactions between persons not dealing at arm’s length become vested in the taxpayer;

    • (i) that was deemed by section 18 of the Income Tax Act, as enacted by the Statutes of Canada, 1958, Chapter 32, subsection 8(1), to have been acquired by the taxpayer and that did not vest in the taxpayer before the 1963 taxation year;

    • (j) of a life insurer, that is property used by it in, or held by it in the course of, carrying on an insurance business outside Canada; or

    • (k) that is linefill in a pipeline.

Partnership Property
[[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] ]
  • (1a) Where the taxpayer is a member of a partnership, the classes of property described in this Part and in Schedule II shall be deemed not to include any property that is an interest of the taxpayer in depreciable property that is partnership property of the partnership.

Land
  • (2) The classes of property described in Schedule II shall be deemed not to include the land upon which a property described therein was constructed or is situated.

Non-Residents
  • (3) Where the taxpayer is a non-resident person, the classes of property described in this Part and in Schedule II shall, except for the purpose of determining the foreign accrual property income of the taxpayer for the purposes of subdivision i of Division B of Part I of the Act, be deemed not to include property that is situated outside Canada.

Improvements or Alterations to Leased Properties
  • (4) Subject to subsection (5), capital cost for the purposes of paragraph 1100(1)(b) includes any amount expended by a taxpayer for or in respect of an improvement or alteration to a leased property.

Buildings on Leased Properties
  • (5) Where the taxpayer has a leasehold interest in a property, a reference in Schedule II to a property that is a building or other structure shall include a reference to that leasehold interest to the extent that that interest

    • (a) was acquired by reason of the fact that the taxpayer

      • (i) erected a building or structure on leased land,

      • (ii) made an addition to a leased building or structure, or

      • (iii) made alterations to a leased building or structure that substantially changed the nature of the property; or

    • (b) was acquired after 1975 or, in the case of any property of Class 31 or 32, after November 18, 1974, from a former lessee who had acquired it by reason of the fact that he or a lessee before him

      • (i) erected a building or structure on leased land,

      • (ii) made an addition to a leased building or structure, or

      • (iii) made alterations to a leased building or structure that substantially changed the nature of the property.

  • (5.1) Where a taxpayer has acquired a property that would, if the property had been acquired by a person with whom the taxpayer was not dealing at arm’s length at the time the property was acquired by the taxpayer, be described in paragraph (5)(a) or (b) in respect of that person, a reference in Schedule II to a property that is a building or other structure shall, in respect of the taxpayer, include a reference to that property.

Leasehold Interests Acquired Before 1949
  • (6) For the purposes of paragraphs 2(a) and (b) of Schedule III, where an item of capital cost has been incurred before the commencement of the taxpayer’s 1949 taxation year, there shall be added to the capital cost of each item the amount that has been allowed in respect thereof as depreciation under the Income War Tax Act and has been deducted from the original cost to arrive at the capital cost of the item.

River Improvements
  • (7) For the purposes of paragraph 1100(1)(f), capital cost includes an amount expended on river improvements by the taxpayer for the purpose of facilitating the removal of timber from a timber limit.

Electrical Plant Used for Mining
  • (8) Where the generating or distributing equipment and plant (including structures) of a producer or distributor of electrical energy were acquired for the purpose of providing power to a consumer for use by the consumer in the operation in Canada of a mine, ore mill, smelter, metal refinery or any combination thereof and at least 80 per cent of the producer’s or distributor’s output of electrical energy

    • (a) for his 1948 and 1949 taxation years, or

    • (b) for his first two taxation years in which he sold power,

    whichever period is later, was sold to the consumer for that purpose, the property shall be included in

    • (c) Class 10 in Schedule II if it is property acquired

      • (i) before 1988, or

      • (ii) before 1990

        • (A) pursuant to an obligation in writing entered into by the taxpayer before June 18, 1987,

        • (B) that was under construction by or on behalf of the taxpayer on June 18, 1987, or

        • (C) that is machinery or equipment that is a fixed and integral part of a building, structure, plant facility or other property that was under construction by or on behalf of the taxpayer on June 18, 1987, or

    • (d) Class 41 in Schedule II in any other case, except where the property would otherwise be included in Class 43.1 in Schedule II and the taxpayer has, by a letter filed with the return of income of the taxpayer filed with the Minister in accordance with section 150 of the Act for the taxation year in which the property was acquired, elected to include the property in Class 43.1.

  • (9) Where a taxpayer has acquired generating or distributing equipment and plant (including structures) for the purpose of providing power for his own consumption in operating a mine, ore mill, smelter, metal refinery or any combination thereof and at least 80 per cent of the output of electrical energy was so used

    • (a) in his 1948 and 1949 taxation years, or

    • (b) in the first two taxation years in which he so produced power,

    whichever period is the later, the property shall be included in

    • (c) Class 10 in Schedule II if it is property acquired

      • (i) before 1988, or

      • (ii) before 1990

        • (A) pursuant to an obligation in writing entered into by the taxpayer before June 18, 1987,

        • (B) that was under construction by or on behalf of the taxpayer on June 18, 1987, or

        • (C) that is machinery or equipment that is a fixed and integral part of a building, structure, plant facility or other property that was under construction by or on behalf of the taxpayer on June 18, 1987, or

    • (d) Class 41 in Schedule II in any other case, except where the property would otherwise be included in Class 43.1 in Schedule II and the taxpayer has, by a letter filed with the return of income of the taxpayer filed with the Minister in accordance with section 150 of the Act for the taxation year in which the property was acquired, elected to include the property in Class 43.1.

  • (9.1) In their application to generating or distributing equipment and plant (including structures) that were acquired by the taxpayer before November 8, 1969, subsections (8) and (9) shall be read without reference to a “metal refinery”.

  • (9.2) Where a taxpayer acquires property after November 7, 1969 from a person with whom he was not dealing at arm’s length that is property referred to in subsection (8) or (9), notwithstanding those subsections, that property shall not be included in Class 10 in Schedule II by the taxpayer unless the property had been included in that class by the person from whom it was acquired, by virtue of subsection (8) or (9) as it read in its application before November 8, 1969.

Railway Companies
  • (10) For the purposes of section 36 of the Act, where a taxpayer is deemed to have acquired depreciable property of a prescribed class at the time a repair, replacement, alteration or renovation expenditure described therein was incurred,

    • (a) if the expenditure was incurred by the taxpayer before May 26, 1976, the class hereby prescribed is Class 4 in Schedule II; and

    • (b) if the expenditure was incurred by the taxpayer after May 25, 1976, the class hereby prescribed is the class in Schedule II in which the depreciable property that was repaired, replaced, altered or renovated would be included if such property had been acquired at the time the expenditure was incurred.

Passenger Automobiles
  • (11) In paragraph (1)(h),

    cost to the taxpayer

    cost to the taxpayer of an automobile means, except as provided in subsections (12) and (13),

    • (a) except in any case coming under paragraph (b) or (c), the capital cost to the taxpayer of the automobile,

    • (b) except in any case coming under paragraph (c), where the automobile was acquired by a person (in this section referred to as the “original owner”) after June 13, 1963, and has, by one or more transactions between persons not dealing at arm’s length, become vested in the taxpayer, the greater of

      • (i) the actual cost to the taxpayer, and

      • (ii) the actual cost to the original owner, and

    • (c) where the automobile was acquired by the taxpayer outside Canada for use in connection with a permanent establishment, as defined for the purposes of Part IV or Part XXVI, outside Canada, the lesser of

      • (i) the actual cost to the taxpayer, and

      • (ii) the amount that such an automobile would ordinarily cost the taxpayer if he purchased it from a dealer in automobiles in Canada for use in Canada; (coût pour le contribuable)

    initial transportation charges

    initial transportation charges in respect of an automobile means the costs incurred by a dealer in automobiles for transporting the automobile (before it had been used for any purpose whatever) from,

    • (a) in the case of an automobile manufactured in Canada, the manufacturer’s plant, and

    • (b) in any other case, the place in Canada, if any, at which the automobile was received or stored by a wholesale distributor,

    to the dealer’s place of business; (frais de transport initiaux)

    passenger automobile

    passenger automobile means a vehicle, other than an ambulance or hearse, that was designed to carry not more than nine persons, and that is

    • (a) an automobile designed primarily for carrying persons on highways and streets, except an automobile that

      • (i) is designed to accommodate and is equipped with auxiliary folding seats installed between the front and the rear seats,

      • (ii) was acquired by a person carrying on the business of operating a taxi or automobile rental service, or arranging and managing funerals, for use in such business, and

      • (iii) is not a vehicle described in paragraph (b), or

    • (b) a station wagon or substantially similar vehicle; (automobile à voyageurs)

    retail sales tax

    retail sales tax in respect of an automobile means the aggregate of municipal and provincial retail sales taxes payable in respect of the purchase of the automobile by the taxpayer. (taxe de vente ou détail)

  • (12) For the purposes of paragraph (1)(h), where an automobile is owned by two or more persons or by partners, a reference to “cost to the taxpayer” shall be deemed to be a reference to the aggregate of the cost, as defined in subsection (11), to each such person or partner.

  • (13) In determining the cost to the taxpayer for the purposes of paragraph (1)(h), subsection 13(7) of the Act shall not apply unless the automobile was acquired by gift.

Property Acquired by Transfer, Amalgamation or Winding-Up
  • (14) For the purposes of this Part and Schedule II, where a property is acquired by a taxpayer

    • (a) in the course of a reorganization in respect of which, if a dividend were received by a corporation in the course of the reorganization, subsection 55(2) of the Act would not be applicable to the dividend by reason of the application of paragraph 55(3)(b) of the Act, or

    • (a.1) to (c) [Repealed, SOR/90-22, s. 3]

    • (d) from a person with whom the taxpayer was not dealing at arm’s length (otherwise than by virtue of a right referred to in paragraph 251(5)(b) of the Act) at the time the property was acquired, and

    • (e) [Repealed, SOR/90-22, s. 3]

    the property, immediately before it was so acquired by the taxpayer, was property of a prescribed class or a separate prescribed class of the person from whom it was so acquired, the property shall be deemed to be property of that same prescribed class or separate prescribed class, as the case may be, of the taxpayer.

  • (14.1) For the purposes of this Part and Schedule II, where a taxpayer has acquired, after May 25, 1976, property of a class in Schedule II (in this subsection referred to as the “present class”) that had been previously owned before May 26, 1976 by the taxpayer or by a person with whom the taxpayer was not dealing at arm’s length (otherwise than by virtue of a right referred to in paragraph 251(5)(b) of the Act) at the time the property was acquired, and at the time the property was previously so owned it was a property of a different class in Schedule II (in this subsection referred to as the “former class”), the property shall be deemed to be property of the former class and not property of the present class.

Townsite Costs
  • (14.2) For the purpose of paragraph 13(7.5)(a) of the Act, a property is prescribed in respect of a taxpayer where the property would, if it had been acquired by the taxpayer, be property included in Class 10 in Schedule II because of paragraph (l) of that Class.

Surface Construction and Bridges
  • (14.3) For the purpose of paragraph 13(7.5)(b) of the Act, prescribed property is any of

    • (a) a road (other than a specified temporary access road), sidewalk, airplane runway, parking area, storage area or similar surface construction;

    • (b) a bridge; and

    • (c) a property that is ancillary to any property described in paragraph (a) or (b).

Manufacturing and Processing Enterprises
  • (15) For the purposes of subsection 13(10) of the Act,

    • (a) property is hereby prescribed that is

      • (i) a building included in Class 3 or 6 in Schedule II, or

      • (ii) machinery or equipment included in Class 8 in Schedule II,

      except

      • (iii) property that may reasonably be regarded as having been acquired for the purpose of producing coal from a coal mine or oil, gas, metals or industrial minerals from a resource referred to in section 1201 as it read immediately before it was repealed by section 2 of Order in Council P.C. 1975-1323 of June 12, 1975, or

      • (iv) property acquired for use outside Canada; and

    • (b) a business carried on by the taxpayer is hereby prescribed as a manufacturing or processing business if,

      • (i) for the fiscal period in which the property was acquired, or

      • (ii) for the fiscal period in which a reasonable volume of business was first carried on,

      whichever was later, the revenue received by the taxpayer, in the course of carrying on the business from

      • (iii) the sale of goods processed or manufactured by the taxpayer in Canada,

      • (iv) the leasing or renting of goods that were processed or manufactured by the taxpayer in Canada,

      • (v) advertisements in a newspaper or magazine that was produced by the taxpayer in Canada, and

      • (vi) construction carried on by the taxpayer in Canada,

      was not less than 2/3 of the revenue of the business for the period.

  • (16) For the purposes of paragraph (15)(b), revenue means gross revenue minus the aggregate of

    • (a) amounts that were paid or credited in the period, to customers of the business, in relation to such revenue as a bonus, rebate or discount or for returned or damaged goods; and

    • (b) amounts included therein by virtue of section 13 or subsection 23(1) of the Act.

Recreational Property
  • (17) Property referred to in paragraph (1)(f) does not include

    • (a) any property that the taxpayer was obligated to acquire under the terms of an agreement in writing entered into before November 13, 1974; or

    • (b) any property the construction of which was

      • (i) commenced by the taxpayer before November 13, 1974 or commenced under an agreement in writing entered into by the taxpayer before November 13, 1974, and

      • (ii) completed substantially according to plans and specifications agreed to by the taxpayer before November 13, 1974.

  • (18) [Repealed, SOR/99-179, s. 2]

Additions and Alterations
  • (19) For the purposes of this Part and Schedule II, where

    • (a) a taxpayer acquired a property that is included in a class in Schedule II (in this subsection referred to as the “actual class”),

    • (b) the taxpayer acquires property that is an addition or alteration to the property referred to in paragraph (a),

    • (c) the property that is the addition or alteration referred to in paragraph (b) would have been property of the actual class if it had been acquired by the taxpayer at the time he acquired the property referred to in paragraph (a), and

    • (d) the property referred to in paragraph (a) would have been property of a class in Schedule II (in this subsection referred to as the “present class”) that is different from the actual class if it had been acquired by the taxpayer at the time he acquired the addition or alteration referred to in paragraph (b),

    the addition or alteration referred to in paragraph (b) shall, except as otherwise provided in this Part or in Schedule II, be deemed to be an acquisition by the taxpayer of property of the present class.

Non-arm’s Length Exception
  • (20) For the purposes of subsections 1100(2.2) and (19), 1101(lad) and 1102(14) (in this subsection referred to as the “relevant subsections”), where, but for this subsection, a taxpayer would be considered to be dealing not at arm’s length with another person as a result of a transaction or series of transactions the principal purpose of which may reasonably be considered to have been to cause one or more of the relevant subsections to apply in respect of the acquisition of a property, the taxpayer shall be considered to be dealing at arm’s length with the other person in respect of the acquisition of that property.

  • (21) Where a taxpayer has acquired a property described in Class 43.1 of Schedule II in circumstances in which clauses (b)(iii)(A) and (B) or (e)(iii)(A) and (B) of that class apply,

    • (a) the portion of the property, determined by reference to capital cost, that is equal to or less than the capital cost of the property to the person from whom the property was acquired, is included in that class; and

    • (b) the portion of the property, if any, determined by reference to capital cost, that is in excess of the capital cost of the property to the person from whom it was acquired, shall not be included in that class.

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • SOR/78-377, s. 8
  • SOR/78-502, s. 1
  • SOR/78-949, s. 1
  • SOR/79-670, s. 2
  • SOR/83-340, s. 2
  • SOR/84-948, s. 7
  • SOR/86-1092, s. 5(F)
  • SOR/88-392, s. 3
  • SOR/90-22, s. 3
  • SOR/94-140, s. 4
  • SOR/94-686, ss. 10(F), 49(F), 58(F), 66(F), 78(F), 79(F), 81(F)
  • SOR/97-377, s. 2
  • SOR/99-179, s. 2
  • SOR/2000-327, s. 1

DIVISION IVInclusions In and Transfers Between Classes

Elections To Include Properties in Class 1

  •  (1) In respect of properties otherwise included in any of Classes 2 to 10, 11 and 12 in Schedule II, a taxpayer may elect to include in Class 1 in Schedule II all such properties acquired for the purpose of gaining or producing income from the same business.

Elections to Include Properties in Class 2, 4 or 17
  • (2) Where the chief depreciable properties of a taxpayer are included in Class 2, 4 or 17 in Schedule II, the taxpayer may elect to include in Class 2, 4 or 17 in Schedule II, as the case may be, a property that would otherwise be included in another class in Schedule II and that was acquired by him before May 26, 1976 for the purpose of gaining or producing income from the same business as that for which those properties otherwise included in the said Class 2, 4 or 17 were acquired.

Elections to Include Properties in Class 8
  • (2a) In respect of properties otherwise included in Class 19 or 21 in Schedule II, a taxpayer may, by letter attached to the return of his income for a taxation year filed with the Minister in accordance with section 150 of the Act, elect to include in Class 8 in Schedule II all properties of the said Class 19 or all properties of the said Class 21, as the case may be, owned by him at the commencement of the year.

Elections to Include Properties in Class 37
  • (2b) In respect of properties that would have been included in Class 37 in Schedule II had they been acquired after the date on which Class 37 became effective, a taxpayer may, by letter attached to the return of his income for a taxation year filed with the Minister in accordance with section 150 of the Act, elect to include in Class 37 all such properties acquired by the taxpayer before that date.

Elections to Make Certain Transfers
  • (2c) Where a taxpayer has acquired, after May 25, 1976, all or any part of a property of a class in Schedule II (in this subsection referred to as “present class”) and the property or part thereof, if it had been acquired before May 26, 1976, would have been property of a different class in Schedule II (in this subsection referred to as the “former class”) and

    • (a) he was obligated to acquire the property under the terms of an agreement in writing entered into before May 26, 1976,

    • (b) he commenced the construction, manufacture or production of the property before May 26, 1976 or the construction, manufacture or production of the property was commenced under an agreement in writing entered into by him before May 26, 1976, or

    • (c) he acquired the property on or before December 31, 1976 or he was obligated to acquire the property under the terms of an agreement in writing entered into on or before December 31, 1976, if

      • (i) arrangements, evidenced by writing, respecting the acquisition, construction, manufacture or production of the property had been substantially advanced before May 26, 1976, and

      • (ii) he had, before May 26, 1976, demonstrated a bona fide intention to acquire the property,

    the taxpayer may, by letter attached to the return of his income filed with the Minister in accordance with section 150 of the Act, for the taxation year in which the property was acquired or for the immediately following taxation year, elect to transfer in the year of acquisition

    • (d) the property or the part thereof, acquired after May 25, 1976, from the present class to the former class; or

    • (e) the part of the property acquired before May 26, 1976, from the former class to the present class.

  • (2d) Where a taxpayer has

    • (a) disposed of a property (in this subsection referred to as the “former property”) of a class in Schedule II (in this subsection referred to as the “former class”), and

    • (b) before the end of the taxation year in which the former property was disposed of, acquired property (in this subsection referred to as the “new property”) of a class in Schedule II (in this subsection referred to as the “present class”) and the present class is neither

      • (i) the former class, nor

      • (ii) a separate class described in section 1101, other than subsection 1101(5d),

    such that

    • (c) if the former property had been acquired at the time that the new property was acquired and from the person from whom the new property was acquired, the former property would have been included in the present class, and

    • (d) if the new property had been acquired at the time that the former property was acquired and from the person from whom the former property was acquired, the new property would have been included in the former class,

    the taxpayer may, by letter attached to the return of income of the taxpayer filed with the Minister in accordance with section 150 of the Act in respect of the taxation year in which the former property was disposed of, elect to transfer the former property from the former class to the present class in the year of its disposition and, for greater certainty, the transfer shall be considered to have been made before the disposition of the property.

Transfers from Class 40 to Class 10
  • (2e) For the purposes of this Part and Schedule II, where property of a taxpayer would otherwise be included in Class 40 in Schedule II, all such properties owned by the taxpayer shall be transferred from Class 40 to Class 10 immediately after the commencement of the first taxation year of the taxpayer commencing after 1989.

Elections to Include Properties in Class 1, 3 or 6
  • (2f) In respect of properties otherwise included in Class 20 in Schedule II, a taxpayer may, by letter attached to the return of income of the taxpayer for a taxation year filed with the Minister in accordance with section 150 of the Act, elect to include in Class 1, 3 or 6 in Schedule II, as specified in the letter, all properties of Class 20 in Schedule II owned by the taxpayer at the commencement of the year.

Transfers to Class 8, Class 10 or Class 43
[[NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] ]
  • (2g) For the purposes of this Part and Schedule II, where one or more properties of a taxpayer are included in a separate class pursuant to an election filed by the taxpayer in accordance with subsection 1101(5q), all the properties in that class immediately after the beginning of the taxpayer’s fifth taxation year beginning after the end of the first taxation year in which a property of the class became available for use by the taxpayer for the purposes of subsection 13(26) of the Act shall be transferred immediately after the beginning of that fifth taxation year from the separate class to the class in which the property would, but for the election, have been included.

Elections Not to Include Properties in Class 44
  • (2h) A taxpayer may, by letter attached to the taxpayer’s return of income filed with the Minister in accordance with section 150 of the Act for the taxation year in which a property was acquired, elect not to include the property in Class 44 in Schedule II.

Election to Include Properties in Class 35
  • (2i) In respect of any property otherwise included in Class 7 in Schedule II because of paragraph (h) of that Class and to which paragraph 1100(1)(z.1a) and subsection 1101(5d), or paragraph 1100(1)(z.1c) and subsection 1101(5d.2), would apply if Class 35 of that Schedule applied to the property, the taxpayer may (by letter attached to the taxpayer’s return of income filed with the Minister in accordance with section 150 of the Act for the taxation year in which the property was acquired) elect to include the property in Class 35 rather than in Class 7.

Election Rules
  • (3) To be effective in respect of a taxation year, an election under this section must be made not later than the last day on which the taxpayer may file a return of his income for the taxation year in accordance with section 150 of the Act.

  • (4) An election under paragraph 1102(8)(d) or (9)(d) or this section shall be effective from the first day of the taxation year in respect of which the election is made and shall continue to be effective for all subsequent taxation years.

  • (5) An election under subsection (1) or (2) shall be made by registered letter addressed to the District Office at which the taxpayer customarily files the returns required by section 150 of the Act.

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • SOR/78-377, s. 9
  • SOR/82-265, s. 3
  • SOR/83-340, s. 3
  • SOR/90-22, s. 4
  • SOR/91-196, s. 3
  • SOR/91-673, s. 3
  • SOR/94-170, s. 3
  • SOR/97-377, s. 3
  • SOR/2005-371, s. 3

DIVISION VInterpretation

Definitions

  •  (1) Where the taxpayer is an individual and his income for the taxation year includes income from a business the fiscal period of which does not coincide with the calendar year, in respect of the depreciable properties acquired for the purpose of gaining or producing income from the business, a reference in this Part to

    end of the taxation year

    end of the taxation year shall be deemed to be a reference to the end of the fiscal period of the business; (la fin de l’année d’imposition)

    taxation year

    taxation year shall be deemed to be a reference to the fiscal period of the business. (l’année d’imposition)

  • (2) In this Part and in Schedule II,

    certified feature film

    certified feature film means a motion picture film certified by the Minister of Communications to be a film of not less than 75 minutes running time in respect of which all photography or art work specifically required for the production thereof and all film editing therefor were commenced after November 18, 1974, and either the film was completed before May 26, 1976, or the photography or art work was commenced before May 26, 1976, and certified by him to be

    • (a) a film the production of which is contemplated in a coproduction agreement entered into between Canada and another country, or

    • (b) a film in respect of which

      • (i) the person who performed the duties of producer was a Canadian,

      • (ii) no fewer than 2/3 in number of all the persons each of whom

        • (A) was a person who performed the duties of director, screenwriter, music composer, art director, picture editor or director of photography, or

        • (B) was the individual in respect of whose services as an actor or actress in respect of the film the highest remuneration or the second highest remuneration was paid or payable,

        were Canadians,

      • (iii) not less than 75 per cent of the aggregate of the remuneration paid or payable to persons for services provided in respect of the film (other than remuneration paid or payable to or in respect of the persons referred to in subparagraphs (i) and (ii) or remuneration paid or payable for processing and final preparation of the film) was paid or payable to Canadians,

      • (iv) not less than 75 per cent of the aggregate of costs incurred for processing and final preparation of the film including laboratory work, sound recording, sound editing and picture editing (other than remuneration paid or payable to or in respect of persons referred to in subparagraphs (i), (ii) and (iii)), was incurred in respect of services rendered in Canada, and

      • (v) the copyright protecting its use in Canada is beneficially owned

        • (A) by a person who is either a Canadian or a corporation incorporated under the laws of Canada or a province, or

        • (B) jointly or otherwise by two or more persons described in clause (A),

    other than a film

    • (c) acquired after the day that is the earlier of

      • (i) the day of its first commercial use, and

      • (ii) 12 months after the day the principal photography thereof is completed, or

    • (d) in respect of which certification under this definition has been revoked by the Minister of Communications as provided in paragraph (10)(b); (long métrage portant visa)

    certified production

    certified production, in respect of a particular taxation year, means a motion picture film or video tape certified by the Minister of Communications to be a film or tape in respect of which all photography, taping or art work required specifically for the production thereof and all film or tape editing therefor were commenced after May 25, 1976, certified by him to be a film or tape in respect of which the principal photography or taping thereof was commenced before the end of the particular taxation year or was completed no later than 60 days after the end of that year and certified by him to be

    • (a) a film or tape the production of which is contemplated in a coproduction agreement entered into between Canada and another country, or

    • (b) a film or tape in respect of which

      • (i) the individual who performed the duties of producer was a Canadian,

      • (ii) the Minister of Communications has allotted not less than an aggregate of six units of production, not less than two of which were allotted by virtue of clause (A) or (B) and not less than one of which was allotted by virtue of clause (C) or (D), for individuals who provided services in respect of the film or tape, in the following manner:

        • (A) for the director, two units of production,

        • (B) for the screenwriter, two units of production,

        • (C) for the actor or actress in respect of whose services for the film or tape the highest remuneration was paid or payable (unless in the opinion of the Minister of Communications the individual did not perform a major role in the film or tape), one unit of production,

        • (D) for the actor or actress in respect of whose services for the film or tape the second highest remuneration was paid or payable (unless in the opinion of the Minister of Communications the individual did not perform a major role in the film or tape), one unit of production,

        • (E) for the art director, one unit of production,

        • (F) for the director of photography, one unit of production,

        • (G) for the music composer, one unit of production, and

        • (H) for the picture editor, one unit of production,

        shall be allotted, provided the individual in respect of such allotment was a Canadian,

      • (iii) not less than 75 per cent of the aggregate of all costs (other than costs determined by reference to the amount of income from the film or tape) paid or payable to persons for services provided in respect of producing the film or tape (other than remuneration paid or payable to, or in respect of, individuals referred to in subparagraph (i) or (ii), costs referred to in subparagraph (iv) incurred for processing and final preparation of the film or tape, and amounts paid or payable in respect of insurance, financing, brokerage, legal and accounting fees and similar amounts) was paid or payable to, or in respect of services provided by, Canadians, and

      • (iv) not less than 75 per cent of the aggregate of all costs (other than costs determined by reference to the amount of income from the film or tape) incurred for processing and final preparation of the film or tape, including laboratory work, sound re-recording, sound editing and picture editing (other than remuneration paid or payable to, or in respect of, individuals referred to in subparagraph (i) or (ii)) was incurred in respect of services provided in Canada,

    other than a film or tape

    • (c) acquired after the day that is the earlier of

      • (i) the day of its first commercial use, and

      • (ii) 12 months after the day the principal photography or taping thereof is completed,

    • (d) acquired by a taxpayer who has not paid in cash, as of the end of the particular taxation year, to the person from whom he acquired the film or tape, at least 5 per cent of the capital cost to the taxpayer of the film or tape as of the end of the year,

    • (e) acquired by a taxpayer who has issued in payment or part payment thereof, a bond, debenture, bill, note, mortgage or similar obligation in respect of which an amount is not due until a time that is more than four years after the end of the taxation year in which the taxpayer acquired the film or tape,

    • (f) acquired from a non-resident, or

    • (g) in respect of which certification under this definition has been revoked by the Minister of Communications as provided in paragraph (10)(b),

    and, for the purposes of the application of this definition,

    • (h) in respect of a film or tape acquired in 1987, other than a film or tape in respect of which paragraph (i) applies, the reference in this definition to “commenced before the end of the particular taxation year or was completed no later than 60 days after the end of that year” shall be read as a reference to “commenced before the end of 1987 or was completed before July, 1988”; and

    • (i) in respect of a film or tape acquired in 1987 or 1988 that is included in paragraph (n) of Class 12 in Schedule II and that is part of a series of films or tapes that includes another property included in that paragraph, the reference in this definition to “commenced before the end of the particular taxation year or was completed no later than 60 days after the end of that year” shall be read as a reference to “completed before 1989”; (production portant visa)

    certified short production

    certified short production[Repealed, SOR/86-254, s. 2]

    computer software

    computer software includes systems software and a right or licence to use computer software; (logiciel)

    data network infrastructure equipment

    data network infrastructure equipment means network infrastructure equipment that controls, transfers, modulates or directs data, and that operates in support of telecommunications applications such as e-mail, instant messaging, audio- and video-over-Internet Protocol or Web browsing, Web searching and Web hosting, including data switches, multiplexers, routers, remote access servers, hubs, domain name servers, and modems, but does not include

    • (a) network equipment (other than radio network equipment) that operates in support of telecommunications applications, if the bandwidth made available by that equipment to a single end-user of the network is 64 kilobits per second or less in either direction,

    • (b) radio network equipment that operates in support of wireless telecommunications applications unless the equipment supports digital transmission on a radio channel,

    • (c) network equipment that operates in support of broadcast telecommunications applications and that is unidirectional,

    • (d) network equipment that is end-user equipment, including telephone sets, personal digital assistants and facsimile transmission devices,

    • (e) equipment that is described in paragraph (f.2) or (v) of Class 10 or in Class 45,

    • (f) wires or cables, or similar property, and

    • (g) structures; (matériel d’infrastructure pour réseaux de données)

    designated overburden removal cost

    designated overburden removal cost of a taxpayer means any cost incurred by him in respect of clearing or removing overburden from a mine in Canada owned or operated by him where the cost

    • (a) was incurred after November 16, 1978 and before 1988,

    • (b) was incurred after the mine came into production in reasonable commercial quantities,

    • (c) as of the end of the taxation year in which the cost was incurred, has not been deducted by the taxpayer in computing his income, and

    • (d) is not deductible, in whole or in part, by the taxpayer in computing his income for a taxation year subsequent to the taxation year in which the cost was incurred, other than by virtue of paragraph 20(1)(a) of the Act. (coût désigné d’enlèvement des terrains de couverture)

    designated underground storage cost

    designated underground storage cost of a taxpayer means any cost incurred by him after December 11, 1979 in respect of developing a well, mine or other similar underground property for the storage in Canada of petroleum, natural gas or other related hydrocarbons; (coût désigné de stockage souterrain)

    gas or oil well equipment

    gas or oil well equipment includes

    • (a) equipment, structures and pipelines, other than a well casing, acquired to be used in a gas or oil field in the production therefrom of natural gas or crude oil, and

    • (b) a pipeline acquired to be used solely for transmitting gas to a natural gas processing plant,

    but does not include

    • (c) equipment or structures acquired for the refining of oil or the processing of natural gas including the separation therefrom of liquid hydrocarbons, sulphur or other joint products or by-products, or

    • (d) a pipeline for removal or for collection for immediate removal of natural gas or crude oil from a gas or oil field except a pipeline referred to in paragraph (b); (matériel de puits de gaz ou de pétrole)

    general-purpose electronic data processing equipment

    general-purpose electronic data processing equipment means electronic equipment that, in its operation, requires an internally stored computer program that

    • (a) is executed by the equipment,

    • (b) can be altered by the user of the equipment,

    • (c) instructs the equipment to read and select, alter or store data from an external medium such as a card, disk or tape, and

    • (d) depends upon the characteristics of the data being processed to determine the sequence of its execution; (matériel électronique universel de traitement de l’information)

    ore

    ore includes ore from a mineral resource that has been processed to any stage that is prior to the prime metal stage or its equivalent; (minerai)

    railway system

    railway system includes a railway owned or operated by a common carrier, together with all buildings, rolling stock, equipment and other properties pertaining thereto, but does not include a tramway; (réseau de chemin de fer)

    specified temporary access road

    specified temporary access road means

    • (a) a temporary access road to an oil or gas well in Canada, and

    • (b) a temporary access road the cost of which would, if the definition Canadian exploration expense in subsection 66.1(6) of the Act were read without reference to paragraph (l) of that definition, be a Canadian exploration expense because of paragraph (f) or (g) of that definition; (route d’accès temporaire déterminée)

    systems software

    systems software means a combination of computer programs and associated procedures, related technical documentation and data that

    • (a) performs compilation, assembly, mapping, management or processing of other programs,

    • (b) facilitates the functioning of a computer system by other programs,

    • (c) provides service or utility functions such as media conversion, sorting, merging, system accounting, performance measurement, system diagnostics or programming aids,

    • (d) provides general support functions such as data management, report generation or security control, or

    • (e) provides general capability to meet widespread categories of problem solving or processing requirements where the specific attributes of the work to be performed are introduced mainly in the form of parameters, constants or descriptors rather than in program logic,

    and includes a right or licence to use such a combination of computer programs and associated procedures, related technical documentation and data; (logiciel de systèmes)

    tar sands ore

    tar sands ore means ore extracted from a deposit of bituminous sands or oil shales; (minerai de sables asphaltiques)

    telegraph system

    telegraph system includes the buildings, structures, general plant and communication and other equipment pertaining thereto; (réseau de télégraphe)

    telephone system

    telephone system includes the buildings, structures, general plant and communication and other equipment pertaining thereto; (réseau de téléphone)

    television commercial message

    television commercial message means a commercial message as defined in the Television Broadcasting Regulations, 1987 made under the Broadcasting Act; (message publicitaire pour la télévision)

    tramway or trolley bus system

    tramway or trolley bus system includes the buildings, structures, rolling stock, general plant and equipment pertaining thereto and where buses other than trolley buses are operated in connection therewith includes the properties pertaining to those bus operations. (réseau de tramway ou d’autobus à trolley)

  • (3) Except as otherwise provided in subsection (6), in this Part and in Schedules II and V,

    industrial mineral mine

    industrial mineral mine includes a peat bog or deposit of peat but does not include a mineral resource; (mine de minéral industriel)

    mineral

    mineral includes peat; (minéral)

    mining

    mining includes the harvesting of peat. (exploitation minière)

  • (4) [Repealed, SOR/79-670, s. 3]

Mining
  • (5) For the purposes of paragraphs 1100(1)(w) to (ya), subsections 1101(4a) to (4d) and Classes 10, 28 and 41 in Schedule II, a taxpayer’s “income from a mine”, or any expression referring to a taxpayer’s income from a mine, includes income reasonably attributable to

    • (a) the processing by the taxpayer of

      • (i) ore (other than iron ore or tar sands ore) all or substantially all of which is from a mineral resource owned by the taxpayer to any stage that is not beyond the prime metal stage or its equivalent,

      • (ii) iron ore all or substantially all of which is from a mineral resource owned by the taxpayer to any stage that is not beyond the pellet stage or its equivalent,

      • (iii) tar sands ore all or substantially all of which is from a mineral resource owned by the taxpayer to any stage that is not beyond the crude oil stage or its equivalent, or

      • (iv) material extracted by a well, all or substantially all of which is from a deposit of bituminous sands or oil shales owned by the taxpayer, to any stage that is not beyond the crude oil stage or its equivalent;

    • (b) the production by the taxpayer of material from a deposit of bituminous sands or oil shales; and

    • (c) the transportation by the taxpayer of

      • (i) output, other than iron ore or tar sands ore, from a mineral resource owned by the taxpayer that has been processed by him to any stage that is not beyond the prime metal stage or its equivalent,

      • (ii) iron ore from a mineral resource owned by the taxpayer that has been processed by him to any stage that is not beyond the pellet stage or its equivalent, or

      • (iii) tar sands ore from a mineral resource owned by the taxpayer that has been processed by him to any stage that is not beyond the crude oil stage or its equivalent,

      to the extent that such transportation is effected through the use of property of the taxpayer that is included in Class 10 in Schedule II because of paragraph (m) thereof or that would be so included if that paragraph were read without reference to subparagraph (v) thereof and if Class 41 in Schedule II were read without the reference therein to that paragraph.

  • (5.1) For the purpose of Class 41 in Schedule II, a taxpayer’s gross revenue from a mine includes

    • (a) revenue reasonably attributable to the processing by the taxpayer of

      • (i) ore (other than iron ore or tar sands ore) from a mineral resource owned by the taxpayer to any stage that is not beyond the prime metal stage or its equivalent,

      • (ii) iron ore from a mineral resource owned by the taxpayer to any stage that is not beyond the pellet stage or its equivalent,

      • (iii) tar sands ore from a mineral resource owned by the taxpayer to any stage that is not beyond the crude oil stage or its equivalent, and

      • (iv) material extracted by a well from a mineral resource owned by the taxpayer that is a deposit of bituminous sands or oil shales to any stage that is not beyond the crude oil stage or its equivalent;

    • (b) the amount, if any, by which any revenue reasonably attributable to the processing by the taxpayer of

      • (i) ore (other than iron ore or tar sands ore) from a mineral resource not owned by the taxpayer, to any stage that is not beyond the prime metal stage or its equivalent,

      • (ii) iron ore from a mineral resource not owned by the taxpayer to any stage that is not beyond the pellet stage or its equivalent,

      • (iii) tar sands ore from a mineral resource not owned by the taxpayer to any stage that is not beyond the crude oil stage or its equivalent, and

      • (iv) material extracted by a well from a mineral resource not owned by the taxpayer that is a deposit of bituminous sands or oil shales to any stage that is not beyond the crude oil stage or its equivalent

      exceeds the cost to the taxpayer of the ore or material processed; and

    • (c) revenue reasonably attributable to the production by the taxpayer of material from a deposit of bituminous sands or oil shales.

  • (5.2) For the purpose of subsection (5.1), “gross revenue from a mine” does not include revenue reasonably attributable to the addition of diluent, for the purpose of transportation, to material extracted from a deposit of bituminous sands or oil shales.

  • (6) For the purposes of Class 10 in Schedule II,

    • (a) income from a mine includes income reasonably attributable to the processing of

      • (i) ore, other than iron ore or tar sands ore, from a mineral resource not owned by the taxpayer to any stage that is not beyond the prime metal stage or its equivalent,

      • (ii) iron ore from a mineral resource not owned by the taxpayer to any stage that is not beyond the pellet stage or its equivalent,

      • (iii) tar sands ore from a mineral resource not owned by the taxpayer to any stage that is not beyond the crude oil stage or its equivalent, or

      • (iv) material extracted by a well from a mineral resource not owned by the taxpayer that is a deposit of bituminous sands or oil shales to any stage that is not beyond the crude oil stage or its equivalent; and

    • (b) mine includes a well for the extraction of material from a deposit of bituminous sands or oil shales or from a deposit of calcium chloride, halite or sylvite.

  • (6.1) [Repealed, SOR/99-179, s. 3]

  • (7) For the purposes of paragraphs 1100(1)(w) to (ya), subsections 1101(4a) to (4d) and 1102(8) and (9), section 1107 and Classes 12, 28 and 41 in Schedule II,

    • (a) mine includes

      • (i) a well for the extraction of material from a deposit of bituminous sands or oil shales or from a deposit of calcium chloride, halite or sylvite, and

      • (ii) a pit for the extraction of kaolin or tar sands ore,

      but does not include

      • (iii) an oil or gas well, or

      • (iv) a sand pit, gravel pit, clay pit, shale pit, peat bog, deposit of peat or a stone quarry (other than a kaolin pit or a deposit of bituminous sands or oil shales);

    • (b) all wells of a taxpayer for the extraction of material from one or more deposits of calcium chloride, halite or sylvite, the material produced from which is sent to the same plant for processing, are deemed to be one mine of the taxpayer; and

    • (c) all wells of a taxpayer for the extraction of material from a deposit of bituminous sands or oil shales that the Minister, in consultation with the Minister of Natural Resources, determines constitute one project, are deemed to be one mine of the taxpayer.

  • (8) For the purposes of subsection (7), stone quarry includes a mine producing dimension stone or crushed rock for use as aggregates or for other construction purposes.

Manufacturing or Processing
  • (9) For the purposes of subsection 1100(26) and Class 29 in Schedule II, “manufacturing or processing” does not include

    • (a) farming or fishing;

    • (b) logging;

    • (c) construction;

    • (d) operating an oil or gas well or extracting petroleum or natural gas from a natural accumulation thereof;

    • (e) extracting minerals from a mineral resource;

    • (f) processing of

      • (i) ore, other than iron ore or tar sands ore, from a mineral resource to any stage that is not beyond the prime metal stage or its equivalent,

      • (ii) iron ore from a mineral resource to any stage that is not beyond the pellet stage or its equivalent, or

      • (iii) tar sands ore from a mineral resource to any stage that is not beyond the crude oil stage or its equivalent;

    • (g) producing industrial minerals;

    • (h) producing or processing electrical energy or steam, for sale;

    • (i) processing natural gas as part of the business of selling or distributing gas in the course of operating a public utility;

    • (j) processing heavy crude oil recovered from a natural reservoir in Canada to a stage that is not beyond the crude oil stage or its equivalent; or

    • (k) Canadian field processing.

Certified Films and Video Tapes
  • (10) For the purposes of subsection 1100(21) and the definitions certified feature film and certified production and in subsection (2),

    • (a) Canadian means an individual who was, at all relevant times,

      • (i) a Canadian citizen as defined in the Citizenship Act, or

      • (ii) a permanent resident within the meaning of the Immigration Act, 1976;

    • (b) a motion picture film or video tape that has been certified by

      • (i) the Secretary of State, or

      • (ii) the Minister of Communications

      as a certified feature film or certified production, as the case may be, may have its certification revoked by the Minister of Communications where an incorrect statement was made in the furnishing of information for the purpose of obtaining that certification and a certification that has been so revoked is void from the time of its issue;

    • (c) “remuneration” does not include an amount determined by reference to the amount of income from a motion picture film or video tape;

    • (c.1) revenue guarantee means a contract or other arrangement under the terms of which a taxpayer has a right to receive a minimum rental revenue or other fixed revenue in respect of a right to the use, in any manner whatever, of a certified feature film or certified production;

    • (c.2) a screenwriter shall be deemed to be an individual who is a Canadian where

      • (i) each individual involved in the preparation of the screenplay is a Canadian, or

      • (ii) the principal screenwriter is an individual who is a Canadian and

        • (A) the screenplay for the motion picture film or video tape is based upon a work authored by a Canadian,

        • (B) copyright in the work subsists in Canada, and

        • (C) the work is published in Canada;

    • (d) unit of production means a measure used by the Minister of Communications in determining the weight to be given for each individual Canadian referred to in subparagraph (b)(ii) of the definition certified production in subsection (2) who provides services in respect of a motion picture film or video tape; and

    • (e) where each individual who performed a service in respect of a motion picture film or video tape as the

      • (i) director,

      • (ii) screenwriter,

      • (iii) actor or actress in respect of whose services for the film or tape the highest remuneration was paid or payable,

      • (iv) actor or actress in respect of whose services for the film or tape the second highest remuneration was paid or payable,

      • (v) art director,

      • (vi) director of photoghraphy,

      • (vii) music composer, or

      • (viii) picture editor

      was a Canadian, the Minister of Communications shall be deemed to have allotted six units of production in respect of the film or tape for the purposes of the definition certified production in subsection (2).

Certified Class 34 Properties
  • (11) For the purposes of paragraph (h) of Class 34 in Schedule II, a certificate issued under

    • (a) subparagraph (d)(i) of that class may be revoked by the Minister of Industry, Trade and Commerce, or

    • (b) subparagraph (d)(ii) or paragraph (g) of that class, as the case may be, may be revoked by the Minister of Energy, Mines and Resources

    where

    • (c) an incorrect statement was made in the furnishing of information for the purpose of obtaining the certificate, or

    • (d) the taxpayer does not conform to the plan described in subparagraph (d)(i) or (d)(ii) of that class, as the case may be,

    and a certificate that has been so revoked shall be void from the time of its issue.

Amusement Parks
  • (12) For the purposes of Class 37 in Schedule II, amusement park means a park open to the public where amusements, rides and audio-visual attractions are permanently situated.

Class 43.1 — Energy Conservation Property
  • (13) The definitions in this subsection apply for the purposes of this subsection and subsection (14) and Class 43.1 in Schedule II.

    basic oxygen furnace gas

    basic oxygen furnace gas means the gas that is produced intermittently in a basic oxygen furnace of a steel mill by the chemical reaction of carbon in molten steel and pure oxygen. (gaz de convertisseur basique à oxygène)

    bio-oil

    bio-oil means liquid fuel that is created from wood waste or plant residues using a thermo-chemical conversion process that takes place in the absence of oxygen. (bio-huile)

    blast furnace gas

    blast furnace gas means the gas produced in a blast furnace of a steel mill, by the chemical reaction of carbon (in the form of coke, coal or natural gas), the oxygen in air and iron ore. (gaz de haut fourneau)

    digester gas

    digester gas means a mixture of gases that are produced from the decomposition of organic waste in a digester and that are extracted from an eligible sewage treatment facility for that organic waste. (gaz de digesteur)

    distribution equipment

    distribution equipment means equipment (other than transmission equipment) used to distribute electrical energy generated by electrical generating equipment. (matériel de distribution)

    eligible landfill site

    eligible landfill site means a landfill site that is situated in Canada, or a former landfill site that is situated in Canada, and, if a permit or licence in respect of the site is or was required under any law of Canada or of a province, for which the permit or licence has been issued. (site d’enfouissement admissible)

    eligible sewage treatment facility

    eligible sewage treatment facility means a sewage treatment facility that is situated in Canada and for which a permit or licence is issued under any law of Canada or of a province. (installation admissible de traitement des eaux usées)

    eligible waste management facility

    eligible waste management facility means a waste management facility that is situated in Canada and for which a permit or licence is issued under any law of Canada or of a province. (installation admissible de gestion des déchets)

    enhanced combined cycle system

    enhanced combined cycle system means an electrical generating system in which thermal waste from one or more natural gas compressor systems is recovered and used to contribute at least 20 per cent of the energy input of a combined cycle process in order to enhance the generation of electricity, but does not include the natural gas compressor systems. (système à cycles combinés amélioré)

    fossil fuel

    fossil fuel means a fuel that is petroleum, natural gas or related hydrocarbons, basic oxygen furnace gas, blast furnace gas, coal, coal gas, coke, coke oven gas, lignite or peat. (combustible fossile)

    landfill gas

    landfill gas means a mixture of gases that are produced from the decomposition of organic waste and that are extracted from an eligible landfill site. (gaz d’enfouissement)

    municipal waste

    municipal waste means the combustible portion of waste material (other than waste material that is considered to be toxic or hazardous waste pursuant to any law of Canada or of a province) that is generated in Canada and that is accepted at an eligible landfill site or an eligible waste management facility and that, when burned to generate energy, emits only those fluids or other emissions that are in compliance with the law of Canada or of a province. (déchets municipaux)

    plant residue

    plant residue means the residue of plants that would, but for its use in a system to convert biomass into bio-oil, be waste material, but does not include wood waste or waste that no longer has the chemical properties of the plants of which it is a residue. (résidus végétaux)

    solution gas

    solution gas means a fossil fuel that is gas that would otherwise be flared and has been extracted from a solution of gas and produced oil. (gaz dissous)

    thermal waste

    thermal waste means heat energy extracted from a distinct point of rejection in an industrial process. (déchets thermiques)

    transmission equipment

    transmission equipment means equipment used to transmit more than 75 per cent of the annual electrical energy generated by electrical generating equipment, but does not include a building. (matériel de transmission)

    wood waste

    wood waste includes scrap wood, sawdust, wood chips, bark, limbs, saw-ends and hog fuel, but does not include residuals (known as black liquor) from wood pulp operations and any waste that no longer has the physical or chemical properties of wood. (déchets de bois)

  • (14) Where property of a taxpayer is not operating in the manner required by paragraph (c) of Class 43.1 in Schedule II solely because of a deficiency, failing or shutdown — that is beyond the control of the taxpayer — of the system of which it is part and that previously operated in the manner required by that paragraph, that property is deemed, for the purpose of that paragraph, to be operating in the manner required under that paragraph during the period of the deficiency, failing or shutdown, if the taxpayer makes all reasonable efforts to rectify the circumstances within a reasonable time.

  • (15) For the purpose of subsection (14), a taxpayer’s system referred to in that subsection that has at any particular time operated in the manner required by paragraph (c) of Class 43.1 in Schedule II includes at any time after the particular time a property of another person or partnership if

    • (a) the property would reasonably be considered to be part of the taxpayer’s system were the property owned by the taxpayer;

    • (b) the property utilizes steam obtained from the taxpayer’s system primarily in an industrial process (other than the generation of electrical energy);

    • (c) the operation of the property is necessary for the taxpayer’s system to operate in the manner required by paragraph (c) of Class 43.1; and

    • (d) at the time that the taxpayer’s system first became operational, the deficiency, failing or shutdown in the operation of the property could not reasonably have been anticipated by the taxpayer to occur within five years after that time.

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • SOR/78-137, s. 3
  • SOR/78-502, s. 2
  • SOR/78-948, ss. 2, 3
  • SOR/79-426, s. 3
  • SOR/79-670, s. 3
  • SOR/80-418, s. 1
  • SOR/80-618, s. 2(F)
  • SOR/80-926, s. 1
  • SOR/80-935, s. 1
  • SOR/80-942, s. 2
  • SOR/81-974, s. 1
  • SOR/81-1026, s. 1
  • SOR/82-265, s. 4
  • SOR/83-855, s. 1
  • SOR/84-265, s. 1
  • SOR/85-174, s. 2
  • SOR/86-254, s. 2
  • SOR/86-1092, s. 6(F)
  • SOR/89-27, s. 3
  • SOR/90-22, s. 5
  • SOR/91-79, s. 1
  • SOR/94-169, s. 2
  • SOR/94-686, ss. 11(F), 62, 81(F)
  • SOR/95-244, s. 2
  • SOR/96-200, s. 1
  • SOR/96-451, s. 1
  • SOR/97-377, s. 4
  • SOR/98-97, s. 2
  • SOR/99-179, s. 3
  • SOR/2000-327, s. 2
  • SOR/2001-295, s. 2(E)
  • SOR/2005-371, s. 4
  • SOR/2005-414, s. 3
  • SOR/2005-415, s. 1

DIVISION VIClasses Prescribed

 The classes of property provided in this Part and in Schedule II are hereby prescribed for the purposes of the Act.

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • SOR/82-265, s. 5
  • SOR/96-228, s. 1

DIVISION VIICertificates Issued by the Minister of Canadian Heritage

Interpretation

  •  (1) The following definitions apply in this Division and in paragraph (x) of Class 10 in Schedule II.

    application for a certificate of completion

    demande de certificat d’achèvement

    application for a certificate of completion, in respect of a film or video production, means an application by a prescribed taxable Canadian corporation in respect of the production, filed with the Minister of Canadian Heritage before the day (in this Division referred to as “the production’s application deadline”) that is the later of

    • (a) the day that is 24 months after the end of the corporation’s taxation year in which the production’s principal photography began, or

    • (b) the day that is 18 months after the day referred to in paragraph (a), if the corporation has filed, with the Canada Customs and Revenue Agency, and provided to the Minister of Canadian Heritage a copy of, a waiver described in subparagraph 152(4)(a)(ii) of the Act, within the normal reassessment period for the corporation in respect of the first and second taxation years ending after the production’s principal photography began. (demande de certificat d’achèvement)

    Canadian

    Canadien

    Canadian means a person that is

    Canadian government film agency

    agence cinématographique d’État

    Canadian government film agency means a federal or provincial government agency whose mandate is related to the provision of assistance to film productions in Canada. (agence cinématographique d’État)

    certificate of completion

    certificat d’achèvement

    certificate of completion, in respect of a film or video production of a corporation, means a certificate certifying that the production has been completed, issued by the Minister of Canadian Heritage before the day (in this Division referred to as “the production’s certification deadline”) that is six months after the production’s application deadline. (certificat d’achèvement)

    excluded production

    production exclue

    excluded production means a film or video production, of a particular corporation that is a prescribed taxable Canadian corporation,

    • (a) in respect of which

      • (i) the particular corporation has not filed an application for a certificate of completion before the production’s application deadline,

      • (ii) a certificate of completion has not been issued before the production’s certification deadline,

      • (iii) where the production is not a treaty co-production, neither the particular corporation nor another prescribed taxable Canadian corporation related to the particular corporation

        • (A) is, except to the extent of an interest in the production held by a prescribed taxable Canadian corporation as a co-producer of the production or by a prescribed person, the exclusive worldwide copyright owner in the production for all commercial exploitation purposes for the 25-year period that begins at the earliest time after the production was completed that it is commercially exploitable, and

        • (B) controls the initial licensing of commercial exploitation,

      • (iv) there is not an agreement in writing, for consideration at fair market value, to have the production shown in Canada within the 2-year period that begins at the earliest time after the production was completed that it is commercially exploitable,

        • (A) with a corporation that is a Canadian and is a distributor of film or video productions, or

        • (B) with a corporation that holds a broadcasting license issued by the Canadian Radio-television and Telecommunications Commission for television markets, or

      • (v) distribution is made in Canada within the 2-year period that begins at the earliest time after the production was completed that it is commercially exploitable by a person that is not a Canadian, or

    • (b) that is

      • (i) news, current events or public affairs programming, or a programme that includes weather or market reports,

      • (ii) a talk show,

      • (iii) a production in respect of a game, questionnaire or contest (other than a production directed primarily at minors),

      • (iv) a sports event or activity,

      • (v) a gala presentation or an awards show,

      • (vi) a production that solicits funds,

      • (vii) reality television,

      • (viii) pornography,

      • (ix) advertising,

      • (x) a production produced primarily for industrial, corporate or institutional purposes, or

      • (xi) a production, other than a documentary, all or substantially all of which consists of stock footage. (production exclue)

    producer

    producteur

    producer means a producer of a film or video production, except that it does not include a person unless the person is the individual who

    • (a) controls and is the central decision maker in respect of the production;

    • (b) is directly responsible for the acquisition of the production story or screenplay and the development, creative and financial control and exploitation of the production; and

    • (c) is identified in the production as being the producer of the production. (producteur)

    remuneration

    rémunération

    remuneration means remuneration other than an amount determined by reference to profits or revenues. (rémunération)

    twinning arrangement

    convention de jumelage

    twinning arrangement means the pairing of two distinct film or video productions, one of which is a Canadian film or video production and the other of which is a foreign film or video production. (convention de jumelage)

Prescribed Taxable Canadian Corporation
  • (2) For the purposes of section 125.4 of the Act and this Division, prescribed taxable Canadian corporation means a taxable Canadian corporation that is a Canadian, other than a corporation that is

    • (a) controlled directly or indirectly in any manner whatever by one or more persons all or part of whose taxable income is exempt from tax under Part I of the Act; or

    • (b) a prescribed labour-sponsored venture capital corporation, as defined in section 6701.

Treaty Co-production
  • (3) For the purpose of this Division, treaty co-production means a film or video production whose production is contemplated under any of the following instruments, and to which the instrument applies:

    • (a) a co-production treaty entered into between Canada and another State;

    • (b) the Memorandum of Understanding between the Government of Canada and the Government of the Hong Kong Special Administrative Region of the People’s Republic of China on Film and Television Co-Production;

    • (c) the Common Statement of Policy on Film, Television and Video Co-Productions between Japan and Canada;

    • (d) the Memorandum of Understanding between the Government of Canada and the Government of the Republic of Korea on Television Co-Production; and

    • (e) the Memorandum of Understanding between the Government of Canada and the Government of the Republic of Malta on Audio-Visual Relations.

Canadian Film or Video Production
  • (4) Subject to subsections (6) to (9), for the purposes of section 125.4 of the Act, this Part and Schedule II, Canadian film or video production means a film or video production, other than an excluded production, of a prescribed taxable Canadian corporation in respect of which the Minister of Canadian Heritage has issued a certificate (other than a certificate that has been revoked under subsection 125.4(6) of the Act) and that is

    • (a) a treaty co-production; or

    • (b) a film or video production

      • (i) whose producer is a Canadian at all times during its production,

      • (ii) in respect of which the Minister of Canadian Heritage has allotted not less than six points in accordance with subsection (5),

      • (iii) in respect of which not less than 75% of the total of all costs for services provided in respect of producing the production (other than excluded costs) was payable in respect of services provided to or by individuals who are Canadians, and for the purpose of this subparagraph, excluded costs are

        • (A) costs determined by reference to the amount of income from the production,

        • (B) remuneration payable to, or in respect of, the producer or individuals described in any of subparagraphs (5)(a)(i) to (viii) and (b)(i) to (vi) and paragraph (5)(c) (including any individuals that would be described in paragraph (5)(c) if they were Canadians),

        • (C) amounts payable in respect of insurance, financing, brokerage, legal and accounting fees, and similar amounts, and

        • (D) costs described in subparagraph (iv), and

      • (iv) in respect of which not less than 75% of the total of all costs incurred for the post-production of the production, including laboratory work, sound re-recording, sound editing and picture editing, (other than costs that are determined by reference to the amount of income from the production and remuneration that is payable to, or in respect of, the producer or individuals described in any of subparagraphs (5)(a)(i) to (viii) and (b)(i) to (vi) and paragraph (5)(c), including any individuals that would be described in paragraph (5)(c) if they were Canadians) was incurred in respect of services provided in Canada.

  • (5) For the purposes of this Division, the Minister of Canadian Heritage shall allot, in respect of a film or video production

    • (a) that is not an animation production, in respect of each of the following persons if that person is an individual who is a Canadian,

      • (i) for the director, two points,

      • (ii) for the screenwriter, two points,

      • (iii) for the lead performer for whose services the highest remuneration was payable, one point,

      • (iv) for the lead performer for whose services the second highest remuneration was payable, one point,

      • (v) for the art director, one point,

      • (vi) for the director of photography, one point,

      • (vii) for the music composer, one point, and

      • (viii) for the picture editor, one point;

    • (b) that is an animation production, in respect of each of the following persons if that person is an individual who is a Canadian,

      • (i) for the director, one point,

      • (ii) for the lead voice for which the highest or second highest remuneration was payable, one point,

      • (iii) for the design supervisor, one point,

      • (iv) for the camera operator where the camera operation is done in Canada, one point,

      • (v) for the music composer, one point, and

      • (vi) for the picture editor, one point;

    • (c) that is an animation production, one point if both the principal screenwriter and the storyboard supervisor are individuals who are Canadians; and

    • (d) that is an animation production, in respect of each of the following places if that place is in Canada,

      • (i) for the place where the layout and background work is done, one point,

      • (ii) for the place where the key animation is done, one point, and

      • (iii) for the place where the assistant animation and in-betweening is done, one point.

  • (6) A production (other than a production that is an animation production or a treaty co-production) is a Canadian film or video production only if there is allotted in respect of the production two points under subparagraph (5)(a)(i) or (ii) and one point under subparagraph (5)(a)(iii) or (iv).

  • (7) An animation production (other than a production that is a treaty co-production) is a Canadian film or video production only if there is allotted, in respect of the production,

    • (a) one point under subparagraph (5)(b)(i) or paragraph (5)(c);

    • (b) one point under subparagraph (5)(b)(ii); and

    • (c) one point under subparagraph (5)(d)(ii).

Lead performer/screenwriter
  • (8) For the purposes of this Division,

    • (a) a lead performer in respect of a production is an actor or actress who has a leading role in the production having regard to the performer’s remuneration, billing and time on screen;

    • (b) a lead voice in respect of an animation production is the voice of the individual who has a leading role in the production having regard to the length of time that the individual’s voice is heard in the production and the individual’s remuneration; and

    • (c) where a person who is not a Canadian participates in the writing and preparation of the screenplay for a production, the screenwriter is not a Canadian unless the principal screenwriter is an individual who is otherwise a Canadian, the screenplay for the production is based upon a work authored by a Canadian, and the work is published in Canada.

Documentary Production
  • (9) A documentary production that is not an excluded production, and that is allotted less than six points because one or more of the positions referred to in paragraph (5)(a) is unoccupied, is a Canadian film or video production if all of the positions described in that paragraph that are occupied in respect of the production are occupied by individuals who are Canadians.

Prescribed Person
  • (10) For the purpose of section 125.4 of the Act and this Division, prescribed person means any of the following:

    • (a) a corporation that holds a television, specialty or pay-television broadcasting licence issued by the Canadian Radio-television and Telecommunications Commission;

    • (b) a corporation that holds a broadcast undertaking licence and that provides production funding as a result of a “significant benefits” commitment given to the Canadian Radio-television and Telecommunications Commission;

    • (c) a person to which paragraph 149(1)(l) of the Act applies and that has a fund that is used to finance Canadian film or video productions;

    • (d) a Canadian government film agency;

    • (e) in respect of a film or video production, a non-resident person that does not carry on a business in Canada through a permanent establishment in Canada where the person’s interest in the production is acquired to comply with the certification requirements of a treaty co-production twinning arrangement; and

    • (f) a person

      • (i) to which paragraph 149(1)(f) of the Act applies,

      • (ii) that has a fund that is used to finance Canadian film or video productions, all or substantially all of which financing is provided by way of a direct ownership interest in those productions, and

      • (iii) that, after 1996, has received donations only from persons described in paragraphs (a) to (e).

Prescribed Amount
  • (11) For the purpose of the definition assistance in subsection 125.4(1) of the Act, prescribed amount means an amount paid or payable to a taxpayer under the License Fee Program of the Canada Television and Cable Production Fund or the Canada Television Fund/Fonds canadien de télévision.

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • SOR/2005-126, s. 3

DIVISION VIIIDetermination of Viscosity and Density

 For the purpose of the definition bituminous sands in subsection 248(1) of the Act, viscosity or density of hydrocarbons shall be determined using a number of individual samples (constituting a representative sampling of that deposit or those deposits, as the case may be, from which the taxpayer is committed to produce by means of one mine) tested

  • (a) at atmospheric pressure;

  • (b) at a temperature of 15.6 degrees Celsius; and

  • (c) free of solution gas.

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • SOR/98-97, s. 3

PART XIIResource and Processing Allowances

 For the purposes of section 65 of the Act, there may be deducted in computing the income of a taxpayer for a taxation year such of the amounts determined in accordance with sections 1201 to 1209 and 1212 as are applicable.

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • SOR/79-245, s. 1

Earned Depletion Allowances

 In computing a taxpayer’s income for a taxation year there may be deducted such amount as he may claim not exceeding the lesser of

  • (a) the aggregate of

    • (i) 25 per cent of the amount, if any, by which the taxpayer’s resource profits for the year exceed four times the total of amounts, if any, deducted under subsection 1202(2) in computing the taxpayer’s income for the year, and

    • (ii) the amount, if any, by which the aggregate of amounts included in computing the taxpayer’s income for the year under paragraphs 59(3.3)(a) and (b) of the Act exceeds the aggregate of amounts, if any, that may reasonably be considered to have been deducted under subsection 1202(2) by reason of subparagraph (b)(ii) thereof in computing the taxpayer’s income for the year; and

  • (b) the aggregate of

    • (i) the taxpayer’s earned depletion base as of the end of the year, and

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

      • (A) the aggregate determined under paragraph 1202(4)(a) in respect of the taxpayer for the year

      exceeds

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

        • (I) the aggregate of all amounts that would be determined under paragraphs 1205(1)(e) to (k)

        exceeds

        • (II) 33 1/3 per cent of the aggregate of all amounts that would be determined under paragraphs 1205(1)(a) to (d.2)

        in computing the taxpayer’s earned depletion base as of the end of the year.

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • SOR/78-502, s. 3
  • SOR/81-974, s. 2
  • SOR/91-79, s. 2
  • SOR/99-179, s. 4
  •  (1) For the purposes of computing the earned depletion base of a corporation, control of which has been acquired under circumstances described in subsection 66(11) of the Act, the amount by which the earned depletion base of the corporation at the time referred to in that subsection exceeds the aggregate of amounts otherwise deducted under section 1201 in computing its income for taxation years ending after that time and before control was so acquired shall be deemed to have been deducted under section 1201 by the corporation in computing its income for taxation years ending before such acquisition of control.

  • (2) Subject to subsections (5) and (6), where after November 7, 1969 a corporation (in this subsection referred to as the “successor”) acquired a particular property (whether by way of a purchase, amalgamation, merger, winding-up or otherwise), there may be deducted by the successor in computing its income for a taxation year an amount not exceeding the aggregate of all amounts each of which is an amount determined in respect of an original owner of the particular property that is the lesser of

    • (a) the earned depletion base of the original owner immediately after the original owner disposed of the particular property (determined as if, in the case of a disposition after April 28, 1978 as a result of an amalgamation described in section 87 of the Act, the original owner existed after the time of disposition and no property was acquired or disposed of in the course of the amalgamation) to the extent of the amount thereof that was not

      • (i) deducted by the original owner or any predecessor owner of the particular property in computing income for any taxation year,

      • (ii) deducted by the successor in computing income for a preceding taxation year, or

      • (iii) otherwise deducted by the successor in computing income for the taxation year, and

    • (b) 25 per cent of the amount, if any, by which

      • (i) the part of the successor’s income for the year that can reasonably be regarded as attributable to

        • (A) the part of any amount included under paragraph 59(3.2)(c) of the Act in computing its income for the year that can reasonably be regarded as attributable to the disposition by it in the year or a preceding taxation year of any interest in or right to the particular property, to the extent that the proceeds of the disposition have not been included in determining an amount under this clause, paragraph (7)(g), clause 29(25)(d)(i)(A) of the Income Tax Application Rules or clause 66.7(1)(b)(i)(A) or (3)(b)(i)(A) or paragraph 66.7(10)(g) of the Act for a preceding taxation year,

        • (B) its reserve amount for the year in respect of the original owner and each predecessor owner, if any, of the particular property,

        • (C) production from the particular property, or

        • (D) processing described in subparagraph 1204(1)(b)(iii), (iv) or (v) with the particular property

        computed as if no deduction were allowed under section 29 of the Income Tax Application Rules or under any of sections 65 to 66.7 of the Act and as if that income did not include any amount designated under clause 66.7(2)(b)(ii)(A) of the Act,

      exceeds

      • (ii) the total of

        • (A) four times the total of all other amounts deducted under this subsection for the year that can reasonably be regarded as attributable to the part of the successor’s income for the year described in subparagraph (i), and

        • (B) the total of all amounts each of which is an amount deducted under subsection 66.7(1), (3), (4) or (5) of the Act or subsection 29(25) of the Income Tax Application Rules for the year that can reasonably be regarded as attributable to the part of the successor’s income for the year described in subparagraph (i).

  • (3) Where in a taxation year ending after February 17, 1987 an original owner of a property disposes of the property in circumstances in which subsection (2) applies,

    • (a) the amount of the earned depletion base of the original owner determined immediately after the time of that disposition shall be deducted in determining the earned depletion base of the original owner at any time after the time that is immediately after the disposition;

    • (b) for the purposes of paragraph (2)(a), the earned depletion base of the original owner determined immediately after the original owner disposed of the property that was deducted in computing the original owner’s income for the year shall be deemed to be equal to the lesser of

      • (i) the amount deducted in respect of the disposition under paragraph (a), and

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

        • (A) the specified amount determined under subsection (4) in respect of the original owner for the year

        exceeds

        • (B) the aggregate of all amounts each of which is an amount determined under this paragraph in respect of any disposition made by the original owner before the disposition and in the year; and

    • (c) for greater certainty, any amount (other than the amount determined under paragraph (b)) that was deducted under section 1201 by the original owner for the year or a subsequent taxation year shall, for the purposes of paragraph (2)(a), be deemed not to be in respect of the earned depletion base of the original owner determined immediately after the original owner disposed of the particular property.

  • (4) Where in a taxation year ending after February 17, 1987 an original owner of a property disposes of the property in circumstances in which subsection (2) applies, the lesser of

    • (a) the total of all amounts each of which is the amount, if any, by which

      • (i) an amount deducted under paragraph (3)(a) in respect of such a disposition in the year by the original owner

      exceeds

      • (ii) the amount, if any, designated by the original owner in a prescribed form filed with the Minister within six months after the end of the year in respect of the amount determined under subparagraph (i), and

    • (b) the amount, if any, deducted under section 1201 in computing the income of the original owner for the taxation year

    is the specified amount in respect of the original owner for the year for the purposes of paragraphs (3)(b) and 1205(1)(d.2).

  • (5) Subsections (2), 1203(3), 1207(7) and 1212(4) do not apply

    • (a) in respect of a property acquired by way of an amalgamation or winding-up to which section 1214 applies;

    • (b) to permit, in respect of the acquisition by a corporation before February 18, 1987 of a property, a deduction by the corporation of an amount that the corporation would not have been entitled to deduct under this Part, if this Part, as it read in its application to taxation years ending before February 18, 1987, applied to taxation years ending after February 17, 1987; or

    • (c) in respect of a property acquired by purchase, amalgamation, merger, winding-up or otherwise, from a person who is exempt from tax under Part I of the Act on that person’s taxable income.

  • (6) Subsections (2), 1203(3), 1207(7) and 1212(4) apply only to a corporation that has acquired a particular property

    • (a) where it acquired the particular property in a taxation year commencing before 1985 and, at the time it acquired the particular property, the corporation acquired the specified property of the person from whom it acquired the particular property;

    • (b) where it acquired the particular property from a person in a taxation year commencing after 1984 and, at the time it acquired the particular property, the corporation acquired

      • (i) all or substantially all of the Canadian resource properties of that person, or

      • (ii) where subparagraph (i) does not apply, the specified property of the person;

    • (c) where it acquired (other than in circumstances in which subparagraph (b)(ii) applies) the particular property after November 16, 1978 and in a taxation year ending before February 18, 1987 by any means other than by way of an amalgamation or winding-up and it and the person from whom it acquired the particular property have filed with the Minister a joint election under and in accordance with any of subsections 66(6), 66.1(4), 66.1(5), 66.2(3), 66.2(4), 66.4(3), and 66.4(4) of the Act as those subsections read in their application to that year;

    • (d) where it acquired the particular property after June 5, 1987 by way of an amalgamation or winding-up (other than in circumstances in which subparagraph (b)(ii) applies) and it has filed an election in the form prescribed for the purposes of paragraph 66.7(7)(c) of the Act with the Minister on or before the day on or before which the corporation is required to file a return of income pursuant to section 150 of the Act for its taxation year in which it acquired the particular property;

    • (e) where it acquired the particular property (other than by means of an amalgamation or winding-up or in circumstances in which subparagraph (b)(ii) applies) in a taxation year ending after February 17, 1987 and it and the person from whom it acquired the particular property have filed a joint election in the form prescribed for the purposes of paragraph 66.7(7)(e) of the Act with the Minister on or before the earlier of the days on or before which either of them is required to file a return of income pursuant to section 150 of the Act in respect of the irrespective taxation years that include the time of acquisition of the particular property; and

    • (f) where it acquired (other than by way of an amalgamation or winding-up) the particular property in circumstances in which subparagraph (b)(ii) applies and it and the person from whom it acquired the particular property agree to have subsection (2), 1203(3), 1207(7) or 1212(4), as the case may be, apply to them and notify the Minister in writing of the agreement in their returns of income under Part I of the Act for their respective taxation years that include the time of acquisition of the particular property.

  • (7) Where at any time after November 12, 1981

    • (a) control of a corporation is considered for the purposes of subsection 66.7(10) of the Act to have been acquired by a person or group of persons, or

    • (b) a corporation ceases to be exempt from tax under Part I of the Act on its taxable income,

    for the purposes of section 1201, this section and section 1205,

    • (c) the corporation shall be deemed after that time to be a successor (within the meaning assigned by subsection (2)) that had, at that time, acquired all the properties owned by the corporation immediately before that time from an original owner thereof;

    • (d) a joint election shall be deemed to have been filed in accordance with subsection (6) in respect of the acquisition;

    • (e) the earned depletion base of the corporation immediately before that time shall be deemed not to be the earned depletion base of the corporation immediately after that time but to be the earned depletion base of the original owner immediately after that time;

    • (f) [Repealed, SOR/93-120, s. 1]

    • (g) where the corporation (in this paragraph referred to as the “transferee”) was, immediately before and at that time,

      • (i) a parent corporation (within the meaning assigned by subsection 87(1.4) of the Act), or

      • (ii) a subsidiary wholly-owned corporation (within the meaning assigned by subsection 87(1.4) of the Act)

      of a particular corporation (in this paragraph referred to as the “transferor”), if both corporations agree to have this paragraph apply to them in respect of a taxation year of the transferor ending after that time and notify the Minister in writing of the agreement in the return of income under Part I of the Act of the transferor for that year, the transferor may, if throughout that year the transferee was such a parent corporation or subsidiary wholly-owned corporation of the transferor, designate in favour of the transferee, in respect of that year, for the purpose of making a deduction under subsection (2) in respect of expenditures incurred by the transferee before that time and when it was such a parent corporation or subsidiary wholly-owned corporation of the transferor, an amount not exceeding such portion of the amount that would be its income for the year, if no deductions were allowed under any of section 29 of the Income Tax Application Rules, and sections 65 to 66.7 of the Act, that may reasonably be regarded as being attributable to

      • (iii) the production from Canadian resource properties owned by the transferor immediately before that time,

      • (iv) the disposition in the year of any Canadian resource properties owned by the transferor immediately before that time, and

      • (v) such processing as is described in subparagraph 1204(1)(b)(iii), (iv), or (v) with property owned by the transferor immediately before that time

      to the extent that such portion of the amount so designated is not designated under this paragraph in favour of any other taxpayer or under paragraph 66.7(10)(g) of the Act in favour of any taxpayer, and the amount so designated shall be deemed, for the purposes of determining the amount under subsection (2),

      • (vi) to be income from the sources described in subparagraph (iii), (iv) or (v), as the case may be, of the transferee for its taxation year in which that taxation year of the transferor ends, and

      • (vii) not to be income from the sources described in subparagraph (iii), (iv) or (v), as the case may be, of the transferor for that year;

    • (h) where, immediately before and at that time, the corporation (in this paragraph referred to as the “transferee”) and another corporation (in this paragraph referred to as the “transferor”) were both subsidiary wholly-owned corporations (within the meaning assigned by subsection 87(1.4) of the Act) of a particular parent corporation (within the meaning assigned by subsection 87(1.4) of the Act), if the transferee and the transferor agree to have this paragraph apply to them in respect of a taxation year of the transferor ending after that time and notify the Minister in writing of the agreement in the return of income under Part I of the Act of the transferor for that year, paragraph (g) shall apply for that year to the transferee and transferor as though one were the parent corporation (within the meaning assigned by subsection 87(1.4) of the Act) of the other; and

    • (i) where that time is after January 15, 1987 and at that time the corporation was a member of a partnership that owned a property at that time

      • (i) for the purposes of paragraph (c), the corporation shall be deemed to have owned immediately before that time that portion of the property owned by the partnership at that time that is equal to its percentage share of the aggregate of amounts that would be paid to all members of the partnership if it were wound up at that time, and

      • (ii) for the purposes of clauses (2)(b)(i)(C) and (D) for a taxation year ending after that time, the lesser of

        • (A) its share of the part of the income of the partnership for the fiscal period of the partnership ending in the year that may reasonably be regarded as being attributable to the production from the property or to such processing as is described in subparagraph 1204(1)(b)(iii), (iv) or (v) with the property, and

        • (B) an amount that would be determined under clause (A) for the year if its share of the income of the partnership for the fiscal year of the partnership were determined on the basis of the percentage share referred to in subparagraph (i)

        shall be deemed to be income of the corporation for the year that may reasonably be attributable to production from the property or to such processing as is described in subparagraph 1204(1)(b)(iii), (iv) or (v) with the property.

  • (8) For the purposes of subsections (1) and (7), where a corporation acquired control of another corporation after November 12, 1981 and before 1983 by reason of the acquisition of shares of the other corporation pursuant to an agreement in writing concluded on or before November 12, 1981, the corporation shall be deemed to have acquired such control on or before November 12, 1981.

  • (9) Where, at any time,

    • (a) control of a taxpayer that is a corporation has been acquired by a person or group of persons,

    • (b) a taxpayer has disposed of all or substantially all of the taxpayer’s Canadian resource properties, or

    • (c) a taxpayer has disposed of the specified property of the taxpayer,

    and, before that time, the taxpayer or a partnership of which the taxpayer was a member acquired a property and it may reasonably be considered that one of the main purposes of the acquisition was to avoid any limitation provided in subsection (2) on the deduction in respect of the earned depletion base of the taxpayer or of a corporation referred to as a transferee in paragraph (7)(g) or (h), the taxpayer or the partnership, as the case may be, shall be deemed, for the purposes of applying subsection (2) to or in respect of the taxpayer, not to have acquired the property.

  • (10) Where in a particular taxation year a predecessor owner of a property disposes of it to a corporation in circumstances in which subsection (2) applies, for the purposes of applying subsection (2) to the predecessor owner for a taxation year ending after February 17, 1987 in respect of its acquisition of the property, the predecessor owner shall be deemed, after the disposition, never to have acquired the property except for the purposes of making a deduction under subsection (2) for the particular year.

  • (11) Where at any time a property is acquired by a person in circumstances in which subsection (2) does not apply, every person who was an original owner or predecessor owner of the property by reason of having disposed of the property before that time shall, for the purposes of applying this Part to or in respect of the person or any other person who after that time acquires the property, be deemed after that time not to be an original owner or predecessor owner of the property by reason of having disposed of the property before that time.

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • SOR/78-502, s. 4
  • SOR/79-245, s. 2
  • SOR/80-418, s. 2
  • SOR/81-974, s. 3
  • SOR/85-174, s. 3
  • SOR/85-696, ss. 2, 3
  • SOR/86-1092, s. 7
  • SOR/90-113, s. 1
  • SOR/90-733, s. 1
  • SOR/91-79, s. 3
  • SOR/93-120, s. 1
  • SOR/94-686, ss. 48, 67(F), 78(F), 79(F), 81(F)
  • SOR/99-179, s. 5
  • SOR/2001-187, s. 1

Mining Exploration Depletion

  •  (1) In computing a taxpayer’s income for a taxation year there may be deducted such amount as he may claim not exceeding the lesser of

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

      • (i) the aggregate of

        • (A) 25 per cent of his income for the year, computed in accordance with Part I of the Act without reference to paragraph 59(3.3)(f) thereof and on the assumption that no deduction were allowed under section 65 thereof, and

        • (B) the amount, if any, included in computing his income for the year by virtue of paragraph 59(3.3)(f) of the Act

      exceeds

      • (ii) the aggregate of amounts deducted under sections 1201, 1202, 1207 and 1212 in computing his income for the year; and

    • (b) his mining exploration depletion base as of the end of the year (before making any deduction under this subsection for the year).

  • (2) For the purposes of this section, mining exploration depletion base of a taxpayer as of a particular time means the amount by which the aggregate of

    • (a) 33 1/3 per cent of the amount by which

      • (i) the aggregate of all amounts each of which was the stated percentage of an expenditure that is, or but for paragraph 66(12.61)(b) of the Act would be, incurred by the taxpayer after April 19, 1983 and before the particular time and each of which was a Canadian exploration expense

        • (A) described in subparagraph 66.1(6) (a)(iii) of the Act, or

        • (B) that would have been described in subparagraph 66.1(6) (a)(iv) or (v) of the Act if the references in those subparagraphs to “any of subparagraphs (i) to (iii.1)” were read as “subparagraph (iii)”,

        other than an expense described in clause (A) or (B) that was

        • (C) an expense renounced by the taxpayer under subsection 66(10.1) or (12.6) of the Act,

        • (D) an amount that was a Canadian exploration and development overhead expense of the taxpayer,

        • (E) an amount that was in respect of financing, including any cost incurred prior to the commencement of carrying on a business, or

        • (F) an eligible expense within the meaning of the Canadian Exploration Incentive Program Act in respect of which the taxpayer, a partnership of which the taxpayer was a member or a principal-business corporation of which the taxpayer was a shareholder, has received, is deemed to have received, is entitled to receive or may reasonably be expected to receive at any time an incentive under that Act,

      exceeds

      • (ii) the aggregate of all amounts each of which is the stated percentage of an amount of assistance (within the meaning assigned by paragraph 66(15)(a.1) of the Act) that any person has received, is entitled to receive or, at any time, becomes entitled to receive in respect of an expense that would be described in subparagraph (i) if that subparagraph were read without reference to clause (C) thereof, other than such an amount in respect of an expense renounced under subsection 66(10.1) or (12.6) of the Act

        • (A) by a corporation in favour of the taxpayer, where the amount of that assistance is excluded from the aggregate in respect of which the expense is so renounced, or

        • (B) by the taxpayer, where the amount of that assistance is not excluded from the aggregate in respect of which the expense is so renounced, and

    • (b) where the taxpayer is a successor corporation, any amount required by paragraph (3)(a) to be added before the particular time in computing the taxpayer’s mining exploration depletion base

    exceeds the aggregate of

    • (c) all amounts each of which is an amount deducted by the taxpayer under subsection (1) in computing his income for a taxation year ending before the particular time; and

    • (d) where the taxpayer is a predecessor, all amounts required by paragraph (3)(b) to be deducted before the particular time in computing the taxpayer’s mining exploration depletion base.

  • (3) Subject to subsections 1202(5) and (6), where a corporation (in this section referred to as the “successor corporation”) has at any time (in this subsection referred to as the “time of acquisition”) after April 19, 1983 and in a taxation year (in this subsection referred to as the “transaction year”) acquired a property from another person (in this subsection referred to as the “predecessor”), the following rules apply:

    • (a) for the purpose of computing the mining exploration depletion base of the successor corporation as of any time after the time of acquisition, there shall be added an amount equal to the amount required by paragraph (b) to be deducted in computing the mining exploration depletion base of the predecessor; and

    • (b) for the purpose of computing the mining exploration depletion base of the predecessor as of any time after the transaction year of the predecessor, there shall be deducted the amount, if any, by which

      • (i) the mining exploration depletion base of the predecessor immediately after the time of acquisition (assuming for this purpose that, in the case of an acquisition as a result of an amalgamation described in section 87 of the Act, the predecessor existed after the time of acquisition and no property was acquired or disposed of in the course of the amalgamation)

      exceeds

      • (ii) the amount, if any, deducted under subsection (1) in computing the income of the predecessor for the transaction year of the predecessor.

  • (3.1) [Repealed, SOR/91-79, s. 4]

  • (4) For greater certainty, where an expense incurred before a particular time is included in the aggregate calculated under subparagraph (2)(a)(i) in respect of a taxpayer and subsequent to the particular time any person becomes entitled to receive an amount of assistance (within the meaning assigned by paragraph 66(15)(a.1) of the Act) that is included in the aggregate calculated under subparagraph (2)(a)(ii), the stated percentage of the amount of assistance shall be included in the amounts referred to in subparagraph (2)(a)(ii) in respect of the taxpayer at the time the expense was incurred.

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • SOR/81-974, s. 4
  • SOR/85-174, s. 4
  • SOR/85-696, ss. 2, 4
  • SOR/90-113, s. 2
  • SOR/90-733, s. 2
  • SOR/91-79, s. 4
  • SOR/94-686, ss. 78(F), 79(F)

Resource Profits

  •  (1) For the purposes of this Part, gross resource profits of a taxpayer for a taxation year means the amount, if any, by which the total of

    • (a) the amount, if any, by which the aggregate of

      • (i) the aggregate of amounts, if any, that would be included in computing the taxpayer’s income for the year by virtue of subsection 59(2) and paragraphs 59(3.2)(b) and 59.1(b) of the Act if subsection 59(2) were read without reference to subsection 64(1) therein, and

      • (i.1) the amount, if any, by which the amount included in computing his income for the year by virtue of paragraph 59(3.2)(c) of the Act exceeds the proceeds of disposition of property described in clause 66(15)(c)(ii)(A) of the Act that became receivable in the year or a preceding taxation year and after December 31, 1982 to the extent that such proceeds have not been deducted in determining the amount under this subparagraph for a preceding taxation year

      exceeds

      • (ii) the aggregate of amounts, if any, deducted in computing his income for the year by virtue of paragraph 59.1(a) and subsections 64(1.1) and (1.2) of the Act,

    • (b) the amount, if any, of the aggregate of his incomes for the year from

      • (i) the production of petroleum, natural gas, related hydrocarbons or sulphur from

        • (A) oil or gas wells in Canada operated by the taxpayer, or

        • (B) natural accumulations (other than mineral resources) of petroleum or natural gas in Canada operated by the taxpayer,

      • (ii) the production and processing in Canada of

        • (A) ore, other than iron ore or tar sands ore, from mineral resources in Canada operated by him to any stage that is not beyond the prime metal stage or its equivalent,

        • (B) iron ore from mineral resources in Canada operated by him to any stage that is not beyond the pellet stage or its equivalent, and

        • (C) tar sands ore from mineral resources in Canada operated by him to any stage that is not beyond the crude oil stage or its equivalent,

      • (iii) the processing in Canada of

        • (A) ore, other than iron ore or tar sands ore, from mineral resources in Canada not operated by him to any stage that is not beyond the prime metal stage or its equivalent,

        • (B) iron ore from mineral resources in Canada not operated by him to any stage that is not beyond the pellet stage or its equivalent, and

        • (C) tar sands ore from mineral resources in Canada not operated by him to any stage that is not beyond the crude oil stage or its equivalent,

      • (iv) the processing in Canada of

        • (A) ore, other than iron ore or tar sands ore, from mineral resources outside Canada to any stage that is not beyond the prime metal stage or its equivalent,

        • (B) iron ore from mineral resources outside Canada to any stage that is not beyond the pellet stage or its equivalent, and

        • (C) tar sands ore from mineral resources outside Canada to any stage that is not beyond the crude oil stage or its equivalent,

      • (v) the processing in Canada of heavy crude oil recovered from an oil or gas well in Canada to any stage that is not beyond the crude oil stage or its equivalent, and

      • (vi) Canadian field processing,

    • (b.1) the total of all amounts (other than an amount included because of paragraph (b) in computing the taxpayer’s gross resource profits for the year) each of which is an amount included in computing the taxpayer’s income for the year as a rental or royalty computed by reference to the amount or value of production from a natural accumulation of petroleum or natural gas in Canada, an oil or gas well in Canada or a mineral resource in Canada, and

    • (c) if the taxpayer owns all the issued and outstanding shares of the capital stock of a railway company throughout the year, the amount that may reasonably be considered to be the railway company’s income for its taxation year ending in the year from the transportation of such of the taxpayer’s ore as is described in clause (b)(ii)(A), (B) or (C),

    exceeds the aggregate of the taxpayer’s losses for the year from the sources described in paragraph (b), where the taxpayer’s incomes and losses are computed in accordance with the Act on the assumption that the taxpayer had during the year no incomes or losses except from those sources and was allowed no deductions in computing the taxpayer’s income for the year other than

    • (d) amounts deductible under section 66 of the Act (other than amounts in respect of foreign exploration and development expenses) or subsection 17(2) or (6) or section 29 of the Income Tax Application Rules, for the year;

    • (e) the amounts deductible or deducted, as the case may be, under section 66.1, 66.2 (other than an amount that is in respect of a property described in clause 66(15)(c)(ii)(A) of the Act), 66.4, 66.5 or 66.7 (other than subsection (2) thereof) of the Act for the year; and

    • (f) any other deductions for the year that can reasonably be regarded as applicable to the sources of income described in paragraph (b) or (b.1), other than a deduction under paragraph 20(1)(ss) or (tt) of the Act or section 1201 or subsection 1202(2), 1203(1), 1207(1) or 1212(1).

  • (1.1) For the purposes of this Part, resource profits of a taxpayer for a taxation year means the amount, if any, by which the taxpayer’s gross resource profits for the year exceeds the total of

    • (a) all amounts deducted in computing the taxpayer’s income for the year other than

      • (i) an amount deducted in computing the taxpayer’s gross resource profits for the year,

      • (ii) an amount deducted under any of section 8, paragraphs 20(1)(ss) and (tt), sections 60 to 64 and subsections 66(4), 66.7(2) and 104(6) and (12) of the Act and section 1201 and subsections 1202(2), 1203(1), 1207(1) and 1212(1) in computing the taxpayer’s income for the year,

      • (iii) an amount deducted under section 66.2 of the Act in computing the taxpayer’s income for the year, to the extent that it is attributable to any right, licence or privilege to store underground petroleum, natural gas or related hydrocarbons in Canada,

      • (iv) an amount deducted in computing the taxpayer’s income for the year from a business, or other source, that does not include any resource activity of the taxpayer, and

      • (v) an amount deducted in computing the taxpayer’s income for the year, to the extent that the amount

        • (A) relates to an activity

          • (I) that is not a resource activity of the taxpayer, and

          • (II) that is

            1. the production, processing, manufacturing, distribution, marketing, transportation or sale of any property,

            2. carried out for the purpose of earning income from property, or

            3. the rendering of a service by the taxpayer to another person for the purpose of earning income of the taxpayer, and

        • (B) does not relate to a resource activity of the taxpayer,

    • (b) all amounts each of which is the amount, if any, by which

      • (i) the amount that would have been charged to the taxpayer by a person or partnership with whom the taxpayer was not dealing at arm’s length if the taxpayer and that person or partnership had been dealing at arm’s length

        • (A) for the use after March 6, 1996 and in the year of a property (other than money) owned by that person or partnership, or

        • (B) for the provision after March 6, 1996 and in the year by that person or partnership of a service to the taxpayer

      exceeds the total of

      • (ii) the amount charged to the taxpayer for the use of that property or the provision of that service in that period, and

      • (iii) the portion of the amount described in subparagraph (i) that, if it had been charged, would not have been deductible in computing the taxpayer’s resource profits, and

    • (c) where the year ends after February 21, 1994, all amounts added under subsection 80(13) of the Act in computing the taxpayer’s gross resource profits for the year.

  • (1.2) For the purposes of paragraph (1.1)(b) and this subsection,

    • (a) a taxpayer is considered not to deal at arm’s length with a partnership where the taxpayer does not deal at arm’s length with any member of the partnership;

    • (b) a partnership is considered not to deal at arm’s length with another partnership where any member of the first partnership does not deal at arm’s length with any member of the second partnership;

    • (c) where a taxpayer is a member, or is deemed by this paragraph to be a member, of a partnership that is a member of another partnership, the taxpayer is deemed to be a member of the other partnership; and

    • (d) the provision of a service to a taxpayer does not include the provision of a service by an individual in the individual’s capacity as an employee of the taxpayer.

  • (2) For greater certainty, for the purposes of this section, in computing the income or loss of a trust for a taxation year from the sources described in paragraphs (1)(b) and (b.1), no deduction shall be made in respect of amounts deductible by the trust pursuant to subsection 104(6) or (12) of the Act.

  • (3) A taxpayer’s income or loss from a source described in paragraph (1)(b) does not include

    • (a) any income or loss derived from transporting, transmitting or processing (other than processing described in clause (1)(b)(ii)(C), (iii)(C) or (iv)(C) or subparagraph (1)(b)(v) or (vi)) petroleum, natural gas or related hydrocarbons or sulphur from a natural accumulation of petroleum or natural gas;

    • (b) any income or loss arising because of the application of paragraph 12(1)(z.1), (z.2) or (z.5) or section 107.3 of the Act; and

    • (c) any income or loss that can reasonably be attributable to a service rendered by the taxpayer (other than processing described in subparagraph (1)(b)(iii), (iv), (v) or (vi) or activities carried out by the taxpayer as a coal mine operator).

  • (4) Notwithstanding any other provision in this Part, for the purposes of this Part, the income or loss of a taxpayer for a taxation year shall be computed on the assumption that paragraphs 12(1)(o) and 18(1)(m) and subsections 69(6) to (10) of the Act were not applicable to

    • (a) amounts receivable and the fair market value of any property receivable by the Crown as a royalty, tax, rental or levy with respect to the Syncrude Project, or as an amount however described, that may reasonably be regarded as being in lieu of any of the preceding amounts,

    • (b) dispositions of leased substances to the Crown by the participant, and

    • (c) acquisitions of leased substances from the Crown by the participant,

    where the taxpayer has been granted a remission of tax for the year pursuant to subsection 3(1) of the Syncrude Remission Order.

  • (5) For the purposes of subsection (4), Crown, leased substances, participant and Syncrude Project have the meanings assigned by section 2 of the Syncrude Remission Order.

  • (6) [Repealed, SOR/96-451, s. 2]

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • SOR/78-502, s. 5
  • SOR/79-245, s. 3
  • SOR/80-132, s. 1
  • SOR/81-158, s. 1
  • SOR/81-974, s. 5
  • SOR/85-174, s. 5
  • SOR/90-113, s. 3
  • SOR/91-79, s. 5
  • SOR/94-686, s. 48
  • SOR/96-451, s. 2
  • SOR/99-179, s. 6

Earned Depletion Base

  •  (1) For the purposes of this Part earned depletion base of a taxpayer as of a particular time means the amount by which 33 1/3 per cent of the aggregate of

    • (a) all amounts, in respect of expenditures (other than expenditures to acquire property under circumstances that entitled the taxpayer to a deduction under section 1202 or would so entitle the taxpayer if the amounts referred to in paragraphs 1202(2)(a) and (b) were sufficient for the purpose) incurred by the taxpayer after November 7, 1969 and before the particular time, each of which was

      • (i) a Canadian exploration and development expense or would have been such an expense if it had been incurred after 1971 and was actually incurred before May 7, 1974, other than

        • (A) a cost of borrowing capital, including any cost incurred prior to the commencement of carrying on a business, that was a Canadian exploration expense or an exploration, prospecting and development expense, as the case may be, of the taxpayer,

        • (B) the cost to the taxpayer of any Canadian resource property acquired by the taxpayer,

        • (C) a Canadian exploration and development expense that was incurred after a mine had come into production in reasonable commercial quantities and may reasonably be considered to be related to the mine or to a potential or actual extension thereof,

        • (D) an expense that would have been described in clause (C) if it had been incurred after 1971,

        • (E) an expense renounced by the taxpayer under subsection 66(10) of the Act or subsection 29(7) of the Income Tax Application Rules,

        • (F) an amount that, by virtue of subparagraph 66(15)(b)(iv) of the Act, was a Canadian exploration and development expense or would have been such an expense if it had been incurred after 1971, if such amount was a cost or expense referred to in clause (A), (B), (C), (D) or (E) that was incurred by an association, partnership or syndicate referred to in that subparagraph, or

        • (G) an amount that, by virtue of subparagraph 66(15)(b)(v) of the Act, was a Canadian exploration and development expense or would have been such an expense if it had been incurred after 1971, if such amount was a cost or expense referred to in clause (A), (B), (C), (D) or (E) that the taxpayer incurred pursuant to an agreement referred to in that subparagraph,

      • (ii) the stated percentage of a Canadian exploration expense other than

        • (A) a cost of borrowing capital, including any cost incurred prior to the commencement of carrying on a business, that was a Canadian exploration expense of the taxpayer,

        • (B) an expense renounced by the taxpayer under subsection 66(10.1) of the Act,

        • (C) an amount that, by virtue of subparagraph 66.1(6)(a)(iv) of the Act, was a Canadian exploration expense, if such amount was an expense referred to in clause (A), (B), (E), (F), (G) or (H) that was incurred by a partnership referred to in that subparagraph,

        • (D) an amount that, by virtue of subparagraph 66.1(6)(a)(v) of the Act, was a Canadian exploration expense, if such amount was an expense referred to in clause (A), (B), (E), (F), (G), or (H) that the taxpayer incurred pursuant to an agreement referred to in that subparagraph,

        • (E) an amount described in clause 66.1(6)(a)(ii)(B) or (ii.1) (B) of the Act,

        • (F) an amount that was a Canadian exploration and development overhead expense of the taxpayer,

        • (G) an amount that was a Canadian oil and gas exploration expense of the taxpayer, or

        • (H) an expense described in subparagraph 66.1(6)(a)(iii) of the Act incurred after April 19, 1983,

      • (iii) a Canadian development expense incurred before 1981 other than

        • (A) a cost of borrowing capital, including any cost incurred prior to the commencement of carrying on a business, that was a Canadian development expense of the taxpayer,

        • (B) an expense renounced by the taxpayer under subsection 66(10.2) of the Act,

        • (C) an amount referred to in subparagraph 66.2(5)(a)(iii) of the Act,

        • (D) an amount that, by virtue of subparagraph 66.2(5)(a)(iv) of the Act, was a Canadian development expense, if such amount was an expense referred to in clause (A), (B) or (C) that was incurred by a partnership referred to in that subparagraph, or

        • (E) an amount that, by virtue of subparagraph 66.2(5)(a)(v) of the Act, was a Canadian development expense, if such amount was an expense referred to in clause (A), (B) or (C) that the taxpayer incurred pursuant to an agreement referred to in that subparagraph,

      • (iv) the stated percentage of the capital cost to the taxpayer of any processing property acquired by the taxpayer principally for the purpose of

        • (A) processing in Canada

          • (I) ore, other than iron ore or tar sands ore, from a qualified resource to any stage that is not beyond the prime metal stage or its equivalent,

          • (II) iron ore from a qualified resource to any stage that is not beyond the pellet stage or its equivalent, or

          • (III) tar sands ore from a qualified resource to any stage that is not beyond the crude oil stage or its equivalent, or

        • (B) processing in Canada

          • (I) ore, other than iron ore or tar sands ore, from an exporting resource beyond the furthest stage to which such ore or similar ore from that resource was ordinarily processed in Canada before such acquisition but not beyond the prime metal stage or its equivalent,

          • (II) iron ore from an exporting resource beyond the furthest stage to which such ore or similar ore from that resource was ordinarily processed in Canada before such acquisition but not beyond the pellet stage or its equivalent, or

          • (III) tar sands ore from an exporting resource beyond the furthest stage to which such ore or similar ore from that resource was ordinarily processed in Canada before such acquisition but not beyond the crude oil stage or its equivalent,

      • (v) where the taxpayer is a corporation that incurred a Canadian oil and gas exploration expense in respect of conventional lands in a calendar year after 1980 and before 1984, the specified percentage for that year of such expense to the extent that it is not an amount or expense referred to in clause (ii)(A), (B) or (F) or an expense that would be referred to in clause (ii)(C) or (D) if the references in those clauses to “clause (A), (B), (E), (F), (G) or (H)” were read as “clause (A), (B) or (F)”, or

      • (vi) where the taxpayer is a corporation,

        • (A) the specified percentage in respect of a Canadian oil and gas exploration expense in respect of non-conventional lands incurred in a calendar year after 1980 and before 1985 to the extent that it is not an amount or expense referred to in clause (ii)(A), (B) or (F) or an expense that would be referred to in clause (ii)(C) or (D) if the references in those clauses to “clause (A), (B), (E), (F), (G) or (H)” were read as “clause (A), (B) or (F)”,

        • (B) the stated percentage of a Canadian development expense incurred after 1980 in respect of a qualified tertiary oil recovery project of the taxpayer to the extent that such expense is not

          • (I) an amount or expense described in any of clauses (iii)(A) to (E),

          • (II) an amount that was a Canadian exploration and development overhead expense of the taxpayer, or

          • (III) an eligible expense within the meaning of the Canadian Exploration and Development Incentive Program Act in respect of which the taxpayer, a partnership of which the taxpayer was a member, a principal-business corporation of which the taxpayer was a shareholder or a joint exploration corporation of which the taxpayer was a shareholder corporation has received, is entitled to receive or may reasonably be expected to receive at any time an incentive under that Act,

        • (B.1) the stated percentage of a Canadian exploration expense incurred after 1981 in respect of a qualified tertiary oil recovery project of the taxpayer that

          • (I) would be referred to in subparagraph 66.1(6)(a)(ii) or (ii.1) of the Act if subparagraph 66.1(6)(a)(ii) were read without reference to clause (B) thereof, or

          • (II) would be referred to in subparagraph 66.1(6)(a)(iv) or (v) of the Act if the Act were read without reference to clause 66.1(6)(a)(ii)(B) and subparagraphs 66.1(6)(a)(i), (i.1), (ii.2), (iii) and (iii.1),

          other than the portion of such expense referred to in subclause (I) or (II) that is

          • (III) described in any of clauses (ii)(A) to (D) and (F),

          • (IV) included in the amount determined under subparagraph (v) or clause (vi)(A),

          • (V) described in subclause (B)(III), or

          • (VI) an eligible expense within the meaning of the Canadian Exploration Incentive Program Act in respect of which the taxpayer, a partnership of which the taxpayer was a member or a principal-business corporation of which the taxpayer was a shareholder corporation, has received, is entitled to receive or may reasonably be expected to receive at any time an incentive under that Act,

        • (C) the stated percentage of the capital cost to it of property that is tertiary recovery equipment, and

        • (D) the stated percentage of the capital cost to it of property that is, or but for Class 41 of Schedule II would be, included in Class 10 in Schedule II by virtue of paragraph (u) of the description of that Class, other than the capital cost to it of property that had, before the property was acquired by it, been used for any purpose whatever by any person with whom it was not dealing at arm’s length,

    • (b) all amounts, in respect of expenditures (other than expenditures referred to in paragraph (a) or expenditures to acquire property under circumstances that entitled the taxpayer to a deduction under section 1202 or would so entitle the taxpayer if the amounts referred to in paragraphs 1202(2)(a) and (b) were sufficient for the purpose) incurred by the taxpayer after May 8, 1972 and before the particular time, each of which was the stated percentage of the capital cost to the taxpayer of property that is or, but for Class 41, would be included in Class 10 in Schedule II because of paragraph (k) of the description of that Class and that was acquired for the purpose of processing in Canada

      • (i) ore (other than iron ore or tar sands ore), after its extraction from a mineral resource, to any stage that is not beyond the prime metal stage or its equivalent,

      • (ii) iron ore, after its extraction from a mineral resource, to any stage that is not beyond the pellet stage or its equivalent, or

      • (iii) tar sands ore, after its extraction from a mineral resource, to any stage that is not beyond the crude oil stage or its equivalent,

      other than the capital cost to him of property that had, before the property was acquired by the taxpayer, been used for any purpose whatever by any person with whom the taxpayer was not dealing at arm’s length,

    • (c) all amounts, in respect of expenditures (other than expenditures referred to in paragraph (a) or (b) or expenditures to acquire property under circumstances that entitled the taxpayer to a deduction under section 1202 or would so entitle the taxpayer if the amounts referred to in paragraphs 1202(2)(a) and (b) were sufficient for the purpose) incurred by the taxpayer before the particular time, each of which was the stated percentage of the capital cost to the taxpayer of property (other than property that had, before it was acquired by the taxpayer, been used for any purpose whatever by any person with whom the taxpayer was not dealing at arm’s length) that is included in Class 28 or paragraph (a) of Class 41, in Schedule II, other than property so included

      • (i) by virtue of the first reference in Class 28 to paragraph (l) of Class 10 in Schedule II, where the property was acquired by the taxpayer before November 17, 1978,

      • (ii) by virtue of the reference in Class 28 to paragraph (m) of Class 10 in Schedule II,

      • (iii) that is bituminous sands equipment acquired by an individual, or

      • (iv) that is bituminous sands equipment acquired by a corporation before 1981,

    • (d) all expenditures (other than expenditures referred to in paragraph (a), (b) or (c)) each of which was incurred by him before November 8, 1969 relating to a mine that came into production in reasonable commercial quantities before that date and that were incurred for the purpose of

      • (i) exploration in respect of, or

      • (ii) development of the mine for the purpose of gaining or producing income from the extraction of material from,

      a bituminous sands deposit, an oil sands deposit or an oil shale deposit,

    • (d.1) three times the total of all amounts each of which is an amount equal to the lesser of

      • (i) the amount that would be determined under subsection 1210(1) in computing the taxpayer’s income for a taxation year that ends before the particular time, if the amount determined for C under that subsection were nil, and

      • (ii) the amount determined for C under subsection 1210(1) in respect of the taxpayer for that year, and

    • (d.2) three times the aggregate of all amounts each of which is the specified amount determined under subsection 1202(4) in respect of the taxpayer for a taxation year ending after February 17, 1987 and before the particular time,

    exceeds the aggregate of

    • (e) all amounts deducted by the taxpayer under section 1201 in computing his income for all taxation years ending after May 6, 1974 and before the particular time;

    • (f) 33 1/3 per cent of the aggregate of all amounts, each of which is the stated percentage of a cost of borrowing capital, including any cost incurred prior to the commencement of carrying on a business, that was

      • (i) included in the capital cost to him of depreciable property described in subparagraph (a)(iv), clause (a)(vi)(C) or (D) or paragraph (b) or (c), or

      • (ii) an expenditure described in paragraph (d);

    • (g) 33 1/3 per cent of the aggregate of all amounts, each of which is an amount

      • (i) that became receivable by the taxpayer after April 28, 1978 and before the earlier of December 12, 1979 and the particular time, and

      • (ii) in respect of which the consideration given by the taxpayer therefor was a property (other than a share, or a property that would have been a Canadian resource property if it had been acquired by the taxpayer at the time the consideration was given) or services, the cost of which may reasonably be regarded as having been primarily an expenditure that was added in computing

        • (A) the taxpayer’s earned depletion base by reason of subparagraph (a)(i), (ii) or (iii) or paragraph (d), or

        • (B) the earned depletion base of an original owner of a property by reason of subparagraph (a)(i), (ii) or (iii) or paragraph (d) as it applied to the original owner, where the taxpayer acquired the property in circumstances in which subsection 1202(2) applies,

    • (h) 33 1/3 per cent of the aggregate of all amounts, each of which is

      • (i) an amount in respect of a disposition of property (other than a disposition of property that had been used by the taxpayer to any person with whom the taxpayer was not dealing at arm’s length) of the taxpayer after April 28, 1978 and before the earlier of December 12, 1979 and the particular time, the capital cost of which was added in computing

        • (A) the taxpayer’s earned depletion base by reason of subparagraph (a)(iv) or paragraph (b) or (c), or

        • (B) the earned depletion base of an original owner of a property by reason of subparagraph (a)(iv) or paragraph (b) or (c) as it applied to the original owner, where the taxpayer acquired the property in circumstances in which subsection 1202(2) applies, and

      • (ii) equal to the lesser of

        • (A) the proceeds of disposition of the property, and

        • (B) the capital cost of the property to the taxpayer, where clause (i)(A) applies, or the original owner, where clause (i)(B) applies, computed as if no amount had been included therein that is a cost of borrowing capital, including any cost incurred prior to the commencement of carrying on a business,

    • (i) any amount required by paragraph 1202(2)(b) (as it read in its application to taxation years ending before February 18, 1987) or paragraph 1202(3)(a) to be deducted at or before the particular time in computing the taxpayer’s earned depletion base,

    • (j) 33 1/3 per cent of the aggregate of all amounts, each of which is in respect of an amount of assistance or benefit in respect of Canadian exploration expenses or Canadian development expenses or that may reasonably be related to Canadian exploration activities or Canadian development activities, whether such amount is by way of a grant, subsidy, rebate, forgivable loan, deduction from royalty or tax, rebate of royalty or tax, investment allowance or any other form of assistance or benefit that

      • (i) the taxpayer before the particular time has received or was entitled to receive, or that the taxpayer at or after the particular time becomes entitled to receive, or

      • (ii) an original owner or predecessor owner of a property before the particular time has received or was entitled to receive, or at or after the particular time becomes entitled to receive, where the original owner or the predecessor owner received, became entitled to receive or becomes entitled to receive that amount

        • (A) at or after the time at which the property was acquired by the taxpayer in circumstances in which subsection 1202(2) applies, and

        • (B) before the time at which the taxpayer becomes a predecessor owner of the property,

      and that is equal to

      • (iii) where the assistance or benefit was in respect of an amount added by reason of subparagraph (a)(ii) or clause (a)(vi)(B) or (B.1) in computing

        • (A) the earned depletion base of the taxpayer (other than such portion thereof included in determining an amount described in paragraph 1202(2)(a) before the particular time), or

        • (B) the portion of the earned depletion base of the original owner included in determining an amount described in paragraph 1202(2)(a) before the particular time,

        the stated percentage of the amount of the assistance or benefit, and

      • (iv) where the assistance or benefit was in respect of an amount of Canadian oil and gas exploration expense added by reason of subparagraph (a)(v) or clause (a)(vi)(A) in computing

        • (A) the earned depletion base of the taxpayer (other than such portion thereof included in determining an amount described in paragraph 1202(2)(a) before the particular time), or

        • (B) the portion of the earned depletion base of the original owner included in determining an amount described in paragraph 1202(2)(a) before the particular time,

        the amount equal to the product obtained when the amount of the assistance or benefit is multiplied by the specified percentage in respect of the expense for the calendar year in which the taxpayer or the original owner, as the case may be, incurred the expense, and

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

      • (i) the aggregate of all amounts that would be determined under paragraphs 1212(3)(d) to (i)

      exceeds

      • (ii) the aggregate of all amounts that would be determined under paragraphs 1212(3) (a) to (c)

      in computing his supplementary depletion base at the particular time.

  • (2) Where an expense is incurred before the particular time referred to in subsection (1) and a person at or after the particular time becomes entitled to receive an amount of assistance or benefit in respect of the expense, the amount of such assistance or benefit shall be included in “the amount of the assistance or benefit” referred to in subparagraphs (1)(j)(iii) and (iv) as of the particular time.

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • SOR/78-137, s. 4
  • SOR/78-493, s. 2(F)
  • SOR/78-502, s. 6
  • SOR/79-245, s. 4
  • SOR/80-418, s. 3
  • SOR/81-974, s. 6
  • SOR/85-174, s. 6
  • SOR/85-696, s. 2
  • SOR/90-113, s. 4
  • SOR/90-733, s. 3
  • SOR/91-79, s. 6
  • SOR/94-686, ss. 48, 78(F), 79(F)
  • SOR/96-451, s. 3

Interpretation

  •  (1) In this Part,

    bituminous sands equipment

    bituminous sands equipment means property of a taxpayer that

    • (a) is included in Class 28 or in paragraph (a) of Class 41 in Schedule II, other than property so included

      • (i) by virtue of the first reference in Class 28 to paragraph (l) of Class 10 in Schedule II, where the property was acquired by the taxpayer before November 17, 1978, or

      • (ii) by virtue of the reference in Class 28 to paragraph (m) of Class 10 in Schedule II, and

    • (b) was acquired by the taxpayer after April 10, 1978 principally for the purpose of gaining or producing income from one or more mines, each of which is a location in a bituminous sands deposit, oil sands deposit or oil shale deposit from which material is extracted; (matériel d’exploitation de sables bitumineux)

    Canadian exploration and development overhead expense

    Canadian exploration and development overhead expense of a taxpayer means a Canadian exploration expense or a Canadian development expense of the taxpayer made or incurred after 1980 that is not a Canadian renewable and conservation expense (in this definition having the meaning assigned by subsection 66.1(6) of the Act) nor a taxpayer’s share of a Canadian renewable and conservation expense incurred by a partnership and

    • (a) that was in respect of the administration, management or financing of the taxpayer,

    • (b) that was in respect of the salary, wages or other remuneration or related benefits paid in respect of a person employed by the taxpayer whose duties were not all or substantially all directed towards exploration or development activities,

    • (c) that was in respect of the upkeep or maintenance of, taxes or insurance in respect of, or rental or leasing of, property other than property all or substantially all of the use of which by the taxpayer was for the purposes of exploration or development activities, or

    • (d) that may reasonably be regarded as having been in respect of

      • (i) the use of or the right to use any property in which any person who was connected with the taxpayer had an interest,

      • (ii) compensation for the performance of a service for the benefit of the taxpayer by any person who was connected with the taxpayer, or

      • (iii) the acquisition of any materials, parts or supplies from any person who was connected with the taxpayer

      to the extent that the expense exceeds the least of amounts, each of which was the aggregate of the costs incurred by a person who was connected with the taxpayer

      • (iv) in respect of the property,

      • (v) in respect of the performance of the service, or

      • (vi) in respect of the materials, parts or supplies; (frais généraux d’exploration et d’aménagement au Canada)

    Canadian oil and gas exploration expense

    Canadian oil and gas exploration expense of a taxpayer means an outlay or expense made or incurred after 1980 that would be a Canadian exploration expense of the taxpayer within the meaning assigned by paragraph 66.1(6)(a) of the Act if that paragraph were read without reference to subparagraphs (iii) and (iii.1) thereof and if the reference in subparagraphs (iv) and (v) thereof to “any of subparagraphs (i) to (iii.1)” were read as a reference to “any of subparagraphs (i) to (ii.2)”, other than an outlay or expense that was a Canadian exploration expense by virtue of clause 66.1(6)(a)(ii)(B) or (ii.1)(B) of the Act that was in respect of a qualified tertiary oil recovery project; (frais d’exploration pétrolière et gazière au Canada)

    coal mine operator

    coal mine operator means a person who undertakes all or substantially all of the activities involved in the production of coal from a resource; (exploitant de mine de charbon)

    conventional lands

    conventional lands means lands situated in Canada other than non-conventional lands; (terres conventionnelles)

    disposition of property

    disposition of property has the meaning assigned by paragraph 13(21)(c) of the Act; (disposition de biens)

    enhanced recovery equipment

    enhanced recovery equipment means property of a taxpayer that

    • (a) is included in Class 10 in Schedule II by virtue of paragraph (j) of the description of that Class, and

    • (b) was acquired by the taxpayer after April 10, 1978 and before 1981 for use in the production of oil, from a reservoir or a deposit of bituminous sand, oil sand or oil shale in Canada operated by the taxpayer, that is incremental to oil that would be recovered using primary recovery techniques alone,

    other than property

    • (c) used by the taxpayer as part of a primary recovery process prior to the use described in paragraph (b),

    • (d) that had, before it was acquired by the taxpayer, been used for any purpose whatever by any person with whom the taxpayer was not dealing at arm’s length, or

    • (e) that has been used by any person before April 11, 1978 in the production of oil, from a reservoir in Canada, that is incremental to oil that would be recovered using primary recovery techniques alone; (matériel amélioré de récupération)

    exempt partnership

    exempt partnership in respect of a taxpayer at a particular time means a partnership of which the taxpayer was a member throughout the period beginning on December 20, 1991 and ending at the particular time, where all or substantially all of the fair market value of the property of the partnership at the particular time is attributable to property held in connection with one or more working interests that were held by the partnership on December 20, 1991 for the production of minerals, petroleum, natural gas or related hydrocarbons, unless

    • (a) any of the depreciable property acquired after December 20, 1991 and before the particular time by the partnership in connection with one of the working interests had, before the time of the acquisition, been owned by the taxpayer (or any other person with whom the taxpayer did not deal at arm’s length) and been used by the taxpayer (or that other person) in connection with that working interest, or

    • (b) it is reasonable to consider that, before the particular time, amounts were charged to the partnership that would not have been so charged if section 1210 were read without reference to subsection (4) of that section; (société de personnes exclue)

    exporting resource

    exporting resource means, in relation to a particular processing property of a taxpayer, a resource the ore or any portion thereof produced from which during the year immediately preceding the day on which the property was acquired by the taxpayer was ordinarily processed outside Canada to any stage that is not beyond the prime metal stage or its equivalent; (ressource destinée à l’exportation)

    mine

    mine means any location where material is extracted from a resource but does not include a well for the extraction of material from a deposit of bituminous sand, oil sand or oil shale; (mine)

    non-conventional lands

    non-conventional lands means lands that belong to Her Majesty in right of Canada, or in respect of which Her Majesty in right of Canada has the right to dispose of or exploit the natural resources, situated in

    • (a) the Yukon Territory, the Northwest Territories or Sable Island, or

    • (b) those submarine areas, not within a province, adjacent to the coast of Canada and extending throughout the natural prolongation of the land territory of Canada to the outer edge of the continental margin or to a distance of two hundred nautical miles from the baselines from which the breadth of the territorial sea of Canada is measured, whichever is the greater; (terres non conventionnelles)

    ore

    ore includes ore from a mineral resource that has been processed to any stage that is prior to the prime metal stage or its equivalent; (minerai)

    original owner

    original owner of a property means a person

    • (a) who owned the property and disposed of it to a corporation that acquired it in circumstances in which subsection 1202(2) applies, or would apply if the corporation had continued to own the property, to the corporation in respect of the property, and

    • (b) who would, but for paragraph 1202(2)(b) (as it read in its application to taxation years ending before February 18, 1987) or paragraph 1202(3)(a), as the case may be, be entitled in computing the person’s income for a taxation year ending after the person disposed of the property to a deduction under section 1201 in respect of expenditures that were incurred by the person before the person disposed of the property; (propriétaire obligé)

    predecessor owner

    predecessor owner of a property means a corporation

    • (a) that acquired the property in circumstances in which subsection 1202(2) applies, or would apply if the corporation had continued to own the property, to the corporation in respect of the property,

    • (b) that disposed of the property to another corporation that acquired it in circumstances in which subsection 1202(2) applies, or would apply if the other corporation had continued to own the property, to the other corporation in respect of the property, and

    • (c) that would, but for subsection 1202(10), be entitled in computing its income for a taxation year after it disposed of the property to a deduction under subsection 1202(2) in respect of expenditures incurred by an original owner of the property; (propriétaire antérieur)

    primary recovery

    primary recovery means the recovery of oil from a reservoir as a result of utilizing the natural energy of the reservoir to move the oil toward a producing well; (récupération primaire)

    proceeds of disposition

    proceeds of disposition of property has the meaning assigned by paragraph 13(21)(d) of the Act; (produit de la disposition)

    processing property

    processing property means property

    • (a) that is included in Class 10 in Schedule II because of paragraph (g) of the description of that Class or would be so included if that paragraph were read without reference to subparagraph (ii) of that paragraph and Schedule II were read without reference to Class 41, or

    • (b) that is included in Class 10 in Schedule II because of paragraph (k) of the description of that Class or would be so included if that paragraph were read without reference to the words following subparagraph (ii) of that paragraph and Schedule II were read without reference to Class 41,

    other than property that had, before it was acquired by a taxpayer, been used for any purpose whatever by any person with whom the taxpayer was not dealing at arm’s length; (biens servant au traitement)

    production royalty

    production royalty means an amount in respect of a particular Canadian resource property included in computing the income of a taxpayer as a rental or royalty computed by reference to the amount or value of petroleum, natural gas or related hydrocarbons produced after 1981 from a natural accumulation of petroleum or natural gas in Canada (other than a resource) or from an oil or gas well in Canada or produced after June, 1988 from a resource that is a bituminous sands deposit, oil sands deposit or oil shale deposit, if

    • (a) the taxpayer has a Crown royalty in respect of

      • (i) such production, or

      • (ii) the ownership of property to which such production relates where the Crown royalty is computed by reference to an amount of production from the accumulation, oil or gas well or resource,

      and it is reasonable to consider that the taxpayer would have had the Crown royalty if the taxpayer’s only source of income had been the rental or royalty in respect of the particular property, or

    • (b) the taxpayer would, but for an exemption or allowance (other than a rate of nil) that is provided, pursuant to a statute, by a person referred to in subparagraph 18(1)(m)(i), (ii) or (iii) of the Act, have a Crown royalty in respect of which paragraph (a) is applicable; (redevance de production)

    qualified resource

    qualified resource means, in relation to a particular processing property of a taxpayer, a resource that, within a reasonable time after the property was acquired by him,

    • (a) came into production in reasonable commercial quantities, or

    • (b) was the subject of a major expansion whereby the greatest designed capacity, measured in weight of input of ore, of the mill that processed ore from the resource was not less than 25% greater in the year immediately following the expansion than it was in the year immediately preceding the expansion; (ressource admissible)

    qualified tertiary oil recovery project

    qualified tertiary oil recovery project in respect of an expense incurred in a taxation year means a project that uses a method (including a method that uses carbon dioxide miscible, hydrocarbon miscible, thermal or chemical processes but not including a secondary recovery method) that is designed to recover oil from an oil well in Canada that is incremental to oil that would be recovered therefrom by primary recovery and a secondary recovery method, if

    • (a) a specified royalty provision applies in the year or in the immediately following taxation year in respect of the production, if any, or any portion thereof from the project or in respect of the ownership of property to which such production relates,

    • (b) the project is on a reserve within the meaning of the Indian Act, or

    • (c) the project is located in the Province of Ontario; (projet qualifié de récupération tertiaire du pétrole)

    resource

    resource means any mineral resource in Canada; (ressource)

    resource activity

    resource activity of a taxpayer means

    • (a) the production by the taxpayer of petroleum, natural gas or related hydrocarbons or sulphur from

      • (i) an oil or gas well in Canada, or

      • (ii) a natural accumulation (other than a mineral resource) of petroleum or natural gas in Canada,

    • (b) the production and processing in Canada by the taxpayer or the processing in Canada by the taxpayer of

      • (i) ore (other than iron ore or tar sands ore) from a mineral resource in Canada to any stage that is not beyond the prime metal stage or its equivalent,

      • (ii) iron ore from a mineral resource in Canada to any stage that is not beyond the pellet stage or its equivalent, and

      • (iii) tar sands ore from a mineral resource in Canada to any stage that is not beyond the crude oil stage or its equivalent,

    • (c) the processing in Canada by the taxpayer of heavy crude oil recovered from an oil or gas well in Canada to any stage that is not beyond the crude oil stage or its equivalent,

    • (c.1) Canadian field processing carried on by the taxpayer,

    • (d) the processing in Canada by the taxpayer of

      • (i) ore (other than iron ore or tar sands ore) from a mineral resource outside Canada to any stage that is not beyond the prime metal stage or its equivalent,

      • (ii) iron ore from a mineral resource outside Canada to any stage that is not beyond the pellet stage or its equivalent, and

      • (iii) tar sands ore from a mineral resource outside Canada to any stage that is not beyond the crude oil stage or its equivalent, or

    • (e) the ownership by the taxpayer of a right to a rental or royalty computed by reference to the amount or value of production from a natural accumulation of petroleum or natural gas in Canada, an oil or gas well in Canada or a mineral resource in Canada,

    and, for the purposes of this definition,

    • (f) the production of a substance by a taxpayer includes exploration and development activities of the taxpayer with respect to the substance, whether or not extraction of the substance has begun or will ever begin,

    • (g) the production or the processing, or the production and processing, of a substance by a taxpayer includes activities performed by the taxpayer that are ancillary to, or in support of, the production or the processing, or the production and processing, of that substance by the taxpayer,

    • (h) the production or processing of a substance by a taxpayer includes an activity (including the ownership of property) that is undertaken before the extraction of the substance and that is undertaken for the purpose of extracting or processing the substance,

    • (i) the production or the processing, or the production and processing, of a substance by a taxpayer includes activities that the taxpayer undertakes as a consequence of the production or the processing, or the production and processing, of that substance, whether or not the production, the processing or the production and processing of the substance has ceased, and

    • (j) notwithstanding paragraphs (a) to (i), the production, the processing or the production and processing of a substance does not include any activity of a taxpayer that is part of a source described in paragraph 1204(1)(b), where

      • (i) the activity

        • (A) is the transporting, transmitting or processing (other than processing described in subparagraph (b)(iii), paragraph (c) or (c.1) or subparagraph (d)(iii)) of petroleum, natural gas or related hydrocarbons or of sulphur, or

        • (B) can reasonably be attributed to a service rendered by the taxpayer, and

      • (ii) revenues derived from the activity are not taken into account in computing the taxpayer’s gross resource profits; (activité extractive)

    secondary recovery method

    secondary recovery method means a method to recover from a reservoir oil that is incremental to oil that would be recovered therefrom by primary recovery, by supplying energy to supplement or replace the natural energy of the reservoir through the use of technically proven methods, including waterflooding; (méthode de récupération secondaire)

    specified development well

    specified development well[Repealed, SOR/85-174, s. 7]

    specified percentage

    specified percentage for a calendar year

    • (a) in respect of a Canadian oil and gas exploration expense of a taxpayer for that year incurred in respect of conventional lands means,

      • (i) for the 1981 calendar year, 100 per cent,

      • (ii) for the 1982 calendar year, 60 per cent, and

      • (iii) for the 1983 calendar year, 30 per cent, and

    • (b) in respect of a Canadian oil and gas exploration expense of a taxpayer for that year incurred in respect of non-conventional lands means,

      • (i) for the 1981 and 1982 calendar years, 100 per cent,

      • (ii) for the 1983 calendar year, 60 per cent, and

      • (iii) for the 1984 calendar year, 30 per cent; (pourcentage désigné)

    specified property

    specified property of a person means all or substantially all of the property used by the person in carrying on in Canada such of the businesses described in subparagraphs 66(15)(h)(i) to (vii) of the Act as were carried on by the person; (biens déterminés)

    specified royalty

    specified royalty means a royalty created after December 5, 1996 (otherwise than pursuant to an agreement in writing made on or before that date) where

    • (a) the cost of the royalty was a Canadian development expense, and

    • (b) the royalty was created as part of a transaction or event or series of transactions or events as a consequence of which depreciable property was acquired at a capital cost that was less than its fair market value (determined without regard to the royalty); (redevance déterminée)

    stated percentage

    stated percentage means

    • (a) where the taxpayer is an individual other than a trust, in respect of subparagraph 1203(2)(a)(i),

      • (i) 100 per cent in respect of an expenditure incurred before 1989,

      • (ii) 50 per cent in respect of an expenditure incurred after 1988 and before 1990, and

      • (iii) 0 per cent in respect of an expenditure incurred after 1989,

    • (b) in respect of subparagraph 1203(2)(a)(i) (where paragraph (a) is not applicable) and paragraphs 1205(1)(a), (b), (c) and (f)

      • (i) 100 per cent in respect of an expenditure incurred or a cost incurred in borrowing capital before July 1, 1988,

      • (ii) 50 per cent in respect of an expenditure incurred or a cost incurred in borrowing capital after June 30, 1988 and before 1990, and

      • (iii) 0 per cent in respect of an expenditure incurred or a cost incurred in borrowing capital after 1989,

    • (c) where the taxpayer is an individual other than a trust, in respect of subparagraph 1203(2)(a)(ii) and subsection 1203(4),

      • (i) 100 per cent in respect of any assistance that relates to expenditures incurred before 1989,

      • (ii) 50 per cent in respect of any assistance that relates to expenditures incurred after 1988 and before 1990, and

      • (iii) 0 per cent in respect of any assistance that relates to expenditures incurred after 1989, and

    • (d) in respect of subparagraph 1203(2)(a)(ii) (if paragraph (c) is not applicable), subsection 1203(4) (if paragraph (c) is not applicable) and subparagraph 1205(1)(j)(iii),

      • (i) 100 per cent in respect of any assistance or benefit that relates to expenditures incurred before July 1, 1988,

      • (ii) 50 per cent in respect of any assistance or benefit that relates to expenditures incurred after June 30, 1988 and before 1990, and

      • (iii) 0 per cent in respect of any assistance or benefit that relates to expenditures incurred after 1989; (pourcentage indiqué)

    tar sands ore

    tar sands ore means ore extracted, other than through a well, from a mineral resource that is a deposit of bituminous sand, oil sand or oil shale; (minerai de sables asphaltiques)

    tertiary recovery equipment

    tertiary recovery equipment means property of a taxpayer that

    • (a) is, or but for Class 41 in Schedule II would be, included in Class 10 in Schedule II by virtue of paragraph (j) of the description of that Class,

    • (b) was acquired by the taxpayer after 1980 for use in a qualified tertiary oil recovery project,

    other than property

    • (c) used by the taxpayer for another use prior to the use described in paragraph (b), or

    • (d) that had, before it was acquired by the taxpayer, been used for any purpose whatever by any person with whom the taxpayer was not dealing at arm’s length. (matériel de récupération tertiaire)

  • (2) In this Part, joint exploration corporation, principal-business corporation, production from a Canadian resource property, reserve amount and shareholder corporation have the meanings assigned by subsection 66(15) of the Act.

  • (3) For the purposes of sections 1201 to 1209 and 1212, where at the end of a fiscal period of a partnership, a taxpayer was a member thereof

    • (a) the resource profits of the partnership for the fiscal period, to the extent of the taxpayer’s share thereof, shall be included in computing his resource profits for his taxation year in which the fiscal period ended;

    • (b) any property acquired or disposed of by the partnership shall be deemed to have been acquired or disposed of by the taxpayer to the extent of his share of thereof;

    • (c) any property deemed by paragraph (b) to have been acquired or disposed of by the taxpayer shall be deemed to have been acquired or disposed of by him on the day the property was acquired or disposed of by the partnership;

    • (d) any amount that has become receivable by the partnership and in respect of which the consideration given by the partnership therefor was property (other than property referred to in paragraph 59(2)(a), (c) or (d) of the Act or a share or interest therein or right thereto) or services, all or part of the original cost of which to the partnership may reasonably be regarded primarily as an exploration or development expense of the taxpayer, shall be deemed to be an amount receivable by the taxpayer to the extent of his share thereof, and the consideration so given by the partnership shall, to the extent of the taxpayer’s share thereof, be deemed to have been given by the taxpayer for the amount deemed to be receivable by him;

    • (e) any expenditure incurred or deemed to have been incurred by the partnership shall be deemed to have been incurred by the taxpayer to the extent of the taxpayer’s share thereof; and

    • (f) any amount or expenditure deemed by paragraph (d) or (e) to have been receivable or incurred, as the case may be, by the taxpayer shall be deemed to have become receivable or been incurred, as the case may be, by the taxpayer on the day the amount became receivable or the expenditure was incurred or deemed to have been incurred by the partnership.

  • (3.1) For the purposes of sections 1201 to 1203, 1205, 1217 and 1218, where a taxpayer was a member of a partnership at the end of a fiscal period of the partnership, the taxpayer shall be deemed to receive or to become entitled to receive any amount of assistance or benefit, whether such amount is by way of a grant, subsidy, rebate, forgivable loan, deduction from royalty or tax, rebate of royalty or tax, investment allowance or any other form of assistance or benefit, that the partnership at any time receives or becomes entitled to receive in respect of expenses incurred in that fiscal period of the partnership, to the extent of,

    • (a) where the partnership in the fiscal period receives or becomes entitled to receive the amount, the taxpayer’s share thereof, or

    • (b) where the partnership after the fiscal period becomes entitled to receive the amount, what would have been the taxpayer’s share thereof if the partnership had in the fiscal period received or become entitled to receive the amount,

    and the time at which the taxpayer is deemed to receive or become entitled to receive such share of the amount shall be the time that the partnership receives or becomes entitled to receive the amount.

  • (4) Where an expense incurred after November 7, 1969 that was a Canadian exploration and development expense or that would have been such an expense if it had been incurred after 1971 (other than an amount included therein that is in respect of financing or the cost of any Canadian resource property acquired by a joint exploration corporation or any property acquired by a joint exploration corporation that would have been a Canadian resource property if it had been acquired after 1971), a Canadian exploration expense (other than an amount included therein that is in respect of financing) or a Canadian development expense (other than an amount included therein that is in respect of financing or an amount referred to in subparagraph 66.2(5)(a)(iii) of the Act) has been renounced in favour of a taxpayer and was deemed to be an expense of the taxpayer for the purposes of subsection 66(10), (10.1) or (10.2) of the Act or subsection 29(7) of the Income Tax Application Rules, the expense shall

    • (a) for the purposes of sections 1203 and 1205, be deemed to have been such an expense incurred by the taxpayer at the time the expense was incurred by the joint exploration corporation; and

    • (b) for the purposes of sections 1204 and 1210 and paragraphs 1217(2)(e) and 1218(2)(e), be deemed to have been such an expense incurred by the taxpayer at the time it was deemed to have been incurred by the taxpayer for the purposes of subsection 66(10), (10.1) or (10.2) of the Act or subsection 29(7) of the Income Tax Application Rules, as the case may be.

  • (4.1) An expense that is a Canadian exploration and development overhead expense of the joint exploration corporation referred to in subsection (4), or would be such an expense if the references to “connected with the taxpayer” in paragraph (d) of the definition Canadian exploration and development overhead expense in subsection (1) were read as “connected with the shareholder corporation in favour of whom the expense was renounced for the purposes of subsection 66(10.1) or (10.2) of the Act”, that may reasonably be considered to be included in a Canadian exploration expense or Canadian development expense that is deemed by subsection (4) to be a Canadian exploration expense or Canadian development expense of the shareholder corporation, shall be deemed to be a Canadian exploration and development overhead expense of the shareholder corporation incurred by it at the time the expense was deemed by subsection (4) to have been incurred by it and shall be deemed at and after that time not to be a Canadian exploration and development overhead expense incurred by the joint exploration corporation.

  • (4.2) For the purposes of paragraphs 66(12.6)(b), (12.601)(d) and (12.62)(b) of the Act, a prescribed Canadian exploration and development overhead expense of a corporation is

    • (a) a Canadian exploration and development overhead expense of the corporation;

    • (b) an expense that would be a Canadian exploration and development overhead expense of the corporation if the references to “connected with the taxpayer” in paragraph (d) of the definition Canadian exploration and development overhead expense in subsection (1) were read as “connected with the person to whom the expense is renounced under subsection 66(12.6), (12.601) or (12.62) of the Act”; and

    • (c) an expense that would be a Canadian exploration and development overhead expense of the corporation if the references to “person who was connected with the taxpayer” in paragraph (d) of the definition Canadian exploration and development overhead expense in subsection (1) were read as “person to whom the expense is renounced under subsection 66(12.6), (12.601) or (12.62) of the Act”.

  • (4.3) For the purposes of subsections (4.2) and (5), a partnership shall be deemed to be a person and its taxation year shall be deemed to be its fiscal period.

  • (5) For the purposes of subsection (6) and the definition Canadian exploration and development overhead expense in subsection (1),

    • (a) a person and a particular corporation are connected with each other if

      • (i) the person and the particular corporation are not dealing at arm’s length,

      • (ii) the person has an equity percentage in the particular corporation that is not less than 10 per cent, or

      • (iii) the person is a corporation in which another person has an equity percentage that is not less than 10 per cent and the other person has an equity percentage in the particular corporation that is not less than 10 per cent;

    • (a.1) a person and another person that is not a corporation are connected with each other if they are not dealing at arm’s length; and

    • (b) “costs incurred by a person” shall not include

      • (i) an outlay or expense described in any of paragraphs (a) to (c) of that definition made or incurred by the person if the references in those paragraphs to “taxpayer” were read as references to “person”,

      • (ii) an outlay or expense made or incurred by the person to the extent that it is not reasonably attributable to the use of a property by, the performance of a service for, or any materials, parts, or supplies acquired by, the taxpayer referred to in that definition, and

      • (iii) an amount in respect of the capital cost to the person of a property, other than, where the property is a depreciable property of the person, that proportion of the capital allowance of the person for his taxation year in respect of the property that may reasonably be considered attributable to the use of the property by, or in the performance of a service for, the taxpayer referred to in that definition.

  • (6) For the purpose of subparagraph (5)(b)(iii), the capital allowance of a person (in this subsection referred to as the “owner”) for his taxation year in respect of a property owned by him means that proportion of an amount not exceeding 20 per cent of the amount that is

    • (a) in the case of a property owned by the owner on December 31, 1980, the lesser of

      • (i) the capital cost of the property to the owner computed as if no amount had been included therein that is a cost of borrowing capital, including any cost incurred prior to the commencement of carrying on a business, and

      • (ii) the fair market value of the property on December 31, 1980,

    • (b) in the case of a property acquired by the owner after December 31, 1980 that was previously owned by a person connected with the owner, the lesser of

      • (i) the capital cost of the property, computed as if no amount had been included therein that is a cost of borrowing capital, including any cost incurred prior to the commencement of carrying on a business, to the person, who was connected with the owner, who was the first person to acquire the property from a person with whom the owner was not connected, and

      • (ii) the fair market value of the property at the time it was acquired by the owner, and

    • (c) in any other case, the capital cost of the property to the owner computed as if no amount had been included therein that is a cost of borrowing capital, including any cost incurred prior to the commencement of carrying on a business,

    that the number of days in the taxation year during which the property was owned by the owner is of 365.

  • (7) For the purposes of paragraph (5)(a), equity percentage has the meaning assigned by paragraph 95(4)(b) of the Act.

  • (8) For the purposes of the definition qualified tertiary oil recovery project in subsection (1), a specified royalty provision means:

    • (a) the Experimental Project Petroleum Royalty Regulation of Alberta (Alta. Reg. 36/79);

    • (b) The Experimental Oil Sands Royalty Regulations of Alberta (Alta. Reg. 287/77);

    • (c) section 4.2 of the Petroleum Royalty Regulations of Alberta (Alta. Reg. 93/74);

    • (d) section 58A of the Petroleum and Natural Gas Regulations, 1969 of Saskatchewan (Saskatchewan Regulation 8/69);

    • (e) section 204 of The Freehold Oil And Gas Production Tax Regulations, 1983 of Saskatchewan (Saskatchewan Regulation 11/83);

    • (f) item 9 of section 2 of the Petroleum and Natural Gas Royalty Regulations of British Columbia (B.C. Reg. 549/78);

    • (g) the Freehold Mineral Taxation Act of Alberta;

    • (h) the Freehold Mineral Rights Tax Act of Alberta;

    • (i) Order in Council 427/84 pursuant to section 9(a) of the Mines and Minerals Act of Alberta;

    • (j) Order in Council 966/84 pursuant to section 9 of the Mines and Minerals Act of Alberta; or

    • (k) Order in Council 870/84 pursuant to section 9 of the Mines and Minerals Act of Alberta.

  • (8.1) For the purposes of paragraph (a) of the definition of qualified tertiary oil recovery project in subsection (1), where at a particular time unconditional approval is given by a person referred to in subparagraph 18(1)(m)(i), (ii) or (iii) of the Act for a specified royalty provision to apply at a time after the particular time, the specified royalty provision shall be deemed to apply as of the particular time.

  • (9) For the purposes of the definition production royalty in subsection (1), a Crown royalty of a taxpayer in respect of the production of petroleum, natural gas or related hydrocarbons from a natural accumulation of petroleum or natural gas in Canada, an oil or gas well in Canada, a resource that is a bituminous sands deposit, oil sands deposit or oil shale deposit or in respect of the ownership of a natural reservoir of gas or petroleum in Canada means an amount

    • (a) that would be included in computing his income for a taxation year by virtue of paragraph 12(1)(o) of the Act in respect of such production or ownership if that paragraph were read without reference to the words “or a prescribed amount”,

    • (b) that would not be deductible in computing his income for a taxation year by virtue of paragraph 18(1)(m) of the Act in respect of such production or ownership if that paragraph were read without reference to the words “other than a prescribed amount”,

    • (c) by which his proceeds of disposition of such production are increased by virtue of subsection 69(6) of the Act, or

    • (d) by which his cost of acquisition of such production is reduced by virtue of subsection 69(7) of the Act,

    less, in respect of an amount described in paragraph (a) or (b), the amount of any reimbursement, contribution or allowance referred to in section 80.2 of the Act received or receivable by the taxpayer in respect of that amount.

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  •  SOR/79-245, s. 5
  • SOR/80-418, s. 4
  • SOR/81-974, s. 7
  • SOR/85-174, s. 7
  • SOR/86-1092, s. 8
  • SOR/88-423, s. 1
  • SOR/90-113, s. 5
  • SOR/90-733, s. 4
  • SOR/91-79, s. 7
  • SOR/92-681, s. 3
  • SOR/94-686, ss. 12(F), 48, 58(F), 68(F), 78(F), 79(F), 81(F)
  • SOR/96-199, s. 2
  • SOR/96-451, s. 4
  • SOR/99-179, s. 7
  • SOR/2000-327, s. 3

Frontier Exploration Allowances

  •  (1) A taxpayer may deduct in computing his income for a taxation year such amount as he may claim not exceeding the lesser of

    • (a) his income for the year, computed in accordance with Part I of the Act, if no deduction were allowed under this subsection; and

    • (b) his frontier exploration base as of the end of the year (before making any deduction under this subsection for the year).

  • (2) For the purposes of this section, frontier exploration base of a taxpayer as of a particular time means the amount by which the aggregate of

    • (a) the aggregate of all amounts, each of which is an amount in respect of a particular oil or gas well in Canada equal to 66 2/3 per cent of the amount by which

      • (i) expenses incurred after March, 1977 and before April, 1980 and before the particular time in respect of the well (other than expenses that may reasonably be regarded as having been incurred as consideration for services rendered to the taxpayer after March, 1980) if those expenses would be included in the Canadian exploration expense of the taxpayer within the meaning of paragraph 66.1(6)(a) of the Act (if that paragraph were read without reference to subparagraphs (iii) and (iii.1) thereof and without reference to the words “within six months after the end of the year, the drilling of the well is completed and” in subparagraph (ii) thereof, and if the reference in subparagraphs (iv) and (v) thereof to “any of subparagraphs (i) to (iii.1)” were read as a reference to “subparagraph (i) or (ii)”) other than

        • (A) a cost of borrowing capital, including any cost incurred prior to the commencement of carrying on a business, that was a Canadian exploration expense of the taxpayer,

        • (B) an expense renounced by the taxpayer under subsection 66(10.1) of the Act,

        • (C) an amount that, by virtue of subparagraph 66.1(6)(a)(iv) of the Act, was a Canadian exploration expense, if such amount was an expense referred to in clause (A) or (B) that was incurred by a partnership referred to in that subparagraph, or

        • (D) an amount that, by virtue of subparagraph 66.1(6)(a)(v) of the Act, was a Canadian exploration expense, if such amount was an expense referred to in clause (A) or (B) that the taxpayer incurred pursuant to an agreement referred to in that subparagraph,

      exceeds

      • (ii) the taxpayer’s threshold amount in respect of the well, minus the amount that would be determined under subparagraph (i) in respect of the taxpayer for the well if the reference therein to “after March, 1977 and before April, 1980” were read as “after June, 1976 and before April, 1977”, and

    • (a.1) where the taxpayer is a successor corporation, any amount required by paragraph (7)(a) to be added before the particular time in computing the taxpayer’s frontier exploration base,

    exceeds the aggregate of

    • (b) all amounts deducted by the taxpayer under subsection (1) in computing his income for taxation years ending before the particular time,

    • (c) 66 2/3 per cent of the aggregate of all amounts, each of which is an amount that became receivable by the taxpayer after March 28, 1979 and before the earlier of December 12, 1979 and the particular time, and in respect of which the consideration given by the taxpayer therefor was a property (other than a share, or a property that would have been a Canadian resource property if it had been acquired by the taxpayer at the time the consideration was given) or services the cost of which may reasonably be regarded as having been primarily an expenditure in respect of an oil or gas well for which an amount was added in computing the taxpayer’s frontier exploration base by virtue of paragraph (a) or in computing the frontier exploration base of a predecessor by virtue of paragraph (a) as it applied to the predecessor where the taxpayer is a successor corporation to the predecessor, as the case may be; and

    • (d) where the taxpayer is a predecessor, any amount required by paragraph (7)(b) to be deducted before the particular time in computing the taxpayer’s frontier exploration base.

  • (3) For the purposes of subparagraph (2)(a)(ii), a taxpayer’s threshold amount in respect of an oil or gas well means

    • (a) where the taxpayer and one or more other persons have filed an agreement with the Minister in prescribed form in respect of the well and

      • (i) the amount allocated to each such person in the agreement does not exceed the amount that would be determined, at the time the agreement is filed, under subparagraph (2)(a)(i) in respect of that person for the well, if the reference in that subparagraph to “March, 1977” were read as “June, 1976”, and

      • (ii) the aggregate of the amounts allocated by the agreement is $5 million,

      the amount allocated to the taxpayer in the agreement, but if no amount is allocated to the taxpayer in the agreement, nil;

    • (b) where such an agreement has been filed in respect of the well by one or more persons other than the taxpayer, nil; or

    • (c) where no such agreement has been filed in respect of the well, $5 million.

  • (4) Where as a result of mechanical or geological difficulties the drilling of a particular oil or gas well does not achieve its stated geological objectives under the drilling authority issued by the relevant government body and a further well, including a relief well, is drilled on the same geological formation and may reasonably be regarded as a continuation of or a substitution for the particular oil or gas well, the expenses in respect of the drilling of the further well shall, for the purposes of this section, be deemed to be expenses in respect of the drilling of the particular oil or gas well.

  • (5) For the purposes of this section,

    • (a) when a shareholder corporation is deemed to have incurred a Canadian exploration expense by virtue of an election made by a joint exploration corporation pursuant to subsection 66(10.1) of the Act, that expense shall be deemed to have been incurred by the shareholder corporation at the time when it was incurred by the joint exploration corporation; and

    • (b) when a member of a partnership is deemed to have incurred a Canadian exploration expense by virtue of subparagraph 66.1(6)(a)(iv) of the Act, that expense shall be deemed to have been incurred by the member at the time when it was incurred by the partnership.

  • (6) For the purposes of this section, oil or gas well means any well drilled for the purpose of producing petroleum or natural gas or of determining the existence, location, extent or quality of an accumulation of petroleum or natural gas, other than a mineral resource.

  • (7) Subject to subsections 1202(5) and (6), where a corporation (in this section referred to as the “successor corporation”) has at any time (in this subsection referred to as the “time of acquisition”) after April 19, 1983 and in a taxation year (in this subsection referred to as the “transaction year”) acquired a property from another person (in this subsection referred to as the “predecessor”), the following rules apply:

    • (a) for the purpose of computing the frontier exploration base of the successor corporation as of any time after the time of acquisition, there shall be added an amount equal to the amount required by paragraph (b) to be deducted in computing the frontier exploration base of the predecessor; and

    • (b) for the purpose of computing the frontier exploration base of the predecessor as of any time after the transaction year of the predecessor, there shall be deducted the amount, if any, by which

      • (i) the frontier exploration base of the predecessor immediately after the time of acquisition (assuming for this purpose that, in the case of an acquisition as a result of an amalgamation described in section 87 of the Act, the predecessor existed after the time of acquisition and no property was acquired or disposed of in the course of the amalgamation)

      exceeds

      • (ii) the amount, if any, deducted under subsection (1) in computing the income of the predecessor for the transaction year of the predecessor.

  • (8) [Repealed, SOR/91-79, s. 8]

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • SOR/78-502, s. 7
  • SOR/79-245, s. 6
  • SOR/80-418, s. 5
  • SOR/80-936, s. 1
  • SOR/81-974, s. 8
  • SOR/85-174, s. 8
  • SOR/85-696, ss. 2, 5
  • SOR/90-113, s. 6
  • SOR/90-733, s. 5
  • SOR/91-79, s. 8
  • SOR/94-686, ss. 58(F), 78(F), 79(F)

Additional Allowances in Respect of Certain Oil or Gas Wells

  •  (1) Subject to subsections (3) and (4) where a taxpayer has income for a taxation year from an oil or gas well that is outside Canada, or where an individual has income for a taxation year from an oil or gas well in Canada, in computing his income for the year he may deduct the lesser of

    • (a) the aggregate of drilling costs incurred by him in that year and previous taxation years in respect of the well (not including the cost of land, leases or other rights and not including indirect expenses such as general exploration, geological and geophysical expenses) minus the aggregate of all amounts deductible in respect thereof in computing his income for previous years; and

    • (b) that part of his income for the year that may reasonably be regarded as income from the well.

  • (2) Where a taxpayer has more than one oil or gas well to which subsection (1) applies, the allowance in respect of the drilling costs of each well shall be computed separately.

  • (3) Where an individual has income for a taxation year from an oil or gas well in Canada, no deduction may be made under this section in computing such income in respect of drilling costs of that well incurred after April 10, 1962.

  • (4) Where a taxpayer has income for a taxation year from an oil or gas well that is outside Canada, no deduction may be made under this section in computing such income in respect of drilling costs of that well incurred after 1971.

Additional Allowances in Respect of Certain Mines

  •  (1) Subject to subsection (3), where a taxpayer operates in Canada a mine for the production of materials from a resource he may deduct, in computing his income for a taxation year, such amount as he may claim not exceeding 25 per cent of the amount computed under subsection (2).

  • (2) The amount referred to in subsection (1) is the aggregate of all expenditures made or incurred by the taxpayer before 1972 that are reasonably attributable to the prospecting and exploration for and the development of the mine prior to the coming into production of the mine in reasonable commercial quantities, except to the extent that the expenditures were

    • (a) expenditures in respect of which a deduction from, or in computing, a taxpayer’s income tax or excess profits tax was provided by section 8 of the Income War Tax Act;

    • (b) expenditures in respect of which an amount was deducted in computing a taxpayer’s income under section 16 of chapter 63, S.C., 1947 or section 16 of chapter 53, S.C., 1947-48 or, if the expenditure was incurred prior to 1953, under section 53 of chapter 25, S.C., 1949 (Second Session);

    • (c) expenditures incurred after 1952 in respect of which a deduction was or is provided by section 53 of chapter 25, S.C., 1949 (Second Session), section 83A of the Act as it read in its application to the 1971 taxation year or section 29 of the Income Tax Application Rules,

    • (d) expenditures deducted in computing the income of the taxpayer in the year they were incurred;

    • (e) the cost to the taxpayer of property in respect of which an allowance is provided under paragraph 20(1)(a) of the Act; or

    • (f) the cost to the taxpayer of a leasehold interest.

  • (3) The amount deductible under subsection (1) shall not exceed the amount computed under subsection (2) minus the aggregate of

    • (a) amounts deducted under subsection (1) in computing the income of the taxpayer for previous taxation years; and

    • (b) similar amounts deducted in computing the income of the taxpayer for the purposes of the Income War Tax Act and The 1948 Income Tax Act (as defined in paragraph 12(d) of the Income Tax Application Rules).

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • SOR/94-686, s. 48

Resource Allowance

  •  (1) For the purpose of paragraph 20(1)(v.1) of the Act, there may be deducted in computing the income of a taxpayer for a taxation year the amount determined by the formula

    .25(A - B) - C

    where

    A
    is the taxpayer’s adjusted resource profits for the year;
    B
    is the total of all amounts each of which is a Canadian exploration and development overhead expense made or incurred by the taxpayer in the year, other than an amount included therein because of subsection 21(2) or (4) of the Act; and
    C
    is the amount, if any, by which
    • (a) the total of all amounts determined under paragraphs 1205(1)(e) to (k) in computing the taxpayer’s earned depletion base at the end of the year, other than any portion of that total determined under paragraph 1205(1)(i) as a consequence of a disposition in the year of property in circumstances to which subsection 1202(2) applies

    exceeds

    • (b) 33 1/3 per cent of the total of all amounts determined under paragraphs 1205(1)(a) to (d.2) in computing the taxpayer’s earned depletion base at the end of the year.

  • (2) For the purposes of this section, “adjusted resource profits” of a taxpayer for a taxation year is the amount, which may be positive or negative, determined by the formula

    A + B - C

    where

    A
    is the amount that would be the taxpayer’s resource profits for the year if the following assumptions were made:
    • (a) the amount determined under paragraph 1204(1)(a) were nil,

    • (b) subsection 1204(1) were read without reference to subparagraph 1204(1)(b)(iv) and the definition resource activity in subsection 1206(1) were read without reference to paragraph (d) of that definition,

    • (c) the following amounts were not deducted in computing the taxpayer’s gross resource profits for the year and were not deducted in computing the taxpayer’s resource profits for the year:

      • (i) each amount deducted in computing the taxpayer’s income for the year in respect of a rental or royalty paid or payable by the taxpayer (other than an amount prescribed by section 1211, an amount that is a production royalty or an amount paid or payable in respect of a specified royalty) computed by reference to the amount or value of petroleum, natural gas or related hydrocarbons

        • (A) produced from a natural accumulation (other than a resource) of petroleum or natural gas in Canada or an oil or gas well in Canada, or

        • (B) produced from a resource that is a bituminous sands deposit, oil sands deposit or oil shale deposit,

      • (ii) each amount deducted in computing the taxpayer’s income for the year

        • (A) under any of paragraphs 20(1)(e), (e.1), (e.2) and (f) of the Act, or

        • (B) as, on account of or in lieu of, interest in respect of a debt owed by the taxpayer, and

      • (iii) each amount deducted under any of paragraph 20(1)(v.1) and sections 65 to 66.7 of the Act and subsections 17(2) and (6) and section 29 of the Income Tax Application Rules,

    • (d) each amount that is the taxpayer’s share of the income or loss of a partnership from any source were not taken into account, and

    • (e) subsections 1204(1) and (1.1) provided for the computation of negative amounts where the amounts subtracted in computing gross resource profits and resource profits exceed the amounts added in computing those amounts;

    B
    is the total of all amounts each of which is the taxpayer’s share of the adjusted resource profits of a partnership for the year, as determined under subsection (3) or (4); and
    C
    is the amount, if any, by which the total of
    • (a) the total of all amounts each of which is an amount included in the taxpayer’s gross resource profits for the year as a rental or royalty (other than a production royalty or a specified royalty) computed by reference to the amount or value of petroleum, natural gas or related hydrocarbons produced from

      • (i) a natural accumulation (other than a resource) of petroleum or natural gas in Canada or an oil or gas well in Canada, or

      • (ii) a resource that is a bituminous sands deposit or oil shale deposit, and

    • (b) 50 per cent of all amounts included in computing the taxpayer’s gross resource profits for the year in respect of specified royalties

    exceeds

    • (c) if the year ends after March 6, 1996, the total of all outlays and expenses that were made or incurred in respect of the total described in paragraph (a) to the extent that the outlays and expenses were deducted in computing the taxpayer’s gross resource profits for the year.

  • (3) Where a taxpayer is a member of a partnership in a fiscal period of the partnership that ends in a taxation year of the taxpayer, the taxpayer’s share of the partnership’s adjusted resource profits for the year is

    • (a) nil, where the fiscal period began before December 21, 1991; and

    • (b) in any other case, the amount, which may be positive or negative, that could, if this subsection did not apply, reasonably be considered to represent the taxpayer’s share of the partnership’s adjusted resource profits for the fiscal period, determined on the assumption that each partnership is a taxpayer the fiscal period of which is a taxation year.

  • (4) Notwithstanding subsection (3), where a taxpayer is a member of an exempt partnership in a fiscal period of the partnership that begins before 2000 and ends in a taxation year of the taxpayer and the taxpayer’s share of the partnership’s adjusted resource profits for the year would, if this subsection did not apply, be a negative amount, the taxpayer’s share of the partnership’s adjusted resource profits for the year is the amount, which may be positive or negative, determined by the formula

    A × B

    where

    A
    is the amount that would, if this subsection did not apply, be the taxpayer’s share of the partnership’s adjusted resource profits for the year; and
    B
    is
    • (a) nil, where

      • (i) the partnership is an exempt partnership in respect of the taxpayer at the end of the fiscal period, and

      • (ii) at the end of the fiscal period, all or substantially all of the assets of the partnership were held in connection with one or more working interests

        • (A) the production from which began in reasonable commercial quantities before December 21, 1991, or

        • (B) the production from which was to begin in reasonable commercial quantities after December 20, 1991 in accordance with an agreement in writing made before December 21, 1991, and

    • (b) in any other case, the lesser of one and the amount determined by the formula

      C / D

      where

      C
      is the amount that would be the partnership’s adjusted resource profits for the fiscal period if the partnership did not have any working interest described in subparagraph (a)(ii), and
      D
      is the partnership’s adjusted resource profits for the fiscal period.
  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  •  SOR/81-974, s. 9
  • SOR/85-174, s. 9
  • SOR/90-113, s. 7
  • SOR/91-79, s. 9
  • SOR/93-120, s. 2
  • SOR/94-686, ss. 58(F), 78(F)
  • SOR/96-451, s. 5
  • SOR/99-179, s. 8

 For the purpose of paragraph 12(1)(z.5) of the Act, a taxpayer’s prescribed resource loss for a taxation year is the amount determined by the formula

A - B

where

A
is the total of all amounts each of which is a Canadian exploration and development overhead expense made or incurred by the taxpayer in the year, other than an amount included therein because of subsection 21(2) or (4) of the Act, and
B
is the taxpayer’s adjusted resource profits for the year (as defined by subsection 1210(2)).
  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  •  SOR/99-179, s. 9

Prescribed Amounts

 The following amounts are hereby prescribed for the purposes of paragraphs 12(1)(o) and 18(1)(m) of the Act:

  • (a) an amount paid to, an amount that became payable to, or an amount that became receivable by

    • (i) Her Majesty in right of Canada for the use and benefit of a band or bands as defined in the Indian Act, or

    • (ii) Petro-Canada Limited;

  • (b) an amount paid to, an amount that became payable to, or an amount that became receivable by any of the persons referred to in any of subparagraphs 18(1)(m)(i) to (iii) of the Act

    • (i) that is an amount that may reasonably be regarded as being in respect of a rental for any property described in clause 66(15)(c)(ii)(B) or subparagraph 66(15)(c)(vi) of the Act,

    • (ii) that was paid, became payable, or became receivable prior to the commencement of production of minerals from the property referred to in subparagraph (i) in reasonable commercial quantities, and

    • (iii) that was paid, became payable, or became receivable, after December 11, 1979, in respect of a period commencing after that date;

  • (c) an amount paid to, an amount that became payable to, or an amount that became receivable by any of the persons referred to in any of subparagraphs 18(1)(m)(i) to (iii) of the Act

    • (i) that may reasonably be regarded as being in respect of a rental for a right, licence or privilege to store underground petroleum, natural gas or other related hydrocarbons in Canada, and

    • (ii) that was paid, became payable, or became receivable, after December 11, 1979, in respect of a period commencing after that date;

  • (d) an amount equal to the lesser of

    • (i) an amount that

      • (A) became payable to or receivable by any of the persons referred to in any of subparagraphs 18(1)(m)(i) to (iii) of the Act as a rental for property described in subparagraph 66(15)(c)(i) of the Act or for a portion of such property, and

      • (B) became payable or receivable

        • (I) in a taxation year in which there was no taking of petroleum, natural gas or related hydrocarbons in relation to the property or portion thereof, as the case may be, to which the rental relates, if the amount became payable or receivable after 1984, or

        • (II) prior to the taking of petroleum, natural gas or related hydrocarbons in relation to the property or portion thereof, as the case may be, to which the rental relates, if the amount became payable or receivable after October 31, 1982 and before 1985, and

    • (ii) an amount equal to $2.50 per year per hectare times the number of hectares to which the amount referred to in subparagraph (i) relates; and

  • (e) an amount paid under section 49 of the Canada Oil and Gas Act.

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • SOR/78-502, s. 8
  • SOR/80-926, s. 2
  • SOR/81-974, s. 10
  • SOR/85-174, s. 10
  • 1991, c. 10, s. 19

Supplementary Depletion Allowances